Penalty under Section 112 of the Customs Act requires clear proof of act, omission, or abetment rendering goods liable to confiscation.

Penalty under Section 112 of the Customs Act could not be sustained against a clearing agent partnership firm where one partner had not been proceeded against, the other was exonerated, and there was no independent finding of culpable participation by the firm. Penalty on an individual for alleged abetment and fraudulent clearance also failed because the evidence did not satisfactorily prove use of lorry receipts and octroi documents to divert goods or otherwise establish conduct rendering the goods liable to confiscation. On the record, the penalties on both appellants were set aside.

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Issues: (i) Whether the penalty imposed on the clearing agent partnership firm was sustainable when one partner was not proceeded against and the other stood exonerated. (ii) Whether the penalty imposed on Mukesh Shah for abetment and participation in the alleged fraudulent clearance and diversion of goods was sustainable on the evidence.

Issue (i): Whether the penalty imposed on the clearing agent partnership firm was sustainable when one partner was not proceeded against and the other stood exonerated.

Analysis: The record did not establish that the firm, as distinct from the individual acts of others, had the requisite culpable participation for penalty. The adjudication itself recorded that one partner had not been issued notice and the other partner was exonerated. In the absence of a clear finding that any person in charge of the firm was liable, and with no independent evidence showing that the partnership firm committed an act or omission attracting confiscation consequences, the penalty on the firm could not be sustained.

Conclusion: The penalty on the partnership firm was not sustainable and was set aside.

Issue (ii): Whether the penalty imposed on Mukesh Shah for abetment and participation in the alleged fraudulent clearance and diversion of goods was sustainable on the evidence.

Analysis: The material was examined issue-wise against the statutory requirement that penalty under Section 112 of the Customs Act, 1962 can be imposed only where the person does or omits to do an act, or abets such act, so as to render the goods liable to confiscation. Although the department relied on statements and surrounding circumstances, the evidence did not satisfactorily prove that the lorry receipts and octroi documents were actually used to divert the goods or that the entire quantity remained within the octroi limits. The seized goods were found outside Mumbai octroi limits, and the surrounding evidence was insufficient to conclusively establish the alleged misuse so as to attract penalty.

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

Final Conclusion: The appeals succeeded and the penalties imposed on both appellants were quashed.

Ratio Decidendi: Penalty under Section 112 of the Customs Act, 1962 requires clear proof of a person's act, omission, or abetment rendering the goods liable to confiscation; where such participation is not established and the evidence is insufficient, the penalty cannot stand.

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