Rule 26 penalty upheld for conscious participation in clandestine removal, with penalties reduced as excessive

Rule 26 penalty was sustainable where the evidence showed conscious participation in clandestine removal through blank challans, invoices and unauthorised transport slips used to facilitate evasion of duty. The proprietors of the trading concerns were found knowingly concerned in the removal and dealing of excisable goods, and the transport corporation was likewise liable because the record showed awareness of the unauthorised removal. Penalty was therefore upheld against the concerned appellants, but the Tribunal held that the amounts imposed were excessive and reduced the quantum.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable against the noticees for their role in clandestine removal of excisable goods, and whether the quantum of penalty required reduction.

Analysis: The proprietors of the trading concerns had admitted that blank challans and invoices were issued to the manufacturer, and those documents were used for clandestine removal of copper tubes without payment of duty. On those facts, the conduct was not a mere formal connection but disclosed collusion and conscious participation in facilitating removal of excisable goods. The Tribunal distinguished the authorities relied upon by the appellants and held that Rule 26 is attracted where a person is knowingly concerned in removing or otherwise dealing with excisable goods in a manner connected with evasion. As regards the transport corporation, the record showed issuance of unauthorised slips and awareness of the unauthorised removal, making liability under Rule 26 sustainable. At the same time, the penalties imposed were found to be excessive in the circumstances.

Conclusion: Penalty under Rule 26 was upheld against the concerned appellants, but the quantum was reduced to Rs. 5,00,000 each for the three trading appellants and to Rs. 2,00,000 for Dhiran Transport Corporation.

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