Knowledge or Reason to Believe test in customs seizures upheld; penalties affirmed but moderated for proportionality.

Penalty under the Customs Act was considered against two appellants accused of possessing foreign-marked gold; the controlling legal test was whether the person "knows or has reason to believe" the goods were liable to confiscation. The Tribunal found inconsistencies in appellant accounts, absence of corroborative proof about the alleged intermediary, and conduct permitting an inference of prior knowledge, satisfying the Section 112(b) standard; it therefore affirmed imposition of penalties but moderated them on proportionality grounds in view of incarceration and ongoing prosecution.

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Issues: (i) Whether penalty under Section 112(b) of the Customs Act, 1962 can be sustained against the appellants who contended they had no prior knowledge of seized foreign-marked gold and whether the penalty amount requires modification.

Analysis: The Tribunal examined the factual matrix including the appellants' initial statements, the investigation records regarding the purported intermediary 'Rajesh Bhai' and the mobile number furnished, the absence of corroborative evidence to support the appellants' account, and their unilateral consent (no objection) to seizure. The Tribunal applied the statutory test under Section 112(b) which requires that the person 'knows or has reason to believe' the goods are liable to confiscation under Section 111. The Tribunal found significant lacunae and inconsistencies in the appellants' version, the failure of inquiries to verify the existence or whereabouts of the alleged intermediary or other corroborative details, and the circumstances permitting an inference of prior knowledge from conduct and attendant facts. While the authorities had already ordered absolute confiscation under Sections 111(b) and 111(d), the Tribunal considered proportionality and the appellants' incarceration and ongoing prosecution in deciding appropriate monetary punishment.

Conclusion: The Tribunal held that the requirement of 'reason to believe' under Section 112(b) is satisfied on the record and affirmed imposition of penalty but reduced the amounts to Rs.3,00,000 on Shri Vishal Kumar Trivedi and Rs.2,00,000 on Shri Kundan Kumar Vyas.

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