2018 (1) TMI 1584 - HC - Customs

Court dismisses petition challenging criminal prosecution for conspiracy and fraud, directs speedy trial completion.

Thirumurthy Versus Inspector of Police

The court dismissed the petition challenging the prosecution of the petitioner for alleged criminal conspiracy and fraudulent duty drawback incentives. It ... Duty Drawback - export of low priced goods by over-invoicing its value many times - HELD THAT:- The scheme of duty draw back is an incentive extended by the Government to any exporter who gains foreign exchange through export of finished goods manufactured from excisable materials used as raw material for manufacturing the goods exported. To avail this incentive, the obligation on the part of the exporter is that he should bring back the sale proceeds of the goods exported in foreign exchange into India through his firm's bank account within 6 months. Sub-sections(1) and (2) of section 155 has to be read conjointly and not disjointly. “Good faith” and “anything done pursuance of this Act” (to be read as customs Act) which are twin pre-conditions mentioned in subsection (1) to be satisfied primarily. For those who satisfy the said twin conditions, proceedings shall be initiated after expiry of one month notice and within 3 months from the date of cause of action as per sub-section (2) of Section 155 of the Act. If the pre-conditions mentioned in sub-section (1) is not attracted, the compliance of mandate mentioned in sub-section (2) does not arise. This court holds that the contentions raised by the petitioner both on facts as well as law is devoid of merit and hence, this Criminal Original Petition is dismissed. Issues Involved:1. Validity of the prosecution against the petitioner based on alleged criminal conspiracy and fraudulent duty drawback incentives.2. Discrimination in prosecution among customs officials.3. Immunity under Section 155 of the Customs Act.4. Prior notice requirement under Section 155(2) of the Customs Act.Issue-wise Detailed Analysis:1. Validity of the Prosecution:The petitioner, accused number 24 in C.C.No.10 of 2010, sought to quash the case on the grounds that no material evidence constituted an offense for prosecution. The CBI registered a complaint alleging that from 2001 to 2006, the petitioner and 25 others entered into a criminal conspiracy to avail fraudulent duty drawback incentives by exporting low-priced goods with over-invoiced values. The petitioner, serving as Superintendent of Customs, allegedly obtained illegal gratification for clearing and sanctioning duty drawbacks, causing a wrongful loss of Rs. 5,77,59,493 to the government. The investigation revealed that the actual value of goods exported was Rs. 23,105,193, while the inflated invoices showed Rs. 518,984,176.2. Discrimination in Prosecution:The petitioner argued that the case was based on a mistaken notion that he was the proper officer for valuation, examination, and sanction of drawbacks. He contended that the customs manual holds multiple officials collectively responsible, and selectively prosecuting a few is discriminatory. However, the court found that the petitioner, as Superintendent, had a significant role in the conspiracy, making his contention unsustainable.3. Immunity under Section 155 of the Customs Act:The petitioner claimed immunity under Section 155, which protects actions taken in good faith under the Act. He argued that no prosecution could be initiated without prior notice or after three months from the cause of action. The court clarified that Section 155(1) provides immunity for acts done in good faith, while Section 155(2) requires notice for proceedings. However, the court emphasized that cheating and obtaining illegal gratification are not acts done in good faith or in pursuance of the Customs Act, thus not covered by Section 155.4. Prior Notice Requirement:The petitioner relied on judgments from the Calcutta and Punjab & Haryana High Courts, interpreting Section 155(2) as requiring prior notice for criminal prosecution. The court disagreed, stating that Section 155(2) should not be read in isolation from Section 155(1). The court highlighted that the Supreme Court's judgment in Raju's case, which dealt with the Central Excise and Salt Act, was factually different and not applicable to the Customs Act. The court also referenced the Rajasthan High Court's judgment, which supported the view that Section 155(2) does not include criminal prosecution.Conclusion:The court dismissed the petition, finding the contentions on both facts and law devoid of merit. The trial court was directed to complete the trial by July 2018 and report to the High Court Registry. The court emphasized that the petitioner's role in the conspiracy and the criminal conduct alleged were sufficient to proceed with the prosecution.