Confiscation ambiguity and bona fide declared value defeated customs duty demand and penalty on imported software.

On confiscation and relinquishment of title, duty was not exigible where the confiscation and redemption directions were ambiguous and the order effectively indicated that the goods need not be confiscated but only duty paid; the duty demand was not sustained. On alleged under-valuation of imported software, contemporaneous documents such as the supplier's invoice and the manufacturer's fax offer supported a bona fide declared value, so penal action was unwarranted and the penalty was set aside. The appeal succeeded with both the duty demand and penalty removed.

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Issues: (i) Whether duty remained payable on the imported goods after the confiscation order and the appellant's relinquishment of title; (ii) Whether penalty was justified for alleged under-valuation of the imported software.

Issue (i): Whether duty remained payable on the imported goods after the confiscation order and the appellant's relinquishment of title.

Analysis: The confiscation and redemption directions in the order were found to be ambiguous. Section 125 of the Customs Act, 1962 contemplates redemption fine where confiscation is ordered, but the order effectively indicated that the goods need not be confiscated and that only duty was to be paid. On either view, the appellant's relinquishment of title meant that duty was not exigible merely on the facts of the case.

Conclusion: The liability to pay duty was not sustained.

Issue (ii): Whether penalty was justified for alleged under-valuation of the imported software.

Analysis: The declared price was supported by the supplier's invoice and a fax offer from the manufacturer at the same price. These materials supported the appellant's bona fide belief in the correctness of the declared value, and the facts did not warrant penal action notwithstanding the allegation of substantial undervaluation.

Conclusion: The penalty was not justified and was set aside.

Final Conclusion: The appeal succeeded, with the demand for duty not sustained and the penalty removed.

Ratio Decidendi: Where the declared import value is supported by contemporaneous material showing bona fide belief in its correctness, and the confiscation order leaves the duty consequence uncertain, penalty under the customs confiscation provisions is not warranted and duty cannot be insisted upon on that basis alone.

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