2018 (8) TMI 1076 - AT - Central Excise

Penalty on partner of firm - Clandestine removal - Held that - The jurisdictional High Court in the case of Pravin N Shah 2012 (7) TMI 850 - GUJARAT HIGH COURT held that the since the Partnership firm is penalised, separate penalty is not imposable on partner of the firm because partner is not a separate legal entity and cannot be equate with employee of the firm. No specific rule is attributed to partner. The separate penalty on the partner of the Partnership firm is not imposable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Clandestine removal charges against a company and duty confirmation.
2. Penalty imposition under Rule 26 of Central Excise Rules 2002 on the partner of a partnership firm.

Analysis:
1. The appeals were filed by the company facing charges of clandestine removal and duty confirmation, along with an appeal by the partner of the partnership firm subjected to a penalty under Rule 26. The counsel for the appellants conceded that the partnership firm had no merit in their case and did not press for the appeal. However, regarding the partner's appeal, it was argued that since a penalty was already imposed on the partnership firm, a separate penalty on the partner should not be imposed. Several judgments were cited in support of this argument.

2. The Revenue, represented by the Superintendent, reiterated the findings of the impugned order and contended that penalties could be imposed on partners even if penalties were already imposed on partnership firms, citing relevant judgments from different High Courts. After considering the arguments from both sides and examining the records, the Tribunal made its decision. The appeal of the partnership firm was dismissed as the counsel did not press for it. However, in the case of the partner, it was noted that a jurisdictional High Court had held that since the partnership firm was penalized, a separate penalty on the partner was not permissible. The Tribunal, following this precedent, concluded that a separate penalty on the partner of the partnership firm was not justified, setting aside the penalty imposed on the partner. Consequently, the appeal of the partnership firm was dismissed, while the appeal of the partner was allowed.

This judgment highlights the legal principles governing the imposition of penalties on partners of partnership firms in cases where penalties have already been levied on the firms themselves. The decision underscores the importance of legal precedents and jurisdictional High Court judgments in determining the liability of partners in such situations.