Penalty under Section 112 quashed for lack of proof that non-notified goods were smuggled under Section 123

CESTAT Kolkata set aside the penalty imposed on the appellant under Section 112 of the Customs Act, 1962 for alleged transportation of smuggled leather jackets and readymade garments. The Tribunal held that the seized goods, though suspected to be smuggled, were not notified items under Section 123, so the burden of proving smuggling lay on the Department. As there was no corroborative evidence that the goods were smuggled or imported without payment of customs duty, mere transportation in a leased parcel van was insufficient. The appeal was allowed and the penalty cancelled.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the seized leather jackets and readymade garments, not being goods notified under Section 123 of the Customs Act, 1962, were proved by the Department to be smuggled into India without payment of customs duty.

1.2 Whether mere transportation of the seized goods in a railway parcel van leased to the appellant, without corroborative evidence of smuggling, justified imposition of penalty under Section 112 of the Customs Act, 1962.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Proof of smuggled nature of seized goods (non-notified items)

Legal framework: The Court noted that leather jackets and garments are not notified items under Section 123 of the Customs Act, 1962, and therefore the burden lies on the Department to establish that the goods are smuggled and imported without payment of appropriate customs duties.

Interpretation and reasoning: The Court observed that the seizure was made on the belief that the recovered 1248 pieces of leather jackets and readymade garments were smuggled into the country without payment of customs duty. However, it found no evidence on record to corroborate this allegation. No material was produced to show illicit importation or non-payment of duty, and the mere presence of foreign-origin garments in the parcel van was held insufficient to establish smuggling when Section 123 did not apply.

Conclusions: The Court held that the Department failed to discharge its burden of proving that the seized goods were smuggled in nature and illegally imported without payment of customs duties.

Issue 2: Liability to penalty under Section 112 for transportation of alleged smuggled goods

Legal framework (as discussed): Penalty under Section 112 of the Customs Act, 1962, presupposes involvement in, or facilitation of, acts rendering goods liable to confiscation, such as aiding transportation of smuggled goods.

Interpretation and reasoning: The Court noted that the parcel van from which the goods were recovered was leased to the appellant, and therefore transportation of booked consignments in that van was his responsibility. However, it held that this fact alone did not establish that the appellant was involved in transporting smuggled goods. In the absence of evidence establishing that the goods were smuggled, it could not be inferred that the appellant had helped in transportation of smuggled goods. The penalty had effectively been imposed merely because the goods were found in a parcel van leased to the appellant, without any corroborative evidence of smuggling or of the appellant's knowledge or involvement.

Conclusions: The Court concluded that, as the smuggled nature of the goods was not established, the allegation that the appellant engaged in transportation of smuggled goods was unsustainable. Consequently, no penalty was imposable on the appellant under Section 112 of the Customs Act, 1962, and the penalty imposed was set aside with consequential relief.

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