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TMI Blog2011 (7) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of fact against the Appellants, reduced the penalty to an amount of ₹ 25 lakhs on the First Appellant which is a partnership firm and ₹ 5 lakhs on the Second Appellant, who is one of its two partners. A penalty of ₹ 5 lakhs was also imposed on the second partner, who is a party to the companion Customs Appeal 30 of 2004. The appeal is admitted on the following substantial questions of law : (A) Whether in view of the findings by the Collector of Customs, Ahmedabad, in his order dated 16-11-1989, imposition of penalty on the Appellant amounts to double jeopardy; (B) Whether imposition of a penalty on the partnership firm as well as on the partners under Section 112 of the said Act is permissible and justified. 2. The First Appellant who was registered as a hundred percent export oriented unit for the manufacture of designated polyester films imported a consignment of 37,852 kgs. between May 1985 and June 1987. It is alleged that a search on 15 October 1989 revealed a shortage of 31,042 kgs. of Polyester film which had been removed from the premises. A notice to show cause was issued to the Appellants on 7 April 1988. Upon adjudication, the Additional Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 111. The contravention in clauses (d), (j), (o) and (p) is thus : "(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; (j) any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission; (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer; (p) any notified goods in relation to which any provisions of Chapter IV-A or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened." Section 112 provides for a penalty upon any person, who, in relation to any goods, does or omits to do any act which act would render such goods liable to confiscation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) deals with acquiring possession of or being concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling, purchasing or dealing in any manner with goods which a person knows or has reason to believe are liable to confiscation under Section 111. In Section 114A, a penalty for short levy or non-levy of duty is imposed on a person who is liable to pay duty or interest. 7. The Act provides for an adjudicatory mechanism before an order of confiscation or penalty can be passed. The adjudicatory mechanism inter alia enunciates the authorities who can adjudicate under Section 122, a procedure for adjudication in Section 122A consistent with the principles of natural justice, the burden of proof in Section 123 and for the issuance of a notice to show cause and a reasonable opportunity of being heard in Section 124. Section 124 which provides for the issuance of a notice to show cause, directs the adjudicating officer to grant an opportunity to the owner of the goods or such person. The adjudicatory mechanism is not confined only to a proceeding against the owner of the goods, but extends to other persons upon whom an obligation of compliance is imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 135 are as follows : "(1) Without prejudice to any action that may be taken under this Act, if any person - (a) is in relation to any goods in any way knowingly concerned in misdeclaration of value or in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods; or (b) acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111 or section 113, as the case may be; or (c) attempts to export any goods which he knows or has reason to believe are liable to confiscation under section 113; or (d) fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under this Act in connection with export of goods." Section 140 provides for offences by Companies and is to the following effect : "140. Offences by companies. - (1) If the person committing an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 140 has further expanded the scope of the provision by bringing within the purview of the expression "Company", a firm or an association of individuals. Similarly, the ambit of the expression "director" has been expanded to mean in relation to a firm, a partner of the firm. 10. The submission, however, that has been urged on behalf of the Appellants is that the deeming provision of Section 140 is available in respect of an offence under the Chapter and cannot be utilized in adjudication proceedings under the Act. In support of the submission, Counsel relied upon the words "if the person committing an offence under this Chapter is a Company" as well as the expression "shall be liable to be proceeded against and punished accordingly". On the other hand, on behalf of the Revenue reliance has been placed on the judgment of the Supreme Court in Standard Chartered Bank v. Directorate of Enforcement (supra). 11. In order to appreciate the rival submissions, it would be necessary to turn to the judgment of the Supreme Court in Standard Chartered Bank. The Supreme Court in the course of its judgment had to construe the provisions of the legislative scheme under the Foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing for imposition of penalty and Section 56 providing for prosecution, speak of contravention of the provisions of the Act. Contravention is the basic element. The contravention makes a person 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. ... Section 68 relating to offences by companies, by sub-section (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, shall also be deemed to be guilty along with the company of the contravention of the provisions of the Act and liable to be proceeded against and punished accordingly." 14. The second important principle which emerges from the judgment of the Supreme Court in Standard Chartered is that the expression "offence" is not confined to a criminal wrong doing : "The proviso, no doubt, indicates that a person liable to punishment could prove that the contravention took place without his knowledge or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied) The ratio of the decision of the Supreme Court would indicate the following principles: (i) Both, in the matter of a criminal prosecution and in the imposition of a penalty, following a process of adjudication, the essential basis for the proceeding is a contravention of the provisions of the Act; (ii) The expression "offence" cannot be narrowly confined to a commission of a crime alone, but would comprehend within its purview, the commission of an act which is prohibited by law; (iii) The deeming fiction which is created in the case of an offence by a Company so as to bring within its purview, a person in charge of or responsible for the affairs of the Company as well as its stated officers would apply not only to a criminal prosecution, but to an adjudication as well. This would in our view necessarily extend to a situation where in terms of the explanation, the 'Company' as defined is a partnership firm. In the case of a partnership firm, the expression 'Director' is extended by the explanation to mean a partner of a firm. The principles which have been enunciated by the Supreme Court were sought to be distinguished, however, on the ground that unlike in the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion emerges from the overall scheme of the Act. Section 140 only constitutes a statutory recognition of the position and is clarificatory. For these reasons, we are of the view that the submission which has been sought to be urged on behalf of the Appellants in the present appeal cannot be accepted. 17. While concluding, it would be necessary to advert to a judgment of a Division Bench of this Court in Commissioner of Customs v. Jupiter Exports - 2007 (213) E.L.T. 641 (Bom.). In that case, a notice to show cause was issued by the Commissioner of Customs on an allegation of the misuse of the DEEC Scheme by adopting fraudulent means to obtain a higher entitlement in respect of duty free import. The Commissioner of Customs confirmed the duty demanded and imposed penalties on the main partners, who had actively participated in the business of the firm. In appeal, the Tribunal held that the firm was liable to pay duty only to the extent of goods actually imported by it quantified in the amount of ₹ 1.38 lakhs. As the bulk of the imports were made by bona fide transferees of the licenses obtained and sold by the Petitioner, the Tribunal held that the Petitioner could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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