Customs redemption fine must follow profit margin and norms, with special reasons needed for any upward departure

Challenge to valuation loading under the Customs Valuation Rules was expressly not pressed, so no merits adjudication was required on that point. For confiscated old and used diesel engines, redemption fine under the Customs Act must be aligned with market price, margin of profit and applicable administrative norms, and any upward departure requires recorded special reasons; the fine was therefore reduced within the normative framework. In light of the reduced fine and the nature of the import, the importer's penalty was also moderated to maintain proportionality. Confiscation was sustained, but the monetary consequences were substantially reduced.

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Issues: (i) Whether the loading of value by application of Rule 5 of the Customs Valuation Rules survived for adjudication. (ii) Whether the redemption fine imposed on confiscated old and used diesel engines was excessive and required reduction. (iii) Whether the penalty imposed on the importer required reduction.

Issue (i): Whether the loading of value by application of Rule 5 of the Customs Valuation Rules survived for adjudication.

Analysis: The challenge to the valuation loading was expressly not pressed. No adjudication on the merits of that question was required.

Conclusion: The valuation issue was not pursued and stood rejected.

Issue (ii): Whether the redemption fine imposed on confiscated old and used diesel engines was excessive and required reduction.

Analysis: Redemption fine under Section 125 of the Customs Act, 1962 is to be fixed with reference to the market price and the margin of profit, subject to the Board's norms. Old and used goods were treated as restricted imports under the Exim Policy, and the adjudicating authority had not recorded special reasons justifying a fine above the prescribed norms. The order also did not determine why the goods were outside the category of basic articles for fine purposes. Since the goods were old and used capital goods machinery, the fine had to be brought within the normative framework.

Conclusion: The redemption fine was reduced to 45% of the CIF value.

Issue (iii): Whether the penalty imposed on the importer required reduction.

Analysis: In view of the reduction in redemption fine and the nature of the import, the penalty called for moderation to maintain proportionality.

Conclusion: The penalty was reduced to 5% of the CIF value.

Final Conclusion: Confiscation was sustained, but the monetary consequences were substantially reduced, resulting in only partial relief to the importer.

Ratio Decidendi: Redemption fine for confiscated imported goods must be fixed on the basis of the statutory ceiling, the margin of profit and the applicable administrative norms, and any departure upward requires recorded special reasons.

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