TaxTMI 
TaxTMI 
2014 (4) TMI 1025
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....deed is a substantial question of law. 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 Licence No.03014593 dated 22.11.1996 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 licence became transferable. As the Appellants were not able to import any goods under the said licence for the initial validity period, the Appellants requested for extension of the validity period of the said licence. A part of the said licence was utilized by importing two consignments vide Bill of Entry filed in January, 1997 and August, 1998, respectively. The validity of the said licence was extended upto 21.05.1999 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 ....
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....ot be confiscated under the provisions of Section 111(d) of the Customs Act, 1962 read with the Foreign Trade (Development & Regulation) Act, 1992 and under Section 111(m) of the Customs Act, 1962; and without prejudice to above for the reasons of liability to confiscation of goods under Section 111 as to why penalty under Section 112(a) and/or 112(b) of the Customs Act, 1962 should not be imposed on each of them. 7. The show cause notice was, therefore, taken up for adjudication by the Commissioner of Customs (Adjudication), Mumbai and he confirmed the demand to the extent indicated therein. He imposed penalty under Section 112(a) of the Customs Act, 1962 on the following persons:- (a) M/s Amrit Laxmi Machine Works : Rs.15 lacs, (b) Mr.N.Nagdutt K. Brahmachari : Rs.5 lacs. 8. This order of adjudication of the Adjudicating Authority was challenged before the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai and by the impugned order dated 07.05.2012, the Appeal of the Appellant has been dismissed. 9. It is contention of the learned counsel appearing for the Appellant that the law does not postulate imposition of penalty on a firm as well as partner. In....
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....n Jupiter Exports (supra) is per incuriam. Such finding and conclusion has not been reached in the case of Textoplast Industries (supra). Therefore, we must not apply the ratio in the case of Textoplast Industries (supra), but follow the binding judgment of the coordinate Bench directly on the point and delivered in the case of Jupiter Exports (supra). More so, when that has not been held to be per incuriam by a later Division Bench. The rule of precedents and judicial discipline is pressed into service by the learned counsel. He submits that Textoplast Industries (supra) refers to a judgment of the Honourable Supreme Court in the case of Standard Chartered Bank (supra). He submits that the judgment is rendered by the Honourable Supreme Court, but it was considering the issue as to whether, a company incorporated and registered under the Indian Companies Act, 1956 can be prosecuted and if prosecuted, punished. What could be the punishment imposed for the offence committed by the Company, whether it could be sentence of imprisonment or payment of fine. These are the issues answered in the case of Standard Chartered Bank (supra). The judgment in the case of Standard Chartered Bank (s....
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....d the partner. This is because a partnership firm unlike a company is not a juristic entity and does not have an existence independent than that of its partners. While the penalty levied on the partners is recoverable from each partner individually, that which is imposed on the partnership firm is also recoverable from the partners. Thus, the partners are penalized twice for the same offence. 16. In that regard and before proceeding further, a reference can usefully be made to the judgment of the Honourable Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v/s M/s K. Kelukutty reported in AIR 1985 SC 1143 . The Honourable Supreme Court, while dealing with the contention that for taxing purpose a partnership firm is treated as an entity distinct from the persons who constitute it, held thus:- "7. It seems to us that the approach adopted by the High Courts is not sound, and that the true solution has to be found not in the tax law but in the partnership law. We are concerned here with the Kerala General Salestax Act. There is no doubt that under that Act a partnership firm must be regarded as an assessable entity. What precisely is the si....
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....ing decided the legal identity of the assessee, that it is a partnership firm, he will then turn to the tax law and apply its relevant provisions for assessing the partnership income. 10. The Kerala General Sales-tax Act contains no provision which bears on the identity of a partnership firm. Therefore, recourse must be had for that purpose to the partnership law alone. Where it is claimed that they are not one but two partnership firms constituted by the same persons and carrying on different businesses, the assessing authority must test the claim in the light of the partnership law. It is only after that question has been first determined namely, whether in law there is only one partnership firm or two partnership firms, that the next question arises: Whether the turnover is assessable in the hands of the partnership firm as a taxable entity separate and distinct from the partners? There is first a decision under the law of partnership; thereafter, the second question arises, the question as to assessment under the tax law. It is clear, therefore, that reference must be made first to the partnership law. 11. The Indian Partnership Act, 1932 has, by S.4, defined a "partnership" ....
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....is made in the Taxing Law. That appears to be the consistent legal opinion. In other words, the Honourable Supreme Court in the case of M/s Malabar Fisheries Co. v/s The Commissioner of Income Tax, Kerala reported in AIR 1980 SC 176 held that a partnership firm registered under the Partnership Act, 1932 is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint and common interest. Further, with great respect the Division Bench rendering the judgment in Textoplast Industries (supra) ought to have referred to the legal position and the statement of law distinct and different than what is referred by us above. If the Honourable Supreme Court of India consistently takes the aforesaid view and reiterates it from time to time, then, the judgment in Jupiter Exports (supra) ought to have been held either as per incuriam or no longer good law. In other words, if the legal position remains the same and as noted above, then, with respect, prima f....
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....at the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation. - For the purposes of this section - (i) "company" means any body corporate and includes a firm or other association of individuals; and (ii) "director", in relation to a firm, means a partner in the firm." 19. In paragraph 25 of the judgment in Standard Chartered Bank (supra), the Honourable Supreme Court refers to the decision of this Court in the following terms:- "25. These appeals are by the Union of India and the Authorities under the FERA challenging the decision of the High Court of Bombay to the extent that court held that Section 68 of the Act is inapplicable to proceedings for adjudication under Section 51 of the Act and its operation is confined only to prosecutions under the Act. The High Court reasoned that the argument that having regard to the placement of Section 68 under the Legislative Sc....
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....son liable both for penalty and for prosecution. Even though the heading to Section 56 refers to offences and prosecutions, what is made punishable by the Section is the contravention of the provisions of the Act and the prosecution is without prejudice to any award of penalty. The award of penalty is also based on the same contravention. Section 63 is the power of confiscation of currency, security or any other money or property in respect of which a contravention of the provisions of the Act has taken place conferred equally on the Adjudicating Authority and the Court, whether it be during an adjudication of the penalty or during a prosecution. Whereas Section 64(1) relating to preparation or attempt at contravention is confined to Section 56, the provision for prosecution, subSection (2) of Section 64 makes the attempt to contravene or abetment of contravention, itself a contravention, for the purposes of the Act including an adjudication of penalty under the Act. Section 68 relating to offences by companies, by subSection (1) introduces a deeming provision that the person who was in charge of and was responsible to the company for the conduct of the business of the company, sha....
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.... being in force. 'Punishable' as noticed by this Court in Sube Singh & Ors. Vs. State of Haryana & Ors. [(1989) 1 SCC 235] is ordinarily defined as deserving of, or capable or liable to punishment. According to Concise Oxford English Dictionary, 'punish' means, 'inflict a penalty on as retribution for an offence, inflict a penalty on someone for (an offence)'. In the New Shorter Oxford English Dictionary (Vol. 2, 3rd ed., reprint 1993), the meaning of punishment is given as, "infliction of a penalty in retribution for an offence; penalty imposed to ensure application and enforcement of a law." Going by Black's Law Dictionary (8th ed.) it is, "a sanctionsuch as a fine, penalty, confinement, or loss of property, right or privilege-assessed against a person who has violated the law." According to Jowitts Dictionary of English Law Vol. 2 (2nd ed. By John Burke), punishment is the penalty for transgressing the law. It is significant to notice that Section 68, both in sub-section (1) and in sub-section (2) uses the expression, shall be liable to be proceeded against and punished accordingly. There does not appear to be any reason to confine the operation of Se....
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....us anomaly." 21. Therefore, it is the judgment delivered in the context of the challenge raised by the Union of India. Further, the challenge was raised in the context of an offence committed by a Company. Therefore, a penalty also can be imposed on a Company and in holding that the Honourable Supreme Court noted the legal status of a company. 22. With great respect, the Division Bench in Textoplast Industries (supra) following this judgment of the Honourable Supreme Court, held that where the contravention has been committed with the consent of or connivance of or is attributable to the negligence of the partner of a partnership firm, such partner can also be proceeded against. In paragraphs 16 and 17 the Division Bench holds thus:- "16. Finally, Section 68 was held only to be clarificatory in nature:- "Section 68 only clarifies the nature and mode of proceeding when the contravention of any of the provisions of the Act is by a company, whether it be by way of adjudication to impose a penalty or by way of prosecution leading to imprisonment and a fine." (emphasis supplied). The ratio of the decision of the Supreme Court would indicate the following principles: (i) Both, in t....
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.... a partnership or its partner. The Customs Act, 1962 is inter alia intended to regulate the levy of the duty of Customs. Obligations for exacting compliance in revenue legislation are cast upon diverse sets of persons or entities. For the purposes of revenue legislation, it is open to the Legislature to cast an obligation for compliance upon, as in this case, an importer or other person. An importer includes a person who is the owner or one who holds himself out as the importer of the goods. As a matter of first principle, there is no reason to exclude the exercise of power by the enacting Legislature to penalise a partnership, particularly when it is consistent with the overall scheme and object of the Act. Moreover, every person who was in charge of and was responsible to the firm for the conduct of the business of the firm, as well as the firm can be proceeded against. Where the contravention has been committed with the consent of or connivance of or is attributable to the negligence of the partner of a partnership firm, such partner can also be proceed against. This legal position emerges from the overall scheme of the Act. Section 140 only constitutes a statutory recognition o....
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....rs separately. The Gujarat High Court held that the explanation in Section 140 was for the purposes of liability in respect of commission of offences under the Act whereas there was no such corresponding provision in relation to the imposition of a penalty under the Act. The Gujarat High Court has also not considered the principle enunciated by the Supreme Court in the Standard Chartered Bank case. As a matter of fact, in a judgment of the Supreme Court in Prakash Metal Works vs. Collector of Central Excise, 2007 (216) E.L.T. 660 (S.C.) Hon'ble Mr.Justice S.H.Kapadia (as the Learned Chief Justice then was) speaking for the Supreme Court upheld an order of the Tribunal imposing a penalty on partners of a firm as well as on the partnership firm." 23. In the light of the above, we are not in agreement with Mr.Rao that two opinions rendered by the two Division Benches of this Court are not conflicting. There is clear conflict, to our mind, in two views. One recognizes the settled concept and applies it, namely, a firm cannot be said to have an independent existence than that of partners even when it comes for imposition of penalty. Whereas, other holds that there is no difference ....
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....l Advani v/s Harpal Singh Abnashi Singh Sawhney reported in AIR 1975 Bombay 120 . Insofar as the Doctrine of Precedent is concerned, the Honourable Division Bench held as under:- "11. Now it is well settled that normally one Division Bench of a High Court cannot take a view contrary to the decision given by another Bench of that Court. In Sri Venkateshwara Rice, Ginning and Groundnut Oil Mill Contractor Co. etc. v. The State of Andhra Pradesh AIR 1972 SC 51, it has been observed that the later Bench before whom a question arises is bond by the earlier decision. Mr. Kripalani on behalf of the petitioner also drew our attention in this connection to Young v. Bristol Aeroplane Company Limited (1944) 1 KB 718, where the following propositions have been set out in the head note: "The Court of Appeal is bound to follow its own decisions and those of courts of co-ordinate jurisdiction, and the 'full' court is in the same position in this respect as a division of the Court consisting of three members. The only exceptions to this rule are:- (1) The Court is entitled and bound to decide which of two conflicting decisions of its own it will follow: (2) the court is bound to refuse....
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....ords to rectify the mistake". Following this, in our opinion the same salutary principle must be adopted and applied here. Both as to the true ratio of Deccan Merchants' Co-operative Bank's case AIR 1969 SC 1320 and the effect of Sabharwal's case AIR 1972 SC 1893 we must follow and apply what has been laid down by a co-ordinate Court viz. the Division Bench which decided Kalavati's case C. A. No. 1699 of 1969 D/-2641973 (Bom) and any aggrieved party must be referred to the Supreme Court for the correction of errors (or what it contends are the errors) in the earlier decision." 26. We must also refer to the argument of Mr.Rao based on Section 26 of the Partnership Act, 1932. He submits that the Division Bench judgment in the case of Textoplast Industries (supra) can be applied by us by taking recourse to Section 26. Section 26 of the Partnership Act, 1932 reads as under:- "26. Liability of the firm for wrongful acts of a partner:Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable ....