Knowingly fabricated licence participation is essential for penalty, while confiscation may still stand and redemption fine must be proportionate.

Penalty cannot be sustained where the importer is found not to have knowingly participated in fabrication of the import licence and was treated as a victim of consultant fraud; the penalty was therefore set aside. Goods imported without a valid licence remained liable to confiscation, because the absence of a valid authorisation was sufficient for that consequence. However, redemption fine had to be fixed on a reasonable and proportionate basis, and was reduced because the goods were not prohibited, there was no finding of undervaluation or quantified margin of profit, and the importer had suffered delay and financial loss.

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Issues: (i) Whether the imposition of penalty on the importer was sustainable when the importer was found not to have knowingly ated in the fabrication of the import licence; (ii) Whether the order of confiscation and the quantum of redemption fine required interference.

Issue (i): Whether the imposition of penalty on the importer was sustainable when the importer was found not to have knowingly participated in the fabrication of the import licence.

Analysis: The importer was held not to have been involved in creating the false DGFT licence and was treated as a victim of the fraud committed by the consultant. In the absence of knowing participation in the fraudulent , the basis for penal action was not made out.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the order of confiscation and the quantum of redemption fine required interference.

Analysis: The imported goods were found to have been brought without a valid licence and were therefore liable to confiscation. At the same time, the goods were not prohibited for import, there was no finding of undervaluation or quantified margin of profit, and the importer had suffered delay and financial loss. On that basis, the redemption fine was considered excessive.

Conclusion: Confiscation was upheld, while the redemption fine was reduced to Rs. 5 lakhs in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of deletion of penalty and reduction of redemption fine, while confiscation of the goods remained affirmed.

Ratio Decidendi: Where an importer is found not to have knowingly participated in the fabrication of an import licence, penalty cannot be sustained; however, goods imported without a valid licence may still be confiscated, and redemption fine must be fixed on a reasonable and proportionate basis.

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