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CASE NO.: Appeal (crl.)  576 of 2008

PETITIONER: Gurcharan Singh

RESPONDENT: Directorate of Revenue Intelligence

DATE OF JUDGMENT: 01/04/2008

BENCH: S.B. SINHA & V.S. SIRPURKAR

JUDGMENT: J U D G M E N T

REPORTABLE

CRIMINAL APPEAL NO.  576 2008 (Arising out of SLP (Crl.) No. 7914 of 2007)

S.B. SINHA, J.

1.      Leave granted.

2.      This appeal is directed against a judgment and order dated 25th  January, 2007 passed by a learned Single Judge of the Delhi High Court in  Crl. M.C. No.4594 of 2003 dismissing an application under Section 482 of  the Code of Criminal procedure filed by the appellant and three others.

3.      A complaint was filed by the Intelligence officer attached to the  Directorate of the Revenue Intelligence alleging that the accused named  therein committed offences punishable under Sections 132 and 135 of the  Customs Act, 1962 (for short the Act).   

4.      One A.K. Saxena figured as accused No.5 therein.  He was a Customs  Officer.  He floated various firms in false and fictitious names.  Duty  drawback amount was claimed for alleged export of readymade garments by  the said firms under certain assumed names to the extent of Rs.1,04,62,596/-   Appellant herein alongwith others Pawan Kumar, Govind Jha, Radhey Lal  made statements under Section 8 of the Act corroborating the allegations  made against them that they had conspired with each other in regard to  export of  inferior quality of readymade garments which had been over- invoiced.

5.      Cognizance of the said offence was taken by the Additional Chief  Metropolitan Magistrate on 16th April, 2003.  An application for discharge  was filed inter alia by the appellant herein which was dismissed by the  learned trial judge by his order dated 1st October, 2003.  

6.      An application for quashing of the said order was thereafter filed  before the High Court.  One of the contentions raised before the High Court  was that Shri A.K. Saxena being a Customs Officer could not have been  proceeded against under Section 135 of the Act and, thus, the complainant  committed a serious illegality in exercising his power of arrest as against  him which is not contemplated under Section 104 thereof.  It was further  more contended that the allegations made in the complaint petition even if  taken to be correct in its entirety do not disclose an offence under Section  135 of the Act.

7.      Indisputably, Section 135 of the Act was amended in the year 2003.  

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The High Court having regard to the explanatory notes to the legislative  changes as per the Budget Bulletin 2003 opined that amendment being   clarificatory in nature will have retrospective effect.  

8.      Dr. Ashutosh, learned counsel appearing on behalf of the appellant  would submit that duty drawback having not been included in Section 135 of  the Customs Act prior to its insertion in 2003, the impugned judgment  cannot be sustained.  It was urged that by insertion of the said provision, a  new type of offence was created and thus, it cannot be held to be  clarificatory in nature.  It was urged that if importation of some goods are  prohibited, no duty could be paid thereon and in that view of the mater the  provisions of Section 135 of the Act will have no application.

9.      Mr, G.S. Vahanvati, the learned Solicitor General of India, on the  other hand, would submit that the allegations made as against the appellant  being covered by Section 135(b)(i) of the Act, the complaint petition  discloses an offence within the meaning of Section 135 of the Act.

10.     Before embarking on the rival contentions raised at the Bar, we may  notice the relevant provisions of the Customs Act, as they stood prior to  enactment of Customs Amendment Act, 2003.    

       Section 2(33) of the Act defines "prohibited goods" as under :-  

"2.(33)  "prohibited goods" means any goods the import  or export of which is subject to any prohibition under this  Act or any other law for the time being in force but does  not include any such goods in respect of which the  conditions subject to which the goods are permitted to be  imported or exported, have been complied with."

       Section 11 empowers the Central Government by issuing a  Notification to prohibit either absolutely or subject to such conditions to be  fulfilled before or after clearance as may be specified in the Notification, the  import or export of goods of any specified description.   The Notification  can be issued for the purpose mentioned in sub-section (2).   

       Section 50 provides for presenting the entry of goods for exportation.

"50. Entry of goods for exportation. - (1) The exporter of  any goods shall make entry thereof by presenting to the  proper officer in the case of goods to be exported in a  vessel or aircraft, a shipping bill, and in the case of goods  to be exported by land, a bill of export in the prescribed  form. (2) The exporter of any goods, while presenting a  shipping bill or bill of export, shall at the foot thereof  make and subscribe to a declaration as to the truth of its  contents."

       Section 113 of the Act provides for confiscation of goods attempted  to be improperly exported, clause (d) whereof reads as under :-  

"113.  Confiscation of goods attempted to be improperly  exported, etc.- The following export goods shall be liable  to confiscation:- (d) any goods attempted to be exported or brought within  the limits of any customs area for the purpose of being  exported, contrary to any prohibition imposed by or  under this Act or any other law for the time being in  force.".

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       Section 135B of the Act reads :-

"135B. Power of court to publish name, place of  business, etc., of persons convicted under the Act: (1) Where any person is convicted under this Act for  contravention of any of the provisions thereof, it shall be  competent for the court convicting the person to cause  the name and place of business or residence of such  person, nature of the contravention, the fact that the  person has been so convicted and such other particulars  as the court may consider to be appropriate in the  circumstances of the case, to be published at the expense  of such person in such newspapers or in such manner as  the court may direct. (2) No publication under sub-section (1) shall be made  until the period for preferring an appeal against the orders  of the court has expired without any appeal having been  preferred, or such an appeal, having been preferred, has  been disposed of. (3) The expenses of any publication under sub-section (1)  shall be recoverable from the convicted person as if it  were a fine imposed by the court."   12.     By reason of the 2003 Amendment, Section 135 was amended, which  reads as under :- "135. Evasion of duty or prohibitions.- (1) Without  prejudice to any action that may be taken under this Act,  if any person,- (a) is in relation to any goods in any way  knowingly concerned in any fraudulent evasion or  attempt at evasion of any duty chargeable thereon  or of any prohibition for the time being imposed  under this Act or any other law for the time being  in force with respect to such goods, or (b) acquires possession of or is in any way  concerned in carrying, removing, depositing,  harbouring, keeping, concealing, selling or  purchasing or in any other manner dealing with  any goods which he knows or has reason to believe  are liable to confiscation under section 111 or  section 113, as the case may be, or, (c) attempts to export any goods which he knows  or has reason to believe are liable to confiscation  under section 113, he shall be punishable,- (i) in the case of an offence relating to any of the  goods to which section 123 applies and the market  price whereof exceeds one lakh of rupees, with  imprisonment for a term which may extend to  seven years and with fine: Provided that in the absence of special and  adequate reasons to the contrary to be recorded in  the judgment of the court, such imprisonment shall  not be for less than three years; (ii) in any other case, with imprisonment for a term  which may extend to three years or with fine, or  with both. (2) If any person convicted of an offence under this  section or under sub-section (1) of section 136 is again  convicted of an offence under this section, then, he shall  be punishable for the second and for every subsequent  offence with imprisonment for a term which may extend  to seven years and with fine: Provided that in the absence of special and  adequate reasons to the contrary to be recorded in the

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judgment of the court such imprisonment shall not be for  less than one year. (3) For the purposes of sub-section (1) and (2), the  following shall not be considered as special and adequate  reasons for awarding a sentence of imprisonment for a  term of less than one year namely:- (i) the fact that the accused has been convicted for  the first time for an offence under this Act; (ii) the fact that in any proceeding under this Act,  other than a prosecution, the accused has been  ordered to pay a penalty or the goods which are the  subject matter of such proceedings have been  ordered to be confiscated or any other action has  been taken against him for the same act which  constitutes the offence; (iii) the fact that the accused was not the principal  offender and was acting merely as a carrier of  goods or otherwise was a secondary party to the  commission of the offence; (iv) the age of the accused."

13.     Section 135 (1)(a) of the Act is in two parts.  The first part relates to  evasion of duty.  The second part relates to prohibitions, which in turn  relates to "prohibited goods".  The words have to be assigned the same  meaning as contained in Section 2(33) of the Act.  It not only takes within its  sweep the goods which are prohibited under the Customs Act but also under  other Acts.  

14.     It is difficult to accept the submissions of the learned counsel for the  appellant that prohibition must have a nexus with the payment of duty and in  the event some goods are imported which are prohibited goods vis-a-vis  payment of duty, then and then only the rigours of Section 135 would be  attracted.   

       As stated earlier Section 135 deals with two types of offences \026 first   relates to evasion of duty and the second prohibitions.  The word "or" has  been used therein.  It must be read disjunctively and not conjunctively.  This  nature of prohibition which would attract the provisions of Section 113 of  the Customs Act also has been noticed by us hereinbefore.  Section 113(d)  uses the words "contrary to any prohibition imposed by or under this Act or  any other law for the time being in force".   

Clause (i) of Section 113(h) is in two parts, one is in relation to goods  entered for exportation under the claim for drawback.  The said words were  inserted by Act 25 of 1978 w.e.f. 1st July, 1978.   Clause (ii) of Section 113  (h), which is in the second part, however, refers to the claim of drawback  which does not correspond in any material particular to any information  furnished by the exporter or manufacturer under the Act.  A wrongful claim  of drawback was, therefore, covered both under clause (i) and (ii), one  dealing with dutiable or prohibited goods and the other with the entry of  goods which was even otherwise covered.   It is in that contingency that  Section 109 of the Finance Act, 2003 provided :-

"109.   In Section 113 of the Customs Act, -

(a)     in clauses (c), (e), (f), (g) and (h), the words  "dutiable or prohibited", wherever they occur,  shall be omitted; (b)     for clause (i) , the following clause shall be  substituted, namely,-

"(i) any goods entered for exportation which do  not correspond in respect of value or in any  material particular with the entry made under  this Act or in the case of baggage with the

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declaration made under Section 77."        

(c)     in clause (k), the words "under a claim for  drawback" shall be omitted.  "   

15.     It is significant to note that clause (ii) of Section 113(h)(i), which was  inserted by Finance (No.2) Act, 1991 w.e.f. 27th September, 1991 remained  in the statute book.  As there was a duplication, one of the clauses, namely  clause (i) of Section 13(h) was sought to be substituted by the other.

16.     The amendments made in Section 135 of the Act by reason of the  Amending Act, 2003 must be viewed from that angle.   

       We have noticed hereinabove that the allegations made against the  appellant in the complaint petition refer to illegal claim of drawback.   

       The effect of the interpretation of the words "prohibited goods" came  up for consideration before this Court in Om Prakash Bhatia vs.   Commissioner of Customs, Delhi :  (2003) 6 SCC 161 wherein a Division  Bench of this Court observed :-

"6. At the outset, we would state that the learned counsel  for the appellant has not pressed for the drawback in  view of the specific provision of Section 76 which inter  alia provides that no drawback shall be allowed "(b) in  respect of any goods the market price of which is less  than the amount of drawback due thereon". Therefore,  for the purpose of getting drawback, the relevant  consideration is the market price of the goods prevailing  in the country and not the price of the goods which the  exporter expects to receive from the overseas purchaser."

       The Court opined that the prohibition of importation and exportation  could be subject to certain prescribed conditions to be fulfilled before or  after clearance of goods and in the event the conditions are not fulfilled, it  may amount to prohibited goods.  

17.     Noticing that such a Notification had been issued by the Central  Government in terms of Section 18 of the Foreign Exchange Regulation Act,  1973 viz-a-viz Section 14 thereof providing for valuation of goods for the  purposes of assessment, it was held :

"16. The aforesaid section would be applicable for  determining the value of goods for the purposes of  assessment of tariff under the Act or any other law for the  time being in force whereunder a duty of customs is  chargeable on any goods by reference to their value. In  the present case, on export of goods in question, no duty  was payable under the Act. It was, therefore, contended  that there is no scope of application of Section 14 for  determining the value of goods by applying the criterion  laid down in the said section. In our view, this  submission cannot be accepted. For determining the  export value of the goods, we have to refer to the  meaning of the word "value" given in Section 2(41) of  the Act, which specifically provides that value in relation  to any goods means the value thereof determined in  accordance with the provisions of sub-section (1) of  Section 14. Therefore, if the export value of the goods is  to be determined, then even if no duty is leviable, the  method (mode) for determining the value of the goods  provided under Section 14 is required to be followed.  Section 14 specifically provides that in case of assessing

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the value for the purpose of export, value is to be  determined at the price at which such or like goods are  ordinarily sold or offered for sale at the place of  exportation in the course of international trade, where the  seller and the buyer have no interest in the business of  each other and the price is the sole consideration for sale.  No doubt, Section 14 would be applicable for  determining the value of the goods for the purpose of  tariff or duty of customs chargeable on the goods. In  addition, by reference it is to be resorted to and applied  for determining the export value of the goods as provided  under sub-section (41) of Section 2. This is independent  of any question of assessability of the goods sought to be  exported to duty. Hence, for finding out whether the  export value is truly stated in the shipping bill, even if no  duty is leviable, it can be referred to for determining the  true export value of the goods sought to be exported."

       The question came up for consideration again in Commissioner of  Central Excise & Customs, A.P.   vs.  Suresh Jhunjhunwala and others :  2006 (10) SCALE 480 wherein this Court not only noticed Om Prakash  Bhatia (supra) but also Commissioner of Customs (EP), Mumbai  vs.   Prayag Exporters Pvt. Ltd. : (2003) 155 ELT 4 (SC) to hold :- "18.    However, it appears, the same Bench considered  the matter at some length in Om Prakash Bhatia (supra)  and opined that the exporters were obliged to declare the  value of the goods. In a detailed judgment, this Court not  only took into consideration the provisions of the  Customs Act, but also the provisions of Section 15 of the  Foreign Exchange Regulation Act and the rules framed  thereunder, as also the notifications issued by the Central  Government from time to time. The Court opined that for  determining the export value of the goods, it is necessary  to refer to the meaning of the word "value" as defined in  Section 2(41) of the Act, and the same must be  determined in accordance with the provision of Sub- section (1) of Section 14, stating: ’\005Section 14 specifically provides that in case of  assessing the value for the purpose of export, value  is to be determined at the price at which such or  like goods are ordinarily sold or offered for sale at  the place of exportation in the course of  international trade, where the seller and the buyer  have no interest in the business of each other and  the price is the sole consideration for sale. No  doubt, Section 14 would be applicable for  determining the value of the goods for the purpose  of tariff or duty of customs chargeable on the  goods. In addition, by reference it is to be resorted  to and applied for determining the export value of  the goods as provided under Sub-section (41) of  Section 2. This is independent of any question of  assessability of the goods sought to be exported to  duty. Hence, for finding out whether the export  value is truly stated in the shipping bill, even if no  duty is leviable, it can be referred to for  determining the true export value of the goods  sought to be exported.’  "  

This Court after noticing the finding of Om Prakash Bhatia (supra) in  paragraph 18, observed as under :

"20,    This Court did not stop there, but also took into  consideration the provision of Rule 11 of the Foreign  Trade (Development and Regulation) Rules, 1993,

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holding: ’Hence, in cases where the export value is not  correctly stated, but there is an intentional over- invoicing for some other purpose, that is to say,  not mentioning the true sale consideration of the  goods, then it would amount to violation of the  conditions for import/export of the goods. The  purpose may be money-laundering or some other  purpose, but it would certainly amount to  illegal/unauthorised money transaction. In any  case, over-invoicing of the export goods would  result in illegal/irregular transactions in foreign  currency.’ "  21.     It may be true that the said decision related to a  matter concerning a drawback scheme, but a decision of  this Court interpreting a different section by itself cannot,  in our opinion, be brushed aside, only on the ground that  the decision of the same bench in Prayag Exporters  (supra) is applicable being related to DEPB Scheme. The  question, in our opinion, has to be considered having  regard to the provisions of the definition of the  ’prohibited goods’, ’entry of goods’ together with the  provisions of the Foreign Exchange Regulation Act."  

       The question came up for consideration yet again in Commissioner of  Customs, New Customs House, Mumbai  vs.  M/s. Vishal Exports Overseas  Limited : 2007 (3) SCALE 19 wherein one of us (Sirpukar, J) was a  Member.  In that case also Om Prakash Bhatia (supra) was noticed.  It was,  however, found that the factual scenario therein in regard to applicability of  the decision had not been established.    

       It may also be noticed that in Sanjeev Kumar Gupta  vs.   Commissioner of Customs : 2001 CRI. L.J. 1963 a learned Single Judge of  the Delhi High Court held :- "A person is said to have done anything fraudulently if  he does that with an intent to defraud but not otherwise.  The requisite guilty knowledge or mens rea under clauses  (a) and (b) of Section 135(1) of the Customs Act can be  established by circumstantial evidence. Here the  petitioner is alleged to have floated fictitious firms with  dishonest intention to obtain the duty draw back. In my  view on the facts alleged, offence under section 135 of  the Act is prima facie made out."

       We are not unmindful of the proposition of law that a penal statute  must receive strict construction.  

18.     But it is also a trite law that the Court while interpreting a statute must  consider the purpose for which the Act has been enacted.  (See - Indian  Handicraft Emporium and others  vs. Union of India and others :   (2003) 7  SCC 589 and Balram Kumawat  vs. Union of India :  (2003) 7 SCC 628.   

19.     At this stage the court is concerned with establishment of a prima  facie case.  As the allegations made in the complaint prima facie discloses an  offence under Section 135 of the Act, the High Court, in our view, has  correctly refused to quash the proceeding.   

20.     Applying the said principle to the fact of the present case, we have no  hesitation in holding that the High Court has not committed any error  whatsoever in passing the impugned judgment.    

21.     For the aforesaid reasons we do not find any merit in this appeal  which is dismissed accordingly.