The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that penalties under Rule 209A of the Central Excise Rules, 1944, cannot be imposed on partnership firms as the rule applies only to individuals dealing with confiscable goods.
Taher & Company and Satish Traders, the appellants, are partnership firms engaged in trading excisable goods. The issue arose when custom authorities imposed penalties under Rule 209A alleging that the appellants had paid cash amounts over and above the invoice price for goods purchased from a 100% Export-Oriented Unit (Unimin India Ltd.). These actions were deemed to have involved goods liable for confiscation under the Central Excise Act.
Law and Procedure for Filing of Appeals
On appeal before the CESTAT, the appellant’s counsel argued that there was no evidence to prove the alleged cash payments and that the valuation of goods for excise duty as per the proviso to Section 3(1) of the Central Excise Act which made the invoice price irrelevant.
The appellant’s counsel claimed that penalties under Rule 209A could not be imposed on partnership firms, citing precedents such as Woodmen Industries and R.S. Jhaveri & Co. Exports, which held that the rule applies only to individuals.
The revenue counsel countered that the appellants knowingly dealt with goods liable for confiscation and relied on the findings of the adjudicating authority. The counsel argued that the penalties were justified under the circumstances.
The two-member bench comprising Member (Judicial) Ramesh Nair found that penalties under Rule 209A are personal liabilities applicable only to individuals who knowingly deal with confiscable goods.
Law and Procedure for Filing of Appeals
Citing precedents such as Woodmen Industries, the tribunal held that partnership firms could not be penalized under Rule 209A of the Central Excise Act. The tribunal also observed that the adjudicating authority’s order was non-speaking and failed to addresssubmissions raised by the appellants.
The tribunal observed that the appellant’s matter was revenue-neutral and lacked substantial evidence of wrongdoing. The tribunal deleted the penalties imposed and allowed the appeals with consequential relief.
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