Excise penalty requires valid statutory footing and evidence of personal involvement; pre-enactment Section 11AC and Rule 209A penalties failed.

Penalty under Section 11AC of the Central Excise Act could not be sustained for an alleged default occurring before that provision came into force, so that penalty was set aside. Personal penalty under Rule 209A of the Central Excise Rules also failed because there was no evidence linking the individual to the offending acts or showing knowledge or reason to believe that the goods were liable to confiscation, and that penalty was likewise set aside. The reduced penalty under Rule 173Q was not interfered with, as the authority's discretion was not shown to be wrongly exercised. The duty liability remained undisturbed and the Tribunal's order was affirmed.

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Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 could be sustained when the provision was not in force at the time of the alleged default; (ii) Whether personal penalty under Rule 209A of the Central Excise Rules, 1944 could be imposed without evidence linking the individual to the offending acts; (iii) Whether reduction of penalty under Rule 173Q of the Central Excise Rules, 1944 called for interference.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 could be sustained when the provision was not in force at the time of the alleged default.

Analysis: The liability to duty was not disputed, but the penalty under Section 11AC could not apply to an alleged default occurring before that provision was on the statute book. A penal provision cannot be sustained for a period when it had not come into force.

Conclusion: The penalty under Section 11AC was rightly set aside and the finding is in favour of the respondent.

Issue (ii): Whether personal penalty under Rule 209A of the Central Excise Rules, 1944 could be imposed without evidence linking the individual to the offending acts.

Analysis: Rule 209A required evidence showing that the person dealt with excisable goods with knowledge or reason to believe that they were liable to confiscation and that the person was concerned in the specified offending acts. In the absence of material connecting the individual with such acts, the foundation for personal penalty was lacking.

Conclusion: The personal penalty under Rule 209A was not sustainable and was rightly set aside in favour of the respondent.

Issue (iii): Whether reduction of penalty under Rule 173Q of the Central Excise Rules, 1944 called for interference.

Analysis: Rule 173Q vested discretion in the adjudicating authority regarding penalty. Although reasons for reducing the quantum were sparse, the original order did not itself establish confiscability of the goods and the Tribunal chose a lesser penalty to avoid further remand and shorten litigation. No sufficient ground was shown to interfere with that exercise of discretion.

Conclusion: The reduced penalty under Rule 173Q was sustained and the challenge to that part failed.

Final Conclusion: The Tribunal's order was affirmed in full, with the duty liability left undisturbed and the penal consequences modified only to the extent already granted by the Tribunal.

Ratio Decidendi: A penalty cannot be imposed under a provision that was not in force on the date of the alleged contravention, and a personal penalty under the excise rules requires evidence linking the person to the specified offending conduct.

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