Rule 26(1) penalty reduced where goods were bought without invoices and duty was later paid by the manufacturer.

Penalty under Rule 26(1) of the Central Excise Rules, 2002 was sustained on the finding that the trader had purchased castings cleared without central excise invoices and without duty payment, but the quantum was reduced in view of the overall facts and circumstances, including subsequent payment of duty by the manufacturer. The adjudicatory authority interfered only with the extent of penalty and reduced it from Rs.40,000 to Rs.25,000, while otherwise rejecting the appeal.

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Issues: Whether the penalty imposed under Rule 26(1) of the Central Excise Rules, 2002 required reduction.

Analysis: The appellant, a trader, had purchased castings cleared without central excise invoices and without payment of duty. The duty demand stood subsequently paid by the manufacturer. Considering the overall facts and circumstances, the quantum of penalty was found to warrant interference.

Conclusion: The penalty was reduced from Rs.40,000/- to Rs.25,000/-. The appeal was otherwise rejected.

Ratio Decidendi: Where the substantive facts justify interference only with the quantum of penalty, the penalty may be reduced while maintaining the finding of liability under Rule 26(1) of the Central Excise Rules, 2002.

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