CA Urvashi Porwal
Brief of the Case
In the case of Sharp Engineers VS. Commissioner of Central Excise,it was held that once partnership firm penalized, separate penalty not imposable upon partner of the firm because the partner is not a separate legal entity as there is no difference between the partner and the partnership firm.
Facts of the Case
M/s Sharp Engineers (hereinafter referred to as the ‘assessee’) a partnership firm was engaged in the manufacture of “Lift Winding Machine unit and parts thereof” falling under Ch 84 and 85 of the Schedule to the Central Excise Tariff Act 1995. On 7.6.2005 the Central Excise officers visited the factory premises of the assessee and the premises of two other proprietorship firms namely M/s Leo Engineers and M/s Eletech Industries. After examining the records and documents, the Central Excise officers were in the opinion that the clearance value of the other two units would be clubbed with the assessee. They have calculated the demand of duty Rs 13,84,180/- for the period 2004-05. The assessee submitted that in order to avoid legal complexity and further litigation, the assessee paid the entire amount of duty along with interest and penalty of 25% of duty, which would be Rs 17,72,800.00. Thereafter, a show cause notice dated 18.12.2007 was issued proposing demand of duty along with interest and to impose penalty of equal amount of duty and to impose penalty on the partner of the assessee and the proprietors of the other two units. The Adjudicating Authority confirmed the demand of duty of Rs 13,57,039.00 along with interest and imposed penalty of equal amount of duty on the assessee It has also imposed penalty of Rs 50,000/- on Shri Babul Joitaram, partner of the assessee and Rs 40,000/-each on S/Shri Amitbhai Babubhai Patel and Shri Dhirubhai K Modhwadia Proprietor of M/s Leo Engineers and M/s Eletech Industries respectively. By the impugned order, the Commissioner (Appeals) upheld the adjudication order and rejected the appeals filed by the appellants. M/s Sharp Engineers filed two appeals along with the appeals of other three appellants before the Tribunal.
Contentions of the Assessee
The appellants submitted that as they have already paid the entire amount of duty along with interest and penalty of 25% of the duty, no Show cause notice should be issued under Section 11A (2B) of the Central Excise Act 1944. It was further submitted that both the authorities below had not given the option to pay penalty of 25% duty as provided under Section 11AC of the Act. It is submitted that as the penalty was imposed on the partnership firm, no separate penalty can be imposed on the partner as held by the Hon’ble Gujarat High Court in the case of Pravin N Shah v. CESTAT 2014 (305) ELT 480. It is also contended that the Revenue held that the other units are dummy and therefore no penalty can be imposed on the dummy units. He relied upon the following cases:
