Rule 26 penalty on a corporate seller failed where scrap was duty-paid and invoice provisions were inapplicable to the earlier period.

Rule 26 penalty was not sustainable against a company that issued invoices in scrap sales where the scrap had been cleared on payment of duty at the factory gate and the buyer was responsible for delivery. On those facts, the necessary knowledge or reason to believe that the goods were liable to confiscation was not established. The post-01.03.2007 provision covering issuance of an invoice without delivery of the goods, or abetment thereof, was inapplicable because the dispute related to an earlier period. The larger bench view that a penalty provision in the nature of Rule 209A does not apply to a corporate entity also supported deletion of penalty.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable against the appellant company for issuing invoices in the course of scrap sales and whether the reduced penalty could be sustained.

Analysis: Rule 26(1) applies only where a person acquires, transports, removes, conceals, sells, or otherwise deals with excisable goods knowing or having reason to believe that they are liable to confiscation. The appellant cleared scrap on payment of duty at the factory gate and the subsequent delivery arrangements were treated as the buyer's responsibility. On those facts, the requisite knowledge or reason to believe was not established. Rule 26(2), which deals with issuance of an excise duty invoice without delivery of the goods specified therein or abetment thereof, was held inapplicable because it came into force only from 01.03.2007 and the dispute related to an earlier period. The Tribunal also applied the larger bench view that the pari materia penalty provision akin to Rule 209A does not apply to a corporate entity.

Conclusion: Penalty under Rule 26 was not leviable on the appellant company, and the Revenue's challenge to the reduction of penalty failed.

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