Penalty under Rule 26 fails without corroboration and clear invocation of the exact clause or sub-rule.

Penalties under Rule 26 of the Central Excise Rules, 2002 were held unsustainable where they rested only on statements of the appellants and witnesses without independent corroborative evidence of clandestine manufacture or removal. The Tribunal also found that the statements were not supported in the manner required by Section 9D of the Central Excise Act, 1944, and that the adjudicating authority had failed to identify the exact clause or sub-rule invoked. Applying strict construction of penalty provisions, the penalties were set aside.

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Issues: Whether penalties imposed under Rule 26 of the Central Excise Rules, 2002 on the appellants were sustainable in the absence of corroborative evidence and without specifying the exact sub-rule or clause invoked.

Analysis: The Tribunal held that the penalties rested essentially on the statements of the appellants and witnesses, without independent corroborative evidence to support clandestine manufacture or removal. It further noted that statements were relied upon without meaningful evidentiary support in the manner required by Section 9D of the Central Excise Act, 1944. The Tribunal also found that the adjudicating authority had not identified the specific clause or sub-rule of Rule 26 under which the penalties were imposed, and penalty provisions must be strictly construed.

Conclusion: The penalties were held unsustainable and were set aside.

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