Mens rea is required for Rule 209A penalty; dealers without knowledge of confiscability cannot be penalised.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires knowledge or mens rea that the goods were liable to confiscation. Where the appellants were merely dealers who purchased goods on invoices from the manufacturer, and the record did not establish that they knew of any alleged ineligibility to SSI exemption or guilty intent, the penalty could not be sustained. The penalty was accordingly set aside and deleted in favour of the assessee.

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Issues: Whether penalty under Rule 209A could be sustained against the appellants in the absence of knowledge that the goods were liable to confiscation.

Analysis: The appellants were only dealers of the goods purchased under invoices from the manufacturer. The material did not show that they knew that the goods were liable to confiscation because the manufacturer was allegedly not entitled to SSI exemption on account of use of another's brand name. Penalty under Rule 209A requires mens rea, and the record did not establish such knowledge or guilty intent on the part of the appellants.

Conclusion: The penalty under Rule 209A was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent of deletion of the penalty imposed on the appellants.

Ratio Decidendi: Penalty under Rule 209A of the Central Excise Rules, 1944 cannot be imposed unless knowledge or mens rea is established.

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