Sec. 112(a) – Simultaneously penalty on firm & partner restricted to alleged abetment by partner/firm – Bombay HC
Brief of the Case
Bombay High Court held that Simultaneous penalty can be imposed both on the partners and partnership-firm under Section 112 (a) where the charge on the firm is of acting or omitting to act rendering the goods liable for confiscation and the notice issued to the partner makes out a separate case of abetment on his part. This abetment should be in respect of the act and/or the omission to act on the part of the firm which has rendered the good liable for confiscation under Section 111 or where the allegation on the firm is of abetment and / or mens rea, then Section 135(1)(a) and 140 is applicable and simultaneous penalty is imposable. It is clear that in all other cases falling under Section 112 (a) simultaneous penalties upon the firm and its partner cannot be imposed. No penalty can be imposed upon the partner ipso facto merely on account of the fact that penalty is being imposed on partnership-firm.
Facts of the Case
The Appellants are engaged in the manufacture of textile machines. The following questions have been referred for opinion –
Contention of the Assessee
The ld counsel of the assessee in support of the proposition that penalty cannot be imposed simultaneously upon a partnership-firm and its partners under Section 112(a) submits as under:- The issue of jurisdiction under Section 112(a) to impose simultaneous penalties upon the partnership-firm and its partners stands concluded by the decision of this Court in Jupiter Exports 2007 (213) E.L.T. 641 (Bom.) holding that it cannot be done. This decision is binding. Subsequent decision of this Court in Textoplast Industries 2011 (272) E.L.T. 513 (Bom.) ought to have followed the binding decision of this Court in Jupiter Exports .The subsequent decision of this Court in Textoplast Industries has incorrectly applied the decision of the Apex Court in Standard Chartered Bank v/s. Directorate of Enforcement 197 ELT 80 which was rendered in the context of the Foreign Exchange Regulation Act, 1973 (FERA), and would have no application while interpreting Section 112(a).
He further submitted that the scheme of the Act and FERA are entirely different. The Act unlike FERA is divided into different chapters and certain provisions/ sections of the Act, are made applicable only to a particular chapter. This chapterization is significantly absent under FERA. Therefore the provisions/ sections of FERA are not restricted in its application. Thus though Section 140 of the Act appears to be identical to Section 68 of FERA, it is not. This is so as the width of application of Section 140 of the Act is restricted. Evident from the fact that Section 140 of the Act is applicable only to offences under Chapter XVI of the Act which when contrasted with Section 138B of the Act, which is also a part of Chapter XVI is made applicable across the Act. Thus, the provisions of Section 140 of the Act have to be restricted in its application.
Further submitted that in any view, on a plain reading of Section 112(a), no penalty is simultaneously imposable upon the partnership-firm and its partners. The penalty under Section 112(a) is imposable upon a person also who does or omits to do any act which renders the imported goods liable to confiscation. A person not being defined under the Act, has to be understood as defined in the General Clauses Act and would include a partnership-firm. However, a firm is not distinct from its partners. A firm name is merely a compendious name to describe all the partners. This is so for the reason that the partnership-firm is not a separate legal entity. Thus, once penalty is levied upon the partnership-firm, it would tantamount to imposing a penalty upon each of the partners individually in respect of same offence. Therefore imposition of penalty once more on the individual partner is not warranted; and Imposition of penalty separately upon the partnership-firm and the partners for the same contravention would amount to double jeopardy/ penalty. Therefore, it is submitted that such imposition of double penalty is not sustainable in the face of Article 20(2) of the Constitution of India.
Contention of the Revenue
The ld counsel of the revenue in support of its contention that penalty under Section 112(a) is imposable on the Partnership-firm and the partners simultaneously, submits as under – The reference to a Full Bench by the Division Bench in Amritlaxmi Machine Works 303 ELP 161 was not called for. This for the reason that there is only one decision holding the field in respect of imposition of simultaneous penalties upon the Partnership-firm and its partners and that is the decision of the Division Bench in Textoplast Industries. It is submitted that this Court in Jupiter Exports (was not called upon to deal with the issue of simultaneous penalties upon the Partnership-firm and the partners. Thus no referable question arises for consideration by this full Court.
Further submitted that Section 112 of the Act which empowers imposition of penalty on any person. It is emphasized that the penalty is not restricted to only the importer. Therefore, where under the Customs Act, the Partnership-firm is an importer who has filed a bill of entry; it can be visited with penalty in its capacity as an importer. This is so as a firm is a person as defined under the General Clauses Act, 1897. A partner of the Partnership-firm can be visited with penalty along with the firm under the Act. This is so as a partner is a person different from the importer i.e. the partnership-firm. Section 112 does not restrict the number of persons on whom penalty can be imposed.
Held by High Court
High Court held that from the Scheme of the Custom Act with regard to import of goods, it is clear that though the charge under the Act is on import/export of the goods, action can be initiated against offending goods which fall foul of Section 111 of the Act and also on any person whose act or omission to act has rendered the goods falling foul of Section111 of the Act. Thus, the penalty under Section 112(a) of the Act is not restricted to only such a person who has filed a bill of entry i.e. the importer but includes within its scope any other person who acts or omits to do any act rendering such goods liable for confiscation, including one who has abetted the act or omission. Further, the Act provides not only for quasi judicial proceedings for imposition of penalty on the person and confiscation of goods in case they offend Section 111 of the Act but also for prosecution in criminal proceedings in Court of law under Chapter XVI of the Act. The criminal proceedings are subject of course to satisfying the additional requirement of doing the act or omitting to do the act with knowledge of the goods becoming liable for confiscation. It should be noted that Section 127 of the Act, which is a part of Chapter XIV of the Act provides that any action taken under Chapter XIV of the Act shall not bar/affect any proceedings taken under Chapter XVI of the Act. Thus, the Act itself provides for parallel proceedings for imposition of penalty under the Act and for prosecution under the Criminal Procedure Code, 1973 in terms of Chapter XVI of the Act. This is permissible and not hit by double jeopardy as held by the Apex Court in Union of India v/s. Purshottam 2015 (3) SCC 779. This is for the reason that the concept of double jeopardy would only apply to successive punishment of criminal character.
Further it is undisputed that the decision in the case of Standard Chartered Bank was rendered in the context of FERA and we are concerned with the Customs Act. Therefore, though the wordings of Section 68 of FERA and Section 140 of the Act are similar, there are significant differences between the two. In particular the words used in Section 140 of the Act that it applies to offences under this Chapter i.e.Chapter XVI of the Act and it is not so in Section 68 of FERA. Thus unlike Section 140 of the Act, Section 68 of the FERA does not restrict its operation only to offences and prosecutions but makes it applicable to all the contraventions across all sections of FERA. One more significant difference is that wherever the Parliament decided that the provisions of Chapter XVI of the Act is to be made applicable across all the provisions of the Act, it so specifically provided for it, as is noticed in Section 138B of the Act which is also a part of Chapter XVI of the Act. Thus, while interpreting Section 140 of the Act, meaning must be given to the words’ in this Chapter’ occurring therein. It is a settled rule that while interpreting a fiscal or a penal enactment it is not open to ignore any words thereof on any assumed or supposed intention/object. Thus though aid /guidance should be taken from the decision of the Apex Court in Standard Chartered Bank, the same cannot be applied, as it is, ignoring the differences in wordings of Section 68 of FERA and Section 140 of the Act.
Further it is clear that that although the Division Bench of this Court in Textoplast Industries has held on first principles that Section 140 of the Act is to be read into all cases falling under Section 112(a) of the Act, we do not agree. Section 140 of the Act on first principles has to be read into only in cases where the notice to impose penalty under Section 112 (a) of the Act, the Revenue makes out a case of an offence prima facie satisfying the requirements of Section 135(1)(a) of the Act. It is only then that Section 140 of the Act can be invoked for purposes of imposition of penalty under Section 112(a) of the Act both upon the partner as well as the firm. In the second class of cases i.e. abetment under Section 112(a) of the Act a specific case of abetment against the partner would have to be made for a separate penalty upon him. The notice issued by the Revenue should make out a case of the partner having acted and/or omitted to act with knowledge in his individual capacity that such act and/or omission to act on the part of the firm would render the goods liable to confiscation. It has nothing to do with Sections 135 and 140 of the Act. However, penalty cannot be imposed on the partner merely because penalty is being imposed upon the firm. The burden is upon the Revenue in the show cause notice to make out a case that penalty is imposable under Section 112 of the Act upon the partner for abetment of the offence by the firm. This is so, as otherwise, a penalty imposed upon the firm would be a penalty imposed upon all the partners of the firm as this has nothing to do with the knowledge of the breach rendering the goods liable for confiscation on the part of the partners concerned. The liability is strict. Therefore, imposed on all parties irrespective of the fact, whether the partner concerned is an active or sleeping partner.
In view of the above, the decision of the Division Bench of this Court in Textoplast Industries to the extent it places reliance upon the Apex Court decision in Standard Chartered Bank does not seem to be appropriate as it was rendered under a different statute. Each of the two Act i.e. FERA and the Act, provides a different scheme for imposition of penalty. However, the decision in the case of Textoplast Industries to the extent it holds on first principle that simultaneous penalty is imposable is the correct view only to the following extent:- (a) where the show cause notice makes out a case of an offence under Section 112(a) of the Act read with Section 135 (1)(a) of the Act, then alone, Section 140 of the Act is applicable for penalty upon the partner; or (b) where the show cause notice makes out an independent case of abetment by the partner for the act or omission done by the partnership firm which has rendered the goods liable for confiscation under Section 111 of the Act. The notice in such a case need not invoke Sections 135 or 140 of the Act for simultaneous imposition of penalties. However, we would like to clarify that (a) above are not case where Section 112(a) of the Act is alone invoked for breaches under Section 111 of the Act. These are cases where penalty is being imposed for an offence under Section 135(1)(a) of the Act r/w Section 112(a) of the Act. Thus, it would cover cases where the allegation is that the importer (firm) is knowingly concerned with acting or omitting to act rendering the goods liable to confiscate then, the partner in charge of the affairs of the firm would be liable (Section 140 of the Act). In both the above cases simultaneous penalties is imposable upon the partnership firm and the partner. It is not open to the Authorities under the Act to impose penalty upon the partner ipso facto only because penalty is being imposed upon the firm under Section 112(a) of the Act. In the light of our above discussion, we answer the two questions posed for our opinion.
Accordingly, appeal disposed of.