ALOK SINGH, J.

Appellant proprietor of M/s Asim Enterprises and partner of M/s Makhan Lal Vinod Kumar is assailing order dated 16.9.2009 passed by Customs, Excise and Service Tax Appellate Tribunal, New Delhi, upholding the levy of penalty under Rule 209A of the Central Excise Rules, 1944 read with Rule 26 of the Central Excise Rules, 2001 & directing the appellant proprietor of M/s Asim Enterprises and partner of M/s Makhan Lal Vinod Kumar to pay penalty of ` 10,00,000/-.

Undisputedly, brief facts of the present case inter alia are that appellant is proprietor of M/s Asim Enterprises, and partner of M/s Makhan Lal Vinod Kumar, registered dealers; the Central Excise Officers searched the business premises of M/s Asian Alloys Ltd. On 12.1.2001 and conducted thorough investigation; M/s Asian Alloys Ltd. availed credit on the basis of invoices issued by the registered dealers and washer manufacturing units during the period from 1.4.2000 to 31.7.2001; Commissioner confirmed the demand of duty of ` 3,79,64,978/- and imposed penalty of equal amount on M/s Asian Alloys Ltd. along with interest and also imposed penalties on various registered dealers and washer manufacturing units. Penalty of ` 8285894/- was imposed on M/s Asim Enterprises and penalty of ` 485107/ was imposed on M/s Makhan Lal Vinod Kumar-; a further penalty of ` 50,00,000/- was imposed on the appellant being proprietor of M/s Asim Enterprises and partner of M/s Makhan Lal Vinod Kumar.

Undisputedly, imposition of penalty on M/s Asian Alloys Ltd., the proprietorship firm, has attained finality and likewise imposition of penalty on M/s Makhan Lal Vinod Kumar, of which appellant is partner, has also attained finality.

Learned Tribunal in an appeal filed by the appellant-proprietor of the firm, having observed that appellant was settling the accounts of other registered dealers/washer manufacturing units, who had supplied invoices to M/s Asian Alloys Ltd. without any physical movement of the goods, confirmed the imposition of penalty on the appellant-proprietor of the firm, however, reduced it to ` 10,00,000/- from ` 50,00,000/-.

Feeling aggrieved, appellant has preferred this statutory appeal.

We have heard Mr. Jagmohan Bansal, learned counsel appearing for the appellant, as well as Ms. Ranjana Shahi, learned Central Government Standing Counsel, for the respondent.

Mr. Bansal has vehemently argued that since penalty was imposed on M/s Asim Enterprises, of which appellant is the sole proprietor, as well as on M/s Makhan Lal Vinod Kumar, of which appellant is the partner, therefore, no penalty can be imposed on the appellant separately, it would amount to imposition of double penalties, which is not permissible under the law.

On the other hand, Ms. Ranjana Shahi, learned Central Government Standing Counsel, has vehemently argued that since appellant has actively participated in the settling of accounts of other registered dealers, who had supplied invoices to M/s Asian Alloys Ltd., the proprietorship firm of the appellant without any physical movement of the goods, therefore, penalty was rightly imposed on the proprietor of M/s Asim Enterprises and partner of M/s Makhan Lal Vinod Kumar & no interference is called therein.

Having heard learned counsel for the parties, we are of the considered opinion that proprietorship firm or proprietor thereof cannot be treated as two different legal entities. Partnership firm is a firm in mercantile usage, however, penalty imposed on the proprietorship or partnership firms would mean penalty on the proprietor or partners thereof, therefore, imposition of penalties one on the proprietorship firm and second on the proprietor would amount to imposition of penalty twice, which cannot be sustained in the eyes of law.

Learned Single Judge of Calcutta High Court in the case of Tarak Nath Sen and others Vs. Union of India and others, AIR 1975 Calcutta 337, has observed as under: -

17. Thus, these decisions make it clear that although a firm in mercantile usage has a personality of its own, strictly in the eye of law, it is not a legal entity like a natural person.

Therefore, the rights and obligations of a firm are really rights and obligations of the individual partners of the firm.

In the instant case, according to the findings made by the Additional Collector of Customs in his adjudication order the petitioners 2 to 4 carrying on business as a partnership firm had contravened provisions of the Customs Act and the Gold Control Rules and were liable for penalties under Section 112 of the Customs Act and under Rule 126-L (16) of the Defence of India (Gold Control) Rules. Therefore, no exception can be taken to imposition of penalties individually upon them. But since the firm is not a legal entity and Section 140 of the Customs Act was inapplicable to the adjudication proceeding, the Additional Collector of Customs by imposing penalties also upon the firm has really twice punished the petitioners Nos.1 to 4 for the same sets of acts. Therefore, although I propose to sustain the imposition of penal ties under the Customs Act and the Defence of India (Gold Control) Rules upon the petitioners 2 to 4, the penalties of fine imposed upon the petitioner No.5 firm should be quashed.

Having perused the observations of learned Single Judge of Calcutta High Court in the case of Tarak Nath Sen (supra), we find that a firm in mercantile usage is the firm in its own, strictly in the eye of law, it is not a legal entity like a natural person. Therefore, the rights and obligations of a firm are really rights and obligations of the individual partners of the firm, therefore, penalty imposed on the firm would amount to imposition of penalty to the proprietor or the partner, as the case may be, therefore, imposition of penalty on the proprietor independently would not be legal.

Appeal is allowed. Imposition of penalty on the appellant stands set aside.