Rule 26 penalty cannot stand against a mere broker without possession or dealings in excisable goods.

Penalty under Rule 26 of the Central Excise Rules, 2002 is not sustainable unless a person is shown to have acquired, transported, removed, kept, concealed, sold or purchased excisable goods knowing them to be liable to confiscation, or to have abetted issuance of invoices without delivery of goods. A broker who merely acts as an intermediary, without possession of or dealings in the goods, does not fall within that provision. Where the foundation allegations against the principal dealers have already been set aside, the consequential penalty on the broker also fails and is set aside.

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Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable against a broker who was not shown to have possessed, dealt with, or transported excisable goods, particularly when the principal allegations against the main dealers had already been set aside.

Analysis: Penalty under Rule 26 attaches where a person acquires possession of, transports, removes, deposits, keeps, conceals, sells or purchases excisable goods knowing them to be liable to confiscation, or issues invoices/documents without delivery of goods or abets such issuance. The appellant was found to have acted only as an intermediary and not to have possessed or dealt with the goods at any stage. The Tribunal also noted that the connected proceedings against the main dealers, on which the alleged brokerage activity was founded, had already been allowed and the underlying order set aside.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Ratio Decidendi: Penalty under Rule 26 of the Central Excise Rules, 2002 cannot be sustained against a person who is not shown to have possessed or dealt with excisable goods and whose alleged role is confined to brokerage, particularly where the foundation of the alleged offence has been set aside.

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