Proof of smuggled import is essential for confiscation and penalty on non-notified goods under customs law.

For non-notified precious and semi-precious stones, the reverse-burden rule under Section 123 of the Customs Act, 1962 did not apply. The Revenue therefore had to prove by affirmative evidence that the stones were of foreign origin and smuggled into India. Because the seizure record did not show the country of origin and the material on record did not satisfactorily establish smuggled import, confiscation and penalty were held unsustainable and set aside, with consequential relief to the assessee.

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Issues: Whether precious and semi-precious stones, being non-notified goods, could be confiscated and a penalty imposed without positive evidence from the Revenue proving that they were smuggled into India.

Analysis: The goods were not covered by the reverse-burden regime under Section 123 of the Customs Act, 1962. In such a case, the Revenue was required to establish by affirmative evidence that the stones were of foreign origin and illegally imported. The seizure list did not indicate the country of origin, and the record did not contain satisfactory proof of smuggled nature merely because the appellant could not produce certain documents at the time of seizure.

Conclusion: The confiscation and penalty were unsustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order of confiscation and penalty was overturned with consequential relief.

Ratio Decidendi: For non-notified goods, confiscation and penalty cannot be sustained unless the Revenue proves smuggled import by positive evidence; absence of such proof defeats the action under the Customs Act, 1962.

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