Conditional customs exemption failed where installation obligations were unmet, sustaining confiscation and penalty but reducing monetary consequences.

Conditional customs exemption under Notification No. 92/2004-Cus was held inapplicable where the importer failed to complete installation of Digital Set Top Boxes and White Smart Cards within the stipulated period and the installation certificate did not match the actual position on inquiry. Confiscation and penalty were therefore upheld. However, because duty with interest had already been paid before the show cause notice and the circumstances justified leniency, the redemption fine and penalties were substantially reduced.

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Issues: Whether the import of Digital Set Top Boxes and White Smart Cards under Notification No. 92/2004-Cus was liable to confiscation and penalty for non-installation within the stipulated period, and whether the redemption fine and penalties required reduction.

Analysis: The imported goods were claimed under the Served from India Scheme subject to the condition that installation be completed within six months and certified by the jurisdictional customs authority or a Chartered Engineer. The goods were not installed within the stipulated period, the installation certificate was found not to reflect the actual position on inquiry, and the importer itself sought extension after the goods had already been seized or restrained. The claim that the condition was wholly inapplicable was not accepted. At the same time, the duty with interest had already been paid before the show cause notice, and the matter warranted moderation in the quantum of monetary consequences.

Conclusion: Confiscation and penalty were upheld, but the redemption fine and penalties were reduced substantially.

Ratio Decidendi: Where exemption under a conditional customs notification is availed but the core installation condition is not fulfilled, confiscation and penalty can follow, though the monetary quantum may be reduced where duty and interest were paid before notice and the circumstances justify leniency.

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