Rule 26 of Central Excise Rules found prima facie ultra vires; interim protection granted against penalty enforcement.

Rule 26 of the Central Excise Rules was held prima facie to exceed the rule-making power under the Central Excise Act, 1944 because Section 11AC confines penalty to the person liable to pay duty as determined under Section 11A(2), while Rule 26 extends penalty to persons dealing with excisable goods liable to confiscation. Applying the principle that penalty can be imposed only by authority of law, the Court found the impugned rule apparently wider than the enabling provision and granted interim protection against enforcement of the penalty order.

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Issues: Whether Rule 26 of the Central Excise Rules is prima facie ultra vires Section 11AC of the Central Excise Act, 1944 so as to justify interim restraint against enforcement of the impugned penalty order.

Analysis: Section 11AC contemplates penalty on the person liable to pay duty as determined under Section 11A(2). Rule 26, which authorises penalty on persons concerned with possession, transport, removal, deposit, concealment, sale, purchase or other dealing with excisable goods liable to confiscation, was held to be prima facie wider than the enabling provision. The Court also proceeded on the settled principle that penalty cannot be imposed except by authority of law.

Conclusion: Rule 26 was held prima facie to be in excess of the rule-making power under the Central Excise Act, 1944, and interim protection was granted in favour of the petitioner.

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