Penalty under Rule 26 for free supply of drawings and designs in a valuation dispute was held unsustainable.

Penalty under Rule 26 of the Central Excise Rules, 2002 was found not to be imposable where the dispute arose from valuation of excisable goods and the alleged undervaluation was linked to drawings and designs supplied free of cost to job workers. The Tribunal applied its earlier ruling on the same valuation issue and held that the reasoning used to set aside penalty for free supply of drawings and designs governed these appeals as well. The decision therefore confirms that, on these facts, the penalty could not be sustained merely because the cost of such drawings and designs was ed for assessable value purposes.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was imposable on the appellants for supplying drawings and designs free of cost to the job workers, leading to alleged undervaluation of excisable goods.

Analysis: The Tribunal followed its earlier decision on the same valuation dispute, where penalty on a person supplying drawings and designs free of cost was set aside. On the facts, the impugned penalty arose from the valuation controversy concerning inclusion of the cost of drawings and designs in the assessable value, and the Tribunal held that the same reasoning governed the present appeals.

Conclusion: Penalty under Rule 26 of the Central Excise Rules, 2002 was held to be not imposable on the appellants.

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