Conduit sales cannot be double-counted in excise clearances, and separate partner penalties were set aside.

Where goods were merely routed through M/s. Devi Agencies without any independent source of supply or manufacturing activity, their resale value could not be added again to the appellant's assessable clearances, as that would duplicate the same turnover. The excess inclusion for 1985-86 was therefore held improper, and fresh quantification was directed after excluding the duplicated amount. On penalties, the firm's penalty under Rule 173Q was maintained, but no separate basis existed to impose additional penalties on the individual partners, so the partner-wise penalties were set aside.

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Issues: (i) Whether the value of clearances routed through M/s. Devi Agencies was liable to be added to the appellant's assessable clearances for the year 1985-86. (ii) Whether separate penalties could be imposed on the partners when the firm had already been penalised.

Issue (i): Whether the value of clearances routed through M/s. Devi Agencies was liable to be added to the appellant's assessable clearances for the year 1985-86.

Analysis: The clearances through M/s. Devi Agencies were found to be of the very same goods supplied by the appellant, with no independent source of supply shown for the agency and no manufacturing activity attributed to it. Since the goods were merely routed through the agency and then sold onwards, inclusion of their sale value again in the appellant's assessable clearances would amount to duplication of value.

Conclusion: The addition of Rs. 18,24,075.02 for 1985-86 was held to be improper and the matter was remanded for fresh quantification after excluding that amount.

Issue (ii): Whether separate penalties could be imposed on the partners when the firm had already been penalised.

Analysis: The firm had already been visited with penalty under Rule 173Q of the Central Excise Rules, and no separate basis was found for fastening additional penalties on the individual partners in the circumstances of the case.

Conclusion: The penalty on the firm was sustained, but the penalties imposed on the three partners were set aside.

Final Conclusion: The duty demand was reduced to the extent of the duplicated turnover component, the firm's penalty remained intact, and the partner-wise penalties were deleted.

Ratio Decidendi: Where a conduit or agent has no independent source of supply or manufacturing activity, the value of the same goods cannot be clubbed again in the principal assessee's clearances so as to inflate duty liability.

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