2015 (10) TMI 2079 - AT - Central Excise

Tribunal overturns penalty on partnership firm and partner, ruling no violation of natural justice

M/s Shree Ram Synthetics And Shri Pawan Kumar Bansal Versus Commissioner, Central Excise & Service Tax, Vapi

The Tribunal set aside the penalty imposed on the partnership firm for the diversion of duty-free raw material, finding that the penalty on both the firm ... 100% EOU - diversion of the duty free raw material in the open market without payment of duty - Penalty under Rule 26 - Held that:- Adjudicating authority had fixed personal hearing on different dates 06.02.2007, 20.02.2007 & 27.02.2007. At the request of the learned Advocate of the Appellant the personal hearing was again fixed on 21.03.2007, 24.04.2007 and 14.05.2007. So, sufficient opportunities of hearing were allowed to present their case. There is no violation of principles of natural justice. That the Adjudicating authority proceeded on the basis of documents and corroborative evidences found at the residence of the Appellant and imposed penalty on the basis of these documents. It is seen from the records that Shri Pawan Kumar Bansal, Partner of the firm is directly involved in selling of the duty free material in the market. There is a force in the submission of the learned Advocate that penalty cannot be imposed on both partnership firm and the partner. - considering the submission of learned Advocate that the Appellant is a mere broker, the quantum of penalty is excessive. In our considered view, as the penalty was imposed on the partner, and therefore, the imposition of penalty on the firm is not warranted. - Penalty imposed is reduced - Decided partly in favour of assessee. Issues:Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on a partnership firm and its partner for diversion of duty-free raw material. Violation of principles of natural justice in passing the impugned order. Imposition of penalty on both the partnership firm and the partner.Analysis:1. Imposition of Penalty on Partnership Firm and Partner:The case involved appeals against the imposition of penalties on a partnership firm and its partner for their alleged involvement in the diversion of duty-free raw material. The Adjudicating authority observed that the firm and the partner had a role in selling the duty-free material in the open market. The Appellants contended that they were not involved in any manner and were unaware of the nature of the goods. The Adjudicating authority provided multiple opportunities for a personal hearing and based the penalty on documents and evidences found at the partner's residence. The Tribunal found that while the partner was directly involved in selling the material, the penalty on both the firm and the partner was not warranted.2. Violation of Principles of Natural Justice:The Appellants argued that the impugned order was passed in violation of principles of natural justice as they were not provided with the relied upon documents to respond to the Show Cause Notice. The Appellants had requested the Department for documents and adjournment, which were not considered. However, the Tribunal noted that the Adjudicating authority had given sufficient opportunities for a personal hearing on multiple dates, and there was no violation of natural justice in the proceedings.3. Imposition of Penalty on Partner and Firm:The learned Advocate contended that the imposition of penalty on both the partner and the partnership firm was not sustainable. Various decisions were cited to support this argument, emphasizing the violation of principles of natural justice in such cases. The Tribunal considered the submissions and reduced the penalty imposed on the partner, stating that as the penalty was already imposed on the partner, imposing it on the firm as well was not justified.In conclusion, the Tribunal set aside the penalty on the partnership firm and allowed the appeal filed by the Appellant. The penalty imposed on the partner was reduced to Rs. 2.5 lakhs, and the appeal was disposed of accordingly.