Retrospective customs classification change barred where established clearance practice existed and mens rea for penalty was not proved.

A long-standing customs classification and clearance practice for imports cleared as "Designer's Kit" could not be altered retrospectively to treat the goods as unauthorised and liable to confiscation; any change in the established practice could operate only prospectively. Confiscation was also unavailable because the goods had already been cleared from customs charge. Penalty could not be sustained without proof of mens rea, and the record showed bona fide reliance on the prevailing practice and the customs authorities' own view. On these facts, confiscatory and penal action was not warranted.

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Issues: (i) Whether the long-standing customs classification and clearance practice could be altered retrospectively to treat the import as unauthorised and liable to confiscation. (ii) Whether confiscation or penalty could be sustained when the goods were already cleared from customs charge and the department failed to establish mens rea.

Issue (i): Whether the long-standing customs classification and clearance practice could be altered retrospectively to treat the import as unauthorised and liable to confiscation.

Analysis: The imports had been consistently cleared for several years as "Designer's Kit" under the relevant REP licences. A practice followed over a long period acquires the character of an established custom-house convention and cannot be altered unilaterally without proper reference to the Board. Any public notice altering such practice could operate only prospectively, not retrospectively.

Conclusion: The retrospective change in classification could not be sustained against the respondents.

Issue (ii): Whether confiscation or penalty could be sustained when the goods were already cleared from customs charge and the department failed to establish mens rea.

Analysis: The goods were no longer available for confiscation, so no effective confiscatory action could be taken at that stage. Penalty proceedings are quasi-criminal in nature and require proof of guilty knowledge. The department did not establish that the respondents knowingly imported unauthorised goods; on the contrary, the record indicated bona fide belief based on the prevailing practice and the customs authorities' own view.

Conclusion: Confiscation and penalty were not warranted, and the department's appeals failed.

Final Conclusion: The department did not succeed in upsetting the clearances, and no confiscatory or penal relief could be granted on the facts found.

Ratio Decidendi: A long-standing customs practice regarding classification cannot be withdrawn retrospectively without proper authority, and penalty cannot be imposed unless mens rea is proved; once goods are out of customs charge, confiscation is not available.

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