Customs penalty requires proof of knowledge; factory-sealed export and verified documents defeated liability here.

Penalties under the Customs Act, 1962 were held unsustainable where the export consignment was factory-sealed, the seals remained intact, and the exporter's KYC particulars and self-sealing permission were verified as genuine. On those facts, no material showed that the customs broker, its director, or connected employees had knowledge that red sanders logs were being exported as contraband goods. The prior proceedings under the Customs Broker Regulations had also been dropped. In the absence of evidence establishing knowledge or culpability, the statutory basis for penalty was not made out and the penalties were set aside.

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Issues: Whether penalties under the Customs Act, 1962 were sustainable against the customs broker and connected appellants in the absence of evidence showing knowledge of contraband export and where the consignment was factory-sealed and the relevant broker proceedings had already been dropped.

Analysis: The consignment was exported in factory-sealed condition, the seals were found intact, and the exporter's KYC particulars and self-sealing permission were obtained and found genuine. On these facts, no material was brought on record to show that the customs broker, its director, or the connected employees had knowledge that red sanders logs were being exported as contraband goods. The earlier proceedings under the Customs Broker Regulations had also been dropped. In the absence of evidence establishing knowledge or culpability, the foundation for penalty was not made out.

Conclusion: The penalties under the Customs Act, 1962 were not imposable and were set aside in favour of the appellants.

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