Decided on April 07,1986



S. Kalyanam, Member (J) - (1.)THE reference applications are directed against the order of the Tribunal dated 9-9-1985 in C(T) Appeal Nos. 154, 155 and 184 of 1980. THE following questions of law have been set out in the reference applications:
(1) Whether the provisions of Section 140 of the Customs Act will apply to the adjudication proceedings under Chapter 14 of the Customs Act?

(2) Whether a partnership firm is a person within the meaning of Section 112 of the Customs Act?

(3) Whether the imposition of penalty on the firm Jain Stationery Mart by the Collector of Customs and Central Excise, Hyderabad under Section 112 of the Customs Act is legal?

(4) Whether notices to the partners of the firm be considered as a notice to the firm in the circumstances of the case?

(5) Whether the confiscation of the goods is legal when notices been sent to the other partners beyond the period of 6 months from the date of seizure?

(6) Whether the said order of confiscation is not vitiated by the provisions of Section 110(2) of the Customs Act?

(7) Whether the statement of Chandi Narayana who is an accomplice be acceptable in the absence of any independent legal witness corroborating him and especially when the documentary evidence produced by him does not at all connect either the firm or any of the partners with his premises?

(8) Whether identification of the appellant Vansraj by Chandi Narayana more than 8 months after his first statement was recorded by the department and in view of the absence of (1) any identification parade and (ii) even the mentioning of the name Vansraj by him during the first 2 statements can be legally accepted?

(9) Whether the imposition of the penalty on the partners is legally sustainable in the absence of any proceedings against the firm?

(10) Whether on the facts of this case, the Appellate Tribunal was right in holding that the firm was the tenant of the premises and was in possession of the said contraband seized by the Department?

(11) Whether the Department has discharged its onus of proving that the contraband goods were of foreign origin and whether the firm Jain Stationery Mart had any connection with it?

(12) Whether on the facts and circumstances of this case, the Appellate Tribunal was right in law in sustaining the penalty of Rs. 70,000/-.

(2.)The learned counsel for the applicants submitted that a firm as such is not a person within the meaning of Section 112 of the Customs Act, 1962, hereinafter referred to as the Act and notice to the partners would not tantamount to statutory notice to the firm and an important question of law with reference to the interpretation of the word 'person' occurring in Section 112 of the Act as to whether that would include a firm as envisaged under Secton 140 of the Act would arise out of the impugned order of the Tribunal meriting reference. The learned counsel further submitted that all other questions set out in the application would only be incidental. or consequential to the said main question and so did not make specific submissions on the same. We therefore instead of taking up each question piecemeal for consideration deal with the main question elaborately argued by the learned counsel and set out above and consider the other issues incidentally.
In the instant case, after the seizure of the contraband goods which were disowned and not claimed by the applicants at all, show cause notice dated 12-10-1973 fastening liability on the firm viz. M/s. Jain Stationery Mart, of which admittedly the applicants herein are partners was served initially on applicant Vansraj. Applicant Vansraj, one of the partners of the firm, sent a reply to the same dated 7-11-1973 contending, inter alia, that since penalty is sought to be levied against the firm, the firm as well as other partners are necessary parties to the proceedings which are quasi-judicial and penal in nature. In response to the same, the fact remains that separate show cause notices were issued to the other partners of the firm who are applicants herein directing them to show cause against the firm's penal liability under Section 112 of the Act and they also responded to the show cause notice. All the three partners of the firm in response to the show cause notice mainly contended that the place of recovery of the contraband goods did not belong to the firm and there was no legal evidence to support the allegations in the show cause notice and the firm should be exonerated. It is only in this factual background the relevant issues have been considered under the impugned order of the Tribunal. The Tribunal in appreciation of the evidence and relevant materials on record under the impugned order has found that the firm was involved in dealing with the contraband goods under seizure. Since a firm is not a juristic person or a legal entity like a company incorporated under the provisions of the Indian Companies Act and is merely a compendious description of all the partners, penalty imposed on the firm was really a penalty on the partners. When the firm does not have an independent legal existence and cannot be called a juridical person in the eye of law and when the partners comprising the firm have been served with show cause notice as per law resulting in the imposition of a penalty on the firm under Section 112(b) of the Act, in our opinion, the question relating to the applicability of the provisions of Section 140 defining the meaning of the word 'company' as inclusive of a firm or other association of individuals and applicability of the same to adjudication proceedings under Section 111 of the Act would not arise for consideration. In other words, the partners of the firm are compendiously referred to and described by the name of the firm and since a firm does not have any legal existence or personality of its own dehors its partners, show cause notices have been served on the partners at the instance of the applicants themselves prior to adjudication resulting in the eventual culmination of imposition of penalty on the firm under the impugned order of the Tribunal. The name of the firm would only indicate or designate the individuals comprising the firm and would be analogous to a situation of an individual who has an alias or an abbreviated name by which he is sometimes called apart from his full name. It is opposite in this context to extract the pertinent observation of the Bench of the Madras High Court in the case of Mura Mohideen v. V.O.A. Mohomed, reported in AIR 1955 Mad. 294:

"A trade name either of a person or a group of individuals carrying on business in partnership is in truth an alias for the person or the group."

The Supreme Court in the case of Commissioner of Income-tax, West Bengal v. A.W. Figgis & Co., AIR 1953 SC 455 - held that under the law of partnership a firm has no legal existence apart from its partners and it is merely a compendious name to describe its partners and this decision was again reiterated by the Supreme Court in the ruling of Duli-chand Laxminarayan v. Commissioner of Income-tax, Nagpur, AIR 1956 SC 354.

(3.)IT would not be out of place to refer to the definition of the term 'partnership' occurring in the Indian Partnership Act (Central Act 9 of 1932):
'"Partnership" is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them."

In civil law when a suit is filed in the name of a firm it is a suit by all the partners of the firm and the Supreme Court has held that even if Order XXX of the Code of Civil Procedure had not been introduced into the Code and a suit had been filed in the name of a firm, it would not be a case of suit filed by a non-existent person and it would still be a suit by the partners of the firm, the defect being that they were described as a firm and in order to clarify matters a court would permit an amendment by striking out the name of the firm and replacing it with the name of the persons forming the partnership. IT would be a case of misdescription and a misdescription is always capable of amendment or rectification or correction and is never a nullity. At the risk of repetition we should like to emphasise that a firm is merely a collective name for the individuals who have entered into a partnership and is not a separate entity from the partners who compose it and each individual partner has a responsibility for the transactions effected and the liability incurred by any one of the partners on behalf of the firm and in terms of the Indian Partnership Act, notice to a partner who habitually acts in the business of the firm or any matter relating to the affairs of the firm operates as notice to the firm except in case of a fraud on the firm committed by or with the consent of that partner. Notice to any habitually acting partner of anything relating to the partnership affairs is generally notice to the firm and it is not a mere question of constructive notice or inference of fact but a Rule of law which inputs knowledge of the agent to the principal. Every partner is jointly with all other partners and also severally liable for all acts of the firm done while he is a partner and where by a wrongful act of a partner in the ordinary course of business of a firm, any penalty is incurred the firm is liable to the same extent as the partner. In the instant case the material facts and relevant ingredients of the penal provisions have been clearly set out in the show cause notice issued to all the partners who comprise the firm and the Tribunal under the impugned order on appreciation of the relevant evidence and materials on record has found the firm liable to penal consequences which have to be borne by the partners of the firm. The Madras High Court in the case of Swaranath Bhatia, AIR 1948 Mad 427 - held that a partner comprising a firm would be liable for contravention of a provision of law by their firm. The ratio of the ruling of the Calcutta High Court in the case of Tarak Nath Sen and Ors. v. Union of India and Ors. - reported in AIR 1975 Calcutta 337 - supports the view that the rights and obligations of a firm are really rights and obligations of the individual partners of the firm and in respect of a contravention of the firm, the partners comprising the firm can be visited with penalties and no exception can be taken to imposition of penalties individually upon them for contravention committed by the firm. We therefore find that no question of law arises out of the impugned order of the Tribunal in this regard meriting reference to the High Court.

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