2015 (10) TMI 150 - AT - Central Excise

Duty demand - Imposition of penalty - Penalty on partner of firm - Held that - Division Bench of the Tribunal in the case of Shri Labdi Prints (2014 (4) TMI 145 - CESTAT AHMEDABAD), following the decision of the Hon,ble Bombay High Court held that penalty is imposable on partner for availing Cenvat Credit fraudulently, I find that in the case of Praveen N. Shah (2012 (7) TMI 850 - GUJARAT HIGH COURT ), the question of law before the Hon ble High Court was whether in the facts of circumstances case, the Tribunal was right in penalty of ₹ 10 lacs imposed on the appellants under Rule 209 A of the erstwhile Central Excise Rule,1944, in the Rule 26 of Central Excise Rule, 2001. The Hon ble High Court set-aside the penalty with the observation that penalty has imposed on the firm, no separate penalty can be imposed on partner.

Summary

Issues:
- Imposition of reduced penalty on the assessee
- Imposition of penalty on the partner of the assessee

Imposition of Reduced Penalty on the Assessee:
The case involved an appeal filed by the Revenue against an order allowing the assessee to pay a reduced penalty. The Tribunal referred to a previous judgment by the Hon'ble Gujarat High Court regarding the benefit of reduced penalty under Section 11AC of the Act. The Tribunal found that if the Adjudicating Authority did not provide such an option, the benefit of reduced penalty should be given to the assessee. Consequently, the appeal filed by the Revenue was deemed to have no merit, and it was rejected.

Imposition of Penalty on the Partner of the Assessee:
Regarding the imposition of penalty on the partner of the assessee, the Tribunal considered conflicting decisions. The learned Advocate cited a High Court decision stating that once a firm is penalized, a separate penalty cannot be imposed on the partner as the partner cannot be equated with an employee of the firm. The Tribunal also referenced a Tribunal decision suggesting that penalties can be imposed on partners for fraudulent Cenvat Credit. Ultimately, the Tribunal followed the High Court decision and held that no separate penalty could be imposed on the partner when the firm had already been penalized. As a result, the appeal filed by the Revenue was rejected, the appeal by the assessee was dismissed as infructuous, and the partner's appeal was allowed.

This comprehensive analysis of the judgment highlights the key issues of reduced penalty imposition on the assessee and penalty imposition on the partner, providing a detailed breakdown of the Tribunal's decision-making process and the legal principles applied in each scenario.