Penalty provisions under Central Excise Rules apply only to specified persons and require physical dealing with goods for invocation.

Penalty under Rule 25 of the Central Excise Rules, 2002 cannot be imposed on a mere purchaser who is not a producer, manufacturer, registered re-warehousing person, or registered dealer; the provision applies only to the persons expressly covered by it, so the penalty against the assessee was unsustainable. Penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 also could not be sustained against a director where the record did not show physical receipt or dealing with the goods in respect of part of the consignments; on that basis, the penalty against the director was also set aside.

---

---

Issues: (i) Whether penalty under Rule 25 of the Central Excise Rules, 2002 could be imposed on a purchaser of goods who was not a producer, manufacturer, registered person of re-warehousing or registered dealer; (ii) Whether penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 could be sustained against a director where the assessee had not physically dealt with the goods.

Issue (i): Whether penalty under Rule 25 of the Central Excise Rules, 2002 could be imposed on a purchaser of goods who was not a producer, manufacturer, registered person of re-warehousing or registered dealer.

Analysis: Rule 25 applies only to specified persons connected with production, manufacture, registration for re-warehousing, or registered dealership. The appellant was only a purchaser of goods manufactured by another EOU and therefore did not fall within the class of persons covered by the rule.

Conclusion: Penalty under Rule 25 of the Central Excise Rules, 2002 was not sustainable against the assessee.

Issue (ii): Whether penalty under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 could be sustained against a director where the assessee had not physically dealt with the goods.

Analysis: The record showed that the goods were not physically received by the assessee in respect of part of the consignments, and the governing penalty provision was not attracted in the absence of physical dealing with the goods. The Larger Bench view relied on this requirement for invocation of the penalty provision.

Conclusion: Penalty on the director under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 was not sustainable.

Final Conclusion: The penalties imposed on both appellants were set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: Penal provisions under the Central Excise Rules apply only to persons expressly covered by the rule, and where physical dealing with the goods is absent, penalty cannot be sustained.

---