recovery of penalty imposed on the director from the refund of company

[Hariharan Sundaram]

Respected experts, One of my client submitted a refund claim consequent of an order of the tribunal. While sanctioning the refund , the Deputy commissioner has deducted certain amount owing to penalty imposed on the director. whether any recovery mechanism avaliable in Central Excise to recover the penalty imposed on the Director of the company from the amount of refund due to the Company? Kindly let your views with circulars / case laws thank you

[DR.MARIAPPAN GOVINDARAJAN]

It cannot be recovered without the consent of the Director.

[Rajagopalan Ranganathan]

Sir,

Company is a different legal person and Director is a different legal person. Therefore penalty imposed on Director of the company cannot be recovered from the refund sanctioned to the company.

[Hariharan Sundaram]

Sirs, thank you very much for your prompt replies. Sirs, in case of penalty levied on the partner of the unit , whether the same can be recovered by the department from the amount owing to the company

[YAGAY andSUN]

Dear Sir,

1. Hrushikesh Panda V State of Oriss 1996 (83) ELT 504 (Ori HC). = 1995 (2) TMI 83 - HIGH COURT OF ORISSA AT CUTTACK
2. Vandana Bidyut Chaterjee v UOI 2012 114 SCL 329 = 2012 (4) TMI 42 - BOMBAY HIGH COURT

However, if any personal penalty was imposed on director then company can pay it off or Department may adjust it from any amount due on department as refunds.

[Rajagopalan Ranganathan]

Sir,

As far as partnership concerns are concerned there is no difference between partnership firm and partners. Therefore penalty imposed on partner can be adjusted against refund payable to the firm.

[Rajagopalan Ranganathan]

Sir,

I want to add further that Limited Liability Partnership is a company under Companies Act. It will be treated as a company and in its case penalty imposed on partner cannot of recovered from LLP firm.

[Ganeshan Kalyani]

Sir, the liability of partnership firm can be recovered from partners. But company and Directors are different legally, therefor recovery of director cannot be made from the refund of the company. Thanks.

AI Summary

Director Penalties Can't Offset Company Refunds Under Central Excise; Different Rules for Partnerships and LLPs A client sought advice on whether a penalty imposed on a company's director could be recovered from the company's refund under Central Excise. Experts responded that a company and its director are distinct legal entities; thus, penalties on directors cannot be offset against the company's refund without the director's consent. However, in partnerships, partners and the firm are not legally distinct, allowing penalties on partners to be recovered from the firm's refunds. In Limited Liability Partnerships, similar to companies, penalties on partners cannot be recovered from the LLP's funds.