The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has set aside penalties imposed under Rule 26 of the Central Excise Rules, 2002 by the Additional Director General (Adjudication), Directorate General of GST Intelligence, holding that such penalties cannot be sustained in the absence of a clear finding that the goods in question were liable to confiscation.

The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) examined the scope of Rule 26, which provides for penalty on persons dealing with goods that they know or have reason to believe are liable to confiscation.

The appellants contended that the adjudicating authority had imposed penalties under Rule 26 without confiscating the goods or recording any finding that the goods were liable to confiscation. It was argued that merely stating that goods are “liable to confiscation” at the stage of penalty imposition is insufficient in law.

The department, however, supported the penalties, asserting that the provisions of Rule 26 justified such imposition.

The Tribunal observed that the impugned order did not contain any discussion or categorical finding that the goods were liable to confiscation. The assertion regarding confiscability appeared only at the stage of penalty imposition, without any supporting reasoning.

Emphasising the statutory requirement, the Tribunal held that a clear finding that goods are liable to confiscation is a sine qua non for invoking Rule 26.

It noted that in the absence of such a finding, penalties under Rule 26 of the Central Excise Rules could not have been imposed.” 

The Tribunal relied on its earlier decision in Ramesh Garg vs. Commissioner, where it was held that penalty under Rule 26 cannot be sustained unless the essential condition of confiscation or liability to confiscation is fulfilled.

The Tribunal set aside the penalties imposed under Rule 26, holding them to be legally unsustainable.

Case Details

Case Title: Sanjeev Khera Versus Additional Director General (Adjudication)

Citation: JURISHOUR-1020-CES-2026(DEL) 

Case No.: Excise Appeal No. 51278 of 2025

Date: 29.04.2026

Counsel For Appellant: Monish Panda, Shri Anmol Jassal and Ms. Amrita Singh and Shri Jayant Kumar

Counsel For Respondent: Mihir Ranjan, Special Counsel 

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