Circumstantial evidence can support confiscation of non-notified goods, but penalty requires proof of knowing involvement in smuggling.

Non-notified imported goods may still be confiscated where credible circumstantial evidence shows they were smuggled or otherwise brought into India in contravention of law, including foreign origin, failure to explain lawful acquisition, denial of sale by alleged sellers, and a false or unsubstantiated explanation by the possessor. On those facts, confiscation and redemption fine were upheld. Penalty under Section 112(b), however, requires proof of knowledge or conscious involvement in smuggled goods; mere possession is insufficient. As the record did not establish such awareness or participation, the penalty was set aside, leaving the confiscation and duty demand intact.

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Issues: (i) Whether the imported goods, though not notified, were liable to confiscation under Section 111(d) on the basis of circumstantial evidence showing that they were smuggled or otherwise brought into the country in contravention of law; (ii) Whether penalty under Section 112(b) could be sustained in the absence of evidence that the persons in possession of the goods knowingly dealt with smuggled goods.

Issue (i): Whether the imported goods, though not notified, were liable to confiscation under Section 111(d) on the basis of circumstantial evidence showing that they were smuggled or otherwise brought into the country in contravention of law.

Analysis: The customs authorities are entitled to investigate both notified and non-notified goods. Where the goods are of foreign origin, the persons in possession fail to produce a credible source for acquisition, and the alleged sellers deny having sold the goods, the department may rely on circumstantial evidence and draw a presumption that the goods were illegally imported. A false explanation from the possessor and the surrounding conduct may be taken into account to discharge the department's burden in a proceeding for confiscation.

Conclusion: The confiscation of the goods and the redemption fine were upheld.

Issue (ii): Whether penalty under Section 112(b) could be sustained in the absence of evidence that the persons in possession of the goods knowingly dealt with smuggled goods.

Analysis: Penalty under Section 112(b) requires knowledge or culpable involvement. Even if the goods are liable to confiscation, a penalty cannot be imposed merely because a person was in possession of them unless the evidence shows awareness that the goods were smuggled or participation in the illicit import or dealing. The record did not establish such knowledge on the part of the appellants.

Conclusion: The penalties were set aside.

Final Conclusion: The order of confiscation and duty demand was sustained, but the penal component was removed, resulting in only partial success for the appellants.

Ratio Decidendi: In confiscation proceedings involving non-notified imported goods, smuggling may be established by credible circumstantial evidence and a false or unsubstantiated explanation from the possessor, but penalty under Section 112(b) cannot be imposed unless knowledge or conscious involvement is shown.

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