Customs penalty requires proof of knowledge or reason to believe that goods were liable to confiscation; mere storage was insufficient.

Penalty under Section 112 of the Customs Act was held unsustainable where the record did not show that the appellant knew, or had reason to believe, that the goods stored in his godown were liable to confiscation under Section 111. Mere involvement in storage was insufficient to establish the requisite mental element for penal liability under the confiscation scheme. On that basis, the penalty was set aside in favour of the assessee.

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Issues: Whether penalty under Section 112 of the Customs Act, 1962 could be sustained against the appellant in the absence of evidence that he had knowledge or reasonable belief that the goods stored in his godown were liable to confiscation under Section 111 of the Customs Act, 1962.

Analysis: The record did not disclose any material showing that the appellant was aware of, or had reason to believe, that the goods kept in his godown were smuggled or otherwise liable to confiscation. The finding of involvement in storage, by itself, was insufficient to establish the mental element required for penal liability under the confiscation scheme.

Conclusion: Penalty under Section 112 was not justified and was set aside in favour of the assessee.

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