Penalty under Rule 26 is only a ceiling, not a mandatory minimum, and enhancement was ?

Rule 26 of the Central Excise Rules, 2002 was construed as prescribing only a maximum penalty, not a mandatory minimum of Rs. 10,000, for a person concerned with excisable goods liable to confiscation. The phrase "a penalty not exceeding the duty on such goods or rupees ten thousand, whichever is greater" was treated as a ceiling on penalty, and the same interpretation was applied to the parallel wording in Rule 25(1). As the provision did not impose a floor, the request for enhancement of penalty was rejected and the existing penalty of Rs. 2,500 was sustained, consistent with the Larger Bench view in Rama Wood Craft (P) Ltd.

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Issues: Whether Rule 26 of the Central Excise Rules, 2002 prescribes a minimum penalty of Rs. 10,000 for a person concerned with excisable goods liable to confiscation.

Analysis: Rule 26 was read as using the expression "a penalty not exceeding the duty on such goods or rupees ten thousand, whichever is greater", which was held to fix only the ceiling of penalty and not a floor. The same construction was applied to the parallel wording of Rule 25(1). Since the rule does not use language imposing a mandatory minimum, the departmental plea for enhancement of penalty was rejected. The reasoning was supported by the view taken by the Larger Bench in Rama Wood Craft (P) Ltd.

Conclusion: Rule 26 does not prescribe a minimum penalty of Rs. 10,000. The penalty of Rs. 2,500 was sustained and the Revenue's request for enhancement failed.

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