2016 (2) TMI 57 - HC - Customs

Levy of simultaneous penalties on both the Partner and Partnership firm in adjudication proceedings under the Customs Act. - Penalty for abeting - abets the doing or omission of such an act - Penalty u/s 112 of the Customs Act, 1962 - Held that - A plain reading of Section 112(a) clearly indicates that there is no requirement of a mens rea for imposing a penalty for an act of abetment. Abetment in this context would be abetment to contravene the provisions of the Act. This can be noted from the fact that the legislature has not used the words knowingly , willfully etc. It may not, therefore, be appropriate to read such words into the provision which would render it nugatory. Whenever the legislature wanted to include such prior knowledge or intention in contravening the provisions of the Act, it has been so expressly included. A perusal of Section 112(a) clearly indicates that abetment as envisaged in this provision would not require any mens rea. The position in law in interpreting such provisions wherein it is held that mens rea is not to be read in statutory contraventions/offences, can be noted from some decisions. Simultaneous penalties can be imposed on the firm and the partners under the Act and more particularly under Section 112(a) of the Act. However as the Act itself stipulates, the same would be subject to the parties proving that the contravention has taken place without their knowledge or despite exercise of all due diligence to prevent such contravention.

Summary

Issues Involved:
1. Whether simultaneous penalties can be imposed on both partners and the partnership firm under Section 112(a) of the Customs Act, 1962.
2. Whether the judgment in Commissioner of Customs (EP) v/s. Jupiter Exports, which held that separate penalties on a partnership firm and a partner cannot be imposed, lays down the correct law, or whether the later judgment in Texoplast Industries v/s. Additional Commissioner of Customs, which held that it is permissible to impose penalties separately on a partnership firm and a partner, is correct.

Detailed Analysis:

Issue 1: Simultaneous Penalties on Both Partners and Partnership Firm under Section 112(a) of the Customs Act, 1962

1. Background and Legislative Intent:
- The Customs Act, 1962, under Section 112(a), provides for penalties on any person who, in relation to any goods, does or omits to do any act which renders such goods liable to confiscation under Section 111, or abets the doing or omission of such an act.
- The term "person" is not defined in the Act, but as per Section 3(42) of the General Clauses Act, 1897, it includes any company or association or body of individuals, whether incorporated or not, thereby including partnership firms.

2. Arguments and Judicial Interpretation:
- The appellant argued that a partnership firm is not distinct from its partners, and hence, imposing separate penalties on both would amount to double jeopardy.
- The respondent contended that both the firm and its partners can be penalized simultaneously, citing the Supreme Court's decision in Standard Chartered Bank v/s. Directorate of Enforcement, which interpreted similar provisions under the Foreign Exchange Regulation Act (FERA).

3. Legal Precedents:
- The Supreme Court in M/s. Agarwal Trading Corporation v/s. Assistant Collector of Customs held that penalties can be imposed on both the firm and its partners under the Sea Customs Act, applying the definition of "person" from the General Clauses Act.
- The Supreme Court in Standard Chartered Bank v/s. Directorate of Enforcement held that the deeming fiction under Section 68 of FERA (similar to Section 140 of the Customs Act) applies to penalty proceedings, thereby allowing penalties on both the firm and its partners.

4. Conclusion:
- The court concluded that simultaneous penalties can be imposed on both the partners and the partnership firm under Section 112(a) of the Customs Act, 1962, 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.

Issue 2: Correctness of Judgments in Jupiter Exports and Texoplast Industries

1. Conflict Between Judgments:
- In Commissioner of Customs (EP) v/s. Jupiter Exports, the Division Bench held that separate penalties on a partnership firm and a partner cannot be imposed.
- In Texoplast Industries v/s. Additional Commissioner of Customs, the Division Bench held that it is permissible to impose penalties separately on a partnership firm and a partner.

2. Analysis and Resolution:
- The court noted that the decision in Jupiter Exports did not specifically address the issue of simultaneous penalties but made a general observation.
- The decision in Texoplast Industries was based on the principles laid down by the Supreme Court in Standard Chartered Bank, which allowed for simultaneous penalties on the firm and its partners.
- The court held that the decision in Texoplast Industries lays down the correct law, allowing for simultaneous penalties on both the partnership firm and its partners in adjudication proceedings under the Customs Act, 1962.

Separate Judgments:

Majority Judgment:
- The majority judgment, delivered by M.S. Sanklecha and M.S. Sonak, concluded that simultaneous penalties can be imposed on both the partnership firm and its partners under Section 112(a) of the Customs Act, 1962, where the notice makes out a separate case of abetment against the partner.

Dissenting Judgment:
- The dissenting judgment by G.S. Kulkarni held that simultaneous penalties can be imposed on the partnership firm and its partners under Section 112(a) without the need for a separate case of abetment, relying on the legislative intent and the principles laid down in the Supreme Court's decisions.

Final Conclusion:
- The court answered the reference by affirming that simultaneous penalties can be imposed on both the partnership firm and its partners under Section 112(a) of the Customs Act, 1962, and that the decision in Texoplast Industries lays down the correct law.