Later departmental clarification cannot sustain confiscation or penalty where importers acted under the earlier exemption practice.

A later Board circular or change in departmental practice cannot, by itself, justify confiscation or penalty where the importer acted before the change and had already shipped the goods under the exemption practice then prevailing. The stated approach was that Notification No. 23/98 had been extended in practice before Circular No. 74/98 introduced a stricter end-use clarification, so the importer could not reasonably have anticipated the revised position. Confiscation and penalty were therefore not warranted and were set aside.

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Issues: Whether confiscation of the imported goods and imposition of penalty were sustainable when the departmental practice allowing the exemption had been followed at the time of shipment and was altered only later by a Board circular.

Analysis: The benefit of the exemption under Notification No. 23/98 had been extended in practice to the goods in question before the issuance of Circular No. 74/98 dated 06-10-1998. The goods had already been shipped when the circular clarified a stricter approach based on end-use. In such circumstances, the importer could not reasonably have anticipated the later change in departmental practice. Where the exemption issue itself was not being pursued further, confiscation and penalty could not be justified merely because the Department subsequently altered its view.

Conclusion: Confiscation and penalty were not warranted and were set aside in favour of the assessee.

Ratio Decidendi: A later change in departmental practice or clarification cannot, by itself, sustain confiscation or penalty against an importer who acted before that change and without notice of the altered approach.

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