Confiscation of seized cash and Rule 26 penalty fail where sale proceeds and knowing dealing with liable goods are not proved.

Seized cash cannot be confiscated as sale proceeds unless the department proves that it represents consideration for goods liable to confiscation. On the stated facts, the cash was found explained and was not established as sale proceeds of excisable goods. Penalty under Rule 26 of the Central Excise Rules, 2002 also requires knowing dealing with excisable goods liable to confiscation, but the allegation here concerned invoices without actual movement or receipt of goods, which did not satisfy that statutory basis. Section 121 of the Customs Act, 1962 was held inapplicable because the cash was not proved to be proceeds of smuggled goods or of sale of confiscable goods.

---

---

Issues: Whether the seized cash could be confiscated as sale proceeds and whether penalty could be sustained under Rule 26 of the Central Excise Rules, 2002 with reference to Section 121 of the Customs Act, 1962 as made applicable to central excise.

Analysis: The Department's case rested on alleged fraudulent availment of CENVAT credit on the basis of invoices without actual receipt of goods. The seized cash was found from the premises of the noticees, but the authorities below recorded concurrent findings that the cash had been satisfactorily explained and was not shown to be sale proceeds of excisable goods. Rule 26 applies where a person deals with excisable goods knowing them to be liable to confiscation, whereas the facts alleged here were of no movement of goods and use of invoices without actual supply. On that footing, the statutory basis for penalty was not established. Section 121 of the Customs Act, 1962 was also held inapplicable because the cash was not proved to be sale proceeds of smuggled goods or consideration for sale of goods liable to confiscation under the excise law.

Conclusion: The confiscation and penalty could not be sustained and the Revenue's challenge failed.

---