Customs penalty under Section 112(b) fails when smuggled character is unproved and burden of proof does not shift.

Penalty under Section 112(b) of the Customs Act could not be sustained where the seized garments were not proved to be smuggled goods, the consignment was mixed with other goods, and no clear identification linked the appellant's sold garments to the seized items. The appellant had produced Bills of Entry, sale invoice and GST entries to support lawful possession, and the goods were not notified under Section 123 so the burden did not shift to the appellant. On these facts, mere suspicion or foreign-origin markings on some goods was insufficient, and the penalty was set aside.

---

---

Issues: Whether the penalty imposed under Section 112(b) of the Customs Act, 1962 was sustainable in respect of the seized garments, and whether the appellant could be fastened with liability when the goods had already been sold, the goods were mixed with other consignments, and their smuggled character was not established.

Analysis: The appellant was a regular importer of ready-made garments and had produced Bills of Entry, sale invoice, and GST return entries to explain lawful possession and sale of the goods. The seized consignment was found in a truck carrying mixed garments, and there was no clear identification linking the appellant's sold goods to the seized goods. The goods were not notified under Section 123 of the Customs Act, 1962, and the circumstances did not justify shifting the burden on the appellant to prove lawful origin. The record did not establish that the seized goods were smuggled goods or that the appellant was concerned with dealing in goods liable to confiscation within the meaning of Section 112(b) of the Customs Act, 1962.

Conclusion: The penalty under Section 112(b) of the Customs Act, 1962 was unsustainable and was set aside.

Final Conclusion: The appellant was entitled to relief, and the impugned penalty could not survive on the facts proved before the Tribunal.

Ratio Decidendi: Where seized goods are not shown to be smuggled goods and the burden of proof is not statutorily shifted, penalty under Section 112(b) of the Customs Act, 1962 cannot be sustained merely on suspicion or on the basis of foreign origin marks on some goods.

---