2019 (2) TMI 1573 - AT - Customs

Partnership firm penalties under Customs Act abated for deceased partner, court remands for fresh order.

Kamal Kishore Parekh, Partner Riddhi Enterprises, Riddhi Enterprises Thro Partner Kamal K Parekh., Ashok P Maniyar Proprieter DJ Impex Versus C. C-Mangalore-cus

The case involved penalties imposed on a partnership firm and its partners under the Customs Act, 1962 for violations related to export obligations. The ... Penalties on the firm and partner u/s 112(a), Section 114 (iii) & Section 114AA of the Customs Act, 1962 - EPCG License - it is alleged that the appellant had lent his shipping bills so as to enable M/s. POP, Mangalore to count such exports towards export obligation fulfillment under EPCG License of the main noticee i.e. M/s. POP, Mangalore under ‘third party exporter category. Penalty on Sh. Ashok P Muniyar - Held that:- Since the appellant, Sh. Ashok P Muniyar has died during the pendency of the appeal, therefore penalty proceedings against the deceased stand abated. Penalty on the appellant, M/s. Riddhi Enterprises and its partner, Sh. Kamal Kishore Parekh - Held that:- The main notice who has mis-used the EPCG License on the basis of the exports made by the appellant and has also obtained EODC certificate from the DGFT. They have gone to the Settlement Commission and have settled the matter before the Settlement Commission and have paid the liability along with interest - further, the Original Authority has not considered that once the settlement is permitted by the Settlement Commission by the main notice then can penalties be imposed on the co-noticee who bona fidely believe that the export made by them were covered under ‘third party exports’ and counted towards export obligation fulfillment of the EPCG License holder - further, the Original Authority has imposed the penalty on the partner as well as Partnership firm on the same very transaction which is not permitted under law as the Partnership is not a separate legal entity and all the partners collectively known as firm and therefore, the imposition of penalty on the partner as well as Partnership firm is not legally sustainable. Further, the Original Authority has not discussed about the role, acts and omission on the part of the appellant in the SCN which necessitated the imposition of penalties under Section 112(a), Section 114(iii) & Section 114AA all under the Customs Act, 1962 and the requirement to be fulfilled for imposition of penalty. The said sections have also not been brought out specifically in the impugned order. -In view of all these infirmities, this case needs to be remanded back to the Original Authority to pass a denovo order after considering the various submissions made by the appellant and also consider the various decisions which may be relied upon by the appellant in support of their submissions. Appeal allowed by way of remand. Issues involved:Penalties imposed under Sections 112(a), 114(iii), and 114AA of the Customs Act, 1962 on a partnership firm and its partners for alleged violations related to export obligations under an EPCG License.Analysis:1. Penalty Abatement Due to Death of Appellant:The judgment addresses the penalty proceedings against the deceased partner of the firm, who passed away during the appeal. Citing the Supreme Court's ruling in a similar case, the penalty proceedings against the deceased individual are deemed abated.2. Settlement Commission's Impact on Penalties:The main noticee, who misused the EPCG License based on exports by the appellant, settled the matter before the Settlement Commission. The Settlement Commission's decision and payment of liabilities by the main noticee should be considered while imposing penalties on the co-noticee. The judgment questions the imposition of penalties on the partner and the partnership firm for the same transaction, highlighting that a partnership is not a distinct legal entity.3. Legal Infirmities and Remand to Original Authority:The Original Authority's failure to discuss the appellant's role, acts, and omissions in connection with the alleged violations under the Customs Act, 1962 is noted. The judgment finds deficiencies in the consideration of legal requirements for imposing penalties under the relevant sections. As a result, the case is remanded back to the Original Authority for a fresh order, emphasizing the need to address the appellant's submissions and relevant legal precedents.The judgment, delivered by the Judicial Member, sets aside the impugned order and remands the appeals to the Original Authority for a denovo order, ensuring the appellants have a fair opportunity to present their case. All issues are kept open for further consideration and clarification.