CESTAT Sets Aside ₹10 Lakh Penalty under Rule 26(1) Due to Lack of Goods Confiscation [Read Order]

Confiscation was a necessary condition for imposing a penalty. Since no goods were confiscated or deemed liable for confiscation, the penalty was unjustified and was set aside

By Sneha Sukumaran Mullakkal - On February 22, 2025 2:15 pm - 2 mins read

CESTAT penalty ruling-Goods confiscation rule-Customs and excise penalty appeal case- Taxscan

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)set aside a ₹10 lakh penalty imposed under Rule 26(1) of the Central Excise Rules, 2002, due to the absence of goods confiscation.

Ramesh Garg, appellant-assessee,challenged the order dated March 30, 2017, issued by the Joint Commissioner, imposing a Rs. 10,00,000 penalty under Rule 26(1) of the Central Excise Rules, 2002.The assessee remained unrepresented in this and previous hearings.

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The two member bench comprising Justice Dilip Gupta(President) and P.V.Subba Rao(Technical Member) heard the Revenue’s authorized representative and examined the records.

Rule 26 of the Central Excise Rules, 2002,(1)] Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or ten thousand rupees, whichever is greater.

Provided that where any proceeding for the person liable to pay duty have been concluded under clause (a)or clause (d) of subsection (1) of section 11AC of the Act in respect of duty, interest and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded.

The impugned order did not involve the confiscation of goods or deem any goods liable for confiscation. Since confiscation was essential for imposing a penalty under Rule 26, the penalty was unwarranted in this case.

Therefore the tribunal set aside the penalty imposed and allowed the appeal for consequential relief.

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