Redemption fine must reflect market conditions, while a proportionate penalty can stand for clear import policy violations.

Redemption fine on confiscated imported goods must be fixed on a rational basis with regard to prevailing market conditions and the value of the consignment; on that footing, the fine on imported used diesel engines was reduced because the Commissioner gave no specific basis for the margin of profit adopted and the relevant market prices had to be considered as at the time of import. A penalty may still be sustained where the import is in clear breach of import policy and the amount is proportionate; on those facts, the penalty on the importer was upheld as commensurate with the consignment value.

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Issues: (i) Whether the redemption fine imposed on confiscation of the imported used diesel engines required reduction; (ii) whether the penalty imposed on the importer called for interference.

Issue (i): Whether the redemption fine imposed on confiscation of the imported used diesel engines required reduction.

Analysis: The declared value of the consignment had been accepted. The Commissioner did not indicate any specific basis for fixing the margin of profit at the level adopted in the impugned order. On the facts, the appropriate margin of profit was to be determined with reference to the market prices prevailing in May 1997, when the consignment was imported.

Conclusion: The redemption fine was reduced from Rs. 28 lakhs to Rs. 16 lakhs, and the issue was decided in favour of the appellant.

Issue (ii): Whether the penalty imposed on the importer called for interference.

Analysis: The goods had been imported in clear violation of the import policy, and the penalty was found to be commensurate with the value of the consignment.

Conclusion: The penalty of Rs. 2 lakhs was upheld, and the issue was decided against the appellant.

Final Conclusion: The appeal succeeded only to the extent of reduction of redemption fine, while the penalty portion of the impugned order was maintained.

Ratio Decidendi: Redemption fine on confiscated imported goods must be fixed on a rational basis having regard to the prevailing market conditions and the value of the consignment, while a penalty may be sustained where the import is in clear breach of the import policy and the amount is proportionate.

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