Circumstantial evidence can sustain confiscation and penalty for foreign-origin goods when lawful import or possession is not proved.

Foreign-origin precious stones were held liable to confiscation even though Section 123 of the Customs Act, 1962 was inapplicable, because confiscation could be founded on cogent circumstantial evidence, the admitted foreign origin, and the possessor's failure to prove lawful import, acquisition, or possession of facts within special knowledge. The unreliable later vouchers did not rebut the inference of smuggling. Penalty was also sustained because conscious possession and guilty knowledge could be inferred from the totality of circumstances, including the absence of credible supporting evidence. The record therefore supported both confiscation and penal action on the basis of inferred smuggling and conscious possession.

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Issues: (i) whether the seized precious stones of foreign origin were liable to confiscation under the Customs Act, 1962 notwithstanding the inapplicability of Section 123; (ii) whether penalty under the Customs Act, 1962 was sustainable on the facts.

Issue (i): whether the seized precious stones of foreign origin were liable to confiscation under the Customs Act, 1962 notwithstanding the inapplicability of Section 123.

Analysis: The foreign origin of the stones was admitted in the appellant's own statement, and the later vouchers were found unreliable and uncorroborated. Even where the statutory rule in Section 123 did not apply, confiscation could still rest on circumstantial evidence, the surrounding facts, and the shifting of the evidentiary burden where the relevant facts were within the special knowledge of the person in possession. Foreign origin, coupled with the appellant's failure to establish lawful import, acquisition, or possession, justified the inference that the goods were smuggled and liable to confiscation.

Conclusion: The goods were lawfully held liable to confiscation, and this finding was against the assessee.

Issue (ii): whether penalty under the Customs Act, 1962 was sustainable on the facts.

Analysis: Once the appellant admitted foreign origin and failed to explain lawful import or possession, conscious possession of smuggled goods and the requisite guilty knowledge could be inferred from the totality of circumstances. The unreliability of the belated vouchers and the absence of credible supporting evidence reinforced the conclusion that the appellant knew the goods were liable to confiscation. On that basis, the mens rea required for penalty stood established.

Conclusion: Penalty was rightly imposed, though the appeal ultimately failed on the merits.

Final Conclusion: The appeal was rejected because the record supported confiscation of the foreign-origin goods and justified the imposition of penalty on the basis of inferred smuggling and conscious possession.

Ratio Decidendi: Even where Section 123 of the Customs Act, 1962 is inapplicable, confiscation and penalty may be sustained on cogent circumstantial evidence, especially when foreign origin is admitted and the possessor fails to prove lawful import or possession from facts within his special knowledge.

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