Hira Lal Hari Lal Bhagwati
Vs. C.B.I., New Delhi
[2003] Insc 263 (2 May 2003)
Ar. Lakshmanan With
Criminal Appeal No.677/2003 @ S.L.P.(Crl.)No.1363/2002 (Arising out of
S.L.P.(Crl.) No. 1356/2002) Dr. Ar. Lakshmanan, J.
Leave granted.
These two appeals arise out of the final judgment and order passed by the
High Court of Delhi at New Delhi in Criminal Miscellaneous (M) Nos. 360/2002
and 447/2002 filed under Section 482 of the Criminal Procedure Code read with
Article 227 of the Constitution of India by the appellants herein seeking the
invocation of the inherent powers of the High Court for quashing the F.I.Rs and
the proceedings initiated in pursuance thereto, as also the process issued by
the Chief Metropolitan Magistrate, Delhi. The learned single Judge of the Delhi
High Court, by the impugned final orders, held against the appellants that
obtaining from the Ministry of Health Customs Duty Exemption Certificate, that
was meant for `actual user' on false assertion makes out the offence under
Section 120B read with Section 420 of the Indian Penal Code.
The respondent herein (Central Bureau of Investigation, New Delhi) initiated
criminal proceedings under Section 120B read with Section 420 of the Indian
Penal Code against the appellants on the ground that the appellants in
conspiracy with the Director of Gujarat Cancer and Research Institute, Mr. T.B.
Patel (deceased), Secretary of the Gujarat Cancer Society, Mr. N.L. Patel and
Dr. Viral C. Shah with each other have cheated the Government of India in terms
of evasion of Customs Duty and by concealment of facts obtained Customs Duty
Exemption Certificate in respect of MRI and Lithotripsy machines and by
violating the provisions of 'actual user' condition as per Import Export Policy
and Customs Notification No. 279/83 dated 30.9.1983 and Customs Notification
No. 64/88 dated 1.3.1988 during the year 1987-90, despite acknowledging the
fact that the Customs Duty has been paid by the appellants to the Customs
Department and settled under the Kar Vivad Samadhan Scheme, 1998. In the
instant case, two machines were imported into India by the Gujarat Cancer
Society (hereinafter referred to as "the GCS") who availed of the
duty exemption on the basis of the exemption certificate issued in the name of
the Gujarat Cancer and Research Institute (hereinafter referred to as "the
GCRI") on a bona fide premise that since all the activities of the GCRI
were funded by the GCS and all the operations of GCS were carried out through
the GCRI and that they are akin to holding any subsidiary company, the same
could be done. The Customs Authority raided the premises of the GCRI and seized
the machines and necessary paper work on the ground that the exemption
certificate was issued in the name of the GCRI and not in the name of the GCS and
thus the GCS was not entitled to exemption and was, therefore, liable to pay
Customs Duty. The machines were immediately released on giving a usual
undertaking. On 11.10.1991, Show Cause Notice was issued to the GCS which was
replied to by them. The Collector of Customs, Bombay by an order dated
10.4.1993 held that the GCS was liable to pay the Customs Duty, thus denying
the concessional duty benefit under Customs Notification Nos. 279/1983 and
64/1988 and demanded a duty of Rs.2,16,80,444/- under Section 28 of the Customs Act, 1962
read with the proviso to the said Section.
The said duty was to be paid by the importer GCS and Canbank Financial
Services as well as ICICI being joint holder of the said imported machines.
However, considering the charitable and philanthropic activities of the GCS, no
prosecution was recommended and only a token redemption fine of Re.1/- was
imposed. No penalty was imposed on the above said financial organisations,
namely, Canbank Financial Services and ICICI as they were acting as a lessor,
who had extended financial extension to the above charitable organisation for
import of sophisticated machines. A personal penalty was imposed on M/s. Shah
Diagnostic Institute Pvt.
Ltd., Ahmedabad and its Director, Dr. Viral C. Shah jointly under Section
112 A the Customs
Act, 1962.
Against the order of the Collector of Customs, the appellants preferred
appeals before the Customs, Excise and Gold (Appellate) Tribunal, West Regional
Branch, Bombay which confirmed the findings of the Collector of Customs.
Against the order of the Customs, Excise & Gold (Appellate) Tribunal,
the GCS came up in appeal before this Court in Civil Appeal No. 31/1999. Whilst
the matter was pending before this Court, the Government of India launched the
Kar Vivad Samadhan Scheme, 1998, whereby whoever takes the benefit under the
said Scheme is granted immunity from prosecution from any offence under the Customs Act including
the offence of evasion of duty. In accordance with the Kar Vivad Samadhan
Scheme, 1998, the GCS had agreed to deposit the stipulated amount of over Rs.98
lakhs which had already been deposited earlier and withdrew the Civil Appeal
pending before this Court. On 19.7.1999, a certificate for full and final
settlement of tax arrears in respect of the Kar Vivad Samadhan Scheme, 1998 was
issued to the GCS. The said Certificate, inter alia, certified the receipt of
payment from the GCS towards full and final settlement of tax arrears
determined in the order dated 10.2.1999 of the Designated Authority and further
granting immunity to the GCS from any proceedings for prosecution from any
offence under the Customs
Act, 1962
or from the imposition of penalty under the said enactment, in respect of the
matters covered in the declaration made by the GCS.
However, a case was registered against the appellants on 6.1.1999 by the
respondent alleging that the appellants in conspiracy with the Director of the
GCRI, Mr. T.B. Patel (deceased), Secretary of the GCS, Mr. N.L. Patel and Dr.
Viral C.
Shah had cheated the Government of India in terms of evasion of Customs Duty
and by violating the provisions of 'actual user' condition as per Import Export
Policy during the year 1987-88. A charge sheet was prepared for commission of
offence under Section 120B read with Section 420 of the Indian Penal Code. On
presentation of the said charge sheet, the trial Court by its order took
cognizance and summoned the appellants. The appellants were furnished copies of
the charge sheet. In the meantime, the appellants preferred Special Criminal
Applications before the High Court of Gujarat at Ahmedabad seeking quashing of
the FIR.
However, the same was disposed of as withdrawn on the ground of jurisdiction
with a liberty to file a fresh petition before an appropriate Court. Thereupon
the appellants filed Criminal Miscellaneous (Main) Petitions under Section 482
of the Code of Criminal Procedure read with Article 227 of the Constitution of
India in the High Court of Delhi at New Delhi seeking an appropriate
order/directions to the respondent quashing the FIR concerned. The learned
single Judge of the High Court of Delhi, by his final order, dismissed the said
petitions. Hence these two appeals by way of special leave petitions.
We have heard Shri P. Chidambaram, learned senior counsel, appearing for the
appellants in both the appeals and Shri K.K. Sood, learned Additional Solicitor
General, appearing for the respondent.
Before considering the rival submissions of the respective counsel appearing
on either side, it is useful to reproduce the short order passed by the learned
single Judge of the High Court of Delhi on 4.3.2002 which reads as under:
"This petition has been filed with a prayer to quash FIR No.
R.C. 1(E)/99/EOW-I/DLI under Section 120B r/w 420 IPC and the proceedings
initiated in pursuance thereto.
It is the case of the petitioner that petitioner has compounded the offence
by taking recourse to Kar Vivad Samadhan Kar Vivad Samadhan Scheme, 1998 and
that no prosecution for offence after compounding of offence can be instituted.
He draws my attention to a judgment of the Supreme Court in Smt. Sushila Rani
vs. Commissioner of Income Tax & Anr., 2002 Vol.II AD Apex Decisions, where
the Supreme Court has held that :
"The appellant in the course of the declarations filed specifically
stated that any adjustment of refunds towards tax arrears of the appellant by
the Department in the earlier years without following the mandatory procedure
of Section 245 of the Act would still remain as tax arrears for the purpose of
the KVSS and it is on that basis the declarations were accepted by the
Department. Having accepted the claim of the appellant on that basis, it will
not be permissible for the respondents now to turn around and take a different
stand." The case of the prosecution is that this is not a question of mere
evasion of custom duties but it is a question of obtaining custom duty
exemption certificate from the Ministry of Health by making a false assertion
that the machines imported are for actual user. The compounding of offence
subsequent thereto only indicates that a certificate was falsely induced from
the Ministry of Health.
Having heard learned counsel for parties and having gone through the
judgment relied upon by learned counsel for the petitioner, I am of the view
that obtaining a certificate, that was meant for actual user, on false
assertion, makes out the offence.
Crl.M.(M) 360/2002 is dismissed." Learned senior counsel appearing for
the appellants submitted that to the show cause notice, the appellants had sent
a proper reply and after hearing the case of the GCS, the Collector of Customs,
Bombay held that the GCS was liable to pay the Customs Duty but in view of the
activities of the Society and the bona fides of the Society, and considering
charitable and philanthropic activities of the Society, no prosecution was
recommended and moreover, only a token redemption fine of Re.
1/- was imposed. Thus, he submitted that the concerned authorities were
satisfied that there was no intention to evade the Customs Duty as stated by
the authorities.
It was further submitted that the GCS was immuned from any criminal proceedings
pursuant to the Certificates issued under the Kar Vivad Samadhan Scheme, 1998
and the present appellants are being prosecuted in their capacity as office
bearers of the GCS. As the Customs Duty has already been paid, the Central
Government has not suffered any financial loss. Moreover, as per the Kar Vivad
Samadhan Scheme, 1998, whoever is granted the benefit under the Kar Vivad
Samadhan Scheme, 1998 is granted immunity from prosecution from any offence
under the Customs
Act, 1962,
including the offence of evasion of duty. In the circumstances, the complaint
filed against the appellants is unsustainable and that the appellants are
reputed persons who had never even contemplated committing any violation of law
or thought of taking undue advantage of the exemption Notifications under the Customs Act and that
when the Society availed of the exemption Notification in respect of the two
machines, it acted bona fide in the belief, that since the machines were being
imported, purely for the benefit of the cancer patients of the GCRI, by such
importation, cancer patients would be benefited, as they would get diagnosis
and treatment in the GCRI itself and would not have to go to Bombay and other
places.
He further contended that the impugned order passed by the High Court of
Delhi is bad in law and fact inasmuch as the learned single Judge has erred in
passing the impugned order, dismissing the petitions filed under Section 482 of
the Criminal Procedure Code on the basis of an erroneous reading and a total
misinterpretation of the judgment and despite the well- settled principle of
law cited by the petitioners. In this context, he cited the judgment of this
Court in the case of Sushila Rani (Smt) vs. Commissioner of Income Tax and
Another, (2002) 2 SCC 697. He also cited the judgment of this Court in the case
of Central Bureau of Investigation, SPE, SIU(X), New Delhi vs. Duncans Agro
Industries Ltd., Calcutta, (1996) 5 SCC 591.
Placing reliance on the above judgments, he urged that the alleged criminal
liability stands compounded on a settlement with respect to the civil issues
and, therefore, the FIR was erroneously issued and was totally unwarranted. He
further submitted that under the penal law, there is no concept of vicarious
liability unless the said statute covers the same within its ambit. In the
instant case, the said law which prevails in the field i.e. the Customs Act,
the appellants have been therein under wholly discharged and the GCS granted
immunity from prosecution. He also contended that the learned single Judge
failed to appreciate that the GCS had taken the benefit of the Amnesty Scheme
of Kar Vivad Samadhan Scheme, 1998 and, therefore, implicating the appellants
being office bearers of the Society under Section 120B read with Section 420 of
the Indian Penal Code is against the purpose and object of the said Scheme,
and, therefore, there is no prima facie case against the appellants in respect
of the alleged offence. He further submitted that evasion of Customs Duty, in
the present case, was predominantly a civil case and that the ingredients of
criminal offence were missing/wanting and which liability, in any case, stood
settled and that, therefore, in such a scenario, the appellants to undergo an
agony of a long criminal trial would be an abuse of process of Court and
against the interest of justice.
He invited our attention to the pleadings, in particular, the F.I.R., the
Annexures of the S.L.Ps, the provisions of the Kar Vivad Samadhan Scheme, 1998,
the relevant provisions of the Indian Penal Code, the Customs Act, 1962
and the rulings relied on by him.
Shri K.K. Sood, learned Additional Solicitor General, appearing for the
respondent, submitted that the material gathered in the investigation clearly
show and establish commission of offences by the accused persons indicating the
appellants herein under Sections 420 and 120B of the Indian Penal Code and that
there is no infirmity in the order of the Chief Metropolitan Magistrate taking
cognizance or in the order of the High Court declining to quash criminal
proceedings at the interlocutory stage. He further submitted that the criminal
proceedings in respect of which cognizance has been taken by the Court can be
interfered with or quashed only if the allegations even if taken on their face
value do not satisfy or make out the ingredients of offences alleged and no
offence is at all made out or there is legal or statutory impediment in
prosecuting the accused person. He submitted that none of these grounds exist
in the present case. According to him, in the present case, material on record
clearly show and establish commission of offences under the Indian Penal Code
by the appellants and since the charges are supported by documentary evidence
which establish the same, there is no warrant or justification or basis for
seeking the relief of quashing the criminal proceedings. He further submitted
that the High Court has rightly declined to quash the criminal proceedings and,
therefore, the same does not call for any interference by this Court.
In regard to the judgments cited by Shri P. Chidambaram, learned senior
counsel appearing for the appellants, he submitted that the reliance placed
upon those judgments is also without any merit and in the present case,
material on record clearly show and establish the criminal conspiracy to cheat
the Government and actually cheating the Government of India pursuant to the
same and that it is not a civil dispute as has been sought to be made out and
that the conduct of the accused persons is criminal in nature and material on
record clearly establish commission of criminal offences by them. Thus, he
would submit that the judgment in the case of Duncans Agro Industries Ltd.,
Calcutta (supra) has no application to the present case. Referring to the plea
that the duty payable has been subsequently paid, he submitted, that such
payment is not a ground for quashing criminal proceedings or absolving the
accused persons of their criminal liability. According to him, the judgment in
the case of Sushila Rani (supra) dealt with proceedings under the Income Tax
Act and held that once the matter is settled under the Kar Vivad Samadhan
Scheme, 1998, such settlement cannot be reopened except under specified grounds
and that the stated grounds do not exist in the said case and that there is
nothing in the said judgment warranting the plea of the appellants, in the
present case, that criminal proceedings under the Indian Penal Code are
prohibited merely because disputes concerning tax have been settled under the
Kar Vivad Samadhan Scheme, 1998. According to him, such settlement only
protects the individual from prosecution under the taxing Statute which is a
limited protection and limited to the proceedings under the taxing Statute
only. Coming to the certificate issued by the authorities under the Kar Vivad
Samadhan Scheme, 1998, he submitted that the certificate issued by the authorities
under the said Scheme cannot be the ground and basis for quashing the criminal
proceedings.
According to him, a perusal of the certificate would show that the
settlement under the Kar Vivad Samadhan Scheme, 1998 gives immunity only from
prosecution under relevant taxing Statute and not under the Indian Penal Code.
Concluding his arguments, he submitted that the criminal proceedings cannot be
quashed merely on account of the fact that Customs Duty payment has been
settled.
Before proceeding to consider the rival submissions, it is beneficial to
refer to certain annexures filed along with the special leave petitions. The
true copy of the agreement dated 28.4.1988 between the GCS and Dr. Viral C.
Shah has been filed.
This agreement was made at Ahmedabad on 28.4.1988 as an addendum to the
original agreement dated 24.2.1987 entered into between the GCS on the one part
and Dr. Viral C. Shah as the second part. The relevant clauses of the agreement
are extracted below:
"(1) The Gujarat Cancer Society shall acquire ESWL and MRI machines in
its own name and for this Dr. Viral Shah shall make necessary arrangements for
the construction of the buildings for housing the said two equipments by way of
arranging donations to the Society of an amount equivalent to the total cost of
construction of premises required for the instalment of said machines. The
Society shall construct the required premises in a portion of the land in the
hospital complex and on completion the said building, the ownership of the said
premises so constructed shall vest with the Society.
(2) The overall control in regard to appointment of all categories of staff
and running and maintenance of these two equipments will be with the Gujarat
Cancer & Research Institute, Ahmedabad as per the tripartite agreement with
the Govt. of Gujarat, the Gujarat Cancer Society, and the Gujarat Cancer and
Research Institute.
(3) Raising of loan, Dr. Shah will arrange for the Society procuring finance
from financial institutions including leasing company or companies for meeting
the cost for the matching out the purchase of procuring such finance the said
machines may be mortgaged or leased to leasing company or financial institution
which in turn will be leased out to the Society.
(4) In consideration of the Society having entrusted the running and
maintaining the said machine to the said Dr. Shah as herein provided the said
Dr. Shah shall pay to the Society rental which shall be equivalent to the
amount of monthly instalment and interest and/or hire charges payable by the
Society to the financial institutions and/or to the leasing company from whom
the finances shall have procured for the said machines.
(6) The Institute agrees that Dr. Shah through the Gujarat Cancer Society
shall be entitled to work, run, and maintain the said two machines for a
maximum period of ten years and Dr. Shah or his nominees shall be responsible
for the repairs and replacements of parts thereof, during the said
period." The First Information Report filed as Annexure P-2 along with the
S.L.P. is as under:
"RC.1(E)/99-EOW.I.DLI 06.01.1999 at 16.00 hrs.
Place of occurrence with State Delhi, Mumbai and Ahmedabad Date and time of
occurrence during the year 1987-90 Name of complainant and Joint Secretary,
Ministry of Health and Informant with address Family Welfare, Government of
India, New Delhi.
Offence 120-B r/w 420 IPC Name and address of accused 1. Sh. N.L. Patel,
Director Gujarat Cancer Research Institute Ahmedabad.
2. Dr. Viral C. Shah, Director M/s. Shah Diagnosis Institute (P) Ltd.,
Mumbai and Ahmedabad.
3. Sh. D.D. Patel, Secretary Gujarat Cancer Society, Ahmedabad.
& others unknown Action taken RC is registered and investigation taken
up.
Investigating Officer Shri Rajveer Singh, DY.SP.CBI/EOW-I/NEW DELHI
INFORMATION The Joint Secretary, Ministry of Health & Family Welfare,
Government of India, New Delhi vide his D.O. No. C-18011/5/96-VIG(PT) dated
22/24.12.98 has sent a copy of the report dated D.O. F.No.
IMP/CDE/1/1/97-RC (GUJ-4), dated 17.08.1998 submitted by Sh. P.
Rosha, Chairman of Special Committee appointed by Hon'ble High Court, Delhi
to inquire into the import of equipments against Customs Duty exemption
certificate for use in Charitable Hospitals. The Hon'ble High Court, Delhi has
approved the suggestion to refer the matter to CBI for registration of case and
investigation. Accordingly, the Joint Ministry of Health and Family Welfare,
Government of India, New Delhi has requested CBI to investigate the
matter." Our attention was drawn to the Rosha Committee Report dated
17.08.1998 and application dated 15.10.1987 for import licence for import of
LITHO ESWL Equipment by 'actual users' (Non-Industrial). There is another
application for import of another machine. The agreement copy was also enclosed
for ready reference to the Joint Chief Controller, Import and Export Trade
Organisations, Ahmedabad.
Along with the application, the agreement between the GCS , the GCRI and the
State Government of Gujarart was also enclosed as Annexure No.4.
Our attention was also drawn to the Text of the Kar Vivad Samadhan Scheme,
1998, under Chapter IV of Finance (No.2) Act, 1998. Our attention was also
drawn to Sections 86 to 98 of the said Scheme which are relevant for the
present purpose. Our attention was further drawn to the Memorandum to
Finance(No.2) Bill, 1998 explaining the provisions of the Kar Vivad Samadhan,
1998. The said Scheme seeks to provide a quick and voluntary settlement of tax
dues outstanding as on 31.3.1998, both in various direct tax enactments as well
as indirect taxes enactments by offering waiver of a part of the arrear taxes
and interest and providing immunity against institution of prosecution and
imposition of penalty.
The assessee on his part shall seek to withdraw appeals pending before
various appellate Authorities and Courts. The Kar Vivad Samadhan Scheme, 1998
comes into force on the first day of September, 1998 and ends on 31st day of
December, 1998. The Kar Vivad Samadhan Scheme, 1998 is applicable to tax
arrears outstanding as on 31.3.1998 under various direct tax enactments and
indirect tax enactments. Clauses 3 & 4 of the Memorandum to Finance (No.2)
Bill, 1998 read as under:
"3. A person desiring to avail the scheme is required to file a
declaration in the prescribed form before the designated authority notified for
this purpose. The designated authority shall pass an order within sixty days of
the declaration determining the amount payable in accordance with the
provisions of the Scheme and grant a certificate indicating the particulars of
tax arrears and the sum payable and intimate the same to the declarant. The
declarant will pay the sum payable as determined by designated authority within
thirty days of the passing of such order. The order passed by the designated
authority shall be conclusive and shall not be reopened in any other
proceedings or under any law for the time being in force. Where the declarant
has filed an appeal or reference before any Authority, Tribunal or Court,
notwithstanding anything contained in any other provision of law for the time
being in force, such appeal, reference or reply shall be deemed to have been
withdrawn. Where writ petitions have been filed before the High Court or
Supreme Court the declarant shall move an application for withdrawing such
petitions and furnish the proof of the same along with the intimation. Any
amount paid in pursuance of declaration made under the Scheme shall not be
refundable under any circumstances.
4. The designated authority shall subject to the conditions provided in the
Scheme grant immunity from prosecution or penalty under the relevant Acts in
respect of matters covered in the declaration." Section 87 (h) of the Kar
Vivad Samadhan Scheme, 1998 defines "direct tax enactment" which
reads thus:
""direct tax enactment" means the Wealth-tax Act, 1957 (27 of
1957) or the Gift-tax Act, 1958 (18 of 1958) or the Income-tax Act, 1961 (43 of
1961) or the Interest-tax Act, 1974 (45 of 1974) or the Expenditure-tax Act,
1987 (35 of 1987)." Sub-clause (j) of Section 87 defines "indirect tax
enactment" which reads thus:
"indirect tax enactment" means Customs Act, 1962 (52 of 1962) or
the Central Excise Act, 1944 (1 of 1944) or the Customs Tariff Act, 1975 (51 of
1975) or the Central Excise Tariff Act, 1985 (5 of 1986) or the relevant Act
and includes the rules or regulations made under such enactment." The
present case comes under the tax arrears payable under the indirect tax
enactment. Section 89 of the Kar Vivad Samadhan Scheme, 1998 deals with
particulars to be furnished in declaration and Section 90 of the Scheme deals
with time and manner of payment of tax arrears. Clause (2) of Section 90
provides that the declarant shall pay, the sum determined by the Designated
Authority within thirty days of the passing of an order by the Designated
Authority and intimate the fact of such payment to the Designated Authority
along with proof thereof and the Designated Authority shall thereupon issue the
certificate to the declarant. Clause (3) of Section 90 of the said Scheme
provides that every order passed under sub- section (1), determining the sum
payable under this Scheme shall be conclusive as to the matters stated therein
and no matter covered by such order shall be reopened in any other proceeding
under the direct tax enactment or indirect tax enactment or under any other law
for the time being in force. Sub-clause (4) of Section 90 of the said Scheme
provides that where the declarant has filed an appeal or reference or a reply
to the show-cause notice against any order or notice giving rise to the tax arrear
before any authority or Tribunal or Court, then, notwithstanding anything
contained in any other provisions of any law for the time being in force, such
appeal or reference or reply shall be deemed to have been withdrawn on the day
on which the order referred to in sub-section (2) is passed.
It is pertinent to notice that the First Information Report was filed on
6.1.1999 and the Certificate under the Kar Vivad Samadhan Scheme, 1998 was
issued to the appellants on 19.7.1999 by the Commissioner of Customs
(Adjudication) & Designated Authority (KVSS-98). It is also to be noticed
that Section 95 of the Kar Vivad Samadhan Scheme, 1998 provides that the
provisions of this Scheme shall not apply in certain cases. Under Section
95(ii)(a) of the said Scheme, in a case where prosecution for any offence
punishable under any provisions of any indirect tax enactment has been
instituted on or before the date of filing of the declaration under Section 88,
in respect of any tax arrear in respect of such case under such indirect tax
enactment, this Scheme shall not apply. Clauses (ii) and (iii) of Section 95 of
the Kar Vivad Samadhan Scheme, 1998, which are relevant for our purpose are
reproduced hereunder:
"(ii) in respect of tax arrear under any indirect tax enactment,- (a)
in a case where prosecution for any offence punishable under any provisions of
any indirect tax enactment has been instituted on or before the date of filing
of the declaration under Section 88, in respect of any tax arrear in respect of
such case under such indirect tax enactment;
(b) in a case where show cause notice or a notice of demand under any
indirect tax enactment has not been issued;
(c) in a case where no appeal or reference or writ petition is admitted and
pending before any appellate authority or High Court or the Supreme Court or
no, application for revision is pending before the Central Government on the
date of declaration made under Section 88;
(iii) to any person in respect of whom prosecution for any offence
punishable under Chapter IX or Chapter XVII of the Indian Penal Code (45 of
1860), the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Narcotic
Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Terrorists and
Disruptive Activities (Prevention) Act, 1987 (28 of 1987), the Prevention of
Corruption Act, 1988 (49 of 1988), or for the purpose of enforcement of any
civil liability has been instituted on or before the filing of the declaration
or such person has been convicted of any such offence punishable under any such
enactment;" Sections 166 to 177 of Chapter IX of the Indian Penal Code
deal with offences relating to public servants. Likewise, Sections 378 to 462
of Chapter XVII of the Indian Penal Code deal with offences against property.
Thus immunity is granted to the persons in respect of whom the offence is
punishable under Chapter IX or Chapter XVII of the Indian Penal Code.
Annexure P-1 is the Certificate issued to the GCS under the Kar Vivad
Samadhan Scheme, 1998 , Form-4 (Rule 5[b]). This certificate has been issued
for full and final settlement of tax arrears under Section 90(2) read with
Section 91 of the Finance (No.2) Act, 1998 in respect of Kar Vivad Samadhan
Scheme, 1998. Before issuing the certificate, the Commissioner of Customs
(Adjudication) & Designated Authority (KVSS-98) takes into consideration
the following facts:
(a) that the Gujarat Cancer Society, Ahmedabad had made declaration under
Section 88 of the Finance (No.2) Act, 1998;
(b) that the designated authority by order dated 10.2.1999 determined the
amount of Rs.98,40,222/- payable by the declarant in accordance with the
provisions of the Kar Vivad Samadhan Scheme, 1998;
(c) that the certificate is granted towards full and final settlement of tax
arrears as per the details given in the certificate;
(d) that the Civil Appeal No.31/1999 filed by the GCS, Ahmedabad in this
Court under Section 130E of the Customs Act, 1962
against the judgment and order Nos. 758 to 761/98-b2 passed by the Customs,
Excise and Gold (Control) Tribunal, New Delhi was withdrawn. The order was
passed by this Court on 16.3.1999 and a copy of the said order was produced
before the authorities as proof of such withdrawal in accordance with the provisions
contained in the proviso to sub-section(4) of Section 90.
(e) The declarant has paid Rs.98,40,222/- being the sum determined by the
Designated Authority.
In exercise of the powers conferred by sub-section(2) of Section 90 read
with Section 91 of the Finance (No.2) Act, 1998, the Designated Authority
issued the certificate to the declarant in the following terms:
(a) Certifying the receipt of the payment from the declarant towards full
and final settlement of tax arrears determined in the order dated 10.2.1999 on
the declaration made by the aforesaid declarant;
(b) Granting immunity, subject to the provisions contained in the Kar Vivad
Samadhan Scheme, 1998, from instituting any proceeding for prosecution for any
offence under the Customs
Act, 1962, or from the imposition of penalty under said enactment, in
respect of matters covered in the aforesaid declaration made by the declarant;
It is thus crystal clear that the Commissioner of Customs (Adjudication)
& Designated Authority (KVSS-98) granted immunity from instituting any
proceeding for prosecution for any offence under the Customs Act, 1962,
or from the imposition of penalty under the said enactment, in respect of
matters covered in the aforesaid declaration made by the declarant. After
hearing the case of the GCS, as already noticed, the Collector of Customs,
Bombay held that the GCS was liable to pay the Customs Duty but in view of the
activities of the Society and the bona fides of the Society, and considering
charitable and philanthropic activities of the Society, no prosecution was
recommended. Moreover, only a token redemption fine of Re.1/- was imposed. Thus
it is seen that the Customs Authorities were satisfied that there was no
intention to evade the Customs Duty. However, the Collector denied the GCS the
concessional duty benefit under Customs Notification Nos. 279/1983 and 64/1988
and demanded the duty of Rs.2,16,80,444/- under Section 28 of the Customs Act, 1962
read with the proviso of the said Section. The said duty was to be paid by the
GCS (Importer) and Canbank Financial Services as well as ICICI being the joint
holder of the said imported machines. A personal penalty of Rs. 10 lakh was
imposed on Dr. Viral C. Shah and M/s. Shah Diagnosis Institute Pvt. Ltd.,
Ahmedabad and Bombay jointly under Section 112 (a) of the Customs Act, 1962.
We have carefully gone through the Kar Vivad Samadhan Scheme, 1998 and the
certificate issued by the Customs Authorities. In our opinion, the GCS is
immuned from any criminal proceedings pursuant to the certificates issued under
the said Scheme and the appellants are being prosecuted in their capacity as
office bearers of the GCS. As the Customs duty has already been paid, the
Central Government has not suffered any financial loss. Moreover, as per the
Kar Vivad Samadhan Scheme, 1998 whoever is granted the benefit under the said
Scheme is granted immunity from prosecution from any offence under the Customs Act, 1962
including the offence of evasion of duty. In the circumstances, the complaint
filed against the appellants is unsustainable.
We shall now analyse the judgment in the case of Sushila Rani (supra).
That case also refers to the Kar Vivad Samadhan Scheme, 1998. The appellant
before this Court in that case is the widow of the original assessee under the
Income Tax Act,1961 for the Assessment Year 1988-89, the appeal was pending
before the Commissioner of Income Tax (Appeals) while for Assessment Years 1989-90
and 1991-92, appeals were pending before the Income Tax Appellate Tribunal. The
appellant requested the Department to indicate or compute the tax arrears as
per the Kar Vivad Samadhan Scheme, 1998 so that all disputes in relation to
these three assessment years can be resolved. As there was no response from the
Department, the appellant submitted three separate declarations under Sections
88 and 89 of the Kar Vivad Samadhan Scheme, 1998 and also pointed out the
mandatory nature of Section 245 of the Act. Respondent 1, on receipt of the
declarations for the three assessment years evaluated and verified the same in
accordance with the provisions of the Kar Vivad Samadhan Scheme, 1998 and on
being satisfied with the correctness of the declaration in every respect,
issued on 26.2.1999 a statutory certificate prescribed in Form 2-A and Rule
4(a) under the provisions of Section 90(1) of the kar Vivad Samadhan Scheme,
1998. On receipt of the said certificate under Section 90(1) of the Kar Vivad
Samadhan Scheme, 1998, the appellant deposited the sum determined and demanded
the issue of certificate under Section 90(2) of the Scheme for the deemed
withdrawal of the appeal filed by the appellant for these years which were
pending adjudication. Respondent No.1 issued a certificate in Form 3 as
required in favour of the appellant certifying the receipt of payments from the
appellant towards full and final settlement of the tax arrears determined in
the order dated 26.2.1999 and granting immunity from instituting any proceeding
for prosecution of any offence under the Act or from imposing any penalty under
the said Act. Thereafter on 11.8.1999 certificate was issued by the Department
to the effect that no arrears or demand of any kind is outstanding against the
appellant as per the records of the respondents. On 26.10.1999, the appellant
submitted a representation requesting the respondents to refund all the amounts
along with interest as per the provisions of the Act upon the finalisation of
the declarations made by the appellant under the provisions of the kar Vivad
Samadhan Scheme. This claim resulted in the issue of a notice on 23.6.2000
under Section 90(1) of the kar Vivad Samadhan Scheme calling upon the appellant
to explain as to why, the certificate issued under Section 90(1) of the Scheme
earlier be not amended, on the ground that the determination made by the
Department for the three assessment years in question was on the Department's
wrong understanding of the judgment of the Allahabad High Court. The appellant,
thereupon, filed a writ petition challenging the issuance of the notice on the
ground that the same is without jurisdiction. The High Court took the view that
what is under challenge in the writ petition is only a show cause notice and it
would be open to the appellant to highlight the question relating to lack of
jurisdiction before the Commissioner when the matter is taken up for further
consideration. The High Court did not express any opinion on the facts of the
case and disposed of the writ petition. Hence, the appeal by special leave. In
paragraphs 6 and 8 of the judgment, this Court held, "An examination of
the scheme of Sections 89, 90 and 91 KVSS would reveal that every person
entitled to make a declaration under the said Scheme was obliged to submit the
declaration on or before 31-1-1999; that a period of 60 days has been
stipulated under Section 90(1) for the designated authority under the Scheme to
determine the amount payable by the declarant and the certificate to this
effect under Section 90(1) has to be granted by the designated authority after
determination towards full and final settlement of the tax arrears within a
period of sixty days.
Thereafter, except on ground of false declaration made by the declarant,
every order passed under sub-section (1) of Section 90 determining the sum
payable under the scheme, is absolutely conclusive as to the matters stated
thereunder and no matter covered by such order can be reopened in any other
proceeding under any law for the time being in force. After this determination
under Section 90(1) KVSS, another certificate is issued under Section 91 KVSS
on the basis of which immunity is granted to the declarant from instituting any
proceeding for prosecution for any offence under any direct tax enactment or indirect
tax enactment.
8. We may notice that a certificate issued under Section 90(1) KVSS making a
determination as to the sum payable under KVSS, is conclusive as to the matter
stated therein and cannot be reopened in any proceedings under any law for the time
being in force, except on the ground of false declaration by any declarant.
Therefore, before issue of a notice, there should be satisfaction that the
declarant has made a false declaratation. There is no such allegation in the
course of the notice issued. All that is stated is that "adjustments
already made should have been taken into account when calculating the tax
arrears. As such there is a mistake in calculation, which needs
rectification". The whole basis of the notice is only that adjustments already
made had not been taken note of. If this is the basis of the issuance of the
notice and not the false declaration and that information was available with
the Department even at the time of the finalisation of the proceedings under
Section 90 KVSS, we fail to understand as to how the matter could be reopened
at this stage. That information was already available with them and there is no
false declaration in that regard.
In that view of the matter, the notice issued is without jurisdiction."
In that view of the matter, this Court allowed the appeal, set aside the order
made by the High Court by allowing the writ petition filed by the appellant and
quash the notice issued by the Department calling upon the appellant to explain
as to why the order issued earlier under Section 90(1 ) KVSS be not amended.
On a reading of the judgment in the case of Sushila Rani. (supra) , it is
clear to us that if an assessee takes the option under this Scheme, he obtains
immediate immunity under any proceeding under any and all laws in force. As
such the present proceedings initiated under Section 120B read with Section 420
of the Indian Penal Code are bad and ought to have been quashed with immediate
effect.
We shall now consider the judgment cited by learned senior counsel for the
appellants in the case of Duncans Agro Industries Ltd. Calcutta, (supra),
which, inter alia, held that, "In the facts of the case, it appears to us,
that there is enough justification for the High Court to hold that the case was
basically a matter of civil dispute. The Banks had already filed suits for
recovery of the dues of the Banks on account of credit facility and the said
suits have been compromised on receiving the payments from the companies
concerned. Even if an offence of cheating is prima facie constituted, such
offence is a compounable offence and compromise decrees passed in the suits
instituted by the Banks, for all intents and purposes, amounts to compounding
of the offence of cheating." It was further held that, "Considering
the fact that the claims of Banks have been satisfied and suits instituted by
the Banks have been compromised on receiving payments, we do not think that the
said complaints should be pursued any further. In our view, proceeding further
with the complaints will not be expedient." In our view, in the present
case, the alleged criminal liability stands compounded on a settlement with
respect to the civil issues and, therefore, the First Information Report was
erroneously issued and was totally unwarranted. From the aforesaid judgment,
the proposition that follows in the instant case is that the Kar Vivad Samadhan
Scheme, 1998 issued by the Government of India was a voluntary Scheme whereby
if the disputed demand is settled by the Authority and pending proceedings are
withdrawn by an importer, the balance demand against an importer shall be
dropped and the importer shall be immuned from penal proceedings under any law
in force. We are, therefore, of the opinion that this judgment squarely comes
in the face of any argument sought to be propounded by the respondent that the
Kar Vivad Samadhan Scheme, 1998 does not absolve the appellants from criminal
liability under the Indian Penal Code. The learned single Judge of the High
Court of Delhi, in our opinion, has not appreciated the fact that the
continuance of the proceedings in the instant case would only tantamount to
driving the present appellants to double jeopardy when they had been honourably
exonerated by the Collector of Customs by their adjudication and further the
GCS of which one of the appellants is the General Secretary in which capacity
he is accused in the present case was granted amnesty under the Kar Vivad
Samadhan Scheme, 1998. In our opinion, the present case does not warrant
subjecting a citizen especially senior citizens of the age of 92 & 70 years
to fresh investigation and prosecution on an incident or fact situation giving
rise to offence under both the Customs Act and
the Indian Penal Code when the matter has already been settled. Likewise, the
respondent herein has initiated criminal proceedings against Accused No.2 &
Accused No.1, inter alia, on the ground alleging that the appellants in
conspiracy with the co-accused named therein with each other have cheated the
Government of India in terms of evasion of Customs Duty and by concealment of
facts obtained CDEC in respect of MRI and Lithotripsy machines and by violating
the provisions of 'actual user' condition as per Import Export Policy and
Customs Notification No.
279/83 dated 30.9.1983 and Customs Notification No. 64/88 dated 1.3.1988
during the year 1987-90, despite acknowledging the fact that Customs Duty has
been paid by the appellants to the Customs Department and settled and that
commission of offences under Section 120B read with Section 420 of the Indian
Penal Code are made out.
In our view, under the penal law, there is no concept of vicarious liability
unless the said statute covers the same within its ambit. In the instant case,
the said law which prevails in the field i.e. the Customs Act,1962 the
appellants have been therein under wholly discharged and the GCS granted
immunity from prosecution. It is well established principle of law that the
matter which has been adjudicated and settled need not to be dragged into the
criminal courts unless and until the act of the appellants could have been
described as culpable. The true fact and import of the Kar Vivad Samadhan
Scheme, 1998, in our view, is that once the said Scheme is availed of and all
the formalities complied with including the payment of the duty, the immunity
granted under the provisions of the Customs Act,1962 also extends to such
offences that may prima facie be made out on identical allegations i.e. of evasion
of Customs Duty and violation of any Notification issued under the said Act.
In our view, there is no prima facie case made out in respect of the alleged
offence under Section 120B read with Section 420 of the Indian Penal Code and,
therefore, the charge sheet and the process issued thereunder has to be
quashed.
To bring home the charge of conspiracy within the ambit of Section 120B of
Indian Penal Code, it is necessary to establish that there was an agreement
between the parties for doing an unlawful Act. It is difficult to establish
conspiracy by direct evidence.
Likewise the ingredients of Section 420 of the Indian Penal Code are also
not made out. There is no reason as to why the appellants must be made to
undergo the agony of a criminal trial as has been held by this Court in the
case of G. Sagar Suri & Anr. vs. State of U.P. & Ors. ( 2000) 2 SCC
636. In this case, this Court held that, "Jurisdiction under Section 482
of the Code has to be exercised with great care. In exercise of its
jurisdiction the High Court is not to examine the matter superficially. It is
to be seen if a matter, which is essentially of a civil nature, has been given
a cloak of criminal offence. Criminal proceedings are not a short cut of other
remedies available in law. Before issuing process a criminal court has to
exercise a great deal of caution. For the accused, it is a serious matter. The
Supreme Court has laid certain principles on the basis of which the High Court
is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction
under this section has to be exercised to prevent abuse of the process of any
court or otherwise to secure the ends of justice. Merely because the accused
persons had already filed an application in the Court of Additional Judicial
Magistrate for their discharge, it cannot be urged that the High Court cannot
exercise its jurisdiction under Section 482 of the Code. Though the Magistrate
trying a case has jurisdiction to discharge the accused at any stage of the
trial if he considers the charge to be groundless but that does not mean that
the accused cannot approach the High Court under Section 482 of the Code or
Article 227 of the Constitution to have the proceeding quashed against them
when no offence has been out against them and still why must they undergo the
agony of a criminal trial." Section 415 of the Indian Penal Code deals
with cheating. To hold a person guilty of cheating as defined under Section 415
of the Indian Penal Code, it is necessary to show that he has fraudulent or
dishonest intention at the time of making the promise with an intention to
retain the property. In other words, Section 415 of the Indian Penal Code which
defines cheating, requires deception of any person (a) inducing that person to:
(i) to deliver any property to any person, or (ii) to consent that any person
shall retain any property OR (b) intentionally inducing that person to do or
omit to do anything which he would not do or omit if he were not so deceived
and which act or omission causes or is likely to cause damage or harm to that
person, anybody's mind, reputation or property. In view of the aforesaid
provisions, the appellants state that person may be induced fraudulently or
dishonestly to deliver any property to any person. The second class of acts set
forth in the Section is the doing or omitting to do anything which the person
deceived would not do or omit to do if he were not so deceived. In the first
class of cases, the inducing must be fraudulent or dishonest. In the second
class of acts, the inducing must be intentional but not fraudulent or
dishonest.
In view of the aforesaid provisions of law, as the Customs Duty has been
paid by the GCS, there is no fraudulent or dishonest intention on the part of
the GCS or its office bearers to retain the property. Moreover, there is no
inducing on the part of the GCS or its office bearers intentionally to retain
the property in view of the fact that the Customs Duty has been paid by the GCS
and, therefore the ingredients of the offence of cheating are missing for
issuing the process against the appellants and, therefore, the same, in our
view, is liable to be quashed and set aside.
Section 111 of the Customs Act, 1962
which provides for confiscation of improperly imported goods, etc. insofar as
it is relevant reads thus:
"Section 111. Confiscation of improperly imported goods, etc. The
following goods brought from a place outside India shall be liable to
confiscation- (o) any goods exempted, subject to any condition, from duty or
any prohibition in respect of the import thereof under this Act or any other
law for the time being in force, in respect of which the condition is not
observed unless the non-observance of the condition was sanctioned by the
proper officer;" The question is whether the import of the machines in
question was contrary to law in any manner and whether the machines are liable
to be confiscated under the Customs Act, 1962,
the only provision relied upon by the learned counsel for the appellants is
clause (o) in Section 111 of the Customs Act, 1962
which we have set out herein above. In our opinion, clause (o) of Section 111
of the Customs
Act, 1962 is not attracted in the present case. The subsequent proceedings
initiated for confiscation of the goods is of no relevance nor does it
retrospectively render the import illegal.
This Court in Union of India & Another vs. Sampat Raj Dugar and Another
(AIR 1992 SC 1417) has, while considering the scope and ambit of Clause (o) of
Section 111, observed as under :
"Clause (o) contemplates confiscation of goods which are exempted from
duty subject to a condition, which condition is not observed by the importer.
Occasion for taking action under this clause arises only when the condition is
not observed within the period prescribed, if any, or where the period is not
so prescribed, within a reasonable period. It, therefore, cannot be said that
the said goods were liable to be confiscated on the date of their import under
clause (o).
In other words, clause (o) is a new provision under which any goods exempted
from duty or from import prohibition subject to certain conditions will become
liable to confiscation if those conditions are not observed without the prior
permission of the appropriate officer. The penal clause is being introduced to
check misuse of exemptions granted in respect of the goods imported.
It is settled law, by catena of decisions, that for establishing the offence
of cheating, the complainant is required to show that the accused had
fraudulent or dishonest intention at the time of making promise or
representation. From his making failure to keep up promise subsequently, such a
culpable intention right at the beginning that is at the time when the promise
was made cannot be presumed.
It is seen from the records that the exemption certificate contained
necessary conditions which were required to be complied with after importation
of the machine.
Since the GCS could not comply with it and, therefore, it rightly paid the
necessary duties without taking advantage of the exemption certificate. The
conduct of the GCS clearly indicates that there was no fraudulent or dishonest
intention of either the GCS or the appellants in their capacities as office
bearers right at the time of making application for exemption. As there was
absence of dishonest and fraudulent intention, the question of committing
offence under Section 420 of the Indian Penal Code does not arise. We have read
the charge sheet as a whole. There is no allegation in the First Information
Report or the Charge sheet indicating expressly or impliedly any intentional
deception or fraudulent/dishonest intention on the part of the appellants right
from the time of making the promise or misrepresentation. Nothing has been said
on what those misrepresentations were and how the Ministry of Health was duped
and what where the roles played by the appellants in the alleged offence. The
appellants, in our view, could not be attributed any mens rea of evasion of cus
toms duty or cheating the Government of India as the cancer society is a non
profit organization and, therefore, the allegations against the appellants
leveled by the prosecution are unsustainable. Kar Vivad Samadhan Scheme
Certificate along with the Duncan's and Sushila Rani's judgments clearly
absolve the appellants herein from all charges and allegations under any other
law once the duty so demanded has been paid and the alleged offence has been
compounded. It is also settled law that once a civil case has been compromised
and the alleged offence has been compounded, to continue the criminal
proceedings thereafter would be an abuse of the judicial process.
In the result, both the appeals stand allowed. The orders of the High Court
which are impugned in these appeals are set aside.
New Delhi;
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