Knowledge requirement for buyer penalty under Central Excise law was not proved, so confiscation and penalty were set aside.

Confiscation and penalty under Rule 209A of the Central Excise Rules, 1944 could not be sustained against buyers where no material showed that they knew or had reason to believe the goods were liable to confiscation. The proceedings rested on an alleged duty short-payment by the manufacturer, but that alone did not establish the buyers' requisite knowledge. The long delay after seizure also made redemption fine and penalty inappropriate on the facts. The confiscation order and buyer penalties were therefore set aside.

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Issues: Whether confiscation of the goods and penalty on the buyers under Rule 209A of the Central Excise Rules, 1944, could be sustained when their knowledge or reason to believe that the goods were liable to confiscation was not established.

Analysis: The buyers were proceeded against on the premise that the manufacturer had cleared the goods at a duty lower than that approved by the department. However, there was no finding or material showing that the buyers knew or had reason to believe that the goods were so liable to confiscation. The circumstances also showed that the goods had been seized long back and the confiscation order had been passed after a substantial lapse of time, making redemption fine and penalty inappropriate on the facts.

Conclusion: The confiscation order and the penalty imposed on the buyers were unsustainable and were set aside, with the appeals being allowed.

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