The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the refund due to a proprietary concern cannot be adjusted or appropriated towards the demand raised on another entity of which the proprietor is a partner. The Tribunal further clarified that both the proprietary concern and a partnership Firm, are two different legal entities.
In the instant case, the Revenue made a demand against M/s Diwan Industries. It took a stand that since a partner in M/s Diwan Industries is a proprietor of a unit, the arrears against the partnership firm can be recovered from the partners, the appropriation of the refund sanctioned to the proprietary unit is legal and proper.
Deleting the order, the Tribunal found that there is no dispute about the fact that proceedings were initiated against M/s Mahavir Industries by treating the same as an individual manufacturer.
“On the success of their appeal before Tribunal, such proprietary unit is admittedly entitled to the refund of the amount pre-deposited by them before the Tribunal. A proprietary unit is an individual legal entity and any refunds due to the proprietary unit cannot be adjusted or appropriated towards the demand which may be pending recovery against another independent legal entity, of which the proprietor of unit is a partner. It has to be kept in mind that the present proceeding are not recovery proceeding against the partnership firm so as to make the recoveries independently from the partners also. The dispute relates to the refund of the duty deposited by a proprietary unit and on success of their appeal before Tribunal such refunds have to be sanctioned to the proprietary unit. Any such adjustments against the dues of a partnership firm is neither justified nor proper nor legal,” the Tribunal said.
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