Knowledge requirement for customs penalty under Section 112 bars liability absent conscious possession or reason to believe goods were confiscable.

Penalty under Section 112 of the Customs Act is sustainable only where the person knew, or had reason to believe, that the goods were liable to confiscation. On the stated facts, the appellant was found not to have smuggled the goods and there was no evidence of conscious or mala fide possession. In the absence of the required knowledge or reason to believe, the penalty provision could not be invoked, and the penalty was held not sustainable.

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Issues: Whether penalty under Section 112 of the Customs Act, 1962 was sustainable when the appellant was found not to have knowingly or with reason to believe possessed goods liable to confiscation.

Analysis: The order under appeal proceeded on the premise that the appellant did not smuggle the goods and that there was no evidence of conscious or mala fide possession. For penalty under Section 112, the statutory requirement is that the person must have knowledge or reason to believe that the goods are liable to confiscation. In the absence of such knowledge or reason to believe, the penalty provision could not be invoked.

Conclusion: The penalty was not sustainable and the assessee succeeded on this issue.

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