Customs penalty requires prima facie proof of smuggled goods and conscious involvement; mere foreign markings are insufficient.

Penalty under Section 112(b) of the Customs Act was unsustainable where the goods were not notified under Section 123 and no statutory presumption of smuggling arose. The Department had to first establish a prima facie case that the goods were smuggled and that the person proceeded against had conscious possession or reason to believe they were liable to confiscation. Mere foreign markings, unexplained possession, or absence of documents was insufficient without proof of clandestine import or violation of import restrictions. On the facts, the initial burden was not discharged, so the penalty was set aside while confiscation remained undisturbed.

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Issues: Whether penalty under Section 112(b) of the Customs Act, 1962 was sustainable when the seized goods were not notified under Section 123 of the Act or covered by Chapter IV-A, and whether the Department had discharged the initial burden of proving that the goods were smuggled and liable to confiscation.

Analysis: Penalty under Section 112(b) required proof that the appellant had possession of goods knowing, or having reason to believe, that they were liable to confiscation under Section 111. The goods were not notified under Section 123 and therefore no statutory presumption against the appellant arose. Mere recovery of foreign-marked articles, or the circumstance that the appellant could not produce valid documents, was not by itself enough to establish smuggled character. The Department had to first produce prima facie evidence of clandestine import or violation of import restrictions, and suspicion could not replace proof. On the facts, such initial burden was not discharged for the goods without foreign markings, and even for the few goods with foreign markings, the evidence was insufficient to prove knowledge or conscious dealing by the appellant so as to attract penalty.

Conclusion: The penalty under Section 112(b) was not legally sustainable and was set aside.

Final Conclusion: The appeal succeeded on the penalty issue, while the confiscation of the goods was left undisturbed.

Ratio Decidendi: For non-notified goods, the Customs authorities must first establish a prima facie case of smuggled character and conscious involvement of the person proceeded against before a penalty under Section 112(b) can be imposed.

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