Rule 209A penalty requires guilty knowledge that goods are liable to confiscation; absent that, the penalty fails.

Penalty under Rule 209A of the Central Excise Rules required proof that the person dealt with excisable goods knowing or having reason to believe they were liable to confiscation. The allegation rested on incorrect invoice particulars said to facilitate credit, but the goods were iron and steel ingots or scrap covered by Modvat credit. As the necessary guilty knowledge was not established, the penalty was not sustainable and was set aside.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules was imposable on the appellant.

Analysis: Penalty under Rule 209A could be imposed only where a person dealt with excisable goods knowing or having reason to believe that they were liable to confiscation. The finding against the appellant was based on the allegation of incorrect particulars in invoices issued for excisable goods to facilitate credit. However, the goods in question were ingots or scrap of iron and steel, both of which were covered by Modvat credit, and therefore the necessary guilty knowledge that the goods were liable to confiscation was not established.

Conclusion: Penalty under Rule 209A was not sustainable and was set aside in favour of the appellant.

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