2011 (7) TMI 282 - AT - Central Excise

Penalty imposed under Rule 209A - goods cleared without payment of duty - The whole argument is that once the partnership firm is penalised, the individual partners on whom penalty cannot be imposed is only for argumentative propensity - Nevertheless, the nature of the penalty to be imposed does not change - By proposing penalties under various provisions, the law itself distinguishes the nature of violations and responsibilities of the firm and on the person for violations committed for the sake of justice. - The personal penalty on person is different from the mandatory penalty imposed on the firm (emphasis supplied) under Rule 173Q(1) - Substitution of penalties is not intended in any law or legal interpretations - Held that a personal penalty on the individual or partner is different from a penalty on the partnership firm provided the commissions or omissions of the partner are proved beyond doubt warranting a penalty if Act/Rule prescribes so in the instant case - Decided against the assessee.

Summary

Issues:
- Imposition of penalty on a partner of a partnership firm for excise duty evasion.

Detailed Analysis:

Issue 1: Imposition of penalty on a partner of a partnership firm for excise duty evasion
The case involves an appeal filed by the Commissioner of Central Excise against a partner of a manufacturing firm for evasion of excise duty. The firm, M/s. Sai Texturisers, was found to have cleared texturised yarn without payment of duty. The Commissioner imposed a penalty on the firm and the partner, Shri Mohd. Amin S. Lakha, under relevant rules. The Commissioner (Appeals) allowed the appeal of the partner, leading to the Revenue filing an appeal to the Tribunal.

Issue 2: Interpretation of Rule 209A for imposing penalties
The Revenue contended that the Commissioner (Appeals) erred in not imposing a personal penalty on the partner under Rule 209A. The Rule states that any person involved in dealing with excisable goods liable for confiscation shall be liable to a penalty. The Tribunal analyzed the Rule and emphasized that the penalty is on the individual concerned with transporting, removing, selling, or purchasing goods. The partner's involvement in the evasion was established through discrepancies in yarn clearance quantities.

Issue 3: Legal precedent on imposing penalties on partners of penalized firms
The Tribunal discussed legal precedents, including the decision of the Hon'ble Bombay High Court, which stated that when a partnership firm is penalized, separate penalties on partners are not permissible. However, the Tribunal differentiated the case at hand, where a personal penalty under Rule 209A was imposed on the partner for individual omissions and commissions. The Tribunal highlighted that penalties on the firm and the individual serve different purposes and are distinct under the law.

Issue 4: Distinction between penalties on partnership firm and individual partners
The Tribunal referred to judgments by the Hon'ble Gujarat High Court, emphasizing that a firm and its partners are not separate legal entities. The Tribunal clarified that while penalties on the firm and individual may arise from the same contravention, they serve different legal purposes. The Tribunal concluded that a personal penalty on the partner is distinct from a penalty on the partnership firm, provided the partner's involvement is proven.

In conclusion, the Tribunal upheld the Revenue's appeal, emphasizing the distinction between penalties on a partnership firm and individual partners for excise duty evasion. The judgment clarified the legal interpretations regarding imposing penalties on partners in cases of firm penalization, highlighting the individual responsibility and liability in such matters.