2012 (7) TMI 850 - HC - Central Excise

Penalty - Whether penalty can be imposed upon the appellant under Rule 209A of the erstwhile Central Excise Rules 1944 now Rule 26 of Central Excise Rules 2001 in the facts and circumstances of the case - Held that - Penalty has been imposed on the firm. The Tribunal 2010 (4) TMI 943 - CESTAT AHMEDABAD has imposed penalty on the partner only on the ground that total amount of duty involved was approximately Rs. 88 lacs and equal amount of penalty has been imposed on the appellant firm. Therefore penalty imposed on Mr. P.N. Shah partner of the firm was on the higher side and it has reduced it to Rs. 10 lacs. Penalty of Rs. 87, 96, 398/- has been imposed on the firm under Section 11AC of the Central Excise Rules 1944. It has been held by the Division Bench of Gujarat High Court in Commissioner of Central Excise v. Jai Prakash Motwani 2009 (1) TMI 501 - GUJARAT HIGH COURT that where no specific Rule is attributed to the partner in the firm then once firm has already been penalised separate penalty cannot be imposed upon the partner because a partner is not a separate legal entity and cannot be equated with employee of a firm. From the order of the Tribunal or other orders on record we do not find that any specific role has been assigned as provided by Rule 26 of Central Excise Rules. Penalty has been imposed on the firm no separate penalty can be imposed on its partner - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty under Rule 209A of Central Excise Rules, 2001.
2. Validity of penalty upheld by the Tribunal.
3. Imposition of penalty on a partner separately from the firm.

Analysis:
1. The first issue pertains to the imposition of a penalty under Rule 209A of the Central Excise Rules, 2001. The court considered whether the appellant could be penalized under this rule based on the circumstances of the case. The court examined the specific provisions of the rule and the facts presented before reaching a decision.

2. The second issue raised was regarding the validity of the penalty upheld by the Tribunal. The Tribunal had imposed a penalty of Rs. 10,00,000 on the appellant under Rule 209A of the Central Excise Rules, 2001. The court evaluated the Tribunal's decision in light of the facts and circumstances of the case to determine if the penalty was justified.

3. The final issue revolved around the imposition of a penalty on a partner separately from the penalized firm. The court noted that a penalty had already been imposed on the firm, and the Tribunal had imposed a penalty on the partner as well. However, the court referred to a previous judgment that stated a partner cannot be penalized separately when the firm has already been penalized. The court emphasized that a partner is not a separate legal entity and cannot be equated with an employee of the firm.

In conclusion, the court held that since no specific role was attributed to the partner in the firm as provided by Rule 26 of the Central Excise Rules, and considering the precedent set by previous judgments, no separate penalty could be imposed on the partner when the firm had already been penalized. Therefore, the court set aside the penalty imposed on the appellant and ruled in favor of the assessee against the department. The appeal was allowed, and the penalty on the appellant was revoked.