However, Paul Begley from Rathcoole in Dublin remains in custody until next month, pending further submissions on an alternative sentence.
The appeal court ruled the sentence imposed last March was not proportionate and that the trial judge had erred in principle by failing to take into account mitigating factors.
The 47-year-old was given the longest sentence ever handed down for this type of offence.
At an appeal hearing last month, Begley’s lawyers said the trial judge ignored his guilty plea and offer to repay the tax.
Begley’s tax evasion scheme was uncovered in 2007.
He had been importing garlic from China for a number of years and made huge savings on import tax by having it labelled as apples.
This afternoon the three-judge appeal court said the trial judge failed to give any explanation for imposing the maximum sentence of five years on one count.
Delivering the judgment, Justice Liam McKechnie said there was an error of principle by the trial judge in excluding mitigating factors.
The court said Begley’s level of cooperation with investigators was, if not unprecedented, then at the very higher end of such processes.