Natural justice and proof requirements bar Customs penalties absent notice, hearing, and credible evidence of active involvement.

Penalty under the Customs Act cannot be sustained where no show cause notice was served on the appellant and no proper opportunity of hearing was afforded; the adverse order was therefore set aside for breach of natural justice. Penalties under Sections 112(a), 112(b) and 114AA were also held unsustainable because the department produced no credible evidence of the appellant's active role, knowledge, or linkage to the alleged diversion of goods, and did not establish the specific ingredients of the penal provisions. The impugned penalty order was set aside in entirety to the extent challenged, and the appeal succeeded.

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Issues: (i) whether the penalty order was sustainable when no show cause notice was served on the appellant and no proper opportunity of hearing was afforded; (ii) whether penalties under Sections 112(a), 112(b) and 114AA of the Customs Act, 1962 were maintainable in the absence of credible evidence showing the appellant's active role or knowledge in the alleged diversion of goods.

Issue (i): Whether the penalty order was sustainable when no show cause notice was served on the appellant and no proper opportunity of hearing was afforded.

Analysis: The record showed that the appellant was not served with the show cause notice and was not even named as a noticee. The Customs framework did not provide for service of notice through portal upload in the manner suggested by the department. An adverse order passed without issuance of notice and without affording a proper hearing could not stand.

Conclusion: The penalty order was unsustainable for breach of natural justice and want of notice, and the finding is in favour of the assessee.

Issue (ii): Whether penalties under Sections 112(a), 112(b) and 114AA of the Customs Act, 1962 were maintainable in the absence of credible evidence showing the appellant's active role or knowledge in the alleged diversion of goods.

Analysis: The department failed to produce transport documents, invoices, bank records, delivery instructions or correspondence linking the appellant to the alleged diversion. The material relied upon did not attribute any active role to him, and no facts were established to satisfy the ingredients of Sections 112(a), 112(b) or 114AA. In the absence of proof of a specific act or omission, possession, handling, or a false declaration or document, the penalty could not be sustained.

Conclusion: The penalties under Sections 112(a), 112(b) and 114AA were not maintainable, and the finding is in favour of the assessee.

Final Conclusion: The impugned penalty order was set aside in entirety to the extent challenged, and the appeal succeeded.

Ratio Decidendi: Penalty under the Customs Act cannot be sustained unless the noticee is served with notice and the department establishes, by credible evidence, the specific ingredients of the penal provisions, including the person's active participation or knowledge where required.

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