2016 (9) TMI 531 - AT - Central Excise

Imposition of penalty - Rule 173Q and Section 11AC of the Act - clandestine removal of excisable goods - short payment of duty in respect of goods cleared from the factory without payment of duty with intent to evade payment of duty - Held that - Partnership firm is a combination of Partners as per the Partnership Act where all partners are equally liable. In view of above, penalty imposed on the partners is sustainable. The Revenue will get the total demand/ penalty from the partners. When it is so then we find no reason to interfere with the impugned order passed by the Commissioner specially in view of Rule 173Q and 209A, where no further penalty is desirable. - Decided against the Revenue

Summary

Issues:
1. Appeal against order of Commissioner of Central Excise
2. Imposition of penalty on assessee for short payment of duty
3. Clandestine removal of excisable goods
4. Division of penalty among partners of the assessee

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Central Excise, Delhi. The Tribunal had earlier directed the assessee to deposit a sum of ?50 lakhs, which was not complied with, leading to the dismissal of all appeals filed by the assessees for non-compliance of the stay order under Section 35F of the Central Excise Act, 1944. A miscellaneous application seeking permission to deposit the amount in ten installments was also rejected.

2. The Revenue's appeal was based on the contention that the Commissioner should have imposed a penalty on the assessee under Rule 173Q and Section 11AC of the Act for the short payment of duty in relation to goods cleared from the factory without payment of duty with the intent to evade payment of duty.

3. The case involved the assessee, engaged in the manufacture of pharmaceutical products, being investigated for evading Central Excise duty by removing goods clandestinely without payment of duty. Searches were conducted, relevant documents seized, and a show cause notice issued. The Commissioner upheld charges of clandestine removal of excisable goods, demanding Central excise duty amounting to ?2,21,71,986. Penalties were imposed under Section 11AC read with Rule 173Q on the partners of the assessee company and other connected persons.

4. The Revenue argued that the penalty imposed by the Commissioner was divided between the partners, questioning the competence of the Commissioner to do so. As none appeared on behalf of the assessee, the Tribunal upheld the penalty on the partners, stating that a partnership firm holds all partners equally liable, making the penalty imposed on the partners sustainable. The Tribunal found no reason to interfere with the impugned order passed by the Commissioner, leading to the dismissal of the appeal filed by the department.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the penalty on the partners of the assessee company for the clandestine removal of excisable goods, emphasizing the equal liability of partners in a partnership firm.