Customs penalties require proof of contravention and knowing participation, not mere allegations of diversion or storage.

Customs penalty and confiscation depend on reliable proof of the alleged contravention and the requisite knowledge or participation. For TCIL and its director, the record did not establish diversion of caster oil from a DTA source or direct export in breach of export policy, so confiscation and penalty could not be sustained. For CTPL, mere storage and co-mingling in a bonded tank was insufficient where there was no evidence of diversion, procedural breach, or knowing abetment of any illegality. The commentary states that, without evidence of the prohibited act and conscious involvement, penal action under customs law is not justified.

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Issues: (i) Whether penalties imposed on TCIL and its director were sustainable for alleged violation of the export control requirements relating to the alleged diversion and direct export of caster oil; (ii) Whether the penalty imposed on CTPL was sustainable for storage and co-mingling of caster oil in its bonded tank without knowledge of any confiscable character or procedural breach.

Issue (i): Whether penalties imposed on TCIL and its director were sustainable for alleged violation of the export control requirements relating to the alleged diversion and direct export of caster oil.

Analysis: The liability to penalty depended on proof that the exported quantity of caster oil had been procured from DTA units and exported in breach of the export policy and the governing trade and customs provisions. The record did not establish that the goods exported under the relevant shipping bill were diverted from a DTA unit, and no investigation produced evidence to support the allegation of direct export from a DTA source. In the absence of such proof, the goods could not be treated as liable to confiscation and the penal consequence could not follow.

Conclusion: The penalty on TCIL and its director was not sustainable and was set aside.

Issue (ii): Whether the penalty imposed on CTPL was sustainable for storage and co-mingling of caster oil in its bonded tank without knowledge of any confiscable character or procedural breach.

Analysis: Penalty under the customs law required some act or omission by CTPL that made the goods liable to confiscation or showed knowing participation in the offence. The record did not show any diversion of the goods from the tank, any proven procedural obligation breached by CTPL, or any evidence that CTPL knew of any illegality in the exporters' conduct. In the absence of evidence of knowledge or knowing abetment, the penal provision could not be invoked against CTPL.

Conclusion: The penalty on CTPL was not sustainable and was set aside.

Final Conclusion: The common thread running through the decision is that penalties could not be sustained without reliable evidence of the alleged prohibited diversion or of knowing participation in the wrongful act, and the appellants were entitled to relief.

Ratio Decidendi: Penalty and confiscation under customs law cannot be sustained unless the alleged contravention and the requisite knowledge or participation are proved by evidence.

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