Important Point – Simultaneous penalties can be imposed on firm and partners.

M. S. Sanklecha, J.

This Full Bench has been constituted on a reference made on 23rd April, 2015 by a Division Bench of this Court in Amritlakshmi Machine Works & Others v/s. The Commissioner of Customs (Import), 303 ELP 161. This reference has arisen when the Division Bench in Amritlakshmi Machine Works (supra) was considering four appeals (two by the partnership firm and two by its managing partner) under Section 130 of the Customs Act, 1962 (the Act) from a common order dated 7th May 2012 of the Customs, Excise Service Tax Appellate Tribunal (Tribunal). All the four appeals raised the following substantial question of law:“

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. In Texoplast Industries v/s. Additional Commissioner of Customs, 272 ELT 513 the Division Bench answered the above question in the negative i.e. in favour of the Revenue while in Commissioner of Customs (EP) v/s. Jupiter Exports, 213 ELT 641 the Division bench answered the above question in the affirmative i.e. in favour of the Appellant -Assessee.

2. In view of the above conflict, the following questions have been referred to us for our opinion:

“(a) 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?

(b) Whether, the judgment in the case of Commissioner of Customs (E.P.) v/s. Jupiter Exports reported in 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/s. Additional Commissioner of Customs reported in 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?.”

3. The bare facts which arose before the Division Bench in Amritlaxmi Machine Works (supra) are set out in its order. The order of the Division Bench referred to the facts emanating from one of the two show cause notices (both of which are identical) leading to four appeals (two by the firm and two by the partner) and are reproduced in verbatim as under:

“4: The facts necessary to appreciate this question are that the Appellants are, inter alia, engaged in the manufacture of textile machines. The Appellants applied for and were granted Value Based Advance License No. 03014593 dated 22111996 against which the Appellants were, inter alia, permitted to import 248 pieces of ball bearings valued approximately at Rs.9 lacs within the overall value of Rs.50,05,468/. It is stated that sometime in February, 1997 the Appellants discharged their export obligation and therefore, the said license became transferable. As the Appellants were not able to import any goods under the said license for the initial validity period, the Appellants requested for extension of the validity period of the said license. A part of the said license was utilized by importing two consignments vide Bill of Entry filed in January, 1997 and August, 1998, respectively. The validity of the said license was extended up to 2151999 and the value thereof was reduced by the office of the Joint Director General of Foreign Trade, Mumbai to Rs.43,41,140/leaving an unutilized balance of Rs.27,32,557/;

5. The information was received by officers of the Directorate of Revenue Intelligence, Mumbai Zonal Unit that several consignments of Bearings have been imported in the names of M/s. Hiral Overseas, M/s. Ankit International, M/s. Nippon Bearings Pvt. Ltd. M/s. M. M. Corporation, M/s. Nippon Bearings (India), M/s. S.N.M. Enterprises, M/s. Devanti Ov