Customs penalty fails without proved confiscability or mala fides; bona fide belief and benefit of doubt protected the importer.

Penalty under customs law cannot survive unless the goods are lawfully liable to confiscation and the department proves deliberate violation or mala fides. For the earlier policy period, contemporaneous clarifications from other authorities and public sector entities supported a bona fide belief that Heptane and Nonene were freely importable, so confiscation and penalty were unsustainable. For the later policy period, conflicting end-use certificates on fuel or feed stock use did not establish intentional diversion, and the benefit of doubt went to the importer. Confiscation and penalty were therefore set aside with consequential relief.

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Issues: Whether the penalty and confiscation were sustainable for imports of Heptane and Nonene during the two policy periods, and whether the assessee's bona fide belief and end-use claim negatived liability.

Analysis: The imports for the earlier policy period were held to have been supported by contemporaneous clarifications from other authorities and public sector entities, creating a bona fide belief that the goods were freely importable. For the later policy period, the record contained conflicting certificates regarding use of the by-products as fuel or feed stock, and the department did not establish deliberate diversion or mala fides. The governing principle applied was that penalty requires a legally sustainable foundation for confiscation and, in penal proceedings, the burden lies on the department to establish contumacious conduct; where two views are possible, the benefit of doubt goes to the assessee.

Conclusion: The confiscation and penalty were held unsustainable, and the appeal was allowed with consequential relief.

Ratio Decidendi: Penalty under Customs law cannot be sustained unless the goods are shown to be liable to confiscation under the correct provision, and in the absence of proved deliberate violation or mala fides, bona fide belief and benefit of doubt operate in favour of the importer.

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