Customs valuation and redemption discretion: absolute confiscation and value enhancement require consistent treatment and valid evidence.

Discretion to order absolute confiscation under Section 125 of the Customs Act must be exercised consistently where a settled practice exists of permitting redemption for similar imported goods, and a selective departure is unjustified. The imported used engines were therefore liable to be cleared on payment of appropriate fine. Transaction value under Rule 4(2) of the Customs Valuation Rules cannot be rejected unless valid, evidenced grounds show that the declared price is not the normal transaction value; mere non-mention of a feature in the invoice was insufficient, so value enhancement was unsustainable. Redemption fine and penalty were moderated in light of comparable imports and proportionality.

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Issues: (i) whether the order of absolute confiscation of the imported used engines could be sustained in view of the established practice of permitting clearance on redemption; (ii) whether the declared transaction value could be rejected and the value enhanced; and (iii) whether the redemption fine and penalty required interference.

Issue (i): whether the order of absolute confiscation of the imported used engines could be sustained in view of the established practice of permitting clearance on redemption.

Analysis: Discretion to permit redemption under Section 125 is vested in the adjudicating authority, but where a settled practice exists of allowing similar goods to be cleared on payment of duty and fine, that discretion must be exercised consistently. A selective departure from the settled course, resulting in discrimination against a single importer, was not justified on the facts.

Conclusion: The order of absolute confiscation could not be sustained and the goods were liable to be cleared on payment of appropriate fine.

Issue (ii): whether the declared transaction value could be rejected and the value enhanced.

Analysis: Rule 4(2) permits rejection of the transaction value only where the statutory exceptions are attracted and the assessing authority establishes valid grounds showing that the transaction was not in the normal course or that the invoice value was influenced by extraneous factors. Mere omission to specifically mention a feature in the invoice, without proof of manipulation or other vitiating circumstances, was insufficient to discard the declared value. The record did not show valid grounds for rejecting the transaction value.

Conclusion: The declared transaction value was to be accepted and the enhancement in value was unsustainable.

Issue (iii): whether the redemption fine and penalty required interference.

Analysis: Redemption fine had to be determined on the circumstances of the case and not by mechanically adopting a percentage from another matter. The relevant factors included the contemporaneous treatment of similar imports and the demurrage suffered. As regards penalty, a deterrent approach was permissible, but the quantum had to remain proportionate and consistent with comparable cases.

Conclusion: The redemption fine was fixed at Rs. 11 lakhs and the penalty was reduced to Rs. 2.5 lakhs.

Final Conclusion: The importers succeeded in obtaining relief against absolute confiscation and value enhancement, while the monetary consequences were moderated to redemption fine and reduced penalty.

Ratio Decidendi: Discretion under Section 125 of the Customs Act must be exercised consistently in comparable cases, and transaction value under Rule 4(2) of the Customs Valuation Rules cannot be rejected without valid, evidenced grounds showing that the declared price is not the normal transaction value.

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