Penalty against directors requires proof of knowledge or reason to believe goods were liable to confiscation; Revenue appeals failed.

Penalty under Section 112(a) of the Customs Act and Rule 209A of the Central Excise Rules, 1944 requires material showing that the person dealt with goods knowing, or having reason to believe, that they were liable to confiscation. On the record, no specific allegation, cogent ground, or supporting evidence was shown against the directors, and the Revenue produced no material to establish the requisite knowledge or belief. The reduction of the company's penalties in the connected matter did not create an independent basis for penal action against the directors. Penalty on the respondents was therefore unwarranted, and the Revenue appeals were rejected.

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Issues: Whether penalty under Section 112(a) of the Customs Act and Rule 209A of the Central Excise Rules, 1944 could be imposed on the directors of the company on the basis of the material on record.

Analysis: Penalty under Section 112(a) of the Customs Act is attracted only where a person, by act or omission in relation to goods, renders them liable to confiscation or deals with them knowing or having reason to believe that they are liable to confiscation under Section 111 of the Customs Act. Likewise, penalty under Rule 209A of the Central Excise Rules, 1944 requires reason to believe that the goods dealt with are liable to confiscation. The order under challenge had specifically recorded that no cogent grounds were made out against the directors, no specific allegation was levelled, and no evidence was adduced against them. The Revenue did not place any material to rebut this finding or to show that the respondents had the requisite knowledge or reason to believe. The reduction of the company's penalties in the connected matter also did not supply any independent basis for penal action against the directors.

Conclusion: Penalty on the respondents was not warranted and the Revenue appeals were rightly rejected.

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