Penalty on partners requires proof of lapse or mala fides; firm-level penalty alone is not automatically enough.

Penalty on the partners of a firm was considered unjustified where no lapses, negligence or mala fides were shown in realising export proceeds, even though the penalty imposed on the firm had been confirmed. The Court treated the Revenue's relied-upon authority as fact-specific and not establishing any absolute rule that confirmation of penalty against the firm automatically requires penalty against the partners. On the stated facts, penalty on the partners was not warranted.

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Issues: Whether penalty could be sustained against the partners of a firm when the penalty imposed on the firm had been confirmed, in the absence of lapses, negligence or mala fides on the part of the partners in realising the export proceeds.

Analysis: The Court noted that an earlier decision had held that where partners were not shown to have acted with lapses, negligence or mala fides in realising export proceeds, imposition of penalty upon them was unjustified, particularly when the penalty against the firm had already been confirmed. The authority relied upon by the Revenue was held distinguishable on facts and not laying down any absolute rule that penalty on the firm must invariably entail penalty on the partners.

Conclusion: Penalty on the partners was not warranted on the facts, and the appeal was not entertained.

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