Amritlakshmi Machine Works vs Commissioner of Customs

These Appeals involve common facts and questions. For properly appreciating the arguments of parties, the facts in Customs Appeal No. 100/2012 are referred to. By this Appeal u/s 130 of the Customs Act 1962 challenging the order dated 7th May, 2012 of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai, the following question of law is projected as a substantial question of law:--

Whether, the CESTAT has erred in imposing simultaneous penalties on both the Partner and Partnership firm?

Having heard the learned counsel appearing for the parties at some length, we are of the opinion that this question indeed is a substantial question of law.

The facts necessary to appreciate this question are that the Appellants are, inter alia, engaged in the manufacture of textile machines. The Appellants applied for and were granted Value Based Advance Licence No. 03014593, dated 22-11-1996 against which the Appellants were, inter alia, permitted to import 248 pieces of ball bearings valued approximately at Rs. 9 lacs within the overall value of Rs. 50,05,468/. It is stated that sometime in February, 1997 the Appellants discharged their export obligation and therefore, the said licence became transferable. As the Appellants were not able to import any goods under the said licence for the initial validity period, the Appellants requested for extension of the validity period of the said licence. A part of the said licence was utilized by importing two consignments vide Bill of Entry filed in January, 1997 and August, 1998, respectively. The validity of the said licence was extended upto 21-5-1999 and the value thereof was reduced by the office of the Joint Director General of Foreign Trade, Mumbai to Rs. 43,41,140/- leaving an unutilized balance of Rs. 27,32,557/-.

The information was received by officers of the Directorate of Revenue Intelligence, Mumbai Zonal Unit that several consignments of Bearings have been imported in the names of M/s. Hiral Overseas, M/s. Ankit International, M/s. Nippon Bearings Pvt. Ltd., M/s. M.M. Corporation, M/s. Nippon Bearings (India), M/s. S.N.M. Enterprises, M/s. Devanti Overseas and a few other firms. The bills of entry for all these goods have been filed by certain Custom House Agent. The clearance of the goods was sought against a duplicate Advance Licence No. 0111434, dated 22-11-1999 issued in the name of M/s. Amrit Laxmi Machine Works and transferred in the names of these firms and that this duplicate advance licence was issued against the original licence No. 03014593, dated 28-11-1996. The limits of this licence and terms thereof are referred to and it is alleged that in the light of information received, the bills of entry were collected, documents were scrutinized and which reveal details of the transaction. The details of good covered by another 29 bills of entry are referred to and in the light of further disclosures, what has been alleged is that M/s. Amrit Laxmi Machine Works, Khar, Mumbai, the licence holder and Shri N. Nagdutt Brahmachari, Director of the licence holding firm for the advance licence No. 0111434, dated 22-11-1999 read with licence No. 03014593, dated 28-11-1996 have caused the obtaining of the advance licence, duplicate copy of the advance licence, amendment to the list attached to the licence so as to cover the goods which were not used in the export product and made misrepresentation in obtaining duplicate copy of the licence. But, for the said licence being obtained in the manner in which it has been so obtained fraudulently, based on misrepresentation/false documents, the clearance of goods free of duty would not have been considered and allowed by the Customs. They have thereby abetted the doing or omitted the doing of such acts which have rendered the goods covered by this notice liable to confiscation under the provisions of Section 111 of the Customs Act, 1962. They have, therefore, rendered themselves liable to action under the provisions of Section 112(a) and/or Section 112(b) of the Customs Act, 1962.

Accordingly, a show cause notice was issued calling upon M/s. Amrit Laxmi Machine Works, the licence holder and others, as to why 2033 pieces of Bearings as detailed in the notice should not be confiscated under the provisions of Section 111(d) of the Customs Act, 1962 read with the Foreign Trade (Development & Regulation) Act, 1992 and u/s 111(m) of the Customs Act, 1962; and without prejudice to above for the reasons of liability to confiscation of goods u/s 111 as to why penalty u/s 112(a) and/or 112(b) of the Customs Act, 1962 should not be imposed on each of them.

The show cause notice was, therefore, taken up for adjudication by the Commissioner of Customs (Adjudication), Mumbai and he confirmed the demand to the extent indicated therein. He imposed penalty u/s 112(a) of the Customs Act, 1962 on the following persons:

(a) M/s. Amrit Laxmi Machine Works : Rs. 15 lacs,

(b) Mr. N. Nagdutt K. Brahmachari : Rs. 5 lacs.

This order of adjudication of the Adjudicating Authority was challenged before the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai and by the impugned order dated 7-5-2012, the Appeal of the Appellant has been dismissed.

It is contention of the learned counsel appearing for the Appellant that the law does not postulate imposition of penalty on a firm as well as partner. In his submission, once the Appellant is a firm registered under the Indian Partnership Act, 1932, then, the independent existence thereof and de-hors the partners is ruled out. In other words, a partnership firm cannot have an independent existence than that of a partner. It is not comparable to a company incorporated and registered under the Indian Companies Act, 1956. A company has an existence independent that of its directors and shareholders unlike a partnership firm. In the present case, the CESTAT as also the Adjudicating Authority have, therefore, seriously erred in law in imposing a penalty on the firm as well as on the partner. There could not have been a direction imposing penalty on the partnership firm as well as the partner. In such circumstances even if this question was not specifically raised before the CESTAT, but finding that it goes to the root of matter, it should be permitted to be raised.

In elaborating the argument based on the above question, the learned Counsel submits that there is a difference of opinion in the views taken in two decisions rendered by this Court. In support of the contention that the law does not envisage imposition of dual or separate penalty, reliance is placed on a judgment of the Division Bench of this Court in the case of The Commissioner of Customs (E.P.) Vs. Jupiter Exports and Others, . It is submitted that the Court framed the necessary questions of law and in answering them, held that it is well settled that when the partnership firm is penalized, separate penalty cannot be imposed on a partner.

It is submitted that this judgment was noted by another Division Bench of this Court in the case of Textoplast Industries Vs. Additional Commissioner of Customs, and this Court held that the view taken in Jupiter Exports (supra) is contrary to the law laid down by the Honourable Supreme Court in the case of Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, .

The learned counsel for the Appellant then submits that the Division Bench delivering the judgment in the case of Textoplast Industries (supra) was bound by the view taken by another Division Bench in Jupiter Exports (supra). It could not have ignored the same unless it recorded a categorical opinion and finding that earlier or prior view in Jupiter Exports (supra) is per incuriam. Such finding and conclusion has not been reached in the case of Textoplast Industries (supra). Therefore, we must not apply the ratio in the case of Textoplast Industries (supra), but follow the binding judgment of the coordinate Bench directly on the point and delivered in the case of Jupiter Exports (supra). More so, when that has not been held to be per incuriam by a later Division Bench. The rule of precedents and judicial discipline is pressed into service by the learned counsel. He submits that Textoplast Industries (supra) refers to-a judgment of the Honourable Supreme Court in the case of Standard Chartered Bank (supra). He submits that the judgment is rendered by the Honourable Supreme Court, but it was considering the issue as to whether, a company incorporated and registered under the Indian Companies Act, 1956 can be prosecuted and if prosecuted, punished. What could be the punishment imposed for the offence committed by the Company, whether it could be sentence of imprisonment or payment of fine. These are the issues answered in the case of Standard Chartered Bank (supra). The judgment in the case of Standard Chartered Bank (supra), therefore, could not be said to be covering the issue raised in Textoplast Industries (supra) at all. The judgment in the case of Textoplast Industries (supra), therefore, proceeds on an erroneous basis and foundation in law. Even otherwise, it is submitted that there is difference of opinion and views on the point noted above. Therefore, we should make a reference to a Larger Bench for resolving the subject controversy.

On the other hand, Mr. A.S. Rao, learned counsel appearing for the Revenue, submitted that the point raised in this Appeal cannot be said to be a substantial question of law at all. It is squarely covered by the judgment in the case of Textoplast Industries (supra). That is a later judgment and rendered by a Division Bench. Therein, the judgment of the Honourable Supreme Court in the case of Standard Chartered Bank (supra) was noted and applied. Once a Division Bench of this Court holds that the issue before it, which is identical to one raised before us, is covered in this manner and by the judgment of the Honourable Supreme Court, then, any wider or larger controversy need not be decided. Following the view in the case of Textoplast Industries (supra), we must hold that the Tribunal committed no error of law or perversity in upholding the penalty imposed on the firm and the partner separately. That was fully justified in the facts and circumstances and permissible as well in law. Once such is the view of the Tribunal, then, the Appeal does not raise any substantial question of law. We must, therefore, proceed to dismiss the Appeal. More so, when all the points which are raised by the learned counsel for the Assessee have not been raised before the Tribunal. Resultantly, the Appeal be dismissed.

With the assistance of the learned counsel appearing for the parties, we have perused the memo of appeal and all annexures thereto. We have also perused the impugned orders. We have perused the relevant statutory provisions. We have also perused the decisions brought to our notice.

The grievance in this case is that the Adjudicating Authority and the Tribunal have erred in law in imposing the penalty u/s 112(a) of the Customs Act, 1962 on the firm as well as the partner. The argument is that the impugned order fails to consider the settled legal position that simultaneous penalties cannot be imposed on both the firm and the partner. This is because a partnership firm unlike a company is not a juristic entity and does not have an existence independent than that of its partners. While the penalty levied on the partners is recoverable from each partner individually, that which is imposed on the partnership firm is also recoverable from the partners. Thus, the partners are penalized twice for the same offence.

In that regard and before proceeding further, a reference can usefully be made to the judgment of the Honourable Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. K. Kelukutty, . The Honourable Supreme Court, while dealing with the contention that for taxing purpose a partnership firm is treated as an entity distinct from the persons who constitute it, held thus:--

It seems to us that the approach adopted by the High Courts is not sound, and that the true solution has to be found not in the tax law but in the partnership law. We are concerned here with the Kerala General Sales-tax Act. There is no doubt that under that Act a partnership firm must be regarded as an assessable entity. What precisely is the significance of that concept? Does the tax law clothe a partnership firm with juristic personality? How far does the tax law depart from the fundamental concept embodied in the partnership law that a business carried on by a partnership firm is, in its material essence, a business carried on by individual members in partnership, and that a name given to a partnership firm is nothing more than a compendious description of the partners carrying on the business?

As long ago as Watson and Everitt v. Blundan, (1934) 18 Tax Cas 402 at p.409 Romer L.J. said that for taxing purposes "a partnership firm is treated as an entity distinct from the persons who constituted the firm". This dictum was approved by the House of Lords in Income Tax Commrs. for City of London v. Gibbs - (1942) 10 ITR Supp. 121 and was accepted as good law in India in respect of a partnership firm under the Indian income tax Act, 1922 in Commissioner of Income Tax, West Bengal Vs. A.W. Figgies and Co. and Others, . What that implies is that for the purposes of assessment to tax the income of the partnership firm has to be assessed in the hands of the firm as a single unit, the firm itself being treated as an assessable entity separate and distinct from the partners constituting it. The firm is an assessable unit separate and distinct from the individual partners, who as individuals constitute assessable units separate and distinct from the firm. It is on that basis that the provisions of the tax law are structured into a scheme providing for the assessment of partnership income. We do not think the principle goes beyond the purposes of that scheme. It does not confer a corporate personality on the firm. Beyond the area within which that principle operates, the general law, that is to say, the partnership law holds undisputed domain.

Now in every case when the assessee professes that it is a partnership firm and claims to be taxed in that status, the first duty of the assessing officer is to determine whether it is, in law and in fact, a partnership firm. The definition in the tax law defines an "assessee" or a "dealer" as including a firm. But for determining whether there is a firm, the assessing officer will apply the partnership law, subject of course, to any specific provision in that regard in the tax law modifying the partnership law. If the tax law is silent it is the partnership law only to which he will refer. Having decided the legal identity of the assessee, that it is a partnership firm, he will then turn to the tax law and apply its relevant provisions for assessing the partnership income.

The Kerala General Sales tax Act contains no provision which bears on the identity of a partnership firm. Therefore, recourse must be had for that purpose to the partnership law alone. Where it is claimed that they are not one but two partnership firms constituted by the same persons and carrying on different businesses, the assessing authority must test the claim in the light of the partnership law. It is only after that question has been first determined namely, whether in law there is only one partnership firm or two partnership firms, that the next question arises: Whether the turnover is assessable in the hands of the partnership firm as a taxable entity separate and distinct from the partners? There is first a decision under the law of partnership; thereafter, the second question arises, the question as to assessment under the tax law. It is clear, therefore, that reference must be made first to the partnership law.

The Indian Partnership Act, 1932 has, by S. 4, defined a "partnership" as "the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". The section declares further that the persons who have entered into partnership with one another are called individually "partners" and collectively "a firm". The components of the definition of "partnership", and therefore of "a firm" consist of (a) persons, (b) a business carried on by all of them or any of them acting for all and (c) an agreement between those persons to carry on such business and to share its profits. It is the relationship between those persons which constitutes the partnership. The relation is founded in the agreement between them. The foundation of a partnership and, therefore, of a firm is a partnership agreement. A partnership agreement is the source of a partnership; it also gives expression to the other ingredients defining the partnership, specifying the business agreed to be carried on, the persons who will actually carry on the business, the shares in which the profits will be divided, and the several other considerations which constitute such an organic relationship. It is permissible to say that a partnership agreement creates and defines the relation of partnership and therefore identifies the firm. If that conclusion be right, it is only a further step to hold that each partnership agreement may constitute a distinct and separate partnership and therefore distinct and separate firms. That is not to say that a firm is a corporate entity or enjoys a juristic personality in that sense. The firm name is only a collective name for the individual partners...........

It is, therefore, that the Division Bench in the case of Jupiter Exports (supra) noted the rival contentions and particularly with regard to imposition of separate penalties and observed that when the partnership firm is penalized the separate penalties cannot be imposed on the partners. When these are the conclusions and which have been rendered in the backdrop of the status of a partnership firm particularly in Custom and Excise Law, then, for the later Division Bench in Textoplast Industries (supra) to have held the same as not binding, something more was required to be said and held. With greatest respect, the position of a partnership firm and as envisaged in the law of partnership is not altered unless a contrary provision is made in the Taxing Law. That appears to be the consistent legal opinion. In other words, the Honourable Supreme Court in the case of Malabar Fisheries Co. Vs. Commissioner of Income Tax, Kerala, held that a partnership firm registered under the Partnership Act, 1932 is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm''s property or firm''s assets all that is meant is property or assets in which all partners have a joint and common interest. Further, with great respect the Division Bench rendering the judgment in Textoplast Industries (supra) ought to have referred to the legal position and the statement of law distinct and different than what is referred by us above. If the Honourable Supreme Court of India consistently takes the aforesaid view and reiterates it from time to time, then, the judgment in Jupiter Exports (supra) ought to have been held either as per incuriam or no longer good law. In other words, if the legal position remains the same and as noted above, then, with respect, prima facie, the later Division Bench ought not to have sounded a different note.

In that regard, we have carefully perused the observations of the Division Bench in the case of Textoplast Industries (supra). We find that it has rendered an altogether different opinion and which appears to be in conflict with that of the Division Bench delivering the judgment in Jupiter Exports (supra). The Division Bench has followed the judgment of the Honourable Supreme Court in the case of Standard Chartered Bank (supra). The judgment in the case of Standard Chartered Bank (supra) was also brought to our notice and Mr. Rao heavily relies on the same. However, in Standard Chartered Bank (supra) the issue for consideration of the Honourable Supreme Court was, whether, Section 68(1) of the Foreign Exchange Regulation Act, 1973 (fore short FERA) is inapplicable to the adjudication proceedings and it was confined to prosecution for penal offences under the FERA. The three Judge Bench decision in Standard Chartered Bank (supra) notes the rival contentions and then outlines the ambit and scope of the proceedings. The proceedings in reference were criminal prosecution and adjudication. The Division Bench of the Bombay High Court had held that Section 68 of the FERA is inapplicable to the proceedings for adjudication u/s 51 of the FERA and its operation is confined only to the prosecution under the FERA. Section 68 of the FERA reads as under:--

Offences by companies.

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this subsection shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in Sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

Explanation.--For the purposes of this section -

(i) "company" means any body corporate and includes a firm or other association of individuals; and

(ii) "director", in relation to a firm, means a partner in the firm.

In paragraph 25 of the judgment in Standard Chartered Bank (supra), the Honourable Supreme Court refers to the decision of this Court in the following terms:--

These appeals are by the Union of India and the Authorities under the FERA challenging the decision of the High Court of Bombay to the extent, that court held that Section 68 of the Act is inapplicable to proceedings for adjudication u/s 51 of the Act and its operation is confined only to prosecutions under the Act. The High Court reasoned that the argument that having regard to the placement of Section 68 under the Legislative Scheme of FERA, the same is equally applicable to penalty, could not be accepted since the very caption of Section 68 indicates that it deals with offences by a company and as such Section 68 cannot be invoked for the levy of penalty on the persons indicated therein. According to the High Court, apart from the caption, sub-sections (1) and (2) of Section 68 speak of the officers referred to therein being liable to be proceeded against and punished and this indicates that it is intended to apply only in respect of prosecutions against a company and only in such a prosecution for an offence by the company, the persons indicated therein are liable to be proceeded against and punished. The Section does not indicate that it could be extended to penalty. Since the penalty could be imposed on a company, as distinct from the punishment of imprisonment, if the company contravenes any of the provisions of the Act, it would be proper to understand Section 68 as being confined only to criminal prosecutions. The High Court stated that Section 50 of the Act dealing with liability for penalty, does not refer to the persons referred to by Section 68 of the Act. As such, Section 68 of the Act could not be availed of to impose a penalty on the officials of the company in terms of Sections 50 and 51 of the Act simultaneously with the company, which is the person guilty of contravention. In view of the fact that Section 50 also prescribes an outer limit for the penalty to be imposed and the said penalty can be imposed on the company itself, it would be incongruous to hold that the same quantum of penalty could be recovered from the officials of the company all over again. That would lead to an anomalous position of the penalty exceeding the outer limit prescribed in Section 50 in respect of a particular offence committed by the company. The High Court gave liberty to the Writ Petitioners to raise this aspect before the Adjudicating Authority based on its finding.

Thereafter, the Honourable Supreme Court notes the argument of the learned Additional Solicitor General in support of the Appeals of the Union of India. It observes in paragraphs 27 and 28 as under:--

Both, Section 50 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. The award of penalty is also based on the same contravention. Section 63 is the power of confiscation of currency, security or any other money or property in respect of which a contravention of the provisions of the Act has taken place conferred equally on the Adjudicating Authority and the Court, whether it be during an adjudication of the penalty or during a prosecution. Whereas Section 64(1) relating to preparation or attempt at contravention is confined to Section 56, the provision for prosecution, sub-section (2) of Section 64 makes the attempt to contravene or abetment of contravention, itself a contravention, for the purposes of the Act including an adjudication of penalty under the Act. 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. The proviso, no doubt, indicates that a person liable to punishment could prove that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. Sub-section (2) again speaks only of a contravention of the provisions of the Act and the persons referred to in that subsection are also to be deemed to be guilty of the contravention liable to be proceeded against and punished accordingly. The word ''offence'' is not defined in the Act. According to Concise Oxford English Dictionary, it means, ''an act or instance of offending''. Offend means, ''commit an illegal act'' and illegal means, ''contrary to or forbidden by law''. According to New Shorter Oxford English Dictionary, an offence is "a breach of law, rules, duty, propriety, etiquette, an illegal act, a transgression, sin, wrong, misdemeanour, misdeed, fault." Thus, an offence only means the commission of an act contrary to or forbidden by law. It is not confined to the commission of a crime alone. It is an act committed against law or omitted where the law requires it and punishable by it. In its legal signification, an offence is the transgression of a law; a breach of the laws established for the protection of the public as distinguished from an infringement of mere private rights; a punishable violation of law, a crime, the doing that which a penal law forbids to be done or omitting to do what it commands (see P. Ramanatha Aiyar''s Advanced Law Lexicon, 3rd Edn, 2005 page 3302). This Court in Depot Manager, Andhra Pradesh State Road Transport Corporation Vs. Mohd. Yousuf Miya, etc., stated that the word ''offence'' generally implies infringement of a public duty, as distinguished from mere private rights punishable under criminal law. In Brown v. Allweather Mechanical Co. [ (1954) 2 QB 443], it was described as "a failure to do something prescribed by a statute may be described as an offence, though no criminal sanction is imposed but merely a pecuniary sanction recoverable as a civil debt." The expression ''offence'' as defined in Section 3(38) of the General Clauses Act means an act or omission made punishable by any law for the time being in force. ''Punishable'' as noticed by this Court in Sube Singh and Others Vs. State of Haryana and Others, is ordinarily defined as deserving of, or capable or liable to punishment. According to Concise Oxford English Dictionary, ''punish'' means, ''inflict a penalty on as retribution for an offence, inflict a penalty on someone for (an offence)''. In the New Shorter Oxford English Dictionary (Vol. 2, 3rd ed., reprint 1993), the meaning of punishment is given as, "infliction of a penalty in retribution for an offence; penalty imposed to ensure application and enforcement of a law." Going by Black''s Law Dictionary (8th ed.) it is, "a sanction-such as a fine, penalty, confinement, or loss of property, right or privilege-assessed against a person who has violated the law." According to Jowitts Dictionary of English Law Vol. 2 (2nd ed. By John Burke), punishment is the penalty for transgressing the law. It is significant to notice that Section 68, both in sub-section (1) and in sub-section (2) uses the expression, shall be liable to be proceeded against and punished accordingly. There does not appear to be any reason to confine the operation of Section 68 only to a prosecution and to exclude its operation from a penalty proceeding u/s 50 of the Act, since the essential ingredient of both is the contravention of the provisions of the Act. A company is liable to be proceeded against under both the provisions. Section 68 is only a provision indicating who all in addition can be proceeded against when the contravention is by a company or who all should or can be roped in, in a contravention by a company. Section 68 only clarifies the nature and mode of proceeding when the contravention of any of the provisions of the Act is by a company, whether it be by way of adjudication to impose a penalty or by way of prosecution leading to imprisonment and a fine.

The High Court rested its decision mainly on the use of the expression in sub-sections (1) and (2) of Section 68 that the officer or officers concerned shall be ''liable to be proceeded against and punished accordingly''. According to the High Court, the use of the expression "punished" makes it apparent that Section 68 can be availed of only when there is a criminal prosecution for an offence by a company, where the person or persons indicted are liable to be punished. Hence, its application cannot be extended to penalty proceedings. The other reason mentioned by the High Court is that the provision u/s 68 had a special task and it dealt with offences and prosecutions against any person which includes a company and on conviction such a person is liable to be imprisoned and company being a juristic person, it cannot suffer imprisonment. Then, section 68 springs into the operation to identify every person who is liable to be punished with imprisonment for the contravention by the company. However, penalty can be saddled on the company if it has contravened any of the provisions of the Act. Section 50 does not refer to every person as envisaged by Section 68. As such, Section 68 cannot be availed of to indict the officials of the company for the purposes of penalty. Section 50 also lays down an outer limit of penalty. Since the penalty can be imposed on the company itself as a person contravening the provisions of the Act, if the operation of Section 68 is extended to penalty proceedings also, the penalty would become leviable against each person who comes within the purview of Section 68 of the Act and that will create a serious anomaly.

Therefore, it is the judgment delivered in the context of the challenge raised by the Union of India. Further, the challenge was raised in the context of an offence committed by a Company. Therefore, a penalty also can be imposed on a Company and in holding that the Honourable Supreme Court noted the legal status of a company.

With great respect, the Division Bench in Textoplast Industries (supra) following this judgment of the Honourable Supreme Court, held that where the contravention has been committed with the consent of or connivance of or is attributable to the negligence of the partner of a partnership firm, such partner can also be proceeded against. In paragraphs 16 and 17 the Division Bench holds thus:--

Finally, Section 68 was held only to be clarificatory in nature:

Section 68 only clarifies the nature and mode of proceeding when the contravention of any of the provisions of the Act is by a company, whether it be by way of adjudication to impose a penalty or by way of prosecution leading to imprisonment and a fine.

(emphasis supplied)

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 FERA, the Customs Act, 1962 contains a separate Chapter on offences and prosecutions and that hence, the deeming fiction can only be confined for the purposes of prosecutions under the Chapter. Hence, it was urged that where an adjudication proceeding is commenced against a partnership firm, it would not be permissible to impose a penalty both upon a firm and its partner. The submission cannot be accepted. Acceptance of this submission would lead an anomalous situation where, for the purposes of a criminal prosecution, a partner of a partnership firm as well as a person who was in charge of and was responsible for the conduct of the business would be held responsible whereas a much narrower construction would have to be imposed while construing who could be proceeded with for the purposes of an adjudication. There is no logical reason why Parliament would intend to make a stricter provision in the matter of an adjudication leading up to the imposition of a penalty as compared to a proceeding in the nature of a criminal prosecution. Secondly, even as a matter of first principle, we have already analysed the provisions of Chapter XIV of the Customs Act, 1962 dealing with the imposition of a penalty and we see no reason or justification to confine the imposition of a penalty only upon a partnership or its partner. The Customs Act, 1962 is inter alia intended to regulate the levy of the duty of Customs. Obligations for exacting compliance in revenue legislation are cast upon diverse sets of persons or entities. For the purposes of revenue legislation, it is open to the Legislature to cast an obligation for compliance upon, as in this case, an importer or other person. An importer includes a person who is the owner or one who holds himself out as the importer of the goods. As a matter of first principle, there is no reason to exclude the exercise of power by the enacting Legislature to penalise a partnership, particularly when it is consistent with the overall scheme and object of the Act. Moreover, every person who was in charge of and was responsible to the firm for the conduct of the business of the firm, as well as the firm can be proceeded against. Where the contravention has been committed with the consent of or connivance of or is attributable to the negligence of the partner of a partnership firm, such partner can also be proceed against. This legal position 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.

While concluding, it would be necessary to advert to a judgment of a Division Bench of this Court in The Commissioner of Customs (E.P.) Vs. Jupiter Exports and Others, . 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 Rs. 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 considered to be the importer for the recovery of the duty. An appeal was filed by the Revenue while a Petition was filed by the firm seeking enforcement of the order of the Tribunal. This Court, in the course of its judgment held that "no fault can be found with the view taken by the Tribunal" since "it is now well settled that when partnership is penalized, separate penalties cannot be imposed on the partners". Evidently, the judgment of the Supreme Court in Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, was not drawn to the attention of the Court. The observation in regard to the ''well settled position'' is with respect contrary to the law laid down by the Supreme Court in the Standard Chartered Bank case. The judgment of the Supreme Court binds us and we hence have followed the position enunciated therein. Similarly, in the case of Collector of Excise and Customs, Surat-II v. Mohammned Farookh Mohammed Ghani, 2010 (259) E.L.T. 179 (Guj.) the Division Bench of the Gujarat High Court relied upon the general principle in the law of partnership that a firm has no legal existence apart from its partners and held that once a penalty was levied on the firm, it amounted to a levy on the partners and hence, there would be no question of penalizing the partners separately. The Gujarat High Court held that the explanation in Section 140 was for the purposes of liability in respect of commission of offences under the Act whereas there was no such corresponding provision in relation to the imposition of a penalty under the Act. The Gujarat High Court has also not considered the principle enunciated by the Supreme Court in the Standard Chartered Bank case. As a matter of fact, in a judgment of the Supreme Court in Prakash Metal Works v. Collector of Central Excise, 2007 (216) E.L.T. 660 (S.C.) Hon''ble Mr. Justice S.H. Kapadia (as the Learned Chief Justice then was) speaking for the Supreme Court upheld an order of the Tribunal imposing a penalty on partners of a firm as well as on the partnership firm.

In the light of the above, we are not in agreement with Mr. Rao that two opinions rendered by the two Division Benches of this Court are not conflicting. There is clear conflict, to our mind, in two views. One recognizes the settled concept and applies it, namely, a firm cannot be said to have an independent existence than that of partners even when it comes for imposition of penalty. Whereas, other holds that there is no difference between criminal prosecution and adjudication or penalty proceedings. Therefore, even in cases falling under the Customs Act, 1962 dealing with imposition of penalty same cannot be confined only on a partnership or its partner. The Division Bench, therefore, does not agree with the principles applied in the earlier Division Bench judgment and expressly differs from it. This divergence of opinion, to our mind, is apparent and we cannot follow the later judgment in the case of Textoplast Industries (supra). It is difficult to hold that the Division Bench in Jupiter Exports (supra) is per incuriam or that the law laid down therein is no longer good law in the light of the judgment in the case of Standard Chartered Bank (supra) delivered by the Honourable Supreme Court. Noting that the controversy before the Honourable Supreme Court was decided in the backdrop of the facts and particularly the legal position and status of a company incorporated and registered under the Indian Companies Act, 1956 that we are of the opinion that this Appeal cannot be dismissed by following the judgment in the case of Textoplast Industries (supra). It is clear that the judgment in Textoplast Industries (supra) cannot be said to be either per incuriam or no longer good law. For a judgment to be termed as per incuriam the Honourable Supreme Court applies the following test. In the case of Central Board of Dawoodi Bohra Community and Another Vs. State of Maharashtra and Another, , the Constitution Bench holds thus:--

7..........Per incuriam means a decision rendered by ignorance of a previous binding decision such as a decision of its own or of a Court of coordinate or higher jurisdiction or in ignorance of the terms of a statute or of a rule having the force of law. A ruling making a specific reference to an earlier binding precedent may or may not be correct but cannot be said to be per incuriam............

Further, in the decision reported in Director of Settlements, Andhra Pradesh and Others Vs. M.R. Apparao and Another, , the Honourable Supreme Court holds that as far as a binding precedent is concerned, it cannot be assailed on the ground that certain issues were not considered or the relevant provisions were not brought to the notice of the Court.

We would be failing in our duty if we do not refer to a Division Bench judgment of this Court in the case of Panjuman Hassomal Advani Vs. Harpal Singh Abnashi Singh Sawhney and Others, . Insofar as the Doctrine of Precedent is concerned, the Honourable Division Bench held as under:--

Now it is well settled that normally one Division Bench of a High Court cannot take a view contrary to the decision given by another Bench of that Court. In Sri Venkateswara Rice, Ginning and Groundnut Oil Mill Contractors Co. and Others Vs. State of Andhra Pradesh and Others, , it has been observed that the later Bench before whom a question arises is bond by the earlier decision. Mr. Kripalani on behalf of the petitioner also drew our attention in this connection to Young v. Bristol Aeroplane Company Limited - (1944) 1 KB 718, where the following propositions have been set out in the head note:

The Court of Appeal is bound to follow its own decisions and those of courts of coordinate jurisdiction, and the ''full'' Court is in the same position in this respect as a division of the Court consisting of three members. The only exceptions to this rule are:--

(1) the Court is entitled and bound to decide which of two conflicting decisions of its own it will follow;

(2) the Court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot in its opinion stand with a decision of the House of Lords;

(3) the Court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam, e.g. where a statute or a rule having statutory effect which would have affected the decision was not brought to the attention of the earlier court.

Now, in the matter before us it is not possible to say that the decision of the Division Bench in Kalavati''s case C.A. No. 1699 of 1969 D/2641973 (Bom) can be considered as given per incuriam. This was very fairly conceded by Mr. Nain. A decision cannot be treated as given per incuriam merely because the Court had not the benefit of a full and exhaustive argument and as a general rule the only cases in which decisions should be held to be given as per incuriam are those given in ignorance of some inconsistent statutory provision or binding authorities. In the matter before us it cannot be said that the Division Bench in Kalavati''s case C.A. No. 1699 of 1969 D/2641973 (Bom) has given its decision either in ignorance of the provisions of any statute or binding authorities i.e. the judgment of the Supreme Court. It was however, contended that the Division bench in Kalavati''s case C.A. No. 1699 of 1969 D/2641973 (Bom) had wrongly understood Sabharwal Brothers and Another Vs. Smt. Guna Amrit Thandani of Bombay, and thereby erroneously came to the conclusion that the decision in Satpalsing Arora Vs. Santdas Prabhudas Malkani, which was binding being a decision of a Division Bench of the Bombay High Court was no longer good law. But then, it is equally well settled that an interpretation (and equally a misinterpretation) of a binding decision of the Supreme Court will itself be binding subsequently on coordinate courts and must be got corrected by a higher Court and no coordinate Court on that ground may refuse to follow an earlier decision, opining that in its view the said earlier decision had wrongly understood or improperly applied a decision of a higher Court. The proposition of law as to be found in Halsbury''s Laws of England (third edition) volume 22, at page 800 reads as follows : "Even if a decision of the Court of Appeal has misinterpreted a previous decision of the House of Lords the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake". Following this, in our opinion the same salutary principle must be adopted and applied here. Both as to the true ratio of Deccan Merchants Co-operative Bank Ltd. Vs. Dalichand Jugraj Jain and Others, and the effect of Sabharwal Brothers and Another Vs. Smt. Guna Amrit Thandani of Bombay, we must follow and apply what has been laid down by a coordinate Court viz. the Division Bench which decided Kalavati''s case C.A. No. 1699 of 1969 D/2641973 (Bom) and any aggrieved party must be referred to the Supreme Court for the correction of errors (or what it contends are the errors) in the earlier decision.

We must also refer to the argument of Mr. Rao based on Section 26 of the Partnership Act, 1932. He submits that the Division Bench judgment in the case of Textoplast Industries (supra) can be applied by us by taking recourse to Section 26. Section 26 of the Partnership Act, 1932 reads as under:--

Liability of the firm for wrongful acts of a partner:--

Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the same extent as the partner.

A perusal thereof would indicate that same falls in Chapter IV and which deals with Relations of Partners with third parties. It is in that context that the liability of the firm for wrongful acts of the partner is dealt with. We cannot by referring to this provision hold that the view taken in Jupiter Exports (supra) is not binding on us.

Our attention has also been invited by the learned counsel appearing for the Appellant to the Customs Act, 1962. He submits that Chapter XIV of the same deals with Confiscation of Goods and Conveyances and Imposition of Penalties. Section 112 falling in the said Chapter and clause (a) thereof speaks of penalty for improper importation of goods and that can be imposed on any person. The argument is that there is separate chapter, namely, Chapter XVI dealing with the Offences and Prosecutions and Section 140 thereof provides for Offences by Companies. Therefore, the distinction between two provisions "any person" and "offences by companies being committed every person who at the time the offence was committed was in charge of and was responsible to the company for the conduct of business of the company as well as the company", shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly, cannot be lost sight of. It is submitted that these two are distinct proceedings and particularly under the scheme of the Customs Act, 1962.

We are of the view that there is no necessity of expressing any opinion on these submissions once we have noted that the Appeal raises a substantial question of law. We have admitted it. It is only to emphasize that the distinction as made by a later Division Bench would require further consideration and by a Larger Bench, the issue, thus, is clearly debatable, that a lengthy order.

In such circumstances we are of the opinion that the present Appeals deserve admission on the above framed substantial question of law. We proceed to admit them and in view of our observations and conclusions recorded above, we direct that the papers and proceedings in these Appeals be placed before the Honourable the Chief Justice by the Registry so as to obtain suitable directions of His Lordship. The conflict as noted above will have to be resolved by a Larger Bench. We, therefore, direct as above and request the Honourable the Chief Justice to refer the following questions for opinion of a Larger Bench:--

(i) Whether, under the Customs Act, 1962 and particularly in exercise of the powers conferred by Section 112(a) thereof, simultaneous penalties on both the Partner and Partnership firm can be imposed?

(ii) '' Whether, the judgment in the case of The Commissioner of Customs (E.P.) Vs. Jupiter Exports and Others, holding that separate penalty on a partnership firm and a partner cannot be imposed, lays down the correct law or whether, as held by the later Division Bench in the case of Textoplast Industries Vs. Additional Commissioner of Customs, it is permissible to impose penalty separately on a partnership firm and a partner particularly in adjudication proceedings under the Customs Act, 1962?