CESTAT Ahmedabad Sets Aside Separate Penalty on Partner After Firm Penalised in Customs Smuggling Case

May 8, 2026 : The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, has held that a separate penalty cannot be imposed on a partner once the partnership firm has already been penalised under the Customs Act, 1962.

The Tribunal, comprising Justice S.S. Garg (Judicial Member), partly allowed the appeal filed by Dilip Dhakan against the Commissioner of Customs, Kandla. The case arose from the seizure of undeclared “Micro” brand SD memory cards concealed inside refrigerators imported in the name of M/s Rodex International through Kandla Special Economic Zone.

According to the Directorate of Revenue Intelligence (DRI), officers intercepted a container declared to contain refrigerators and LCD/Plasma televisions. During examination, authorities recovered 28,580 pieces of 2 GB memory cards hidden in refrigerators, which were not declared in the Bill of Entry.

The Commissioner of Customs had imposed penalties under Sections 112(a) and 114AA of the Customs Act. The appellant challenged the penalties, arguing that once the partnership firm had been penalised, a separate penalty on the partner was impermissible in law.

Accepting the contention, the Tribunal relied on Gujarat High Court judgments including Commissioner of Central Excise v. Jai Prakash Motwani and CCE v. Mohammed Farookh Mohammed Ghani, reiterating that a partnership firm has no separate legal existence apart from its partners unless specifically provided by statute.

The Tribunal observed that the Customs Act does not treat a partnership firm and its partners as separate entities for the purpose of penalties under Section 112(a). Accordingly, the penalty imposed on Dilip Dhakan under Section 112(a) was set aside.

However, the Tribunal upheld liability under Section 114AA after noting that the appellant had admitted in his statement that he had agreed to allow import of the goods in the name of Rodex International and was to receive financial benefit from the transaction.

Considering that the appellant’s admitted benefit was limited to ₹1 lakh, the Tribunal held that the original penalty was excessive and disproportionate. It consequently reduced the penalty under Section 114AA to ₹2 lakh. The appeal was partly allowed.

Cause Title: Dilip Dhakan v. Commissioner of Customs-Kandla

Case No.: Customs Appeal No. 240 of 2012

Final Order No.: 10331/2026

Coram: Shri S. S. Garg, Member (Judicial)