CUSTOMS APPEAL NO. 100 OF 2012

Customs appeal against penalty imposed under Section 112(a) of the Customs Act, 1962 on partnership firm and its managing partner simultaneously.

Appellants sought to quash the simultaneous penalties imposed on both the partnership firm and its partner, arguing it was impermissible under the law.

Alleged fraudulent import of bearings using a duplicate advance license, resulting in confiscation of goods and imposition of penalties.

Commissioner of Customs (Adjudication) confirmed demand and imposed penalties; Customs, Excise and Service Tax Appellate Tribunal dismissed the appeals; Division Bench of High Court noticed conflicting decisions and referred the matter to Full Bench.

Whether under the Customs Act, 1962 and particularly in exercise of the powers conferred by Section 112(a) thereof, simultaneous penalties on both the Partner and Partnership firm can be imposed? Whether, the judgment in the case of Commissioner of Customs (E.P.) v. Jupiter Exports (2007) 213 E.L.T. 641 (Bom.), holding that separate penalty on a partnership firm and a partner cannot be imposed, lays down the correct law or whether, as held by the later Division Bench in the case of Texoplast Industries v. Additional Commissioner of Customs (2011) 272 E.L.T. 513 (Bom.) it is permissible to impose penalty separately on a partnership firm and a partner particularly in adjudication proceedings under the Customs Act, 1962?

Appellant argued that the issue was already concluded by Jupiter Exports which held that separate penalties cannot be imposed, and that decision is binding; the later decision in Texoplast Industries incorrectly applied Standard Chartered Bank v. Directorate of Enforcement, a case under FERA, which has no application to Section 112(a) of the Customs Act. Appellant submitted that the scheme of the Customs Act and FERA are entirely different; Section 140 of the Customs Act is restricted in its application to Chapter XVI (offences and prosecution), unlike Section 68 of FERA, and therefore its width is limited. Appellant contended that Chapter XVI of the Customs Act applies only to offences and prosecution, whereas Chapter XIV (which includes Section 112) deals with confiscation of goods and penalty in adjudication proceedings, thus the principles of simultaneous penalty should be assessed within this distinct framework.

Whether the Tribunal has erred in imposing simultaneous penalties on both partners and partnership firm? This reference arose as in the view of the Division Bench in Amritlakshmi Machine Works (supra) there was a cleavage of opinion on the above issue between the decisions of two Division Benches of this Court. when a penalty is imposed upon the partnership firm, separate penalty cannot be imposed upon the partner of the firm.

Show cause notices were issued alleging fraudulent import using duplicate advance license, calling for confiscation and penalty under Customs Act. Commissioner of Customs (Adjudication) adjudicated and imposed penalty of Rs. 15 lakhs on firm and Rs. 5 lakhs on partner under Section 112(a). Appeals filed before Customs, Excise and Service Tax Appellate Tribunal were dismissed on 7-5-2012. Appellants filed four appeals under Section 130 of Customs Act before High Court. Division Bench on 23-4-2015 noticed conflicting decisions of this Court in Jupiter Exports and Texoplast Industries and referred the questions to Full Bench.

• Customs Act, 1962: 112(a), 112(b), 111(d), 111(m), 130, 140, 138B, Chapter XIV, Chapter XVI
• Foreign Trade (Development & Regulation) Act, 1992:
• Foreign Exchange Regulation Act, 1973: 68