Confiscation for alleged misdescription fails where re-exported SEZ goods lacked proof of prior knowledge or deliberate wrongdoing.

Imported goods sent into an SEZ for warehousing and later re-exported could not be confiscated under the Customs Act merely because they appeared old and used. The department relied on scratches and dust to allege prior misdescription, but the record did not establish that the importer had prior knowledge that the goods were second-hand or had deliberately misdescribed them at import. In the absence of proof of conscious wrongdoing, the foundation for confiscation failed, and the connected redemption fine and penalty were also unsustainable. Consequential relief followed for the assessee.

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Issues: Whether confiscation of the goods under the Customs Act, 1962, and the consequential redemption fine and penalty were sustainable when the goods imported into a Special Economic Zone were intended for re-export, the goods were later re-exported without change in description, and there was no evidence that the appellant had prior knowledge that the goods were old and used.

Analysis: The goods were brought into the Special Economic Zone for warehousing and were subsequently re-exported. The record showed that the export documents continued to describe the goods in the same manner, and the department's case rested mainly on physical indications such as scratches and dust to infer that the goods were old and used. The finding of liability depended on the premise that the appellant knew the goods were second-hand and had wrongly described them at import. The absence of evidence establishing such knowledge was material. The factual setting of an SEZ unit engaged predominantly in export activity also made the alleged conduct commercially implausible. On these facts, the basis for confiscation and the related monetary penalties was not sustained.

Conclusion: The confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, together with the redemption fine and penalty, was set aside in favour of the assessee.

Final Conclusion: The impugned order could not stand on the proved facts and the appellants were granted consequential relief.

Ratio Decidendi: Where imported goods meant for re-export are actually re-exported and the department fails to prove prior knowledge or deliberate misdescription, confiscation and consequential redemption fine or penalty cannot be sustained merely on the basis that the goods appeared old and used.

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