Rule 209A penalty requires knowledge or reason to believe goods were liable to confiscation; deletion of penalty was upheld.

Penalty under Rule 209A of the Central Excise Rules, 1944 applies only where a person deals with excisable goods knowing, or having reason to believe, that they are liable to confiscation. The record showed purchases were made through a broker on an "on for" basis, with no verification of the supplier's genuineness or documents, while the broker denied the transaction and no effective opportunity of cross-examination was given. On these facts, the High Court held that the Tribunal's finding that the necessary knowledge or reason to believe was not proved could not be treated as perverse, and the deletion of penalty was upheld.

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Issues: Whether the Tribunal was justified in holding that there was no evidence of connivance with non-existent dealers so as to sustain penalty under Rule 209A of the Central Excise Rules, 1944.

Analysis: Penalty under Rule 209A is attracted only when a person acquires, keeps, sells, purchases, or otherwise deals with excisable goods knowing or having reason to believe that they are liable to confiscation. The evidence recorded in the proceedings showed that the authorised signatory stated that the goods were purchased through a broker on an "on for" basis and that no effort was made to verify the genuineness of the documents or the supplier. The broker denied the transaction, and the Director sought to confront him, but no effective opportunity of cross-examination was afforded. On these facts, the finding that the Director had the requisite knowledge or reason to believe could not be treated as perverse.

Conclusion: The Tribunal's view deleting penalty was upheld and the challenge to that finding failed.

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