Rule 209A penalty for dealing in goods without duty-paying documents sustained, with quantum reduced on facts.

Penalty under Rule 209A of the Central Excise Rules, 1944 was upheld where the appellant dealt with processed fabrics received without duty-paying documents and had not filed the declaration required for exemption from Rule 174 under Notification No. 27/92-C.E. The receipt of goods only with folding reports, together with the processing unit's statement that the goods were cleared without duty, established knowledge that the goods were liable to confiscation. The liability finding was sustained, but the penalty was moderated on the facts and reduced to Rs. 1,00,000.

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Issues: (i) Whether the appellant was liable to penalty under Rule 209A of the Central Excise Rules, 1944 for dealing with processed fabrics received without duty-paying documents; (ii) Whether the penalty required reduction in the facts of the case.

Issue (i): Whether the appellant was liable to penalty under Rule 209A of the Central Excise Rules, 1944 for dealing with processed fabrics received without duty-paying documents.

Analysis: The appellant procured grey fabrics and sent them for processing on job work basis, but did not file the declaration required for exemption from the rigour of Rule 174 of the Central Excise Rules, 1944 under Notification No. 27/92-C.E. dated 9-10-1992. The processed fabrics were received only with folding reports and not under cover of duty-paying documents, and the processing unit had ed that the goods were cleared without payment of duty. These facts established knowledge that the goods were liable to confiscation, bringing the appellant within the mischief of Rule 209A.

Conclusion: The penalty under Rule 209A was correctly attracted and was sustainable against the appellant.

Issue (ii): Whether the penalty required reduction in the facts of the case.

Analysis: Although the penalty was justified, the surrounding facts and circumstances warranted moderation of the quantum.

Conclusion: The penalty was reduced to Rs. 1,00,000/-.

Final Conclusion: The appeal succeeded only to the extent of reduction of penalty, while the finding of liability under Rule 209A was maintained.

Ratio Decidendi: A person dealing with excisable goods received without duty-paying documents, and without complying with the declaration requirement for job-work based exemption, can be subjected to penalty under Rule 209A when knowledge of the goods being liable to confiscation is established.

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