Customs penalty requires corroborated evidence and compliant statements; third-party records alone were insufficient to sustain liability.

Penalty under section 112(b) of the Customs Act could not be sustained where the department relied mainly on third-party records and a statement under section 108 without compliance with section 138B. The appellants had denied purchasing the alleged non-duty-paid goods and produced purchase ledgers, bank records and clearance documents showing recorded sales of fabricated material to the supplier. As the statement was not tested in the manner required by law, it could not serve as substantive evidence, and the record lacked independent corroboration of knowledge or involvement in goods liable to confiscation. The penalty order was therefore set aside.

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Issues: Whether penalty under section 112(b) of the Customs Act, 1962 could be sustained against the appellants on the basis of alleged purchase of non-duty-paid goods, supported mainly by third-party records and a statement recorded under section 108 of the Customs Act, 1962, without compliance with section 138B of the Customs Act, 1962.

Analysis: The appellants consistently denied any purchase of the alleged goods from the supplier and explained that they had only made recorded sales of fabricated material to the supplier against ARE-1 certificates. They produced purchase ledgers, bank records and clearance documents to support their stand. The impugned order did not deal with these explanations and proceeded mainly on the basis of records maintained by the supplier and the statement recorded under section 108. Since the statement was not tested in the manner required by section 138B, it could not be relied upon as substantive evidence. For penalty under section 112(b), the department had to establish that the appellants were concerned with goods liable to confiscation and that they had the necessary knowledge or belief regarding such liability. That foundational requirement was not met on the evidence on record, and the case lacked independent corroboration.

Conclusion: Penalty under section 112(b) could not be sustained; the order imposing penalty on the appellants was set aside.

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