Burden of proof for notified goods recovery from controlled premises sustains customs penalty, with quantum reducible on mitigation.
Penalty under Section 112 of the Customs Act is sustainable where notified goods are recovered from premises under a person's possession, custody or control and no lawful source or documentary proof of possession is shown. The text explains that recovery of gold from a godown under the appellant's control shifted the burden to establish lawful import or acquisition, which was not discharged. Conscious involvement in keeping, harbouring or dealing with goods liable to confiscation was inferred from the surrounding circumstances. It also notes that penalty quantum may be reduced on mitigating factors, including absence of foreign markings on record and incomplete compliance with safeguards for statement evidence, while liability itself remains intact.
Issues: (i) whether the appellant's conduct attracted penalty under Section 112(a) and Section 112(b) of the Customs Act, 1962 for keeping, harbouring or dealing with smuggled gold found in premises under his control; (ii) whether the penalty required reduction in view of the mitigating circumstances noticed by the Tribunal.
Issue (i): whether the appellant's conduct attracted penalty under Section 112(a) and Section 112(b) of the Customs Act, 1962 for keeping, harbouring or dealing with smuggled gold found in premises under his control.
Analysis: Gold was recovered from the godown premises under the appellant's custody and control, and no licit documents were produced to show lawful importation, acquisition or possession. The Tribunal treated gold as a notified commodity and held that once notified goods are recovered from premises in the possession, custody or control of a person, the burden shifts to that person to establish lawful possession. The appellant failed to discharge that burden, and the surrounding circumstances, including his association with the premises and his statements during investigation, supported conscious involvement in keeping, harbouring and dealing with goods liable to confiscation. The absence of full evidentiary compliance regarding the statements did not dislodge the Revenue's case.
Conclusion: The appellant was held liable to penalty under Section 112(a) and Section 112(b) of the Customs Act, 1962.
Issue (ii): whether the penalty required reduction in view of the mitigating circumstances noticed by the Tribunal.
Analysis: Although liability for penalty was sustained, the Tribunal took note that the seized gold did not bear foreign markings on record and that the statements relied upon had not been tested with the safeguards contemplated by Section 138B of the Customs Act, 1962. These circumstances were considered relevant to the quantum of penalty and justified a lenient approach.
Conclusion: The penalty was reduced from Rs. 8,00,000 to Rs. 2,00,000.
Final Conclusion: The impugned order was modified only to the extent of reducing the penalty, while maintaining the finding of liability under Section 112(a) and Section 112(b) of the Customs Act, 1962.
Ratio Decidendi: Where notified goods are recovered from premises under a person's possession, custody or control and no lawful source is established, the statutory burden remains undischarged and penalty under Section 112 of the Customs Act, 1962 is sustainable, though the quantum may be moderated on mitigating circumstances.