Rule 26 penalty requires dealing with goods liable to confiscation; record manipulation alone was insufficient here.

Penalty on a director under Rule 26 of the Central Excise Rules, 2002 is sustainable only where the person deals with excisable goods liable to confiscation, with knowledge or reason to believe that liability exists. Here, the director merely manipulated records and did not physically deal with any excisable goods, and no goods were held liable to confiscation. That statutory precondition was therefore absent, making Rule 26 inapplicable. The absence of penalty on the company under the related Cenvat Credit provisions also supported the conclusion that the director's penalty was unwarranted. The penalty was set aside.

---

---

Issues: Whether penalty on the director was sustainable under Rule 26 of the Central Excise Rules, 2002 when no goods were held liable to confiscation and the director had only manipulated records.

Analysis: Penalty under Rule 26 applies only where a person deals with excisable goods that are liable to confiscation, with knowledge or reason to believe of such liability. The findings recorded below were that the director had manipulated records but had not physically dealt with any excisable goods. Since no goods were held liable to confiscation, the statutory condition for invoking Rule 26 was not satisfied. The order also noted that no penalty had been imposed on the company under Rule 13(2) of the Cenvat Credit Rules, 2002, which supported the view that penalty on the director was unwarranted on merits.

Conclusion: The penalty on the director was not sustainable and was set aside.

---