Natural justice and proof of knowing involvement were required before sustaining customs penalty for alleged smuggling-linked conduct.

Denial of cross-examination was treated as a breach of natural justice in a customs penalty matter. Penalty under customs confiscation provisions could not rest on past involvement in other cases or COFEPOSA detention alone; liability had to be proved by specific evidence that the person knowingly handled or dealt with goods liable to confiscation in the incident under consideration. As that direct involvement was not established, the penalty was held unsustainable and set aside.

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Issues: Whether the penalty imposed under Section 112 of the Customs Act, 1962 could be sustained when cross-examination was denied and the finding of liability rested on past conduct rather than proof of involvement in the particular smuggling incident.

Analysis: Denial of cross-examination was treated as a breach of natural justice. The material relied upon for penalty was found insufficient, because prior involvement in other customs cases and detention under COFEPOSA could not by themselves establish liability in the present case. Penalty under Section 112 required a finding that the appellant had knowingly handled or dealt with goods liable to confiscation in the case under consideration, which was not specifically established.

Conclusion: The penalty was not sustainable and was set aside in favour of the appellant.

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