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CASE NO.: Appeal (crl.)  834 of 2008

PETITIONER: M. Natarajan

RESPONDENT: State by Inspector of Police, SPE, CBI, ACB Chennai

DATE OF JUDGMENT: 07/05/2008

BENCH: P.P. Naolekar & V.S. Sirpurkar

JUDGMENT: JUDGMENT                                     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

                             JUDGMENT

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

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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

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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

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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

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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

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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

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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

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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

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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

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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:

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     "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

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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

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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

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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

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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

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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

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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

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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.

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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

judgment of Sushila Rani (Smt.) Vs. Commissioner of Income Tax &

Anr. and of Central Bureau of Investigation, SPE, SIU (X), New Delhi

Vs. Duncans Agro Industries Ltd., Calcutta. The learned Judges in their

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).

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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

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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              relied upon Hira Lal Bhagwati Vs. CBI. According to learned              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

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            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,

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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

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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.

23.   This   situation   was   explained    in   State,   CBI   Vs.   Sashi

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

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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

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           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

Court made in CBI Vs. Duncans Agro Industries Ltd. (supra).                In

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

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       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.

26.     One other judgment in Master Cables (P) Ltd. Vs. State of Kerala

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

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           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.

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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

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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; May 7, 2008