Penalty for dealing in excisable goods requires knowledge and physical involvement; invoice-only transactions are not enough.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires actual dealing with excisable goods, together with knowledge or reason to believe that the goods are liable to confiscation. The provision was read as covering acts such as possession, transport, removal, deposit, concealment, sale or purchase, and not as extending to mere invoice-based involvement without physical movement of goods. The same requirement of knowledge was treated as applicable to companies and corporations, so penalty cannot be fastened on a corporate entity unless the statutory mental element is established. The rule was thus understood as directed at persons knowingly involved in the goods, not at indirect participants lacking such knowledge.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules, 1944 can be imposed only when a person has dealt with excisable goods with knowledge or reason to believe that they are liable to confiscation, and whether a company or corporation can be penalised in the absence of such knowledge.

Analysis: The rule was read as requiring actual dealing with excisable goods, such as acquiring possession, transporting, removing, depositing, keeping, concealing, selling, purchasing, or otherwise dealing with them, coupled with knowledge or reason to believe that the goods are liable to confiscation. The expression was treated as extending only to acts involving physical contact with goods, and not to situations where penalty is sought merely on the basis of indirect involvement or issuance of invoices without movement of goods. The same reasoning was held applicable to corporate entities, since a company can be penalised only where the statutory requirement of knowledge is satisfied; the rule was viewed as aimed at guilty individuals acting behind the corporate veil, not at fastening penalty on a corporation lacking such knowledge.

Conclusion: Penalty under Rule 209A is not sustainable unless the person concerned dealt with the excisable goods with the requisite knowledge or reason to believe that they were liable to confiscation; the rule is not attracted merely by invoice-based transactions without physical movement of goods, and the company case was also answered in the assessee's favour.

Ratio Decidendi: For penalty under Rule 209A of the Central Excise Rules, 1944, the statutory condition of dealing with excisable goods with knowledge or reason to believe that they are liable to confiscation is mandatory, and penalty cannot be imposed in the absence of such knowledge and physical dealing with the goods.

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