2017 (5) TMI 881 - AT - Central Excise

Imposition of penalties on partners of manufacturing firm u/r 26 of CER - non-payment of Central Excise duty by M/s Allied Electricals - penalties u/s 11AC have already been imposed on the appellant - Held that - Penalty u/r 26 can be imposed on any person, who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules; shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees , whichever is greater. It is clear on plain reading of the above-mentioned provisions and the facts of the case penalties under Section 11AC and Rule 26 operate in different fields. It is not correct to say that the penalties now imposed on the partners/ appellant will amount to double penalty for the same offence. It is clear that the provisions involved are different and the nature of offence sought to be penalized is also different. The penalties imposed on the appellants are reduced to ₹ 50,000/- each, u/r 26 of CER, 2002 - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Imposition of penalties on partners of a manufacturing firm under Rule 26 of Central Excise Rules, 2002.

Analysis:
The judgment deals with two appeals against an order imposing Central Excise duty and penalties on a manufacturing firm. The appellants, who are partners of the firm, contested the penalties imposed on them. The main issue was whether penalties could be imposed on the partners in addition to the manufacturing firm. The appellants argued that since penalties were already imposed on the firm, further penalties on the partners would be unjust. They cited a High Court decision to support their argument. However, the Authorized Representative contended that there was no legal bar to imposing penalties on partners for identified offenses and referred to relevant tribunal decisions.

Upon examination, the tribunal found that penalties under Section 11AC and Rule 26 of Central Excise Rules operate in different contexts and for different offenses. The penalties on the manufacturing firm were for specific violations related to excisable goods, while the penalties on the partners were under a different provision. The tribunal concluded that imposing penalties on the partners did not amount to double jeopardy as the nature of offenses and provisions were distinct. The tribunal distinguished the case law cited by the appellants as not applicable to the present situation.

The tribunal also considered a plea for reducing the penalties on the partners based on the firm's actions during investigation. The manufacturing firm had paid a significant amount during the investigation, resulting in a refund. As the firm had met its obligations within the prescribed time, certain penalties were waived. In light of these circumstances, the tribunal decided to reduce the penalties on the partners to ?50,000 each, aligning with the reduced penalty liability of the manufacturing unit. The overall appeal was rejected except for this modification.

In conclusion, the judgment clarifies that penalties on partners of a manufacturing firm can be imposed separately from those on the firm itself, provided the offenses and provisions are distinct. The tribunal exercised discretion to reduce the penalties on the partners based on the firm's actions during the investigation, ensuring fairness in the penalty imposition process.