The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Allahabad has held that imposing a separate penalty on the proprietor of a business concern when the concern itself had already been penalised for the same offence is unsustainable. The bench found that this violated the legal principle against double jeopardy, which prevents an individual from being penalized twice for the same offence.
The case involved a situation where a proprietorship concern was penalised for smuggling and the same proprietor was separately penalised as an individual for the same offence.
The appellants, Shri Raj Kumar Singh, the proprietor of M/s Bunti Scrap Suppliers and Shri Harishchandra Singh, represented by Ms Surabhi Sinha argued that imposing a separate penalty on the proprietor for the same offence already penalised against the proprietorship concern is unjust and legally unsustainable.
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The appellant contended that penalising both the business and its proprietor for the same set of facts constituted double punishment, which should not be allowed under the law. They emphasised that penalising the proprietor separately shall not be permissible under the law.
The respondent revenue, Commissioner of Customs, Central Excise & CGST, Lucknow, represented by Shri A.K. Choudhary contended that the proprietor and the proprietorship are distinct entities under the law, and therefore, separate penalties for both are justified.
They argued that the proprietor’s personal involvement in the offence warranted an additional penalty, irrespective of the penalty imposed on the business concern.
The CESTAT agreed with the appellant’s argument, observing that imposing a separate penalty on the proprietor, who was already part of the penalised concern, amounted to an unjust duplication of penalties. The bench emphasised that the legal framework should ensure that punishments are not imposed more than once for the same infraction.
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The bench stressed the necessity to ensure that the penalties imposed are proportionate and fair, preventing unfair duplication of punishments in cases where the legal entity has already been penalised. It also highlighted the need for careful evaluation of penalties to avoid procedural errors and ensure justice.
The two-member bench of the CESTAT comprising Mr. P.K. Choudhary (Judicial Member) and Mr. Sanjiv Srivastava (Technical Member) concluded that the same person shall not be penalised both in their capacity as the business owner and for their role in the offence. The ruling strengthens the legal safeguards against double punishment and ensures a fairer approach to penalising individuals and entities in such cases.
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