Rule 26 penalty requires proven dealing with excisable goods and knowledge of confiscability, not brokerage alone.

Penalty under Rule 26 of the Central Excise Rules, 2002 requires proof that a person was concerned with excisable goods in a manner covered by the rule and had knowledge or reason to believe that the goods were liable to confiscation. Mere brokerage or commission-agent activity, without evidence of acquiring, dealing with, transporting, removing, keeping, concealing, selling or purchasing the goods, does not satisfy the statutory ingredients. On the facts described, the notices rested on brokerage activity and statements alone, which were insufficient to attract the penal provision, and the penalty was stated to be not exigible.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable when the noticees were only brokers or commission agents and were not shown to have acquired, dealt with, transported, removed, kept, concealed, sold or purchased any excisable goods liable to confiscation.

Analysis: Rule 26 requires satisfaction of the specified condition precedent before penalty can be imposed, namely that the person must have been concerned with excisable goods in a manner contemplated by the rule and with knowledge or reason to believe that the goods were liable to confiscation. On the facts found, the noticees were not shown to have handled any excisable goods or to have dealt with them in any prohibited manner. The case against them rested on brokerage activity and statements, which did not establish the statutory ingredients needed to attract the penal provision.

Conclusion: Penalty under Rule 26 was not exigible; the finding of penalty was set aside in favour of the assessees.

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