2016 (9) TMI 531 - AT - Central Excise

Partners' Penalty Upheld for Goods Removal: Tribunal Dismisses Revenue's Appeal

The Tribunal dismissed the Revenue's appeal against the Commissioner's order, upholding the penalty on the partners of the assessee company for ... Penalty for clandestine removal with intent to evade duty - imposition and division of penalty among partners - vicarious liability of partners in a partnership firm - penalty under Rule 173Q and Rule 209A read with relevant provisions - no further penalty desirable where statutory penalties have been imposedPenalty for clandestine removal with intent to evade duty - imposition and division of penalty among partners - penalty under Rule 173Q and Rule 209A read with relevant provisions - Sustainability of the penalty imposed by the Commissioner for clandestine removal of excisable goods and the competence to divide the penalty between the partners of the partnership firm. - HELD THAT: - The Commissioner adjudicated that the assessee engaged in clandestine removal of excisable goods with intent to evade duty and quantified duty and penalties accordingly. The Tribunal accepted that a partnership firm is a combination of its partners under the Partnership Act and that partners are equally liable for liabilities of the firm. Consequently, the division of the total penalty between the partners and imposition of penalties under the statutory scheme (as applied via Rule 173Q and Rule 209A read with the relevant provisions) is sustainable. The Revenue was held entitled to recover the total demand/penalty from the partners jointly or severally. Having found the penalties valid and recoverable from the partners, there was no reason to interfere with the Commissioner's order.Penalty imposed by the Commissioner is sustainable and competent to be divided between the partners; no interference with the impugned order.No further penalty desirable where statutory penalties have been imposed - penalty under Rule 173Q and Rule 209A read with relevant provisions - Whether any additional or further penalty ought to be imposed beyond the penalties already levied by the Commissioner. - HELD THAT: - The Tribunal noted that penalties under the applicable rules have already been imposed on the partners and other connected persons. In the factual and legal context before it, the Tribunal found that no further penalty was desirable. There being valid statutory penalties already quantified and imposed, the Department's appeal seeking further or different penal consequences was dismissed.No further penalty to be imposed; appeal insofar as it sought additional penalty is dismissed.Final Conclusion: The departmental appeal is dismissed: the penalties imposed by the Commissioner for clandestine removal are sustained, the division of the penalty between the partners is upheld, and no further penalty is warranted. Issues:1. Appeal against order of Commissioner of Central Excise2. Imposition of penalty on assessee for short payment of duty3. Clandestine removal of excisable goods4. Division of penalty among partners of the assesseeAnalysis:1. The appeal was filed by the Revenue against the order of the Commissioner of Central Excise, Delhi. The Tribunal had earlier directed the assessee to deposit a sum of Rs. 50 lakhs, which was not complied with, leading to the dismissal of all appeals filed by the assessees for non-compliance of the stay order under Section 35F of the Central Excise Act, 1944. A miscellaneous application seeking permission to deposit the amount in ten installments was also rejected.2. The Revenue's appeal was based on the contention that the Commissioner should have imposed a penalty on the assessee under Rule 173Q and Section 11AC of the Act for the short payment of duty in relation to goods cleared from the factory without payment of duty with the intent to evade payment of duty.3. The case involved the assessee, engaged in the manufacture of pharmaceutical products, being investigated for evading Central Excise duty by removing goods clandestinely without payment of duty. Searches were conducted, relevant documents seized, and a show cause notice issued. The Commissioner upheld charges of clandestine removal of excisable goods, demanding Central excise duty amounting to Rs. 2,21,71,986. Penalties were imposed under Section 11AC read with Rule 173Q on the partners of the assessee company and other connected persons.4. The Revenue argued that the penalty imposed by the Commissioner was divided between the partners, questioning the competence of the Commissioner to do so. As none appeared on behalf of the assessee, the Tribunal upheld the penalty on the partners, stating that a partnership firm holds all partners equally liable, making the penalty imposed on the partners sustainable. The Tribunal found no reason to interfere with the impugned order passed by the Commissioner, leading to the dismissal of the appeal filed by the department.In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the penalty on the partners of the assessee company for the clandestine removal of excisable goods, emphasizing the equal liability of partners in a partnership firm.