Central Excise Appeal No. 84 of 2011 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Central Excise Appeal No. 84 of 2011 Date of decision: 13.10.2011 Commissioner of Central Excise Commissionerate, Chandigarh-I ...Appellant Versus Vikas Garg ...Respondent Central Excise Appeal No. 85 of 2011 Commissioner of Central Excise, Chandigarh-I ...Appellant Versus Ritesh Garg ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr. Kamal Sehgal, Advocate for the appellant. **** HEMANT GUPTA, J (Oral). This order will dispose of CEA Nos.84 and 85 of 2011 as both the appeals arise out of same facts but in the matter of two partners. The appeals have been preferred by the revenue under Section 35G of the Central Excise Act, 1944 (for short “the Act”) against order dated 5.1.2011 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi whereby claim of the revenue for imposition of penalty under Rule 26 of the Central Excise Rules, 2002 (for short “the Rules”) on the partners of the firm was declined. The Revenue served a show notice dated 1.8.2008 on the Central Excise Appeal No. 84 of 2011 -2- *** firm-M/s Kripalu Steel Industries that the said firm is indulging in clandestine manufacture and clearance of M.S.Bars/Patra etc. and using clandestinely procured M.S. Ignotes from various furnace units. This led to search of the premises on 27.2.2008. At the time of search, shortages were found. Noticee M/s Kripalu Steel Industries agreed with the shortages and paid the duty on the spot on 27.2.2008. Later M/s Kripalu Steel Industries was called upon as to why the total central excise duty amounting to ` 1762106/- (BED ` 1710782 + Ed Cess ` 34216/- + ` Cess Rs.17108/-) and the deficiency in the payment of central excise duty amounting to ` 218336/- (211976+4240+2120) on 57.155 M.T. M.S. Ignots and Rs.36520/- (35456+709+355) on 9.560 M.T. M.S. Bar/Patras be not recovered from them under Section 11(A)(1) of the Act. It was also stated that why the penalty should not be imposed on the firm under Section 11AC of the Act. Apart therefrom such notice to the firm, the partners were issued show cause notices as to why penalty should not be imposed under Rule 26 of the Rules. During the Adjudication proceedings, the firm deposited the amount claimed and that the Additional Commissioner returned a finding that the proceedings against the firm stands concluded under proviso to sub section (2) of Section 11A of the Central Excise Rules,1944 but for imposed a penalty of ` 2 lacs each individually and separately on the partners of the firm. The said order was set aside by the Commissioner (Appeals) on 20.3.2009. It was held that the Rule 26 of the Rules is a penal provision and not the one under which show cause notice can be issued. Since the show cause notice under Section 11A(1) of the Act had been issued and proceedings stands concluded against firm, therefore, penalty proceedings under Rule 26 of the Rules cannot be continued Central Excise Appeal No. 84 of 2011 -3- *** against partners. The said order was affirmed in appeal by the Tribunal as well vide order dated 5.1.2011. Learned counsel for the appellant vehemently argued that the conclusion of proceedings under Section 11A (2) of the Act does not absolve the partners from the penalty proceedings initiated separately under Rule 26 of the Rules. We do not find any merit in the said argument. Once the proceedings against the firm stand concluded, penalty proceedings against partners of the firm cannot continue as Rule 26 of the Rules is not an independent provision but has to be read with Section 11A of the Act. The firm has satisfied the due of the revenue, therefore, the imposition of penalty under Rule 26 of the Rules are not justified. In view of above, both the appeals are dismissed. (Hemant Gupta) Judge October 13, 2011 (G.S.Sandhawalia) Pka Judge