Penalty provisions cannot be stretched retrospectively; blank GR book suppliers were outside Rule 209A for excisable goods dealings.

Penalty under Rule 173Q(1)(bbb) could not be applied to fake invoices used to pass on Modvat credit of additional customs duty for a period before the 14-7-99 amendment, because the pre-amendment rule covered only wrong entries meant to facilitate credit of excise duty. The later expansion to additional duty under Section 3 of the Customs Tariff Act, 1975 operated only from the amendment date. Penalty under Rule 209A also failed against transporters who merely supplied blank GR books, since they were not shown to have acquired, transported, or otherwise dealt with excisable goods liable to confiscation with the required knowledge. The penalties were therefore unsustainable.

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Issues: (i) Whether penalty could be imposed under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944 for issuing fake invoices to facilitate availment of Modvat credit of additional customs duty for a period prior to 14-7-99. (ii) Whether penalty could be imposed under Rule 209A of the Central Excise Rules, 1944 on transporters who had merely supplied blank GR books and were not shown to have dealt with excisable goods liable to confiscation.

Issue (i): Whether penalty could be imposed under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944 for issuing fake invoices to facilitate availment of Modvat credit of additional customs duty for a period prior to 14-7-99.

Analysis: Rule 173Q(1)(bbb), as it stood before amendment by Notification No. 50/99-C.E. (N.T.) dated 14-7-99, covered only wrong entries in invoices made with intent to facilitate availment of credit of duty of excise. The words extending the clause to additional duty under Section 3 of the Customs Tariff Act, 1975 were inserted only by the 14-7-99 amendment. The Board's circular and the prior Tribunal view confirmed that the penal provision did not apply to wrong passing on of credit of additional customs duty during the relevant earlier period.

Conclusion: Penalty under Rule 173Q(1)(bbb) was not sustainable against the dealers for the period prior to 14-7-99 and was rightly set aside in their favour.

Issue (ii): Whether penalty could be imposed under Rule 209A of the Central Excise Rules, 1944 on transporters who had merely supplied blank GR books and were not shown to have dealt with excisable goods liable to confiscation.

Analysis: Rule 209A applies only where a person acquires, transports, removes, deposits, keeps, conceals, sells, purchases, or otherwise deals with excisable goods knowing or having reason to believe that they are liable to confiscation. The transporters were not found to have dealt with excisable goods; the allegation was only that they had supplied blank GR books which were later used for bogus invoicing. Since no excisable goods were shown to have been transported or otherwise handled by them with the requisite knowledge, the essential ingredients of the rule were absent.

Conclusion: Penalty under Rule 209A was not sustainable against the transporters and was rightly set aside in their favour.

Final Conclusion: The penalties on all the appellants were held unsustainable, and the appeals succeeded in full.

Ratio Decidendi: A penalty provision cannot be applied retrospectively beyond its express scope, and liability under Rule 209A arises only when the statutory ingredients relating to dealing with excisable goods and knowledge of confiscability are established.

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