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Report No. 47

15.11. Observations of Study Team.-

The Study Team on Leakage of Foreign Exchange1 has made certain observations relevant to prosecutions, which we quote:-

"9.7. Under the provisions of the Customs Act, a person involved in under-invoicing of export goods is punishable with imprisonment for a term which may extend to two years or with fine or with both. (A higher punishment is provided for commodities which are notified under section 123 of the Customs Act but those commodities are not the one which are exported). In the Foreign Exchange Regulation Act also the punishment provided is the same. Since the maximum punishment is two years only, and no minimum punishment is prescribed, (minimum punishment is for commodities which are notified under section 123 of the customs Act), it has been noticed that offenders are let off with imprisonment for a small period or with nominal fines.

We would suggest that such offences should be made punishable to sentence of imprisonment in all cases, and any fine imposable by the court should be in addition to imprisonment and not as an alternative to imprisonment. For cases of under-invoicing/over-invoicing involving loss of foreign exchange of Rs. 1 lath or more, a minimum sentence of six months' imprisonment should also be prescribed and the maximum, we recommend, should be raised to five years. In order to ensure that the persons are not prosecuted in petty cases or for offences of a technical nature, it would be desirable for the Customs Department and the Enforcement Directorate to lay down certain guidelines for deciding as to the cases in which prosecution should be launched."

The question of laying guidelines for deciding as to the cases in which prosecution should be launched, requires consideration2. We think that the recommendation quoted above is a sensible one, and we would invite Government to give effect to it.

1. Report of the Study Team on Leakage of Foreign Exchange through Invoice Manipulation (Ministry of Finance) (1971), p. 95, para. 9.7.

2. The matter could be dealt with by administrative instructions.

15.12. Foreign Exchange Act-Conspiracy and Abetment.-

It was stated1 in one of the suggestions made to us that the Foreign Exchange Regulation Act, at present, does not take cognizance of the acts of conspiring, counselling or procuring another person to contravene its provisions, and thus leaves out the important category of professional racketeers who are behind most of the offences committed. The suggestion therefore, is to amend the Act so as to make it an offence to conspire, counsel or procure another person for contravening the provisions of the Act.

1. Letter dated 28-12-1971.

15.13. The position in this respect has been examined by us. The main penal provision in the Foreign Exchange Act is in section 23(1) and section 23(1A), which punish contravention of various provisions of the Act. Acts amounting to conspiracy with, counselling, or procuring another person to commit an off4ence, are not specifically dealt with in the Foreign Exchange Act1.

(a) Central Excise Act . . .Section 9(d).
(b) Foreign Exchange Act . . .Nil.
(c) Prevention of Food Adulteration Act . . . . .Nil
. . . But section 16(1)(a) applies whether the act is done by a person "himself or by any other person".
(d) Essential Commodities Act . . . Section 8.
(e) Wealth Tax Act . . . Section 36(2A) (Limited provision).
(f) Income-Tax Act . Section 287 (Limited provision). . . . Section 287 (Limited provision).
(g) Customs Act . . . The main provision-section 135(a) applies to a person who is "in any way knowingly concerned in any fraudulent evasion 4 or attempt at evasion" etc.
(h) Gold Control Act Section 88(2) (Limited provision).

1. Position as to express provision regarding abetment in the major Acts is as below-

15.14. But conduct in the nature of conspiracy, procuring or counselling would almost invariably amount to abetment. The abettor is liable to be punished under the Penal Code. The relevant sections1 of that Code are not confined to abetment of offences under the Code; they are wide enough to apply to abetment of offences under other laws also.2

1. Section 109 and 116, Indian Penal Code.

2. See definition of "offence" in section 40, Indian Penal Code.

15.15. We do not, therefore, as at present advised, see any serious lacuna even in the present law. Since the wording in the Penal Code is clear, an amendment is not needed.

15.16. Preparation to commit certain offences under the Foreign Exchange Act and the Customs Act.-

Another matter of substantive nature that requires to be considered is that of preparation to commit certain offences. In general, in countries which follow the Anglo-American system, law does not punish preparation for an offence. An attempt to commit an offence is punishable, but the attempt must be sufficiently proximate to the crime intended, and this 'proximity rule' finds its negative form in the rule that mere preparation is not enough.

Authorities are, no doubt, not very clear as to what is an attempt;1 but it is not necessary for the present purpose to pursue that matter.

1. See the Law Commission of India, 42nd Report (Indian Penal Code), para. 5.41 to 5.43.

15.17. The position taken in some Foreign Codes is different in this respect. It would be of interest to refer to the provision in the Russian Penal Code,1 quoted below:-

"Article 15. Responsibility for preparation of crime and for attempted crime.-Acquiring or arranging the means or instruments, or other intentional creation of conditions for the commission of a crime, shall be deemed preparation of a crime.

An intentional action immediately directed toward the commission of a crime shall be deemed an attempted crime, provided the crime is not brought to completion for reasons independent of the will of the guilty person. Punishment for preparation of crime and for attempted crime shall be assigned in accordance with the article of the Special Part of the present Code which provides for responsibility for the given crime. In assigning punishment the court shall take into account the character and degree of social danger of the actions committed by the guilty person, the degree to which the criminal intention is carried out, and the causes by reason of which the crime is not brought to completion."

1. Article 15, R.S.F.S.R. Penal Code.

15.18. Academic opinion on the question is conflicting. Some writers support a provision punishing preparatory acts. On the other hand, the remark of Holmes, J., is often emphasised, namely, "As the aim of the law is not to punish sins, but to prevent certain external results, the act must come pretty near to accomplishing that result before the law will notice it1." And the query has been raised-"Is it not a cardinal principle of our law that the successful criminal is always more severely punished than one who, equally guilty ethically, has failed in his efforts? And, just as the completed crime merits a heavier penalty, so an 'attempter' who has got beyond the stage of incitement and "mere preparation is regarded by the law as a worse offender than one who has never been 'on the job' at al12."

1. Homes J. quoted in Book review in (1954), 70 LQR 551.

2. Book review in (1954), 700 LQR 551.

15.19. Whatever be the merits of the general rule, it seems to us that in the context of some of the offences with which we are concerned, the law could make a departure from its general approach.

In cases under the Customs Act and the Foreign Exchange Act, having regard to the gravity of the harm, the adoption of a stringent approach is needed. Where an act is done with the fixed intention of committing a crime and by way of preparation for it, it should be treated as criminal. For example, where a person is about to leave the shores of India with Indian currency in his pocket, with the definite object of violating the Foreign Exchange Act, it is better that he is stopped. An amendment punishing such acts would enable the enforcement authorities to prevent crimes under these Acts before its consummation.

15.20. Accordingly, we recommend that the following section should be inserted in the Foreign Exchange Act and in the Customs Act:-

"If a person makes preparation to commit an offence under this Act, and from the circumstances of the case it may be reasonably inferred that if not prevented by circumstances independent of his will, he is determined to carry out his intention to commit the offence he shall be punishable with imprisonment for three years, or with fine, or with both."

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