Strict proof required for penalty under central excise rules; retracted statements and suspicion were insufficient.

Penalty under Rule 26 of the Central Excise Rules, 2002 and Rule 209A of the Central Excise Rules, 1944 requires proof of actual participation in acquiring, transporting, removing, keeping, concealing, selling, purchasing, or otherwise dealing with excisable goods liable to confiscation. Mere suspicion, association with the manufacturer, or receipt of royalty was held insufficient. A retracted statement, unsupported by independent corroboration, could not establish the appellants' involvement or control over the alleged clandestine removals. On that material, the penalty was held unsustainable and was set aside.

---

---

Issues: Whether penalty on the appellants under Rule 26 of the Central Excise Rules, 2002 and Rule 209A of the Central Excise Rules, 1944 was sustainable on the basis of the material relied upon by the Department.

Analysis: Penalty under the cited rules could be imposed only if the Department proved actual involvement of the appellants in acquiring, transporting, removing, keeping, concealing, selling, purchasing, or otherwise dealing with excisable goods liable to confiscation. The Court held that penal provisions require strict construction and that mere suspicion, association with the manufacturer, or receipt of royalty was insufficient. The principal incriminating statement relied upon by the Department had been promptly retracted and was not supported by independent corroboration. The remaining material did not establish that the appellants themselves participated in any of the acts contemplated by Rule 26, nor did it show that they controlled the alleged clandestine removals.

Conclusion: The penalty imposed on the appellants was not legally sustainable and was set aside.

---