2008 (4) TMI 762 - AT - Central Excise

Summary

Issues Involved:
1. Whether penalty under Rule 209A of the Central Excise Rules, 1944 can be imposed on both the partnership firm and its partner.
2. Whether the decision in Woodmen Industries, which was upheld by the Supreme Court, precludes the imposition of penalties on partnership firms under Rule 209A.

Issue-wise Detailed Analysis:

1. Whether penalty under Rule 209A of the Central Excise Rules, 1944 can be imposed on both the partnership firm and its partner:

The Tribunal examined whether penalties could be simultaneously imposed on both a partnership firm and its partner under Rule 209A. The Revenue relied on the Tribunal's decision in National Jagan Nath v/s. Commissioner of Central Excise, which held that penalties could be imposed on both. The Revenue argued that "person" in Rule 209A includes a partnership firm as per Section 3(42) of the General Clauses Act, 1897. However, the Tribunal noted that the decision in Woodmen Industries, upheld by the Supreme Court, established that Rule 209A permits imposition of penalties on a person and not on the firm. The Tribunal also cited several cases where penalties on partners were vacated if a penalty was already imposed on the firm, such as Harish Dyeing and Printing Works, Jag Prakash Synthetics, and Swen Industries.

2. Whether the decision in Woodmen Industries, which was upheld by the Supreme Court, precludes the imposition of penalties on partnership firms under Rule 209A:

The Tribunal found that the issue was settled in favor of the respondents by the decision in Woodmen Industries, which was upheld by the Supreme Court. The Tribunal emphasized that the Supreme Court's dismissal of the Civil Appeal against the Woodmen Industries decision serves as a binding precedent, establishing that penalties under Rule 209A cannot be imposed on partnership firms. The Tribunal also referred to the Larger Bench decision in Steel Tubes of India Ltd. which concluded that Rule 209A applies to individuals and not to firms. The Tribunal noted that the decision in Woodmen Industries, confirmed by the Supreme Court, and the Larger Bench decision in Steel Tubes of India Ltd., clearly indicate that penalties under Rule 209A cannot be imposed on firms, only on individuals.

Majority Order:

The majority upheld the order of the Commissioner (Appeals) setting aside the penalty on the respondent firm and rejected the Revenue's appeal. The Tribunal concluded that penalties under Rule 209A are not sustainable on both the partnership firm and its partner, aligning with the precedent set by Woodmen Industries and the Larger Bench decision in Steel Tubes of India Ltd. The Tribunal directed that the file be placed before the referral bench for further disposal, affirming that penalties under Rule 209A should only be imposed on individuals, not on partnership firms.