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Kerala Commercial Corporation and ors. Vs. Additional Collector of Customs and anr. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtKerala High Court
Decided On
Case NumberWrit Appeal No. 452 of 1974
Judge
Reported in1984(15)ELT325(Ker)
ActsCustoms Act, 1962 - Sections 2, 3, 23, 23C, 34, 34(1), 63(2), 111, 112, 115(2), 125, 125(1), 131, 132 and 140; Imports and Exports (Control) Act, 1947 - Sections 3(2); General Clauses Act, 1897 - Sections 2(42) and 3(42); Income Tax Act, 1922 - Sections 3, 34; Foreign Exchange Regulations Act, 1947 - Sections 8; Sea Customs Act, 1878 - Sections 167(3), 167(8) and 167(37); Partnership Act - Sections 4; Constitution Amendment Act - Sections 58; Constitution of India - Article 226 and 226(3); Code of Civil Procedure (CPC) - Order 1, Rule 10 - Order 6, Rule 17 - Order 30
AppellantKerala Commercial Corporation and ors.
RespondentAdditional Collector of Customs and anr.
DispositionAppeal dismissed
Cases ReferredCotton Mfg. Co. v. Union of India
Excerpt:
.....of any of the provisions of the foreign exchange regulation act read with sea customs act by a firm, the partners of it who are incharge of its business or are responsible for the conduct of the same cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention. -(1) if the person committing an offence under this chapter is a company, 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 :provided that nothing contained in this sub-section..........length. counsel for the appellant contended that without issuing notice to all the partners of the firm, the firm as such cannot be made liable for the contravention. counsel for the respondents replied that in the absence of any definition of the term 'person' in the customs act, the definition of that expression in section 3(42) of the general clauses act, 1897, could be resorted to. the said definition reads :' 'person' shall include any company or association or body of individuals, whether incorporated or not:' our attention was called to narayana chetty v. i.t. officer, nellore, a.i.r. 1959 s.c. 213 paras 5, 6 and 9 and to m.m. ipoh v. i.t. commr., mad., a.i.r. 1968 s.c. 317 para 21. in the earlier of these cases the question arose with respect to the provisions of the indian.....
Judgment:

V.P. Gopalan Nambiyar, C.J.

1. The appellants, the Kerala Commercial Corporation (a partnership firm), its Managing Partner, and its Spices Broker, were proceeded against under Sections 111 and 112 of the Customs Act, 1962. The contravention alleged against them was that they had smuggled 244.40 kgs of cloves of foreign origin and two bottles of foreign brandy. A statement was recorded from the 2nd appellant, the Managing Partner. Ext. P2 notice dated 1-5-1970 was issued by the Assistant Collector of Customs, Cochin, to show cause why proceedings should not be taken under Section 111(d) of the Customs Act read with Section 3(2) of the Imports and Exports (Control) Act, 1947, and the cloves confiscated, and why penalty should not be imposed on the persons concerned under Section 112(b) of the Act for acquiring possession, or and carrying, depositing, harbouring, keeping, concealing etc. goods which they knew or had reason to believe, were smuggled goods liable to confiscation under the Act. Copies of the notice were addressed to the appellants before us. The notice recited that a party of Preventive Staff, on receipt of information, and in pursuance of a search had proceeded to search the premises of the appellants and had found the goods and documents specified in the notice and recovered the same from the premises under a search-list, in the presence of the 2nd appellant, the Managing Partner of the 1st appellant-firm, and two independent witnesses. This was replied to, by Ext. P3 dated 11-5-1970, Exts. P. 3(a) and P l(b) (being the Explanations of the different writ-petitioners). It was pointed out, inter alia, that the 1st appellant-firm consisted of persons whose names had been disclosed. Various other objections, lengthy in nature and varying in their import, were taken, which, it is unnecessary to detail. By Ext. P6 order, the contravention of Section 112(b) of the Customs Act was found established. It was recorded that the cloves seized from the 1st appellant were all of foreign origin brought into India in contravention of the 'restrictions' imposed and were liable to confiscation under Section 111(d) of the Customs Act (vide para 42). It was recorded that the 2nd appellant, as the Managing Partner of the 1st appellant was liable for penalty under Section 112 of the Act and that the 1st appellant itself was also liable for penalty under the same Section for acquiring possession of contraband cloves. The 2nd appellant, it was noted, had admitted that he received the cloves from the Spices Broker, Moideen, (who was also a petitioner in the writ petition, and the 3rd appellant before us). Moideen himself had denied having supplied any contraband cloves to the 2nd appellant. Moideen's Explanation was not accepted and he was also adjudged liable for penalty. Copy of the order is Ext. P6. Appeal against the said order jointly filed by the appellants was dismissed by the Central Board of Revenue (vide Ext. P7). The writ petition was to quash Exts. P6 and P7.

2. The learned Judge rejected the argument of counsel for the appellants that there was no evidence to support the findings recorded. Counsel for the appellants very fairly submitted before us that he did not propose to attempt the unprofitable task of attacking the findings recorded by the adjudicating authority and the appellate authority. Very rightly he confined his arguments to two aspects, namely, that before confiscation of the goods was ordered, no option to redeem the goods in lieu of confiscation was offered to the appellants as directed by Section 125 of the Act; and secondly, that the 1st appellant, the firm, was not given due and lawful notice of the proceedings, but had been made liable after notice to one of the partners alone, (the 2nd appellant), despite the disclosure of the details and particulars of the persons composing the firm.

3. We take up first the objection in respect of holding the firm liable without notice and notice to all the partners of the firm. We find that no such objection in pointed or specific form seems to have been taken before the learned Judge. In para 4 of the judgment the learned Judge recorded :

'The petitioners have no case that in passing the impugned order the 1 st respondent had failed to conform to any procedural requirement laid down either in the Customs Act or the rules framed thereunder.'

In para 6, the learned Judge noted the last of the contentions on behalf of the writ petitioners, namely that the respondents had acted illegally in imposing separate penalties against the firm as well as against its Managing Partner. The learned Judge answered this objection by pointing out that the firm would fall within the definition of 'person' and that the levy of penalty against it was warranted under Section 112 of the Act; and further, that the second writ-petitioner as the person in active charge of the firm as Managing Partner, was one 'directly concerned in the purchase and also the subsequent dealing with the contraband goods in question'. As such he was also held liable.

4. Before us, argument regarding the liability of the firm was raised at considerable length. Counsel for the appellant contended that without issuing notice to all the partners of the firm, the firm as such cannot be made liable for the contravention. Counsel for the respondents replied that in the absence of any definition of the term 'person' in the Customs Act, the definition of that expression in Section 3(42) of the General Clauses Act, 1897, could be resorted to. The said definition reads :

' 'person' shall include any company or association or body of individuals, whether incorporated or not:'

Our attention was called to Narayana Chetty v. I.T. Officer, Nellore, A.I.R. 1959 S.C. 213 paras 5, 6 and 9 and to M.M. Ipoh v. I.T. Commr., Mad., A.I.R. 1968 S.C. 317 para 21. In the earlier of these cases the question arose with respect to the provisions of the Indian Income-tax Act, 1922 and proceedings for re-assessment thereunder Section 34. The contention raised was that the proceedings were invalid because the notice required to be issued under the section had not been issued against the assessee, viz., the firm, but only to one of its partners. In support of the contention, the definition of the word 'assessee' under Section 2, Clause (2) prior to its amendment in 1953, and the provisions of Section 23, Clause (5) in regard to a registered firm, were referred to. The Court pointed out that a firm is specifically treated as an assessee by Section 3 of the Act; and that the word 'person' in the definition of 'assessee' in Section 2, Clause (2) of the Act, would include a 'firm' by reason of Section 3, Clause (39) of the General Clauses Act [now Clause (42) thereof]. It was therefore, held that it would be wrong to treat the assessee under Section 2, Clause (2) as consisting of the individual partners and as not including a firm. Next, the Court dealt with the argument that notices had to be issued to the individual partners because at the material time the firm had been dissolved. Reference was made to Section 63(2) which permitted a notice or requisition to be issued to a member of the firm. As an additional reason, it was pointed out that the main appellant had in fact been served personally and that the other persons who had not been served had made no grievance in the matter, in the circumstance, the Court ruled that it was not open to contend that proceedings taken under Section 34(1) were invalid as notices had not been served on the alleged partners of the firm. The decision is apposite. In M.M. Ipoh v. I.T. Commissioner, Madras, A.I.R. 1968 S.C. 317 the Supreme Court again dealt with the position of a firm with respect to the provisions of the Income-tax Act, 1922. With respect to the provisions of Section 3, Clause (42) of the General Clauses Act, it was pointed out that a firm is a 'person' under the Indian Income-tax Act and that a firm and a group of individuals form an 'association of the persons' under the Act. Attention was also called to the decision of the Supreme Court in Agrawal Trading Corporation v. Collector of Customs (1972), 1 SCC 553 : A.I.R. 1972 S.C. 648. The proceedings were there under the provisions of the Foreign Exchange Regulations Act, 1947, read with the provisions of the Sea Customs Act, 1878. Criminal prosecutions and penalty proceedings were launched against the partners and also against the firm constituted by them. It was observed : (at p. 654 of A.I.R.).

'The second contention that because the firm is not a legal entity, it cannot be a person within the meaning of Section 8 of the Foreign Exchange Regulation Act or of Section 167(3), (8) and (37) of the Sea Customs Act, is equally untenable. There is of course, no definition of 'person' in either of these Acts but the definition in Section 3(42) of the General Clauses Act, 1897, or Section 2(3) of the Act of 1868 would be applicable to the said Acts in both of which 'person' has been defined as including any company or association or body of individuals whether incorporated or not. It is of course contended that this definition does not apply to a firm which is not a natural person and has no legal existence, as such Clauses (3), (8) and (37) of Section 167 of the Sea Customs Act are inapplicable to the appellant firm. In our view, the Explanation to Section 23-C clearly negatives this contention, in that a company for the purposes of that section is defined to mean any body corporate and includes a firm or other association of individuals and a director in relation to a firm means a partner in the firm. The High Court was clearly right in holding that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with Sea Customs Act by a firm, the partners of it who are incharge of its business or are responsible for the conduct of the same cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention.'

Apart from the authority of the above decisions, we think, on the general principles of the law of partnership and Agency, service of notice is quite proper and valid. Each partner is in law, an implied agent of the other partners. As agent, each partner can bind the other by his actions.

5. Counsel for the appellants cited the decisions in Dulichand v. Income-tax Commr., Nagpur A.I.R. 1956 S.C. 354 at 359 and Purushottam & Co. v. Manilal & Sons, A.I.R. 1961 S.C. 325 at 328 to 330. We do not think these decisions are of much avail or assistance to the appellants. The earlier of these dealt with the question whether under Section 4 of the Partnership Act, there can be a partnership constituted of different firms; the latter one was concerned with the misdescription of a firm in the matter of institution of a suit, having regard to Order 1 Rule 10; Order 6 Rule 17, and Order 30 of the C.P.C.

6. We may also point out that the contention that the proceedings against the firm were defective for want of notice to the individual partners does not appear to have been urged at any stage of the proceedings, including the stage of writ proceedings before the learned Single Judge. None of the partners of the firm have so far chosen to make any grievance that they had not been served with notice of the proceedings. We find no substance in this objection.

7. Counsel for the respondents drew our attention to Section 140 of the Customs Act, clause (1) of which reads :

'140. Offences by Companies.-(1) If the person committing an offence under this Chapter is a company, 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 :

Provided that nothing contained in this Sub-section shall render any such person liable to such punishment provided in this Chapter if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

* * * *There is an Explanation to the Section, clause (a) of which enacts : 'Explanation.-For the purposes of this section,-

(a) 'Company' means a body corporate and includes a firm or other association of individuals; and

* * * *Counsel for the respondents placed reliance on this provision; but, for the appellants, it was promptly pointed out that the Section applies only in respect of offences, 'under this Chapter', namely, Chapter 16, commencing from Section 132; and we are concerned in this case with the offences under Section 112(b). The Section is therefore unhelpful.

8. The next grievance of the appellants is that no option to pay the fine and redeem the goods in lieu of confiscation was offered to the appellants as required by Section 125(1) of the Act. That section, in so far as it is material, reads :

'125. Option to pay fine in lieu of confisation.-(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit :

Provided that, without prejudice to the provisions of the proviso to Sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.* * * *

Counsel for the appellants submitted that the importation of cloves had not been prohibited but only restricted, and therefore it was obligatory on the adjudicating authority to give the owner of the goods an option to pay the fine in lieu of confiscation. As this had not been done, the proceedings, it was submitted, were invalid. These aspects do not seem to have figured at all before the learned Single Judge. In view of the interests involved, and the fundamental nature of the objection, we did not preclude counsel from urging the point; and are not inclined to regret this indulgence. There is an element of unfairness in springing such a point for the first time at the stage of appeal before us. Counsel for the respondents is right in his complaint that he cannot be expected to be satisfactorily armed with the facts as to whether the import of cloves had been totally 'prohibited' or only partially 'restricted'. But he was prepared to meet the appellant four square, and cited to us the decision of the Calcutta High Court in Shaik Md. Omer v. Customs Collector, A.I.R. 1967 Cal. 16, affirmed on appeal by the Supreme Court in Sheikh Mohd. Omer v. Collector of Customs, Calcutta (1970) 2 S.C.C. 728 : A.I.R. 1971 S.C. 293. The decision is authority for the proposition that a restriction on import subject to certain conditions would operate as a prohibition if the conditions are not conformed to. There is thus judicial authority that a prohibition will include restriction, just, as, in the sphere of fundamental rights, there is authority that a restriction will include prohibition as well. In the light of these, there is no force in the contention of counsel for the appellants.

9. We have so far dealt with the argument on the merits. Counsel for the respondents raised a preliminary objection that in view of Clause (3) of Article 226 after its amendment by the Constitution 42nd Amendment, alternative remedy of revision under Section 131 of the Customs Act is available to the Appellants and therefore the writ petition is not entertainable, and should abate under Section 58 of the Constitution Amendment Act. On the terms of the provisions, the argument appears to be well founded, and we are inclined to accept the same. Counsel for the appellants drew our attention to the decision of the Gujarat High Court in A'bad Cotton Mfg. Co. v. Union of India, A.I.R. 1977 Guj. 113 to the effect that the alternative remedy, in order to bar the entertainment of a writ petition under Article 226(3), must be adequate and effective, both qualitatively and quantitatively. We find it rather difficult to read this limitation into -the terms of Article 226(3), having regard particularly, to the purpose and the object of the 42nd Amendment and the terms of the constitutional provision. We are inclined to accept the objection of counsel for the respondents and to dismiss the appeal and the writ petition on this ground as well. As the appellants have no case on the merits, we do not wish to express our final and concluded view on the preliminary objection.

10. We dismiss this appeal with no order as to costs.


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