Bombay HC: Misdeclaration in Import Manifest or Bill of Lading Alone Insufficient for Confiscation Under Section 111(m)

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 14.10.2026

Bombay HC: Misdeclaration in Import Manifest or Bill of Lading Alone Insufficient for Confiscation Under Section 111(m)

The Bombay High Court at Goa dismissed Customs’ appeals and confirmed that Kabul Textiles, a Dubai-based supplier, could re-export textile consignments after the named Indian consignees failed to claim them. The Court held that confiscation for misdeclaration could not be sustained where no bill of entry had been filed and the supplier was not shown to have participated in a conspiracy to evade duty.

Background: Alleged misdeclaration of imported fabrics

The case arose from an investigation by the Directorate of Revenue Intelligence (DRI) into fabric imports arriving at Marmagoa Port. The DRI received information that certain Delhi-based importers had imported textile consignments through misdeclaration and undervaluation to reduce customs duty.

Among seven consignments examined, two were in the names of R.T. & Co. and Ruchitra Impex. Neither entity filed a bill of entry or otherwise came forward to clear the goods. The investigation concluded that the fabrics had been described in the import documents as polyester knit fabrics, while Customs considered them to be polyester warp-knitted fabric classifiable under a tariff heading attracting a higher duty. Customs also assessed a higher CIF value than the value declared in the import manifests.

Kabul Textiles (LLC), the foreign supplier, stated that the goods had been supplied through a broker, Daulat. It said the original title documents had been returned by the bank and remained in its possession because the consignees had refused to retire the documents. Kabul Textiles therefore claimed ownership and asked Customs to allow re-export of the consignments.

Customs ordered confiscation and penalties

The Commissioner of Customs found that the shipping documents and consignee details had been altered and treated those circumstances as evidence of an attempt to misclassify the fabrics and evade duty. The Commissioner ordered confiscation of the goods and imposed penalties on Kabul Textiles:

• Rs. 73 lakh in relation to the R.T. & Co. consignments; and
• Rs. 42 lakh in relation to the Ruchitra Impex consignments.

The order also allowed redemption of the goods on payment of equivalent redemption fines.

Kabul Textiles appealed to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). CESTAT set aside the confiscation order and permitted re-export. The Revenue then appealed to the Bombay High Court under Section 130 of the Customs Act, 1962.

Issues before the High Court

The Revenue sought to raise two principal questions:

1. Whether the goods were liable to confiscation under Section 111(d) of the Customs Act because they were allegedly imported contrary to the Foreign Trade (Development and Regulation) Act, 1992; and
2. Whether the goods were liable to confiscation under Section 111(m) for misdeclaration.

The Court rejected both grounds.

Section 111(d): A new case could not be introduced at the appeal stage

Section 111(d) applies where goods are imported, attempted to be imported, or brought into Indian customs waters contrary to a statutory prohibition.

Customs argued before the High Court that the imports violated the Foreign Trade (Development and Regulation) Act and related rules because the alleged importers did not have an Importer-Exporter Code (IEC). The Court declined to entertain that argument.

The key reason was procedural fairness: the show-cause notice had not alleged confiscation under Section 111(d) on the basis of a breach of the Foreign Trade Act, the IEC requirement, or a specific import prohibition. Both the Customs authorities and CESTAT had proceeded on the basis that the goods were freely importable, although they might attract a higher rate of duty if correctly classified.

The Court held that the Revenue could not raise an entirely new point for the first time in a second appeal. Referring to the requirements for a substantial question of law, it emphasized that such a question must have a foundation in the pleadings and arise from sustainable factual findings. A new theory unsupported by the notice and earlier proceedings could not be used to justify confiscation at the High Court stage.

The Court also observed that the IEC provision was, in any event, inapplicable to a foreign supplier such as Kabul Textiles.

Section 111(m): Misdeclaration must relate to a legally defined “entry”

Section 111(m) permits confiscation where imported goods do not correspond, in value or another relevant particular, with the “entry” made under the Customs Act.

The Court focused on the statutory definition of “entry.” Under Section 2(16) of the Customs Act, it refers, in the relevant context, to an entry made in a bill of entry, shipping bill, or bill of export. Here, no bill of entry had been filed for the consignments by R.T. & Co. or Ruchitra Impex.

That fact was decisive. The Court held that changes in invoices, bills of lading, or the Import General Manifest could not, by themselves, establish a mismatch with an entry under Section 111(m) when no bill of entry existed. Therefore, the alleged changes in the description of the textiles were insufficient to support confiscation under that provision.

In short, an allegation of misdescription in commercial or shipping documents is not automatically enough for confiscation under Section 111(m). The statutory requirement must be met: there must be a relevant entry against which the goods can be compared.

Foreign supplier retained ownership when consignees abandoned the goods

The Court relied on the Supreme Court’s ruling in Union of India v. Sampat Raj Dugar. That decision recognizes that when an importer does not pay for the goods or obtain the documents of title, and effectively abandons the consignment, the exporter may remain the owner and can seek re-export.

In this case, the Indian consignees neither filed bills of entry nor claimed any right, title, or interest in the goods. Kabul Textiles retained the original title documents after the banks returned them. On those facts, the Court accepted that the supplier’s title was not in doubt and that it was entitled to re-export the consignments.

Re-export can be denied where the supplier is part of fraud—but that was not proved

The Court acknowledged the principle that a supplier involved in a conspiracy or fraudulent scheme to evade customs duty would not be entitled to rely on its ownership to obtain re-export.

However, Kabul Textiles had not been issued a show-cause notice alleging that it was a participant in a conspiracy with the importers. While the supplier had changed documents at the broker’s request, the Court found that this alone did not prove an intention to assist duty evasion.

The Court refused to infer a fraudulent conspiracy merely from the document changes, particularly in the absence of a specific allegation and a fair opportunity for Kabul Textiles to answer it.

Why the restricted-goods precedent did not apply

Customs relied on Commissioner of Customs v. Grand Prime Ltd., a case involving raw silk imported without the licence required for restricted goods. The High Court distinguished that decision.

In Grand Prime, import itself was restricted and required a licence. In the Kabul Textiles matter, the authorities had treated the fabrics as freely importable. The dispute concerned classification, valuation, and alleged misdescription, not an established prohibition on import.

This distinction mattered because the legal consequences for restricted or banned goods differ significantly from those for freely importable goods subject to customs assessment.

No confiscation, no penalty

The Court further held that once confiscation failed, the related penalties under Section 112 of the Customs Act could not stand. The penalties imposed on Kabul Textiles were therefore unsustainable.

Final decision

The Bombay High Court at Goa found no merit in the Revenue’s appeals and dismissed both of them. It upheld CESTAT’s decision to set aside confiscation and penalties and to permit Kabul Textiles to re-export the goods.

The ruling reinforces three important customs-law principles: a confiscation case must be based on the grounds actually alleged in the show-cause notice; Section 111(m) requires a mismatch with a statutory “entry,” not merely an inconsistency in shipping documents; and a foreign supplier may retain the right to re-export goods abandoned by the consignee unless its participation in fraud is properly alleged and established.

Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.

Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.

Source: Bombay High Court

Disclaimer

Handy Download:

Write to us at office@aadrikaalaw.com

Tel: +91-11-4999 2707

www.aadrikaalaw.com

Ravi Shekhar Jha – Advocate, Bar Council of Delhi