TMI Blog2014 (4) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples applied in earlier Division Bench judgment and expressly differs from it - This divergence of opinion is apparent and this Court cannot follow judgment in Textoplast Industries. It is difficult to hold that Division Bench in Jupiter Exports is per incuriam or that the law laid down therein is no longer good law in the light of the judgment in Standard Chartered Bank v/s Directorate of Enforcement [2006 (2) TMI 272 - SUPREME COURT OF INDIA] noting that the controversy before 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, this Appeal cannot be dismissed by following judgment in Textoplast Industries - Judgment in Textoplast Industries cannot be said to be either per incuriam or no longer good law - Further, in Director of Settlements, A.P. v/s M.R. Apparao [2002 (3) TMI 909 - SUPREME COURT] 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. Matter referred to larger bench referring the following q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsion 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 21.05.1999 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/-. 5. 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 lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs, (b) Mr.N.Nagdutt K. Brahmachari : Rs.5 lacs. 8. 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 07.05.2012, the Appeal of the Appellant has been dismissed. 9. 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 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. 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 ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention that for taxing purpose a partnership firm is treated as an entity distinct from the persons who constitute it, held thus:- 7. 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 Salestax 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? 8. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. 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 founda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 18. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t refers to the decision of this Court in the following terms:- 25. 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 under Section 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, subSections (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 punishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to preparation or attempt at contravention is confined to Section 56, the provision for prosecution, subSection (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 subSection (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. SubSection (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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctionsuch 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 under Section 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded against. In paragraphs 16 and 17 the Division Bench holds thus:- 16. 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 adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 claificatory. 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 vs. 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 impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal imposing a penalty on partners of a firm as well as on the partnership firm. 23. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ung 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 co-ordinate 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. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ao 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:- 26. 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. 27. 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. 28. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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