Rule 209A penalty needs proof of conscious dealing with undervalued goods; co-noticee settlement does not create liability.

Penalty under Rule 209A of the Central Excise Rules, 1944 requires a specific finding that the person actively and consciously dealt with goods known to be undervalued and liable to duty; absent that essential factual basis, the penalty cannot stand. Settlement by the main noticee under the Kar Vivad Samadhan Scheme does not, by itself, create liability against a co-noticee or amount to an admission binding the appellant. The text therefore reflects that liability under Rule 209A must be independently established, and cannot be inferred merely from another party's scheme settlement.

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Issues: (i) Whether penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained without a finding that the appellant actively and consciously dealt with undervalued goods. (ii) Whether settlement by the main noticee under the Kar Vivad Samadhan Scheme could, by itself, fasten liability on the appellant.

Issue (i): Whether penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained without a finding that the appellant actively and consciously dealt with undervalued goods.

Analysis: The appellate authority recorded that the appellant's plea that it was not working as a commission agent was convincing, which amounted to a categorical finding against the very basis adopted in the show cause notice. However, it did not return any finding on the remaining issue as to whether the appellant had actively and consciously dealt with goods known to be undervalued and on which duty had not been paid on the sale value. A penalty under Rule 209A could not be sustained in the absence of such a finding on the essential ingredients attracting the provision.

Conclusion: The penalty under Rule 209A was unsustainable and liable to be set aside in favour of the assessee.

Issue (ii): Whether settlement by the main noticee under the Kar Vivad Samadhan Scheme could, by itself, fasten liability on the appellant.

Analysis: The settlement of the dispute by M/s Ram Ply Board Industries (P) Ltd. under the Kar Vivad Samadhan Scheme did not amount to an admission that could automatically be used against the appellant. Any admission or consequence arising from the main noticee's settlement could not, by itself, establish the appellant's liability for an excise offence.

Conclusion: The main noticee's settlement under the Kar Vivad Samadhan Scheme did not render the appellant liable.

Final Conclusion: The penalty imposed on the appellant was vacated and the appeal succeeded, with refund of the amount deposited as a pre-condition for entertaining the appeal.

Ratio Decidendi: Penalty under Rule 209A requires a specific finding on the conduct that attracts the provision, and liability cannot be inferred merely from the co-noticee's settlement under a voluntary disclosure scheme.

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