Prosecution under Customs settlement law begins at magisterial cognisance, not mere FIR registration, preserving immunity from prosecution.

For the proviso to Section 127H of the Customs Act, 1962, prosecution is instituted only when the criminal process reaches the stage of magisterial cognisance on filing of the challan or police report, not on mere registration of an FIR. The Court held that an FIR only sets investigation in motion and does not by itself trigger the statutory bar on settlement immunity. Because the challans were filed after the settlement application, proceedings for prosecution had not been instituted when the application was made. The refusal to grant immunity from prosecution was therefore unsustainable, and immunity was granted.

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Issues: Whether, for the purpose of the proviso to Section 127H of the Customs Act, 1962, proceedings for prosecution are instituted on registration of an FIR or only when the challan is presented before the Magistrate, and whether immunity from prosecution could therefore be denied.

Analysis: The statutory bar in the proviso to Section 127H operates only where proceedings for prosecution have already been instituted before receipt of the settlement application. The Court construed the expression in light of the criminal procedure scheme, holding that mere registration of an FIR sets investigation in motion but does not, by itself, amount to institution of prosecution. Institution of prosecution was held to occur only when the matter reaches the stage of magisterial cognisance on submission of the police report or challan. On that interpretation, proceedings had not been instituted when the settlement application was filed, because the FIRs predated the application but the challans were presented later.

Conclusion: The refusal to grant immunity from prosecution was unsustainable. The order of the Settlement Commission was quashed to that extent, and immunity from prosecution was granted to the petitioner.

Ratio Decidendi: For the proviso to Section 127H of the Customs Act, 1962, proceedings for prosecution are instituted only when the criminal process reaches the stage of magisterial cognisance on filing of the challan or report, and not upon mere registration of an FIR.

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