Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation
Date: 21.05.2026
CESTAT Chandigarh Sets Aside Confiscation and Penalty for Alleged Mis-Declaration under Customs Act, 1962
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a significant judgment in the case of M/s Fortune Metals Ltd. versus the Commissioner of Customs, Ludhiana. This case revolved around the alleged mis-declaration of the country of origin for imported scrap and the subsequent confiscation and penalties imposed by customs authorities. The Tribunal’s decision provides important clarifications on the interpretation of customs law, retrospective policy changes, and the rights of importers.
Background of the Case
M/s Fortune Metals Ltd., based in Punjab, imported 105.720 metric tons of ‘LMS Bundle Scrap’ from the United Arab Emirates (UAE) through M/s Tradeway International UK Ltd. The company filed the necessary bill of entry and provided all required documentation, including the commercial invoice, packing list, certificate of origin, bill of lading, Pre-Shipment Inspection Certificate (PSIC), and container tracking details.
However, customs authorities alleged that the goods were mis-declared as being of UAE origin at a time when the export of ferrous scrap from the UAE was prohibited. The department seized the goods, ordered their confiscation under Section 111(d) of the Customs Act, 1962, and imposed a redemption fine of Rs. 80,000 and a penalty of Rs. 20,000 on the importer under Section 112(a)(i) of the Act.
Key Legal Issues
The central questions before the Tribunal were:
- Was there a mis-declaration of the country of origin by Fortune Metals Ltd.?
- Did the importer violate any provisions of the Foreign Trade Policy or customs regulations?
- Were the penalties and confiscation legally sustainable?
Arguments Presented
Appellant (Fortune Metals Ltd.)
- Asserted that, under Indian law, the import of ferrous waste and scrap from Dubai/UAE was freely allowed with no statutory ban at the time of import.
- Produced all required documents, including a valid PSIC, and argued there was no mis-declaration.
- Pointed out that the Dubai Customs Notification 08/2022, which banned exports, was effective only until 19 March 2023, and the next notification (05/2023) was issued on 19 April 2023. The inspection of goods occurred on 12 April 2023, when no ban was in effect.
- Contended that the Office Memorandum (OM) issued by DGFT could not retrospectively invalidate valid PSICs.
Respondent (Customs Department)
- Maintained that the export ban from Dubai was made retrospective from 20 March 2023, and the OM from DGFT dated 13 June 2023 invalidated PSICs for such imports.
- Supported the confiscation and penalties imposed.
Tribunal’s Analysis and Findings
- The Tribunal found that, as per Indian law, there was no statutory bar on the import of ferrous scrap from Dubai/UAE at the relevant time.
- All import documentation was in order, and there was no evidence of mis-declaration by the appellant.
- The Dubai Customs ban notice effective until 19 March 2023 had lapsed, and the next ban notice was issued after the inspection date. Thus, no ban was in force on 12 April 2023.
- The Tribunal held that retrospective policy changes or office memoranda could not invalidate actions that were legal and compliant at the time they were undertaken.
- Consequently, the imposition of redemption fine and penalty was found unsustainable in law.
Final Order
The CESTAT Chandigarh set aside the confiscation, redemption fine, and penalty imposed on Fortune Metals Ltd., allowing the appeal in favor of the importer. The Tribunal emphasized that holding the appellant guilty of mis-declaration was not legally sustainable, given the facts and the law at the time of import.
Implications of the Ruling
This judgment reinforces the principle that importers cannot be penalized for actions that were lawful at the time of import, even if subsequent policy changes are made with retrospective effect. It also underscores the importance of clear and timely communication of trade policy changes to avoid unnecessary litigation and hardship for businesses.
The case serves as a valuable precedent for importers and legal practitioners dealing with customs disputes, especially those involving retrospective policy changes and documentary compliance.
Source: CESTAT Chandigarh
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707 I +91-9999005379
Leave a Reply