M.
Natarajan Vs. State by Inspector of Police, Spe, CBI, ACB Chennai [2008] INSC
828 (7 May 2008)
P.P. Naolekar & V.S. Sirpurkar
1 "REPORTABLE"
IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL
APPEAL NO.834 OF 2008 (Arising out of SLP (Criminal) No.5134 of 2005) M.
Natarajan ...Appellant Versus State by Inspector of Police, SPE, CBI, ACB
Chennai ...Respondent WITH
CRIMINAL APPEAL NOs.835 OF 2008 (Arising out of SLP (Criminal) No.5135 of 2005)
M. Natarajan ...Appellant Versus State by Inspector of Police, SPE, CBI, ACB,
Chennai ...Respondent
V.S. SIRPURKAR, J.
1. Leave granted.
2. The challenge in these appeals is to the common judgment of the learned
Single Judge of the Madras High Court whereby the High Court has dismissed the
Criminal Revision Case No.538 of 2005 and Criminal O.P. No.21636 of 2005 filed
by the appellant herein.
3. Following facts will highlight the controversy involved.
4. One Dr.S. Balakrishnan, purchased the Toyota Lexus Car which was sent by
Ship to Madras Port in July, 1994. His son Yogesh Balakrishnan presented
certain documents for getting clearance of the said car from the 2 Customs
Department. One such document was a letter dated 8.9.1994 authored by the
appellant herein Shri M. Natarajan who is the publisher of a magazine called
"Tamilarasi" which publication had commenced in the year 1992. He is
also the author of bi-monthly magazine "Pudiya Paarvai"
which surfaced in the year 1993. One Baskaran was said to be assisting the
appellant being the incharge of these publications. The said letter dated
8.9.1994 which was used by accused Yogesh Balkrishnan was authored by the
appellant and addressed to the Manager, Indian Bank, Abiramapuram, Madras on
behalf of Tamilarasi publication to the following effect:
"We invite reference to the various remittances made by our purchase
creditors on 22.6.94 into our account, and would like to inform you that a sum
of Rs.12 lacs remitted relates to the remittances made by our Foreign buyers of
our weekly and fortnightly magazines.
Kindly issue a Foreign Inward certificate for this sum of Rs.12 lacs."
On the basis of this letter the Foreign Inward Certificate, as sought for by
the appellant, was issued by the bank. Ultimately the said car was cleared and
was allowed to be imported.
5. A First Information Report came to be lodged at the instance of Central
Bureau of Investigation, Chennai for offences under Sections 120B read with
Section 420, 468, 471 IPC and Section 13(2) read with Section 3 13(1)(d) of the
Prevention of Corruption Act. In that First Information Report, four accused
were arrayed, they being, (i) Shri S. Senthivel, Commissioner of Customs
(Retd.), Chennai, (ii) Shri Hariharan, former Asstt. Collector Customs,
Chennai, (iii) Shri Raja Manoharan, Former Apprising Officer, Customs, Chennai
and (iv) Shri Balakrishnan. It was suggested in the report that in the year
1994 the four accused persons entered into a criminal conspiracy in Chennai to
cheat the Department of Customs, Government of India in the matter of assessment
of duty on a car imported by fourth accused and in pursuance of the said
conspiracy, the fourth accused, in connivance with Accused Nos.1 to 3 imported
Toyata Lexus Car CS 300 of engine capacity 3000 CC bearing Engine No.2320283150
and Chassis No. JT 153-Jse 7 - 000727250 and had sought customs clearance under
the condition of transfer of residence to India for permanent settlement by
producing forged and fabricated invoice LEX00077 dated 13.7.1993 showing the
value of 21405 as if the car was purchased in 1993 for that value. In pursuance
of this conspiracy A1 to A3 fraudulently and dishonestly abused their official
position and cleared the car on 8.9.1994 after allowing 19% depreciation on the
cost of the car, knowing fully well that firstly the car was not purchased in
the year 1993 and the original cost of the car was more than the declared value
and further that the importer was producing forged documents and thereby had
caused wrongful loss of Rs.4 lakhs to the Government of India by way of 4 customs
duty. On the basis of this the investigation was started by the CBI.
6. Ultimately, however, the charge-sheet was filed against the present
appellant and the four other accused, namely, (i) Shri V. Bhaskaran, (ii) Shri
S. Balakrishnan, (iii) Shri Yogesh Balakrishnan and (iv) Smt.Sujaritha
Sundarajan. In the charge-sheet it was stated that the first accused (appellant
herein) was Director of Tamilarasi Publication, the second accused was a
private individual and authorized signatory to operate the current account of
M/s.Tamilarasi Publication, the third accused was a private individual, the
fourth accused was also a private individual and the fifth accused was the
Branch Manager, Indian Bank, Abiramipuram Branch, Chennai and Smt.R. Bhavanai,
Approver was working as the Assistant Manager, Indian Bank, Abiramipuram,
Chennai in the year 1994. In the charge-sheet it was stated that the accused
had conspired to cheat the Government of India and to commit act of criminal
misconduct and in furtherance of the conspiracy, the appellant and the second
accused fabricated documents for the purpose of clearing the imported Lexus Car
which was imported by the third and fourth accused in order to take advantage
of the provisions of Transfer of Residence and pay less customs duty, though
they fully knew that the car was manufactured in the year 1994 which was
mis-declared to be manufactured in the year 1993 and in pursuance of the said
conspiracy, the fifth accused misued and 5 abused her official position as the
Branch Manager of the Indian Bank, issued the Foreign Inward Remittance
Certificate to the effect that the Lexus Car which was imported would be
released by the Customs Department on the basis of the same, knowing very well
that the Current Account No.872 of M/s.Tamilarasi had not received any foreign
remittance, though it was one of the pre-condition that only foreign
remittances could be used for payment of customs duty, thereby the accused had
caused loss to the Customs Department of Rs.1,06,20,472/-. It was suggested
further that third accused had fraudulently and dishonestly imported the Lexus
Car by ship while the fourth accused Yogesh Balakrishna has handed over five
documents to Shri Janaki Raman of M/s.Samba Sivam &
Company, Chennai for getting the car cleared. It was further stated in the
charge-sheet that the original sale invoice of the car dated 13.7.1994 was
replaced and substituted with another photocopy of fabricated invoice by
changing the date to 13.7.1993 for the purposes of clearing the car under the
provisions of Transfer of Residence since otherwise the car could not be
cleared under the said provisions. This was done by the fourth accused in
connivance with the first accused. It was suggested that the assessment of the
car was done on the basis of the fabricated documents. This assessment was made
on Cost Insurance Freight value which suggested that consignment was imported
directly by the manufacturer to the country of the buyer as a new car. It was
further suggested that the third accused falsely declared and showed that the
car was one year old, when in fact, it 6 was not. He had also filed a false
affidavit that the car was in use for more than one year before he came to
India for permanent settlement. The accused had also filed fake First
Registration Certificate showing the first registration on 15.7.1993 whereas
the car itself was manufactured in March, 1994. It was, therefore stated that
Accused Nos.1 to 4 had submitted documents for the clearance of the car
imported by the third and fourth accused knowing them to be false documents for
taking advantage of the provisions of Transfer of Residence scheme. It was
clarified that for taking advantage of the scheme of Transfer of Residence, the
Customs duty has to be paid in foreign exchange or otherwise it should be
through an account where there is foreign inward remittances and for this
purpose the Branch Manager of the Bank in which the account lies has to issue a
certificate mentioning that the concerned account is receiving or had received
foreign remittances. While the appellant herein and second accused Shri
Balakrishnan very well knew that the Current Account bearing No.872 at Indian
Bank, Abiramipuram, Chennai did not receive any foreign inward remittance, got
a false certificate issued by Smt.Sujarita Sudararajan, the fifth accused,
Branch Manager of the bank on the basis of a false letter presented by the
first accused and on the basis of that the Branch Manager had issued foreign
inward remittance certificate dated 8.9.1994 to the effect that the Lexus Car
can be cleared from the Customs.
She had also directed her Assistant Manager Smt.Bhavani to modify the
certificate and issue the same to Shri M. Natarajan, appellant and Shri 7
Bhaskaran, second accused. Thus the certificate was used by the four accused
persons (A1 to A4) for the purposes of clearing the imported car, knowing fully
well that the Current Account No.872 did not receive any foreign exchange
remittance.
7. The charge-sheet, therefore, went to show that the acts of accused Nos.1
to 5 constituted offences punishable under Section 120B IPC read with Sections
420, 467, 471 IPC and Section 13(2) read with Section 13(1) (d) of the
Prevention of Corruption Act, 1988. It was pointed out further that the other
accused persons named in the FIR, who were government officials, were not sent
for trial as the Departmental action for major penalty was recommended against
them. It was further pointed out that Smt.Bhavani, original Accused No.6 was
granted tender of pardon by the 2nd Metropolitan Magistrate, Egmore, Chennai
while fifth respondent was already dismissed from service and as such no
sanction order was required under the law.
8. This charge-sheet was filed on 30th January, 2004 and the case was posted
in the month of April, 2004 for receiving copies by the accused.
The case was split up as Non Bailable Warrant was pending against the third
accused and had remained unexecuted. The trial commenced against the other
accused in which 22 witnesses were examined, 82 documents were marked and the
case stood posted for 5.9.2005 for examination of the Defence Witnesses.
However, in the meantime, the 8 present appellant filed a discharge application
vide Criminal M.P. No.146 of 2005 on the file of the learned Principal Special
Judge for CBI Cases, Chennai. This Criminal M.P. was dismissed on 18.4.2005
against which order a Revision Petition being Criminal Revision No.538 of 2005
came to be filed. Besides this the appellant also filed a Criminal Original
Petition being Criminal O.P. No.21636 of 2005 for quashing the proceeding under
trial. It seems that the appellant had approached this Court also and this
Court had issued a direction on 13.5.2005 for the early disposal of the
Criminal Revision Petition. The High Court ultimately came to decide and
dispose off the Criminal Revision Petition as well as Criminal Original
Petition by a common judgment which is impugned before us.
9. In the application for discharge as also in the Revision Petition before
the High Court as well as in the Criminal O.P., the contention of the appellant
was firstly that he had no role with respect to the production of documents for
clearance of the car, secondly in a scheme, namely, Kar vivad Samadhan Scheme,
1998 (KVSS) floated vide Finance Act No.2 of 1998 which commenced from
1.9.1998, it was clearly provided that if a tax- payer settles his dues
regarding the direct and indirect taxes and once a final settlement is arrived
at in pursuance of the scheme and once the payment is made as per the
settlement, the tax-payer earns a complete immunity in respect of the
transaction which includes the prosecution from all or any of the offences. It
was pointed out that third accused in 9 pursuance of Rule 3(1)(b) of the Rules
had filed a declaration in Form 1-B under Section 88 of the Finance Act and the
Customs Department had issued a certificate of intimation under Section 90(1)
of the Finance Act and determined the tax under Section 88(f) of the Act as
being Rs.2,84,325/- which was remitted by the third accused on 18.3.1999. This
final settlement was arrived at between the parties as against the original
claim arrears of tax of Rs.5,68,649/-. In short, the appellant prayed that in
respect of the transaction in question no prosecution could have been launched
against the third accused or for that matter any other accused.
For this the appellant relied on the reported decisions of this Court in
Central Bureau of Investigation, SPE, SIU (X), New Delhi v. Duncans Agro
Industries Ltd., Calcutta [(1996) 5 SCC 591] and Sushila Rani (Smt.) v.
Commissioner of Income Tax & Anr. [(2002) 2 SCC 697] and Hira Lal Hari Lal
Bhagwati v. CBI, New Delhi [(2003) 5 SCC 257].
10. As against this, it was argued before the learned Single Judge by the
Public Prosecutor that firstly the Revision Petition under Section 239 Cr.P.C.
could not co-exist with the Criminal Original Petition under Section 482 of the
Cr.P.C. It was secondly suggested that the law laid down by this Court in
Duncans Agro's case and Sushila Rani's case (supra) was no more a good law
because of the decision of this Court in State of Orissa v.
Debendra Nath Padhi [(2005) 1 SCC 568]. It is also suggested by the Public
Prosecutor that for the purposes of framing charges under the 10 provisions of
Cr.P.C. what may be seen is the material produced by the prosecution in
charge-sheet and no other material. It was, therefore suggested by the learned
Public Prosecutor that the court could not have looked into the KVSS, 1998 to
find out as to whether there was an absolute immunity to the tax-payer and
other granted by that scheme and whether the appellate court utilized the
alleged immunity.
11. Learned Single Judge went into the details of the scheme. In that the
learned Judge considered Sections 88, 90, 91 and 95 of the KVSS 1998 and also
referred to the case law cited and posed before him a question in the following
words:
"Thus the crux of the question is whether "KVSS" is
applicable to the present facts of the case or not, and if not applicable, how
the present case is different from the facts in issue of Hiralal's case."
In short the learned Judge came to the conclusion that it is permissible to
look into the KVSS 1998 though it was not the part and parcel of the
charge-sheet and for that purpose in order to decide as to whether the
prosecution was legally launched or not and could continue or not, the court
could look into the KVSS 1998. For this, the learned Judge relied on the
decision of this Court in State of Haryana & Ors. V. Bhajan Lal & Ors.
[1992 Supp (1) SCC 335) and more particularly on the following observations
regarding the circumstances under which interference under Section 482 Cr. P.C.
was possible:
11 "Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a criminal proceeding
is instituted) to the institution and continuance of the proceedings and/or
where there is a specific provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party."
In our opinion, the learned Judge was right in examining the KVSS 1998 to
decide whether it provided complete immunity from the prosecution since that
was the mainstay of appellants attack against the prosecution.
12. The learned Judge then undertook the detailed examination of the KVSS
1998 as also the case law and came to the conclusion that the acts complained
of against the appellant were outside the declaration statement under Section
88 made by third accused. The acts complained of in the charge sheet did not have
any connection with the declaration of statement (by accused no. 3) and the
letter dated 8.9.1994 which was the basis for issuance of Foreign Inward
Remittance certificate amounted to misrepresentation and false representation
and it had no connection with the scheme whatsoever and as such the learned
Judge came to dismiss the Revision Petition as well as Criminal O.P. under
Section 482 Cr.P.C.
13. It is on this background that we have to proceed to decide the present
appeals.
14. Shri K. Subramaniam, Senior Advocate, appearing on behalf of the
appellant very heavily relied on the decision in Hiralal's case (supra). He 12
pointed out that the law laid down in Duncans Agro's case and Sushila Rani's
case (supra) was reiterated in Hiralal's case, more particularly in para 27
thereof. Para 27 reads as under:
"On a reading of the judgment in the case of Sushila Rani, 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."
Learned counsel points out that the observations made in this paragraph and
more particularly the user of the terms "under any and all laws in
force"
would go to suggest that the concerned accused earns an absolute immunity
for the prosecution of all the offences including under Sections 120B and 420
IPC which were also alleged against the appellant herein in the present case.
Learned counsel further very painstakingly took us through the provisions of
KVSS 1998 as engrafted in the Finance Act and invited our attention to Sections
90, 91 and 95 of the same which are the relevant sections. It was further
contended that the criminal act complained of against the appellant was so
inextricably connected with the Customs transactions that it had to be held a
part and parcel of the same and, therefore, all and every prosecution related
to the customs transaction not only against the person who had made the
declaration but also against each and every person connected with the
transaction were covered in the 13 immunity provided under Section 91 of the
Act. Our attention was further invited to the judgment of this Court in K.C.
Builders & Anr. V. Assistant Commissioner of Income Tax [(2004) 2 SCC 731]
and also Duncans Agro Industries Ltd. Calcutta V. Commissioner of Central
Excise, New Delhi [(2006) 7 SCC 642]. Learned counsel also relied on the
judgment of this Court in Alpesh Navinchdnara Shah v. State of Maharashtra
& Ors.
[(2007) 2 SCC 777] where this Court had reiterated the law laid down in
Hiralal's case.
15. As against this Shri Vikas Singh, learned Additional Solicitor General
very carefully sifted the facts. He firstly suggested that at this stage the
court should not interfere in the matter as the trial was complete and only the
judgment had to be delivered. He then points out that the act complained of
against the appellant is an independent offence inasmuch as he had made a false
representation to the bank, knowing it to be false.
He had known that there were no foreign remittances in Account No.872 of
M/s.Tamilarasi and that his request for issuance of certificate to that effect
was totally unfounded. On the basis of this letter, a certificate which was
essentially false came to be issued by the Branch Manager and, therefore, this
act is independent offence, though ultimately the said certificate had been
used by the third accused for getting the clearance of the car. Our attention
was invited to the provisions suggesting that under the scheme the remittance
is either to be made in foreign currency or atleast on the 14 basis of the
remittance by an NRI credited in the account held in the Indian Bank. He
further points out that the provisions of Sections 90, 91, 95 and more
particularly Section 91 were clear and couched in the language which admitted
of no doubts. Relying heavily on the language of Section 91, the learned ASG
suggests that this immunity has to be restricted to the offence under the Act
and it could not be viewed as general immunity providing immunity covering all
the other offences covered by different Acts which are distinct and separate
from the tax laws. Further the learned counsel urged that the immunity was not
available to a totally non connected persons like the appellant. In that behalf
he pointed out that the third accused had not claimed immunity before the trial
court or before the High Court. The learned counsel also suggested that the
observations made in para 27 of the Hiralal's case were entirely based on the
observations in Sushila Rani's case. However, considering the narrow scope and
the factual scenario in Sushila Rani's case, the broad observations made in
para 27 in Hiralal's case were not justified. He further points out that those
observations were ultimately diluted by Hon'ble Lakshmanan, J. in the
subsequent decision in Alpesh Navinchdnara Shah's case. Learned counsel further
invites our attention to the two judgments both by Hon'ble Sinha, J. reported
in State, CBI v. Sashi Balasubramanian & Anr.
[(2006) 13 SCC 252 and Master Cables (P) Ltd. V. State of Kerala &
Anr. [(2007) 5 SCC 416]. According to learned counsel both these are 15 direct
judgments wherein the earlier judgments in Duncans Agro's case, Sushila Rani's
case, Hiralal's case and K.C. Builders's case have been explained and this
Court has drifted away from the broad propositions laid down in those
judgments. He, therefore, urges for the dismissal of the appeals.
16. It will be, therefore, our task first to examine the provisions of KVS
Scheme and more particularly, Section 90, 91 and 95. Sections 88 to 98 which
are included in Chapter IV of the Finance Act (No. 2) of 1998 cover the entire
Kar vivad Samadhan Scheme. The basic object of the Scheme, undoubtedly, is to
recover the taxes both direct as well as indirect. Section 87 (j) specifically
brings into the fold of the Scheme the Customs Act, 1962,
which is the concerned Act for the purpose of the present controversy. Section
87 (a) gives the definition of declarant as- "declarant means a person
making a declaration under Section 88".
Section 88 provides that a declarant has to make the declaration during the
period from 1.9.1998 to 31.12.1998. The said declaration has to be in respect
to the tax payable either under direct tax enactment or indirect tax enactment
or any other provision of any law. Section 88 then provides the modality for
settlement of such tax. There is no dispute that in the present case, it was
the third accused and not the appellant who actually gave a declaration
statement under section 88, in respect of the tax liability which was attracted
on account of the import of the car. There is also no dispute 16 that on the
basis of this declaration under Section 88, the authorities went on to decide
the liability on the part of third accused and ultimately, the tax liability
was satisfied and the car was allowed to be imported. Section 90 provides for
the time and manner of payment of tax arrear which have been settled on the
basis of the declaration under Section 88. Indisputably, a certificate in the
prescribed form was granted in favour of the third accused in which particulars
of the tax arrear and the sum payable after such determination was mentioned
being a full and final settlement of the tax arrears. Section 91 is the real
crux of the matter. It provides immunity from prosecution and imposition of
penalty in certain cases:
"91. Immunity from prosecution and imposition of penalty in certain
cases- The designated authority shall, subject to the conditions provided in
Section 90, grant immunity from instituting any proceeding for prosecution for
any offence under any direct tax enactment or indirect tax enactment, or from
the imposition of penalty under any of such enactments, in respect of matters
covered in the declaration under Section 88".
It is this Section 91, which has been relied upon by the appellant
suggesting that the language is broad enough to cover not only the declarant
but any other person and the prosecution not only under the direct tax
enactment or indirect tax enactment but any and every other offence also. It is
for this purpose, that the learned senior counsel, Shri K. Subramanian heavily
relied upon the observations in paragraph 27 of Hiralal's case. The learned
counsel also relied on the concurring and 17 supplementing observations by
Hon'ble Brijesh Kumar, J., in which, the learned Judge has made a specific
reference to Section 95 after quoting that Section.
17. We were taken extensively through this judgment by the learned counsel
who was at pains to urge that the factual scenario in Hiralal's case is
comparable to the present case, if not identical. There also, the High Court in
a petition under Section 482 Cr.P.C. had refused to quash the FIR and the
proceedings which were taken against the Director of Gujarat Cancer &
Research Institute (for short "GCRI"), Secretary of Gujarat Cancer
Society (GCS) and one Dr. Viral C. Shah. It was the case of the prosecution
that the three had cheated the Government of India in terms of the 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. In that case also, the customs duty had been paid by the
appellant and was settled under the KVSS 1998. The charge against the appellant
was that the machines were imported into India by the GCS who availed of the
duty exemption on the basis of the exemption certificate issued in the name of
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, such imports could be made. The Customs Authority raided the premise of
18 the GCRI and seized the machines on the ground that the exemption certificate
was issued in the name of the GCRI and not in the name of GCS and, therefore,
GCS was not entitled to the exemption and was, therefore, liable to pay customs
duty. The GCS was held liable to pay the customs duty, thus, denying the
concessional duty benefit demanded from it under Section 28 of the Customs Act, 1962
read with the proviso to the said Section. Against the order imposing the duty
by the Collector of Customs, the appeals were filed before Customs, Excise and
God (Control) Appellate Tribunal, West Regional Branch, Bombay which confirmed
the findings of the Collector of Customs. Against that, the GCS filed an appeal
before this Court and while the matter was pending before this Court, the
Government of India launched a Kar Vivad Samadhan Scheme, 1998, and in
accordance thereof, the GCS had agreed to deposit a stipulated amount of over
Rs.98 lakhs and also withdrew the civil appeal pending before this Court. On
19.7.1999, a certificate for full and final settlement of the tax arrears was
issued to the GCS. The said certificate provided the final settlement of tax
arrears and also granted the immunity to the GCS from any proceedings for
prosecution for any offence under the Customs Act,
1962 or from the imposition of penalty under the concerned enactments.
However, a case was registered against the appellants on the ground that the
appellants in conspiracy with the Director of the GCRI, Secretary of the GCS
and others had cheated the Government of India. The prosecution was for the
offence under Section 120-B read with Section 420 of the IPC.
19 It was this prosecution which was challenged and after the challenge, failed
at the High Court level, and the party had successfully approached this Court
the proceedings were ordered to be quashed.
18. In Hiralal's case heavy reliance seems to have been placed on the Anr.
and of Central Bureau of Investigation, SPE, SIU (X), New Delhi separate but
concurrent judgments upheld the challenge and had quashed the proceedings
relying on the KVSS 1998. The learned Judges noted the various provisions of
the Scheme from Sections 86 to 98. It was also noted that FIR in that case was
filed on 6.1.1999, while the certificate under KVSS 1998 was issued on
19.7.1999. Hon'ble Lakshmanan, J. in paragraph 23 observed:
"23. It is thus crystal clear that the Commissioner of Customs
(Adjudication) and 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
the charitable and philanthropic activities of the Society, no prosecution was
recommended. Moreover, only a token redemption fine of Re.1 was imposed."
(Emphasis supplied).
20
19. In paragraph 25, the learned Judge analyzed the judgment in Sushila
Rani's case (supra), which was also under the KVSS 1998.
Paragraph 6 and 8 of Sushila Rani's case were quoted by the learned Judge
which suggested that once a certificate was granted under Section 90 (1), it
was absolutely conclusive as to the matter stated and no matter covered could
be reopened in any other proceeding under any law for the time being in force.
It is probably on the basis of observations in paragraph 6 of Sushila Rani's
case, that the learned Judge made the observation in paragraph 27 which we have
already quoted in para 13 of this judgment.
We may at this stage itself point out that the observations in paragraphs 6
and 8 in Sushila Rani's case seem to have been made only in the pursuance of
tax laws. The question of prosecution under some other offences (not under the
Indirect Tax Act or the Direct Tax Act) was not there.
20. A reference must be made, at this stage, to the judgment of this Court
reported in Alpesh Navinchandra's case (cited supra) which was again decided by
the Division Bench consisting of Hon'ble Lakshman and Kabir, JJ., the judgment
was, however, authored by Hon'ble Lakshmanan, J. This was the case of immunity
granted under Sections 127H of the Customs Act, 1962,
however, the appellant and his brother were preventively detained under
COFEPOSA. The detention was challenged on the ground that once the immunity
under Section 127H of the Customs 21 Act was granted in respect of customs
offences, after settling the taxes finally by the Settlement Commissioner, the
preventive detention could not have been ordered by the authorities for the
same reasons. The case of Hiralal (cited supra) was relied upon, which is clear
from a reading of paras 17 and 46. This Court proceeded to hold in paras 46 and
47 of its judgment as under:
"46. At the time of hearing, learned counsel for the petitioner counsel
for the respondent the said relied upon case was a case of duty evasion and the
appellant therein was booked by Customs Authority and therefore, customs duty
was paid under KVS Scheme and further in the criminal proceedings under
Sections 120-B and 420 IPC initiated by CBI was quashed by this Court.
Therefore, it is admitted that the above cited case is different from the
present case as in the case in hand the detention order was issued under the
COFEPOSA Act against the petitioner with objective to prevent the nefarious
activities in future. Therefore, the immunity granted by the Settlement Commission
from fine, penalty and prosecution under the provisions of the Customs Act and
IPC have no bearing on the order of detention passed under the COFEPOSA Act.
Therefore, it is contended that the detention order issued by the detaining
authority is very much legal and the same needs to be upheld.
47. The Settlement Commission was constituted with the aim and objective of
settling the tax evasion issues and by virtue of disclosure by tax offender,
they gain immunity from fine/penalty which is otherwise mandatory under the
provisions of tax laws. But, such opportunity is only extended to one-time tax
offenders but not available to habitual smugglers. For the persons involved in
smuggling activities, other than the provisions made for the prosecution under
the Customs Act, 1962, an
equal deterrent is emphasized under the provisions of the COFEPOSA Act, 1974
i.e. provisions for preventive detention. Such preventive detention prohibits
smugglers from indulging in further smuggling activities. In the present case
the investigation reveals the consistent involvement of the 22 petitioner
detenu and his brother, Kamlesh Navinchandra Shah in smuggling activities,
therefore, the detaining authority on the basis of evidence placed before him
felt it necessary to issue the detention orders in respect of both the detenus
in order to prevent them from prejudicial activities in future.
Accordingly, the impugned order is justifiable in the eye of the law and the
present writ petition deserves to be dismissed."
In our opinion, the rigour of the observations made in paragraph 27 in
Hiralal's case is removed by the observations made in paragraphs 46 and 47 in
Alpesh Navinchandra Shah's case. It was contended that the legislature had
created a Settlement Commission for generating revenue and had also made
provisions for release of the goods on payment of duty and had also made
provisions for granting immunity from prosecution under the Customs Act, 1962
under the Penal Code and also under the other Central law and, therefore, it
was clear that the intention of the legislature was more on revenue aspect
rather than prosecution and punishment aspect or in continuing with multiple
litigations. And, therefore, it would be unjust, unfair and unreasonable if a person
is made to suffer preventive detention mainly after his application for
settlement is allowed to be proceeded with, and after realization of the
customs duties not only the goods are ordered to be released but on considering
the cooperation extended by him in the settlement proceedings, the Settlement
Commission had also granted to him immunity from prosecution under the Customs Act, 1962
as well as under IPC. The reliance there, however, 23 was being made not on
KVSS 1998, but on the Scheme under Section 127-H of the Customs Act, 1962
which provided the immunity not only from the Customs Act
offences but also from the Indian Penal Code and other central enactments. We
must hasten to point out that at this juncture itself, the immunity under the
KVSS 1998 does not refer to the offences under the Penal Code or under any
other central law, but restricts itself under Section 90 (1) only to the
offences under the direct tax enactment or indirect tax enactment and as such
Section 127H of the Customs Act is
much broader than Section 90(1) of Finance Act in its operation.
21. The Court then in paragraph 46 of the above case held that the immunity
granted by the Settlement Commission under the provisions of Customs Act and
IPC had no bearing on the order of detention passed under the COFEPOSA Act.
Thus inspite of the broader nature of Section 127H of the Customs Act as
compared with Section 90(1) of the Finance Act, this Court proceeded to hold
that the detention under COFEPOSA Act was "outside the immunity". It
was, therefore, clear that the rigour of observations made in paragraph 27 of
Hiralal's Case was taken away in paragraphs 46 of Alpesh Navinchandra Shah's
case.
22. It may be noted further that in Hiralal's case the learned Judge had
specifically found that there was no prima facie material as regards the
offences under Sections 120B and 420 of the Indian Penal Code and that was also
the reason why the prosecution was quashed. Such is not the 24 case here. It
cannot again be forgotten that in Hiralal's case the immunity was granted to
the tax-payer whereas the appellant in the present case was neither an
applicant under Section 90(1) nor was any immunity granted to him specifically.
This aspect whether the immunity could be granted and could be enjoyed by any
other person than the one who had made a declaration under Section 88 and was
granted the immunity was considered in the subsequent judgment of this Court.
Balasubramanian and Anr. [(2006) 13 SCC 252]. There also, the private
respondent had applied for import of cotton fabrics for a certain quantity of
"cotton men's ensemble" under "the Duty Exemption Entitlement
Certificate Scheme". That application was recommended and the Company was
allowed to import cotton fabrics of a particular description. On allegations in
regard to the grant of the license, an FIR came to be lodged on 2.3.1995 for commission
of offences under Sections 120-B, 420 and 471 IPC as also Section 13 (2) read
with Section 13(1)(d) of the Prevention of Corruption Act, 1988 and Section 136
of the Customs
Act, 1962. The Company and its Directors had given a declaration on
31.12.1998. However, the charge sheet against them and the four public servants
was filed on 12.4.1999, originally against the 7 accused persons, 3 out of whom
were the private parties, namely, the Company and its 2 Directors. The High
Court quashed the criminal proceedings against the private parties as also the
25 Government servants. Challenging this quashing, the CBI came before this
Court. It was urged before this court that: (i) the High Court had erred in
holding that though the private parties have become entitled to immunity from
prosecution, the official respondents would also be covered thereby, (ii) the
High Court erred in holding Section 95(iii) of the Act to be inapplicable to
the present case, and (iii) public servants were not entitled to any relief
under the Scheme and far less immunity from prosecution.
The questions which were formulated were: (i) Whether the Scheme was
applicable in relation to a public servant?, (ii) when does a prosecution
start? (iii) whether the offences enumerated under Section 95 (iii) were
excluded from immunity under Section 91?.
24. Hon'ble Justice Sinha referred to the KVSS 1998 and more particularly,
to Hiralal's case in paragraph 42 of his judgment. This Court also referred to
the observations of Justice Brijesh Kumar in Hiralal's case. In paragraphs 44
and 45, this Court observed:
"44. An accused may be discharged from a criminal case under Section
245 of the Code, if his civil liability has been determined in his favour; but
the same must have a direct nexus with his criminal liability. He would not
acquire any immunity only because civil and criminal liabilities have some
connection, however remote the same may be. The connection between the two types
of liabilities must be direct and proximate. If in incurring the civil
liability, he has committed offence wherewith determination thereof has no
nexus, the immunity would not extend thereto.
45. We will give a simple example. A person while obtaining undue favour
from an authority under the indirect tax 26 enactment offers a bribe. Obtaining
of an undue favour resulting in prosecution under the indirect tax enactment
may be a separate offence, but involvement of the public servant qua offences
under the Prevention of Corruption Act would be a separate and distinct
one."
In paragraph 46, the Court took into consideration the observations of this
paragraph 47, K.C. Builders case was also referred to. This Court ultimately
set aside the judgment of the High Court insofar as it was pertaining to the
quashing of the prosecution in respect of public servants.
25. In the above case, the question was whether the immunity granted under
the KVSS 1998 could also cover proceedings under the Kerala Sales Tax Act in respect
of the same assessee. The learned Judges again referred in paragraph 15 to
Sushila Rani's case as also to Hiralal's case and more particularly to the
observations made in paragraphs 18 and 27, which we have already quoted above.
The learned Judges then proceeded to hold that Hiralal's case was distinguished
in Sashi Balasubramanian's case (cited supra) and held that the transfer of
application of Salex Tax Act would not be covered by the immunity under KVSS,
1998. This Court in paragraph 33 observed as under:
"33.....an immunity is granted only in respect of offences purported to
have been committed under direct tax enactment or indirect tax enactment, but
by no stretch of imagination, the same would be granted in respect of offences
under the 27 Prevention of Corruption Act. A person may commit several offences
under different Acts; immunity granted in relation to one Act would not mean
that immunity granted would automatically extend to others. By way of example,
we may notice that a person may be prosecuted for commission of an offence in
relation to property under the Penal Code as also under another Act, say for
example, the Prevention of Corruption Act. Whereas charges under the Prevention
of Corruption Act may fail, no sanction having been accorded therefore, the
charges under the Penal Code would not."
Thus this Court accepted the principle that the immunity could not cover
certain other offences than those covered in direct and indirect tax
enactments. The Court also accepted that the immunity could not be granted to
any other person automatically merely it was granted to a tax- payer who had
made declaration under Section 88 of the Finance Act.
and Anr. (supra) is to be seen at this stage. The concerned Sections 90(1)
& (3), Section 91 and Section 87(h) & (j) fell for consideration in
this case also. It was declared in paragraph 10 in unequivocal terms in this
judgment as follows:
"10. What is conclusive is the order passed under sub-section (1) of
Section 90 of the Scheme determining the sum payable under the Scheme. The
terms "direct tax enactment" or "indirect tax enactment" or
"any other law for the time being in force" refer only to those
statutes under which the order had been passed. Immunity, as noticed hereinbefore,
is in respect of institution of any proceeding for prosecution of any offence
under direct tax enactment or indirect tax enactment or from imposition of
penalty under any of such enactments. The 28 terms "direct tax
enactment" and "indirect tax enactment" have been defined under
Sections 87 (h) and 87 (j) of the Scheme, which read as under:
87. (h) "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);
* * * * * * * * (j) "indirect tax enactment" means the 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;"
In paragraph 11, this Court observed:
"11. Admittedly, the case of the appellant does not come within the
purview thereof. Amplitude of the provisions of the Scheme having been extended
only to the enactments made by Parliament. Having regard to the constitutional
scheme contained in Article 246 of the Constitution of India, in our opinion,
the same cannot be extended to assessment of sales tax under a State
Legislation...................."
Once this Court had noticed the observations made in Hiralal's case and then
narrowed the width of the observations expressed in paragraph 27 thereof, we
must proceed in terms of the subsequent judgment where the earlier judgment was
taken note of.
29
27. By way of almost a desperate effort Shri K. Subramaniam, learned Senior
Advocate then urged that the only offence which could have been alleged against
any of the accused was under Section 132 of the Customs Act, 1962, i.e., of
making a false declaration. The argument was that since the offence complained
of related to the false declaration and false documents, the appellant could be
prosecuted only under Section 132 of the Customs Act and
not under the offences covered under the Indian Penal Code. Section 132 of the Customs Act is
as under:
"132. False declaration, false documents, etc. - Whoever makes, signs
or uses, or causes to be made, signed or used, any declaration, statement or
document in the transaction of any business relating to the customs knowing or
having reason to believe that such declaration, statement or document is false
in any material particular, shall be punishable with imprisonment for a term
which may extend to two years or with fine, or with both."
The argument is only to be rejected. It is not at this stage that we would
consider the nature of offences under Section 132 of the Customs Act
and/or those under the Indian Penal Code, under which the appellant is being
charged. However, merely because there may be some overlapping in the two
offences, it does not mean that the appellant cannot be tried under the
offences covered under the Indian Penal Code. The Court would proceed to decide
the question on the basis of the evidence led before it.
We must hasten to add that merely because the appellant could be tried 30
under Section 132 of the Customs Act, it
does not mean that he could not be tried for the offence committed under the
Indian Penal Code. There is no such provision.
28. Considering, therefore, the overall situation and considering the law
laid down by this Court in the earlier judgments, we are of the clear opinion
that the appeals are without any merit. Therefore, both the appeals are
dismissed.
..............................J.
(P.P. Naolekar) ..............................J.
(V.S. Sirpurkar) New Delhi;
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