Rule 26 penalty for alleged undervaluation was unsustainable where the facts matched earlier favourable valuation rulings.

Penalty under Rule 26 of the Central Excise Rules, 2002 was held unsustainable where the allegations of aiding undervaluation, the agreement terms, investigation material and statements were materially the same as in earlier cases involving the same assessee. The Tribunal followed its prior decisions in comparable valuation disputes, in which the demand and penalty had already been set aside, and treated the present controversy as covered by the same reasoning. On that basis, the penalty was set aside in favour of the assessee.

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Issues: Whether the penalty imposed under Rule 26 of the Central Excise Rules, 2002 was sustainable when the allegations and evidence were materially similar to earlier decided cases involving the same assessee and comparable valuation disputes.

Analysis: The appellant was penalised on the allegation that it had aided undervaluation of air coolers supplied by the manufacturer. The facts, agreement terms, investigation material, and statements relied upon by the Revenue were found to be substantially similar to the earlier cases where the Tribunal had already held in favour of the assessee and set aside the demand and penalty. The Tribunal relied on those decisions and noted that the present controversy was covered by the same reasoning, making the imposition of penalty unsustainable.

Conclusion: The penalty under Rule 26 was not sustainable and was set aside in favour of the assessee.

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