Separate penalty on partner under Central Excise rules not sustainable once firm was already penalised

A separate penalty on a partner was held unsustainable under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2001 where the firm had already been penalised. The Court applied the principle that, for this purpose, a partner is not a separate legal entity from the firm, and noted that no specific role attributable to the partner had been established to justify an additional penalty. The question was answered in the negative, in favour of the assessee and against the department.

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Issues: Whether, after penalty had already been imposed on the partnership firm, a separate penalty could be imposed on its partner under Rule 209A of the erstwhile Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2001.

Analysis: The penalty on the partner was upheld by the Tribunal only on the basis that the duty involved was substantial and the penalty on the firm was already equal to the duty demand, leading to a reduction of the partner's penalty. The Court applied the principle that a partner is not a separate legal entity from the firm for this purpose and relied on the view that, where no specific role attributable to the partner is established under the rule, a further penalty on the partner cannot be sustained once the firm has already been penalized.

Conclusion: Separate penalty on the partner was not permissible. The question was answered in the negative, in favour of the assessee and against the department.

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