Legal principle

There is no bar on the simultaneous imposition of penalty on a partnership firm and its partner under the Customs Act, 1962, provided the partner's active knowledge and involvement in the acts leading to contravention and duty evasion is established on the facts of the case.

Court decision

The Tribunal dismissed all four appeals, upholding the confiscation of the copper/brass scrap, the customs duty demand with interest under the proviso to section 28, the penalty on the firm under section 114A, and the penalties on partner Shri Ramesh Jain, holding there was no bar to simultaneous imposition of penalty on the firm and its partner.

Facts

M/s Sameer Industries, a unit in Kandla Special Economic Zone engaged in import and recycling of metal scrap, cleared copper/brass scrap to DTA units without payment of duty against advance licences/advance release orders. DRI investigations revealed the buyers (M/s Lord Empire International, M/s Laxmi Enterprises and M/s MIEC Moradabad) were fictitious or never received the goods, their advance licences were cancelled or suspended, payments were made in cash routed through bank accounts, and transporters could not confirm delivery. The Commissioner of Customs, by Order-in-Original dated 11/11/2011, ordered confiscation of the scrap, confirmed customs duty of Rs.70,76,139 under the proviso to section 28 with interest, imposed penalty of Rs.70,76,139 on the firm under section 114A and Rs.15 lakh on partner Shri Ramesh Jain under section 112(a) (besides excise duty demands and penalties). The firm and its partner appealed to the Tribunal.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 114, Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 9(4), The Foreign Trade (Development and Regulation) Act, 1992 — Issue, suspension and cancellation of licence.
• Section 2(2), Customs Act, 1962 — Definitions