2011 (3) TMI 116 - AT - Central Excise

Penalty - Penalty can be imposed on the partner when the partnership firm already penalised - As per the case of Jai Prakash Motwani (2009 -TMI - 201843 - GUJARAT HIGH COURT ), Hon ble Gujarat High Court held that admittedly a partner is not a separate legal entity and cannot be equated with the employees of a firm - Once the firm has already been penalized, separate penalty cannot be imposed upon the partner Hence,waived the penalty on the partner and the appeal filed by the Revenue is rejected.

Summary

Issues:
1. Whether penalty can be imposed on a partner when the partnership firm has already been penalized.

Analysis:
The Appellate Tribunal CESTAT, New Delhi heard an appeal by the Revenue against an order where the penalty on a partner was dropped by the lower appellate authority. The main issue in question was whether a penalty can be imposed on a partner when the partnership firm has already been penalized. The learned SDR cited various case laws to support their argument, including decisions from the CCE, Surat, and the Hon'ble Supreme Court. However, it was noted that some of these decisions were ex-parte and not directly relevant to the present case. The tribunal highlighted that in a previous case, it was unclear whether the partner of the main appellant's firm had appealed.

Further, the tribunal referenced decisions from the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court. The Bombay High Court had established that when a partnership is penalized, separate penalties cannot be imposed on the partners. Similarly, the Gujarat High Court held that a partner is not a separate legal entity and cannot be equated with the employees of a firm. Therefore, once the firm has been penalized, a separate penalty cannot be imposed on the partner.

Based on the precedents set by the Bombay and Gujarat High Courts, the tribunal concluded that the issue of imposing separate penalties on partners when the partnership is penalized is well-settled. In the case at hand, where the partnership firm had already been penalized and the penalty on the partner was waived by the Commissioner (Appeals), the tribunal found no fault in the impugned order. Consequently, the tribunal upheld the impugned order and rejected the Revenue's appeal, in line with the decisions of the Hon'ble High Courts of Bombay and Gujarat.