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2019 (7) TMI 630 - AT - Central ExciseImposition of penalty on partners - HELD THAT - It is settled principle and there are umpteen number of decisions in which it was held that once a firm is penalised, separate penalty is not imposable upon the partner of the firm because partner is not separate legal entity and cannot be equated with the employee of the firm. The Hon ble High Court in that matter answered the question in favour of the Appellants therein and set aside the penalty on the partners. Similarly, a coordinate Bench of the Tribunal in the matter of M/S NATIONAL IMPEX AND SHRI UMAR T CHAMADIA VERSUS COMMISSIONERS OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX-DAMAN 2015 (12) TMI 1350 - CESTAT AHMEDABAD has held that penalty on partner is not imposable when the firm is penalised under Rule 25 of the Central Excise Rules, 2002. The authorities below are not justified in imposing the penalty on the partners of M/s. Classic Packaging Industry and therefore the penalties imposed on Mr. Jasbir Singh Siwach and Ms. Kiran S Siwach, partners of M/s Classic Packaging Industry are not sustainable and are hereby set aside. Penalty set aside - appeal allowed - decided in favor of appellant.
Issues:
Penalty imposition on partners of a company under Central Excise Rules. Detailed Analysis: The Appeals were filed against an order passed by the Commissioner(Appeals) Customs and Central Excise, Goa. The Appellants were involved in the manufacture of excisable goods and were found to have cleared goods without determining duty liability or payment of duty to M/s Sai Pack N Print. A show cause notice was issued, leading to an order-in-original that confirmed Central Excise duty, imposed penalties, and ordered recovery. The Appellants paid the duty amount along with interest and a penalty within 30 days of the order. The Commissioner upheld the order-in-original but reduced the penalty on the partners of the company. The Appellants argued that once the company paid the penalty, there was no justification for imposing a personal penalty on the partners. The Counsel cited legal principles stating that separate penalties on partners are not imposable when the firm is penalized, as partners are not separate legal entities. Referring to past decisions, including one by the Hon'ble Gujarat High Court, it was concluded that penalties on the partners were not justified. Consequently, the penalties imposed on the partners were set aside, and the Appeal was allowed with relief for the partners. In the judgment, it was emphasized that once a firm is penalized, a separate penalty on the partners is not justifiable as partners are not distinct legal entities and cannot be equated with employees of the firm. Legal precedents, such as the case of Pravin N Shah vs. CESTAT, were cited to support the argument that penalties on partners are not imposable when the firm is penalized. The principle was further reinforced by a decision of a coordinate Bench of the Tribunal in the case of National Impacts vs. CCE and ST, which was later affirmed by the Hon'ble Gujarat High Court. The settled legal position was reiterated, stating that penalties on partners of a firm are not sustainable when the firm itself has been penalized under the Central Excise Rules. As a result, the penalties imposed on the partners of the company were deemed unjustified and were consequently set aside in the judgment.
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