2008 (9) TMI 587 - HC - Customs

Penalty Penalty on firm recovery from partner - penalty for failure to fulfill export obligation - opportunity of being heard - held that - no need to issue show cause notice to every partner of the firm, but what is important is, if any partner failed to avail of the opportunity and if the adjudicating authority was constrained to observe that the petitioner-firm was only seeking adjournments and not availing the opportunity, it is definitely not a case of want of opportunity. Therefore, the ground of not providing opportunity does not sustain. - Under the partnership Act, it is the law that all the partners are liable for the liability of the firm and no partner can escape such liability on any technicalities.

Summary

Issues:
1. Failure to fulfill export obligation under an advance license.
2. Levy of penalty under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992.
3. Lack of opportunity for personal hearing to the petitioner.
4. Dispute regarding the obligation fulfillment.
5. Whether each partner should have been heard in penalty imposition.
6. Applicability of provisions under Paras 128A and 128B of the policy.
7. Imposition of penalty on the firm and joint liability of partners.
8. Liability of partners under the partnership Act.

Analysis:
1. The petitioner was granted an advance license for importing mulberry raw silk fabrics but failed to meet the export obligation of Rs. 4.65 crores, fulfilling only about 8% of the obligation. Consequently, a penalty was imposed under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992.
2. The petitioner contended that they were not given a fair opportunity for a personal hearing, as the notice issued to the firm was not considered as an opportunity for the partners. However, the court held that the firm acts through its partners, and the opportunity given to the firm is sufficient, especially when the partners fail to avail themselves of the opportunity.
3. The argument that the authorities should have considered provisions under Paras 128A and 128B of the policy was dismissed, as the adjudicating authority was found to be aware of these provisions and their applicability to the petitioner's case. The authority had given multiple opportunities for compliance, which were not utilized by the petitioner.
4. Concerns raised about the penalty being imposed on each partner were deemed unfounded, as the penalty was on the firm, and partners were jointly liable to pay it. The law holds all partners responsible for the firm's liabilities, and technicalities cannot be used to escape such liability.
5. Ultimately, the court dismissed the writ petition, finding no grounds for interference with the order in the exercise of writ jurisdiction. The petitioner's failure to fulfill the export obligation and the levy of penalty were upheld based on the facts and legal principles presented in the case.