Proof of nexus with smuggled goods is essential before confiscating currency or imposing Customs penalties.

Confiscation of seized Indian currency and Bangladesh Taka under the Customs Act required independent, reliable evidence proving that the cash represented the sale proceeds of smuggled goods. A retracted statement of a co-accused, without corroboration, and mere suspicion were insufficient to establish the required nexus. The department had to prove the link to smuggling, and the appellants were not required to prove the source of the cash. On the facts described, the materials against both appellants did not satisfy that burden, so confiscation and personal penalties were not sustainable.

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Issues: Whether the seized Indian currency and Bangladesh Taka were liable to confiscation as sale proceeds of smuggled goods, and whether the personal penalties imposed on the appellants were sustainable.

Analysis: The confiscation could stand only if the department established, by independent and reliable evidence, that the Indian currency represented the sale proceeds of smuggled Bangladesh Taka. A retracted statement of a co-accused, without corroboration, was not sufficient to discharge that burden. The Indian currency was not a notified item, and the department had to prove the nexus with smuggled goods; the appellants were not required to prove the source of the cash. In the case of Kiran Chandra Sarkar, the surrounding circumstances created suspicion, but there was no independent evidence proving that the Rs. 40,000 and the 400 Bangladesh Taka were sale proceeds of smuggled currency. In the case of Provash Chandra Dey, the only material was the retracted confession of the co-accused and his unexplained possession of cash, which by itself was insufficient to sustain confiscation or penalty.

Conclusion: The confiscation of the seized currencies and the penalties imposed under the Customs Act were not sustainable.

Ratio Decidendi: Confiscation under section 121 of the Customs Act, 1962 and penalty under section 112 can be sustained only on proof, supported by independent evidence, that the currency in question is the sale proceeds of smuggled goods; a retracted confession of a co-accused and mere suspicion are insufficient.

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