Procedural import-code lapse does not justify confiscation under customs law, though a proportionate penalty may still apply.

Failure to obtain an Import Export Code before importing an excimer laser was treated as a procedural lapse under the Foreign Trade regime, not as an import in contravention of a prohibition for purposes of confiscation under Section 111(d) of the Customs Act. Confiscation was therefore not justified and was set aside. A penalty could still be imposed for the technical non-compliance, but it had to be proportionate to the nature and gravity of the default; the original penalty was found excessive and reduced to a nominal amount. The ruling draws a distinction between procedural non-observance and substantive illegality in import control compliance.

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Issues: (i) Whether import of an excimer laser without obtaining Import Export Code number justified confiscation under Section 111(d) of the Customs Act. (ii) Whether penalty was imposable and, if so, what quantum was appropriate.

Issue (i): Whether import of an excimer laser without obtaining Import Export Code number justified confiscation under Section 111(d) of the Customs Act.

Analysis: The requirement of obtaining the Import Export Code was treated as a procedural formality under the Foreign Trade regime. Non-observance of such a procedural condition did not make the import itself illegal or amount to import contrary to a prohibition for the purposes of Section 111(d) of the Customs Act. The failure to obtain the code, by itself, was held insufficient to sustain confiscation of the goods.

Conclusion: Confiscation under Section 111(d) of the Customs Act was not justified and was set aside in favour of the assessee.

Issue (ii): Whether penalty was imposable and, if so, what quantum was appropriate.

Analysis: A penalty was held to be maintainable for the procedural lapse, but it had to be commensurate with the nature and gravity of the default. Considering that the goods had been imported for the first time and the violation was technical, the original penalty was found excessive. The penalty was therefore reduced to a nominal amount.

Conclusion: Penalty was sustained but reduced from Rs. 50,000 to Rs. 1,000 in favour of the assessee.

Final Conclusion: The order of confiscation was annulled, while the penal consequence was retained only to the limited extent of a nominal penalty for the procedural violation.

Ratio Decidendi: A procedural non-compliance with import-code requirements does not, without more, amount to import in contravention of a prohibition so as to attract confiscation, though a proportionate penalty may still be imposed for the lapse.

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