Mens rea is essential for customs penalty under Section 112(b); mere transport of sealed consignments was insufficient.

Penalty under Section 112(b) of the Customs Act, 1962 requires proof that a person dealt with goods knowing, or having reason to believe, that they were liable to confiscation. The logistics company transported sealed consignments booked as garments on invoice basis, cooperated when one consignment was intercepted, and followed its standard operating procedure for the remaining consignments. A communication that did not clearly require circulation to all branches and a mere internal procedural lapse were insufficient to establish mens rea, deliberate defiance, or conscious disregard of law. On these facts, the penalty was not sustainable and was set aside.

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Issues: Whether penalty under Section 112(b) of the Customs Act, 1962 was sustainable against the logistics company and its manager in the absence of proof that they knew or had reason to believe that the consignments contained goods liable to confiscation.

Analysis: Penalty under Section 112(b) attaches only where a person acquires possession of, or deals with, goods with knowledge or reason to believe that they are liable to confiscation. The admitted facts showed that the goods were booked as garments on the basis of invoices, the appellant logistics company acted as a transporter of sealed consignments, one consignment was intercepted with the appellant's cooperation, and the remaining consignments were released in accordance with the company's standard operating procedure after a communication that did not clearly require circulation to all branches. The circumstances did not establish deliberate defiance of law, contumacious conduct, or conscious disregard of an obligation. Mere transportation or a procedural lapse in internal communication was held insufficient to infer mens rea, and the physical act of carriage alone did not satisfy the statutory requirement.

Conclusion: Penalty under Section 112(b) was not sustainable and was set aside in favour of the appellants.

Ratio Decidendi: Penalty under Section 112(b) of the Customs Act, 1962 cannot be imposed unless the person is shown to have dealt with the goods with knowledge or reason to believe that they were liable to confiscation; mere transportation or a procedural lapse, without mens rea, is insufficient.

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