Joint Appeal by Firm and Partner is Permissible: CESTAT [Read Order]

In M/s. Rajhans Enterprises & Anr. vs. Commissioner of Central Tax, the Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that a joint appeal is permissible by the firm as well as the Management Partner.

In the instant case, the assessee-appellants are engaged in the manufacture of excisable goods. Based on case materials and documents seized by the Income Tax Authorities during a search operation conducted at the premises of the assessee, a show cause notice was issued to the appellants alleging that a quantity of 19,31,715 Nos. of cartons were clandestinely cleared without payment of duty during the period from November 2007 to February 2008 to M/s. DIL, Bangalore demanding duty liability of Rs.4.33 Lacs on the value of unaccounted clearances of packing materials of Rs.26.27 Lacs along with interest and penalty. The adjudicating authority confirmed the demand for the value of unaccounted clearances under proviso to Section 11A of the Central Excise Act along with applicable interest under Section 11AB of Central Excise Act and imposed penalty. The lower authority also imposed a personal penalty of Rs.1,10,000/- on the Managing Partner under Rule 26 of Central Excise Rules for contravening the provisions of Central Excise Act.

On appeal, the Commissioner Appeals set aside the duty demand and the penalty; however, penalty under Rule 26 of the Central Excise Rules, 2002 imposed on the Managing Partner of the appellant-firm was upheld on the ground that no separate appeal has been filed by the Managing Partner. Aggrieved, appeal was filed before the CESTAT.

The Counsel for the appellant argued that the Commissioner (A) has wrongly held that there is no concept of joint appeal and the Managing Partner has to separately file an appeal under Rule 3(1) and (2) of the sub-rules. He further submitted that a joint appeal is permissible under law because it is a firm and not a company and in the case of firm, the appeal was filed challenging the demand on the firm as well as the penalty imposed on the Managing Partner of the firm. He also submitted that once the demand along with penalty has been set aside on the firm on merit, the penalty on the Managing Partner automatically goes and there is no need to file a separate appeal by the Managing Partner challenging the imposition of penalty. The Counsel for the Revenue contented reiterated the orders of the Commissioner.

The bench comprising of Judicial Member S.S Garg relying on the decisions of Bombay High Court in Benu Ramesh Agarwal vs. CCE, observed that “I find that there was joint appeal filed by the firm as well as the Managing Partner of the firm and the Commissioner (A) vide the impugned order has allowed the appeal of the firm on merit and dropped the demand as well as penalty but upheld the penalty of Rs.1,10,000/- on Shri A. Ravindranath, Managing Partner under Rule 26 of Central Excise Rules. Further, I find that once the appeal of the firm has been allowed on merit, then the penalty on the Managing Partner cannot be imposed under Rule 26 of the Central Excise Rules. For this, I find support in the decisions relied upon by the appellant cited supra. Further, I find that in the decision relied upon by the appellant, it has been held that a joint appeal is permissible by the firm as well as the Partner because under Law a Partnership Firm is not a separate legal entity as in the case of Company under the Companies Act.”