Independent penalty under Rule 26 upheld for knowing involvement in clandestine removal and duty evasion by a company director.

Independent penalty under Rule 26 of the Central Excise Rules, 2002 applies where a person knowingly participates in clandestine removal or other prohibited dealing with excisable goods liable to confiscation. Here, the Director admitted his involvement in the shortage, clearance of goods without invoice, and non-payment of duty, so his own conduct attracted Rule 26. The prior penalty on the company under Section 11AC did not prevent separate action against him. The exoneration order was therefore set aside and penalty upheld.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was imposable on the Director of the company for his admitted involvement in the clandestine removal and clearance of excisable goods without payment of duty.

Analysis: The shortage of raw material and finished goods was detected during stock verification, and the Director, who was present at the factory, admitted the shortage and stated that the goods found short had been consumed in manufacture and cleared without invoice and without payment of duty. Rule 26 applies to any person who, in relation to excisable goods, is concerned with transporting, removing, depositing, keeping, concealing, selling, purchasing, or otherwise dealing with goods which he knows or has reason to believe are liable to confiscation. The prior penalty on the company under Section 11AC did not bar separate penalty on the Director where his own conduct attracted Rule 26.

Conclusion: Penalty under Rule 26 of the Central Excise Rules, 2002 was rightly imposable on the Director, and the order exonerating him was set aside.

Ratio Decidendi: A person who knowingly participates in the clandestine removal or other prohibited dealing with excisable goods liable to confiscation is independently liable to penalty under Rule 26, even if the company has also been penalized under Section 11AC.

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