Penalty under Customs law fails where imported goods are only misclassified, without independent misdeclaration supporting confiscation.

Penalty under section 112(a)(ii) of the Customs Act, 1962 cannot be sustained unless the imported goods are first shown to be liable to confiscation under section 111. Where the only basis for confiscation is an alleged misclassification in the Bill of Entry, and there is no independent material showing misdeclaration, a mere classification dispute does not by itself attract section 111(m). In the absence of liability to confiscation, the foundation for penalty fails and the penalty is not maintainable.

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Issues: Whether penalty under section 112(a)(ii) of the Customs Act, 1962 could be sustained when the only for invoking confiscation was alleged misclassification of the imported goods.

Analysis: Penalty under section 112(a)(ii) is contingent upon the goods being liable to confiscation under section 111. The basis adopted for confiscation was section 111(m), but a mere classification dispute or wrong classification in the Bill of Entry does not, by itself, amount to misdeclaration attracting confiscation. Where the goods are only misclassified, and there is no independent basis showing liability to confiscation, the foundation for penalty disappears.

Conclusion: Penalty under section 112(a)(ii) of the Customs Act, 1962 was not sustainable and had to be set aside.

Ratio Decidendi: A penalty under section 112(a)(ii) cannot survive unless the goods are first shown to be liable to confiscation under section 111, and mere misclassification without misdeclaration does not render the goods liable to confiscation.

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