Suspicion cannot sustain customs duty demand, confiscation or penalties without reliable proof of diversion or false documents.

Duty demand, confiscation and penalties were held unsustainable where the Revenue alleged diversion and recycling of imported goods but failed to produce reliable evidence linking the alleged diversion to the appellant unit. The documentary record, including shipping bills and the explanation that the imported lining fabric was used in exported garments, was not shown to be forged or unreliable. Third-party statements and a fax relied on by the department were treated as insufficient, and suspicion arising from a connected fraud investigation could not substitute for proof. The demand was therefore not maintainable, the goods were not liable to confiscation, and Customs penalties were not leviable.

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Issues: Whether the duty demand, confiscation and penalties were sustainable when the Revenue alleged diversion and re-cycling of imported goods but the appellants produced documentary evidence of proper bonding, utilisation and export.

Analysis: The Revenue's case rested on suspicion arising from investigations in a connected fraud and on statements of third parties, but there was no evidence linking the alleged diversion to the appellant unit or its managing director. The documentary record, including shipping bills and the explanation of use of the imported lining fabric in exported garments, was not shown to be forged or unreliable. The fax relied upon by the department was held to have little evidentiary value, and the assumption that the documents were fabricated was unsupported by proof.

Conclusion: The duty demand was unsustainable, the imported goods were not liable to confiscation, and the penalties under the Customs Act were not leviable; the appeals were allowed.

Ratio Decidendi: A demand of duty, confiscation and penalty cannot rest on suspicion alone and must be supported by reliable evidence of diversion or falsity of documents.

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