Knowledge requirement for excise penalty bars liability absent a finding that goods were knowingly dealt with as confiscable.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires proof that a person acquired, transported, removed, deposited, kept, concealed, sold, purchased or otherwise dealt with excisable goods while knowing or having reason to believe that they were liable to confiscation. Rule 26 of the Central Excise (No. 2) Rules, 2001 is pari materia. Where the record contains no factual finding that the person knowingly dealt with the goods in that manner, a bare recital of transport, purchase or sale is insufficient to sustain penalty. On that basis, the penalty was held unsustainable and set aside.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise (No. 2) Rules, 2001 could be sustained in the absence of findings that the appellants knowingly dealt with goods liable to confiscation.

Analysis: Penalty under Rule 209A of the Central Excise Rules, 1944 requires proof that the person concerned acquired possession of, transported, removed, deposited, kept, concealed, sold, purchased, or otherwise dealt with excisable goods, knowing or having reason to believe that they were liable to confiscation. Rule 26 of the Central Excise (No. 2) Rules, 2001 is pari materia. The impugned order contained no factual finding that the appellants physically dealt with the goods with the requisite knowledge or belief, and the mere recital of transport, purchase, or sale was insufficient to support penalty.

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

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