Rule 209A penalty requires proof of knowledge or reason to believe goods were liable to confiscation; mere office or filing is insufficient.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires proof that the person dealt with goods while knowing or having reason to believe that they were liable to confiscation. The commentary notes that this ingredient was not shown against any of the three company officers. The chairman was linked only by inference from his position, without evidence of participation or specific knowledge; the vice-president was connected mainly to acts predating the rule's application; and the commercial manager's signing and filing of price lists did not establish that he made or knowingly joined the undervaluation decision. On that reasoning, the penalties were held unsustainable.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules, 1944 was sustainable against the three company officers on the facts found, particularly in the absence of material showing that each of them knew or had reason to believe that the goods were liable to confiscation.

Analysis: Rule 209A required proof that the person sought to be penalised dealt with goods while knowing or having reason to believe that they were liable to confiscation. The findings against the chairman were based largely on surmise that, by virtue of his position, he must have been informed of the valuation exercise, but the record did not show that he initiated, participated in, or was specifically informed about the undervaluation process. As regards the vice-president, the material related to acts before the rule became applicable, and there was no post-commencement conduct linking him to the offending valuation. In the case of the commercial manager, the evidence showed that he signed and filed price lists, but did not establish that he took the valuation decision or knowingly joined the undervaluation scheme.

Conclusion: The necessary ingredients for penalty under Rule 209A were not established against any of the appellants, and the penalties were unsustainable.

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