Separate Penalty On Partner Not Sustainable Once Partnership Firm Penalised Under Customs Act: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that once a partnership firm has already been penalised under the Customs Act, a separate penalty cannot ordinarily be imposed on its partner for the same contravention. However, the bench of S. S. Garg (Judicial Member) upheld a reduced penalty against the partner under Section 114AA of the Customs Act on the basis of his own admissions regarding concealment of imported goods. The appeal was filed by Dilip Dhakan against an order passed by the Commissioner of Customs, Kandla, imposing penalties under Sections 112(a) and 114AA of the Customs Act, 1962. As per the facts recorded by the Tribunal, M/s Rodex International, a partnership concern operating from the Kandla Special Economic Zone, had imported a consignment declared as refrigerators and LCD/Plasma televisions. Acting on intelligence inputs, officers of the Directorate of Revenue Intelligence intercepted the container and conducted a detailed examination. During the inspection, the DRI officers allegedly discovered four black polyethylene bags concealed behind refrigerators. Upon opening the bags, the officers recovered 28,580 pieces of “Micro” brand 2 GB SD memory cards which had not been declared in the Bill of Entry filed before customs authorities. Following investigation, a show cause notice was issued and penalties were imposed on various persons connected with the import transaction, including the appellant. The appellant argued that he was merely a partner of the importing firm and that once the partnership firm itself had been penalised, no separate penalty could legally be imposed upon him under Section 112(a) of the Customs Act. It was also submitted that the imports actually belonged to another individual, namely Lilaram Asudani, and that the appellant had merely lent the Import Export Code of the firm. The appellant further relied upon several judicial precedents, including decisions of the Gujarat High Court, to contend that a partnership firm and its partners are not distinct legal entities for the purpose of imposing duplicate penalties under customs law. The Tribunal noted that the issue was already settled by the Gujarat High Court in the case of Commissioner of Central Excise vs. Jai Prakash Motwani, where it was held that once the firm is penalised, a separate penalty on the partner is impermissible unless the statute specifically treats them as separate entities. The Bench also referred to another Gujarat High Court judgment in Commissioner of Central Excise & Customs vs. Mohammed Farookh Mohammed Ghani, where the Court observed that a partnership firm has no separate legal existence apart from its partners and therefore imposition of penalty on the firm effectively amounts to penalty on the partners themselves. Relying upon these precedents, the Tribunal set aside the penalty imposed on the appellant under Section 112(a) of the Customs Act. However, the Tribunal took a different view regarding the penalty imposed under Section 114AA. The Bench observed that this penalty had not been imposed on the partnership firm but specifically on the appellant based on his own statement recorded during investigation. According to the Tribunal, the appellant had admitted before customs authorities that it had been agreed between him and another individual that the goods would be imported in the name of Rodex International and that he would receive monetary consideration for the concealed memory cards and profits from the televisions and refrigerators. The Bench observed that the appellant had never retracted his statement and that an admitted fact need not be separately proved by the department. The Tribunal therefore held that there was sufficient evidence to sustain penalty proceedings under Section 114AA. The Tribunal found the original quantum of penalty to be excessive and disproportionate considering the appellant’s alleged benefit in the transaction. Consequently, while upholding liability under Section 114AA, the Tribunal reduced the penalty amount to ₹2 lakh from the higher amount originally imposed by the Commissioner. Case Details Case Title: Dilip Dhakan Versus Commissioner of Customs-Kandla Citation: JURISHOUR-1191-CES-2026(AHM) Case No.: Customs Appeal No. 240 of 2012 Date: 08.05.2026 Counsel For Appellant: Nirav P Shah, Advocate Counsel For Respondent: Himanshu Nachane, Superintendent (AR) Click Here To Read Order Read More: Additional Excise Duty Can’t Be Levied On Pre-Budget Stock Manufactured Before Levy Came Into Force: CESTAT

Separate Penalty On Partner Not Sustainable Once Partnership Firm Penalised Under Customs Act: CESTAT

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