Knowing dealing with confiscable goods is essential for Rule 209A penalty; absent proof, the penalty fails.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires proof that the person knowingly dealt with goods liable to confiscation, or did so with reasonable belief of that liability. Mere reference to a production pattern or general allegations of evasion is insufficient without material linking the Managing Director to the alleged illegal activity. As there was no evidence of his involvement in clearance of goods or day-to-day operations, the factual foundation for penalty was absent and the penalty was set aside.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained against the Managing Director in the absence of evidence showing his knowing dealing with goods liable to confiscation.

Analysis: Penalty under Rule 209A requires the Department to establish that the person concerned dealt with the goods with knowledge, or reasonable belief, that the goods were liable to confiscation. The record did not contain material connecting the appellant with the alleged illegal activities for evasion of duty beyond a general reference to the production pattern. There was no evidence showing his involvement in clearance of goods or in the relevant day-to-day operations, and the necessary factual foundation for penalty was absent.

Conclusion: The penalty could not be imposed and was set aside in favour of the assessee.

Ratio Decidendi: Penalty under Rule 209A of the Central Excise Rules, 1944 is sustainable only when the Department proves knowing dealing with goods liable to confiscation; absence of such proof defeats the penalty.

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