Rule 26 penalty on a company director fails absent proof of personal involvement, knowledge, or mens rea

Penalty on a company director under Rule 26 of the Central Excise Rules was unsustainable because the record showed no specific act of dealing with excisable goods, no allegation of personal involvement, and no evidence of knowledge or reason to believe that the goods were liable for confiscation. Mere designation as director or general control of the unit was insufficient without proof of mens rea or direct participation. The penalty was therefore set aside and the Revenue's appeal failed.

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Issues: Whether penalty on a company director was sustainable under Rule 26 of the Central Excise Rules in the absence of evidence showing his personal role, mens rea, or knowledge that the goods were liable for confiscation.

Analysis: Rule 26 fastens penalty only on a person who acquires possession of, transports, removes, deposits, keeps, conceals, sells, purchases, or otherwise deals with excisable goods, knowing or having reason to believe that they are liable for confiscation. The record contained no finding or allegation of any specific act by the director showing that he personally dealt with the goods or intended to evade duty. The absence of evidence of mens rea or of personal involvement meant that mere designation as director and general overall charge of the unit was insufficient to sustain penalty.

Conclusion: Penalty on the director was not sustainable, and the Revenue's appeal failed.

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