Bona fide belief in customs import classification can defeat penalty where policy ambiguity creates genuine doubt.

Penalty under the Customs Act for unauthorised import of a boat was considered in light of the import policy and a clarification from the licensing authority. Although the import was found unauthorised, the surrounding policy position created genuine doubt about whether sailing boats and similar craft fell within the negative list. The vessel's nature and intended use supported the importer's bona fide belief that the item was not prohibited. On that basis, penalty under Section 112 was held not justified and the setting aside of the penalty was upheld.

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Issues: Whether penalty under Section 112 of the Customs Act, 1962 was exigible for import of a boat in the circumstances of the case.

Analysis: The import was found to be unauthorised, but the surrounding import policy and the licensing authority's clarification created genuine doubt about the scope of the prohibition. The respondent's understanding that sailing boats and similar crafts were not covered by the negative list, together with the nature of the vessel and its intended use, supported the view that the import was made under a bona fide belief and that penalty was not warranted.

Conclusion: Penalty under Section 112 was not justified and the setting aside of the penalty was upheld.

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