| SooperKanoon Citation | sooperkanoon.com/4862 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Feb-23-1989 |
| Reported in | (1989)(23)LC581Tri(Chennai) |
| Appellant | Collector of C. Ex. |
| Respondent | Swaminathan and Sons |
2. G/ROM/92/88 is an application under Section 81-A(2) of the Gold (Control) Act, 1968, hereinafter referred to as the 'Act' purporting to be one for rectification of a mistake in the impugned order of the Tribunal referred to supra.
3. Shri K.K. Bhatia, the learned S.D.R., contended that in the impugned order of the Tribunal the Tribunal has found that the adjudication proceedings instituted on the basis that a partnership firm was in existence within the meaning of Section 2(h) of the Act at the relevant time when the offence was committed are not legally tenable and on the basis of this finding set aside the penalty imposed on the firm. The learned S.D.R. submitted that this finding of the Tribunal that the firm in question was not in existence at the relevant time when the offence was committed is not factually correct and the records would show that the firm was in existence and therefore, this error apparent on the face of the order of the Tribunal has to be rectified under Section 81 A(2) of the Act. The learned S.D.R. submitted that M/s.
Selvarajan and Ramanujam entered into a partnership as evidenced by a Deed of Partnership, though not registered, dated 29-3-82 for the purpose of dealing as dealer under the Act and submitted the same to the Department and the Department accorded recognition to the said partnership deed on 20-7-82. Business was also carried on by the said firm with the approval of the department. Therefore, when the firm was found to have committed an offence under the Act on 20-9-1982 proceedings instituted against the firm as well as the individual partners comprising it would be legally valid and tenable under the Act and the finding of the Tribunal in the impugned order of the Tribunal setting aside the penalty on the firm on the ground that the firm itself was not in existence on the date of the commission of the offence is a factual error apparent on the face of the record warranting rectification in terms of Section 81-A(2) of the Act. The learned S.D.R. further urged that though the firm was dissolved on 16-8-84 by a dissolution deed, inasmuch as M/s. Selvarajan and Ramanujam were holding out as partners of the firm, proceedings against the firm would be tenable in law. The learned S.D.R. further urged that the mere fact that Selvarajan and Ramanujam were granted a separate licence under Licence No. 78/GOLD/82 dated 15-7-82 would not make them individual licensees as found in the impugned order of the Tribunal.
4. Shri L. Suganchand Jain, the learned Counsel for the Respondent submitted that the scope of the rectification application under Section 81-A(2) of the Act is very limited only to the extent of correcting or rectifying errors apparent on the face of the record. When the appeal was disposed of resulting in the impugned order of the Tribunal dictated in the open Court in the presence of the parties, no plea was raised about the existence of the firm and even today no documentary evidence about the existence of the firm as understood within the meaning of Section 2(h) of the Act has been produced before the Tribunal and, therefore, there is absolutely no mistake at all either in the impugned order or in the finding of the Tribunal much less any error apparent on the face of the record warranting rectification. The learned Counsel further urged that reference to the partnership deed alleged to have been entered into between Selvarajan and Ramanujam on 29-3-82 is irrelevant and inadmissible when the Tribunal is in seisin of a rectification application. The learned Counsel further submitted that adducing or reception of fresh evidence even at the appeal stage is conditioned by Rule 23 of the Customs, Excise & Gold (Control) Appellate Tribunal (Procedure) Rules, 1982, under which the parties would not be entitled to produce any additional evidence and it is only if the Tribunal is of the opinion that any document should be produced, the Tribunal, for reasons to be recorded, may allow such documents to be produced as evidence. There- ** fore, even when the Department is precluded of the said rule from adducing additional evidence or production of a new document at the appellate stage suo motu; a fortiori the Department would be precluded from adducing and placing the reliance on a new document at the time of filing a rectification application under Section 81-A(2) of the Act. The learned Counsel further urged that a firm is a recognisable legal entity for the purposes of the Gold (Control) Act, 1968. though it cannot be a juristic person under the General Law and the Department in the present case, as a matter of fact, granted a licence under the Act in the name of two individuals viz. Servarajan and Ramanujam and having granted a licence under the Act, the licensee alone can be proceeded against and an internal arrangement between the said two persons to form a partnership firm would not convert such a firm into a licensee under the Act, notwithstanding the fact that they have held out themselves as a firm before the authorities who also accepted the same. , The learned Counsel in this context placed reliance on the ruling of the Madras High 1 Court in the case of Kathiresan Pillai end Others v. Ac Additional Collector of Central Excise, Madurai-2 reported in 1989 (19) ECC (14). Finally, the learned Counsel, Shri Suganchand Jain, submitted that the firm Swaminathan & Sons was admittedly dissolved on 16-8-84 and was not in existence thereafter and, therefore, imposition of penalty by an order dated 4-4-86 nearly after two years after the firm ceased to exist and had become defunct is patently unsustainable in law.
5. I have carefully considered the submissions made before me. The short question that arises for my consideration in the present application is whether the impugned order of the Tribunal dated 4-9-86 referred to supra suffers from an error apparent from the record warranting amendment or rectification in the facts and circumstances of the case. Factual narration of certain relevant facts would be relevant in appreciating the issue involved in the present case. On 20-9-82 at about 3 p.m. the Superintendent of Central Excise, Quilon and party visited M/s. Swaminathan & Sons, Main Road, Quilon, and inspected the accounts and found gold coins and ornaments had not been accounted for in their statutory accounts as per law and the proceedings instituted after investigations by issue of a Show Cause Notice eventually culminated in an order of adjudication at the hands of the Collector of Central Excise, Chochin, dated 4-4-86, under which he imposed a penalty of Rs. 15,000/- on M/s. Swaminathan & Sons and a separate and individual penalty of Rs. 10,000/- on each of the other appellants viz.
Servarajan and Ramanujam under Section 74 of the Act besides a fine of Rs. 25,000/- on M/s. Swaminathan & Sons in lieu of confiscation of gold coins and ornaments weighing 36? gms. The Tribunal in an appeal preferred against the said order of the Collector of Central Excise, on consideration of the entire evidence and relevant materials, gave a rinding that there was no firm under the name and style M/s.
Swaminathan & Sons in existence within the meaning of Section 2(h) Clause (ii) of the Act at the relevant time and, therefore, imposition of a penalty on the firm was not legally tenable. For purpose of convenience and better appreciation, let me extract the finding of the Tribunal in this context.
"I have carefully considered the submissions of the parties herein.
I also went through the licence copy issued in favour of the appellants Servarajan and Ramanujam. It is not the case of the Department that Servarajan and Ramanujam have created among themselves any association or formed any partnership firm within the meaning of Section 2(h) of the Act. Merely because a licence has been granted in the names of two individuals who joined together and did business in gold, that would not ipso facto convert such a transaction or the business into partnership firm within the meaning of Section 2(h) Clause (ii) of the Act. I, therefore, hold that the proceedings instituted on the basis that a partnership firm was in existence and the partnership firm was the holder of a gold dealer licence are not legally tenable as against the firm and in this new of the matter, I set aside the penalty imposed on the firm. The adjudicating authority, as rightly contended by the learned Counsel for the appellants has accepted the claim of the various claimants to the ornaments under seizure and therefore, the order of confiscation of the ornaments and release of the same on payment of fine in lieu of confiscation is not legally correct. I agree with the submission of the learned Counsel for the appellants that when it has been established to the satisfaction of the officer adjudging the confiscation of the ornaments under seizure that they belong to various claimants the ornaments should not have been ordered to be confiscated in view of the proviso to Section 71 of the Act." Shri Bhatia, the learned S.D.R. in the present rectification application contended that this factual finding about the non-existence of the firm at the relevant time in the impugned order is incorrect and an error apparent on the face of the record. If really a licence under the provisions of the Gold (Control) Act, 1968 had been issued in the name of M/s. Swaminathan & Sons and was in currency at the relevant time when the offence was committed, I would readily agree that a finding contra in the order of the Tribunal would he an error apparent on the face of the record warranting rectification. But unfortunately no such licence at all was granted by any competent licensing authority under the provisions of the Act in the name of the firm M/s.
Swaminathan & Sons. The learned S.D.R. also does not dispute this factual position but his contention is that though a licence as per the Act was not granted in the name of a firm as such, the fact that two persons Selvarajan and Ramanujam who had been granted a licence under the Act forming themselves into a partnership firm by means of a Deed, though not registered, dated 29-3-82 and sought recognition of the same from the Department, without seeking any Licence under the Act and the Department according recognition, by a communication dated 20-7-82 would be sufficient enough to bring into existence a firm within the meaning of the Act for purposes of instituting adjudication proceedings and imposition of consequential penalty for contravention by the firm of the provisions of law. This plea of the learned S.D.R. is, in my opinion, legally untenable and as rightly contended by the learned Counsel for the Respondent, though a firm is not a juristic person under General Law, a firm is considered to be a legal entity under the provisions of the Gold (Control) Act, 1968, and for the purposes mentioned therein. In this connection I should like to refer to the ruling of the Division Bench of the Delhi High Court in the case of Talwar Diamonds v. Union of India and Ors. reported in 1987 (12) ECC 122 wherein the Division Bench has held that the definition of the word "dealer" defined under Section 2(h) of the Act includes a Hindu Undivided Family a Society Registered under the Societies Registration Act, a Co-operative Society, a club, firm or other association of persons. The Division Bench, therefore, has held that, "It is, therefore, clear that, whether a firm can be treated as a legal person or not in general law, for the purposes of Gold (Control) Act a firm is a legal entity.... The Act clearly envisages a licence in the name of a firm. This is also clear from the provisions of Section 52 of the Act." "It is, therefore, clear in the context of the Gold Control Act that in the case of a firm, the "person" who holds a licence is the firm itself. As under the Income-tax Act, so under this Act a firm is also a "person" capable of holding a licence." This ruling of the Division Bench of Delhi High Court has been referred to and followed by the Madras High Court in the case of Kathiresan Pillai referred to supra. In the case decided by the Madras High Court one Kathiresan Pillai was holding a licence as a dealer under the Act and entered into a partnership with three others to carry on the business under the name and style "Sujatha Jewellers". Thereafter the licence was issued in the names of the four partners and was also renewed for the years 1983 to 1985. On 18-11-85 the four partners applied to the authorities for renewal of their licence and the Collector of Central Excise issued a Show Cause Notice to the firm "Sujatha Jewellers" and refused renewal for contravention of certain provisions of the Act. The Madras High Court in the Writ Petition filed by Kathiresan Pillai and others in the said case held that the licence under the Act could be in the name of individual or individuals or in the name of a firm and the licence in that case was in the names of four Writ petitioners who are no doubt partners of the firm. The licence was not in the name of the firm. The four Writ petitioners were the licensees and the firm was not the licensee. While application for renewal had been filed by the four petitioners and not by the firm, the order of the Collector rejecting renewal on an erroneous assumption that the holder of the licensee was the firm M/s. Sujatha Jewellers and that the application for renewal had been filed by the said firm was not correct. The Madras High Court held that when the firm was not the licensee and the firm had not applied for renewal of the licence, the order rejecting the renewal as if the firm were the holder of a licence was void in law. In the present case Licence No. 78/GOLD/82 dated 15-7-82 is a licence under the Act granted by the licensing authority to two individuals (1) Selvarajan (2) Ramanujam which was also renewed for the year 1983-85. In the teeth of this licence granted by the authorities to two individuals in their individual capacity, I am unable to appreciate as to how it can be contended by the Department that the firm was the licensee. No licence in the name of the firm is in existence nor was admittedly granted much less produced before me.
This licence issued individually in the names of two persons cannot, by any stretch of imagination, be construed to be a licence in the name of a firm and this is precisely the issue that has been settled by the ratio of the Division Bench of the Delhi High Court and also the Madras High Court cited supra. Incidentally, I may mention that M/s. Sujatha Jewellers referred to above preferred an appeal before the Tribunal and the Tribunal held that the very impugned order of the Collector against Sujatha Jewellers which was not a licensee under the Act was nonest and without jurisdiction. Therefore, on consideration of the entire materials, I find that no licence had been granted in the name of the firm M/s. Swaminathan & Sons and no such firm was in existence within the meaning of Section 2(h) of the Act at the time of the commission of the offence viz. 20-9-82. Therefore, I do not find any error at all in the impugned order of the Tribunal and on the other hand the finding of die Tribunal is in accordance with the evidence on record and therefore, the rectification application is dismissed. In view of my categorical finding with reference to the evidence on record that M/s.
Swaminathan & Sons was not a firm in existence as a licensee under the Act on 20-9-82, and consequent dismissal of the rectification application, I do not feel called upon to pronounce upon the other question raised by the learned Counsel for the Respondent.
6. The Reference Application G/Ref/147/86 arising out of the impugned order of the Tribunal filed by the Collector of Central Excise, Cochin, sets out the same issue as question of law viz. whether the firm M/s.
Swaminathan & Sons was in existence at the relevant time or not. In view of my findings on fact with reference to evidence that no such firm was in existence and on the contrary the licensing authority had granted a licence under the Act in Licence No. 78/GOLD/82 in the name of two individuals viz. Selvarajan and Ramanujam on 15-7-82 which was also renewed subsequently for the year 1983 to 1985.1 do not find any question of law arising out of the impugned order of the Tribunal meriting reference. In this view of the matter, the Reference Application is also rejected.