Retrospective penalty under Central Excise Rules cannot apply to clearances made before the penal provision came into force.

Penalty under Rule 26(2)(ii) of the Central Excise Rules, 2002 could not be imposed for clearances made before 01.03.2007 because the provision was inserted only by Notification No. 08/2007-CE(T) with effect from that date. The relevant clearances related to 11.06.2003 to 31.05.2005, so applying the penal provision to those past transactions would amount to retrospective operation without express statutory authority. The penalty was therefore held unsustainable for the period in issue, and the matter was decided in favour of the assessee.

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Issues: Whether penalty under Rule 26(2)(ii) of the Central Excise Rules, 2002 could be imposed for clearances made before 01.03.2007 when the provision was inserted by Notification No. 08/2007-CE(T) dated 01.03.2007.

Analysis: The penalty was imposed by invoking Rule 26(2)(ii), but that sub-rule came into force only on 01.03.2007. The clearances in question pertained to periods between 11.06.2003 and 31.05.2005, which were prior to the commencement of the provision. A penal provision inserted later cannot be applied retrospectively to earlier clearances unless the statute clearly so provides.

Conclusion: The penalty under Rule 26(2)(ii) was not sustainable for the period involved and the issue was decided in favour of the assessee.

Ratio Decidendi: A penal provision introduced by a later notification cannot be retrospectively applied to past transactions in the absence of express retrospective operation.

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