[Judgment per : H.N. Devani, J. (Oral)]. - In these appeals under Section 130 of the Customs Act, 1962 (the Act), appellant-revenue has challenged the order dated 16-11-2007 made by the Customs, Excise & Service Tax Appellate Tribunal (the Tribunal), proposing the following two questions :
“(1) Whether in the facts and circumstances of the case, the Tribunal is justified in law and has committed a substantial error of law in confirming the order of the learned Commissioner (Appeals) setting aside the penalty imposed on the partners of a partnership firm under Section 112 of the Customs Act, 1962 despite the partners having willfully and knowingly acted in a manner to facilitate in clearance of the goods in a clandestine manner and despite having dealt with the goods which they knew or had reason to believe were liable to confiscation under Section 111 of the Act?
(2) Whether in the facts and circumstances of the case, the Tribunal is justified in law in rejecting the appeal of the revenue and confirming the order of the learned Commissioner (Appeals) without interfering with the issue of penalty despite having upheld the duty demand and having upheld the confiscation?”
2. Since both these appeals arise out of consolidated order made by the Tribunal, the facts and contentions also being common, the same were taken up for hearing together and are disposed of by this common judgment.
3. The respondents herein are partners of a partnership firm M/s. Maharaja Textiles Exports, a 100% E.O.U. Vide order dated 20-1-2005 made by the adjudicating authority, penalty of Rs. 4,00,000/- came to be imposed upon the assessee, a partnership firm. Penalty of Rs. 1,00,000/- each came to be imposed upon the respondents who were partners of the assessee firm. Against the said order, the assessee firm as well as the respondents preferred appeal before Commissioner (Appeals), who vide order dated 27-7-2006 reduced the penalty levied on the firm from Rs. 4,00,000/- to Rs. 50,000/- and set aside the penalties imposed upon the respondents herein on the ground that separate penalty on partnership firm and its partners was not justifiable. Revenue carried the matter in appeal before the Tribunal, but did not succeed.
4. Learned Standing Counsel for the appellant-revenue has assailed the impugned order, submitting that the Tribunal had erred in confirming the order of Commissioner (Appeals) and setting aside the penalty imposed on the partners of the partnership firm under Section 112 of the Act despite the fact that the partners having willfully and knowingly facilitated the clearance of the goods in a clandestine manner and despite having dealt with the goods which they knew or had reason to believe were liable to confiscation under Section 111 of the Act.
5. As can be seen from the order of Commissioner (Appeals), Commissioner (Appeals) after appreciating the evidence on record, has held that merely because the respondents had paid duty before the issuance of show cause notice would not absolve the respondents from the liability of removing the goods without payment of duty. However, considering the fact that the duty had been deposited prior to issuance of show cause notice, Commissioner (Appeals) was of the view that the same could be considered as a mitigating factor for reducing the penalty and accordingly, reduced the penalty imposed on the partnership firm from Rs. 4,00,000/- to Rs. 50,000/-. Insofar as the penalty imposed on the partners, namely, respondents herein is concerned, Commissioner (Appeals) after placing reliance upon various decisions of the Tribunal, was of the view that there was no justification for imposition of separate penalties on partnership firm as well as the partners.
6. As can be seen from the impugned order of the Tribunal, the Tribunal has concurred with the view taken by Commissioner (Appeals) that considering the facts and circumstances of the case, no separate penalties were warranted on the partners in addition to the penalty of Rs. 50,000/- on the partnership firm.
7. Section 4 of the Partnership Act, 1932, which defines ‘partnership’, ‘partner’, ‘firm’ and ‘firm name’ reads as under :
‘Partnership’ is the relation between persons who have agreed to share the profits of a business carried on by all of any of them acting for all.
Persons who have entered into the partnership with one another are called individually ‘partners’ and collectively ‘a firm’, and the name under which their business is carried on is called the ‘firm name’.
8. Thus, under the law of partnership, a firm has no legal existence apart from its partners and is merely a compendious name to describe its partners as distinguished from a company which stands as a separate juristic entity distinct from its shareholders. Thus, once penalty is levied on the firm for contravention of any provision of the Act or the Rules framed thereunder, it amounts to levy of penalty on the partners, hence, there would be no question of penalizing the partners separately for the same contravention, unless the intention of the legislature to treat the firm and partners as distinct entities is borne out from the statute itself, as in the case of the Income-tax Act, 1961. Whenever the legislature intends to treat the partners and the firm as separate entities it expressly provides for the same. This is apparent when one sees Section 140 of the Act which makes provision for ‘Offences by companies’. The Explanation below Section 140 which is relevant for the present purpose reads thus :
‘Explanation - For the purposes of this section, -
‘company’ means a body corporate and includes a firm or other association of individuals; and
‘director’, in relation to a firm, means a partner of the firm.’
9. Thus, for the purpose of liability in respect of commission of offences under the Act, a partnership firm is equated with a company, whereas there is no such corresponding provision in relation to imposition of penalties under the Act. In the circumstances, the Tribunal was justified in holding that no separate penalties were warranted on the partners in addition to the penalty on the partnership firm.
10. In the light of the aforesaid discussion, no infirmity can be found in the impugned order of the Tribunal so as to warrant interference. In absence of any question of law as proposed or otherwise, much less a substantial question of law, the appeals are dismissed.