Supreme Court affirms Customs Act Section 135's retrospective application for fraudulent evasion.

The Supreme Court upheld the High Court's decision that the allegations in the complaint established a prima facie offense under Section 135 of the Customs Act. It affirmed the retrospective application of the 2003 amendment to Section 135, rejecting the argument that a Customs Officer could not be prosecuted under this provision. The court emphasized that Section 135 applies to any individual involved in fraudulent evasion of duty or prohibited goods, regardless of their official status. The appeal was dismissed, and the proceedings were upheld.

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Issues Involved:
1. Legality of prosecuting a Customs Officer under Section 135 of the Customs Act.
2. Retrospective application of the 2003 amendment to Section 135 of the Customs Act.
3. Prima facie establishment of an offence under Section 135 of the Customs Act.

Detailed Analysis:

1. Legality of prosecuting a Customs Officer under Section 135 of the Customs Act:
The appellant contended that A.K. Saxena, being a Customs Officer, could not be prosecuted under Section 135 of the Customs Act. It was argued that the complainant committed a serious illegality in exercising his power of arrest against Saxena, which is not contemplated under Section 104 of the Act. However, the court did not accept this argument, noting that the allegations made in the complaint, including the appellant's own statements under Section 8 of the Act, indicated that Saxena had conspired with others in the illegal export of over-invoiced readymade garments. The court emphasized that Section 135 applies to any person involved in the fraudulent evasion of duty or prohibited goods, regardless of their official status.

2. Retrospective application of the 2003 amendment to Section 135 of the Customs Act:
The appellant argued that the duty drawback was not included in Section 135 of the Customs Act prior to its amendment in 2003, and thus, the impugned judgment could not be sustained. The High Court, referencing the explanatory notes to the legislative changes in the Budget Bulletin 2003, opined that the amendment was clarificatory in nature and would have retrospective effect. The Supreme Court upheld this view, stating that the amendments made in Section 135 by the 2003 Amendment Act must be viewed in the context of the overall legislative intent to curb fraudulent practices related to duty evasion and prohibited goods.

3. Prima facie establishment of an offence under Section 135 of the Customs Act:
The court examined whether the allegations in the complaint disclosed a prima facie offence under Section 135 of the Act. It was noted that Section 135 deals with two types of offences: evasion of duty and prohibitions related to prohibited goods. The court emphasized that the word "or" in Section 135 should be read disjunctively, covering both types of offences independently. The court referred to various provisions of the Customs Act, including Sections 2(33), 11, 50, 113, and 135B, as well as relevant case law, to interpret the scope and application of Section 135. It was concluded that the wrongful claim of duty drawback and the over-invoicing of export goods constituted a prima facie offence under Section 135. The court cited previous judgments, including Om Prakash Bhatia vs. Commissioner of Customs and Commissioner of Central Excise & Customs vs. Suresh Jhunjhunwala, to support its interpretation.

The court also noted that the amendments to Section 135 by the 2003 Amendment Act were intended to address issues related to the fraudulent evasion of duty and prohibited goods, including wrongful claims of duty drawback. The court held that the allegations made in the complaint, including the appellant's involvement in floating fictitious firms and over-invoicing export goods, prima facie disclosed an offence under Section 135. Therefore, the High Court correctly refused to quash the proceedings.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's judgment that the allegations in the complaint disclosed a prima facie offence under Section 135 of the Customs Act. The court affirmed the retrospective application of the 2003 amendment to Section 135 and rejected the argument that a Customs Officer could not be prosecuted under this provision.

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