2005 (9) TMI 469 - AT - Central Excise

Tribunal overturns penalty on partner, reduces firm's penalty, stresses procedural adherence

The Tribunal set aside duty calculation exceeding 5 years under Section 11A(1) of the CE Act, starting from the date of service of the Show Cause Notice. ... Demand - Limitation - Relevant date Issues:1. Duty calculation exceeding 5 years under Section 11A(1) of the CE Act.2. Imposition of penalty on the partner of the appellant-firm.3. Legal personality of a partnership firm distinct from its partners.4. Computation of duty from the date of service of Show Cause Notice.Issue 1: Duty calculation exceeding 5 years under Section 11A(1) of the CE ActThe appeals arose from a Commissioner (Appeals) decision reducing duty to Rs. 86,490 and modifying penalty under Section 11AC of the CE Act. The appellant argued that duty beyond 5 years under Section 11A(1) was unsustainable. The Counsel referred to a Tribunal judgment stating the 5-year period should start from the relevant date under Section 11A(1)(c). Another judgment highlighted that duty would only be Rs. 20,000 if this clause applied. The Tribunal set aside duty beyond 5 years from the date of service of the Show Cause Notice.Issue 2: Imposition of penalty on the partner of the appellant-firmThe partner of the appellant-firm was imposed a penalty of Rs. 10,000. The Counsel argued that the penalty on the partner should not be confirmed as the partner and the firm were one and the same, citing a judgment that a partnership firm has no legal personality distinct from its partners. The Tribunal set aside the penalty of Rs. 10,000 imposed on the partner.Issue 3: Legal personality of a partnership firm distinct from its partnersThe Tribunal considered the legal personality of a partnership firm distinct from its partners. It was noted that the penalty imposed on the partner was set aside based on the principle that a partnership firm has no legal personality distinct from its partners.Issue 4: Computation of duty from the date of service of Show Cause NoticeUpon examination of the facts, it was found that the appellants had not declared themselves as manufacturers nor followed procedures. The duty computation was to start from the date of service of the Show Cause Notice. The duty beyond 5 years from this date was set aside, and authorities were directed to re-compute the amount. The penalty on the firm was reduced to Rs. 10,000, and the penalty on the partner was set aside. The appellants were given an opportunity for a hearing if the computation was not proper.This judgment clarifies the calculation of duty under Section 11A(1), the imposition of penalties on partners of a firm, and the legal personality of a partnership firm. It emphasizes the importance of following procedures and the need for proper computation in such cases.