Mens rea requirement for Rule 209A penalty fails where the Department cannot prove knowledge of confiscability.

Penalty under Rule 209A of the Central Excise Rules is sustainable only if the Department proves that the person dealt with excisable goods knowing, or having reason to believe, that they were liable to confiscation. The burden lies on the Department to establish this guilty knowledge or conscious participation. On the facts, no evidence showed the requisite mens rea, so the statutory precondition for penalty was not met and the penalty was set aside.

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Issues: Whether penalty was sustainable under Rule 209A of the Central Excise Rules in the absence of proof that the appellant knew or had reason to believe that the goods were liable to confiscation.

Analysis: Penalty under Rule 209A can be imposed only when a person deals with excisable goods knowing, or having reason to believe, that they are liable to confiscation. The burden rests on the Department to establish such guilty knowledge or reason to believe. On the facts, no evidence was produced to show that the appellant had the requisite mens rea, and the record did not establish conscious participation with knowledge of confiscability. In the absence of proof of guilty mind, the precondition for penalty was not satisfied.

Conclusion: Penalty under Rule 209A was not sustainable and was set aside in favour of the appellant.

Ratio Decidendi: Penalty under Rule 209A of the Central Excise Rules requires proof by the Department that the person dealt with excisable goods knowing or having reason to believe that they were liable to confiscation; without such proof, the penalty cannot stand.

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