Treaty-based transit goods cannot be confiscated for mere delay unless statutory notification and lawful confiscation basis are established.

Goods moved under the Indo-Nepal Treaty of Trade and Transit were held not to be liable to confiscation and redemption fine under the Customs Act merely for delay in transit, because treaty implementation into the Act required a notification under section 11(2)(r), which was not shown. A quantity later accepted by the department as part of the same CTD-linked consignment could not be separately treated as unclaimed goods, so confiscation was unsustainable and the deposit had to be refunded. For the remaining quantity, defects in seizure particulars and the absence of a proper inquiry on ownership and CTD linkage required de novo consideration, and the matter was remanded for fresh adjudication.

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Issues: (i) Whether goods covered by the Customs Transit Declaration and moved under the Indo-Nepal Treaty were liable to confiscation and redemption fine under the Customs Act in the absence of a notification under section 11(2)(r); (ii) whether the confiscation of 6.6 MT of iron rods as unclaimed goods could stand; (iii) whether the confiscation of 7.332 MT of iron rods required interference or remand for fresh inquiry.

Issue (i): Whether goods covered by the Customs Transit Declaration and moved under the Indo-Nepal Treaty were liable to confiscation and redemption fine under the Customs Act in the absence of a notification under section 11(2)(r).

Analysis: The goods were found to be part of consignments lawfully imported by the Nepal undertaking and moved in transit under the Indo-Nepal Treaty of Trade and Transit. The Tribunal found that, for bringing treaty implementation within the Customs Act, a notification under section 11(2)(r) was necessary, but no such notification was shown. The proceedings were treated as arising only from delay in transit and not from a case warranting confiscation under the invoked provisions. The use of sections 111 and 112 was also found inapposite on the facts of the case.

Conclusion: Confiscation and redemption fine were not sustainable, and the order was set aside in favour of the assessee.

Issue (ii): Whether the confiscation of 6.6 MT of iron rods as unclaimed goods could stand.

Analysis: The record showed that the department itself later found this quantity to be part of the same CTD-linked consignment, and the goods had already been subjected to inquiry and investigation pursuant to the High Court's directions. The Tribunal held that the ownership and treaty linkage had been satisfactorily established, leaving no separate ground for confiscation. In those circumstances, the deposit made pursuant to the earlier order was directed to be returned.

Conclusion: The confiscation could not be sustained and the amount deposited was ordered to be refunded, in favour of the assessee.

Issue (iii): Whether the confiscation of 7.332 MT of iron rods required interference or remand for fresh inquiry.

Analysis: The Tribunal found serious defects in the claimed seizure and claimant notice, including absence of clear seizure particulars and absence of a proper inquiry correlating the goods with the relevant CTD. Since the department had not adequately established the basis for treating the goods as unclaimed or for denying the assessee's claim, the matter required fresh examination. The Tribunal directed a de novo inquiry with an opportunity to substantiate ownership and CTD linkage.

Conclusion: The confiscation order was set aside and the matter was remanded for fresh consideration, partly in favour of the assessee.

Final Conclusion: The appeals resulted in relief against confiscation and fine in respect of the first two consignments, while the third matter was sent back for fresh adjudication after proper inquiry.

Ratio Decidendi: Goods moving under a treaty-based transit arrangement cannot be confiscated under the Customs Act for mere delay or shortage unless the statutory treaty-implementation mechanism is activated and the department establishes a legally sustainable basis for confiscation and denial of ownership.

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