Petition dismissed for quashing complaint against cigarette smuggling worth Rs 74 lakhs under customs law

The Telangana HC dismissed a petition seeking quashment of a complaint filed under Section 200 CrPC for smuggling foreign cigarettes worth Rs. 74 lakhs disguised as electronic goods imports. The court held that the customs department circular's threshold value provision did not apply to this case involving prohibited goods under Section 123 of the Customs Act. The Additional Director General was found to be a competent authority to grant prosecution sanction. The court ruled that limitation under Section 468 CrPC did not apply as the alleged offences carried punishment exceeding three years. The petition was dismissed with petitioners' rights to legal recourse remaining open.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(i) Whether the prosecution initiated against the petitioners under Sections 132, 135(1)(a), and 135(1)(b) of the Customs Act, 1962, is liable to be quashed on the ground that the value of the alleged smuggled goods is below the monetary threshold prescribed in the Customs Department Circular dated 16.08.2022;

(ii) Whether the Additional Director General who granted sanction for prosecution on 28.11.2020 was a competent authority to do so under the relevant Circular and legal provisions;

(iii) Whether the complaint filed in August 2023 is barred by limitation under Section 468 of the Code of Criminal Procedure, 1973 (Cr.P.C.) and the corresponding Section 514 of the BNSS;

(iv) Whether the offences charged, being punishable for a maximum period of two years, render the complaint filed beyond three years from the alleged offence date as not maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Applicability of Monetary Threshold for Prosecution under Customs Department Circular dated 16.08.2022

The petitioners contended that since the value of the smuggled goods was less than Rs. 2 crores, prosecution should be dropped as per the Circular dated 16.08.2022 issued by the Customs Department. The Circular revised the threshold limits for launching prosecution in various categories of cases.

The Circular delineates two relevant categories:

• Clause 3.1: Baggage and outright smuggling cases, prescribing a threshold of Rs. 50 lakhs for unauthorized importation of goods including those notified under Section 123 of the Customs Act, 1962;
• Clause 3.2: Appraising cases/commercial frauds involving wilful mis-declaration or concealment of goods, prescribing a threshold of Rs. 2 crores.

The Court noted that cigarettes were notified under Section 123 of the Customs Act by a notification dated 25.07.2016. The smuggling involved foreign-made cigarettes worth approximately Rs. 74.44 lakhs. Therefore, Clause 3.1(ii) of the Circular applies, which sets a threshold of Rs. 50 lakhs for outright smuggling of goods notified under Section 123. The petitioners' reliance on Clause 3.2 was rejected because that clause pertains to appraising cases involving wilful mis-declaration, which was not the case here.

The Court concluded that the prosecution is not liable to be dropped on the ground of monetary threshold as the value of the smuggled cigarettes exceeded Rs. 50 lakhs, and Clause 3.1(ii) is applicable.

Issue (ii): Competency of Additional Director General to Grant Sanction for Prosecution

The petitioners challenged the sanction granted by the Additional Director General (ADG) on the ground that he was not the competent authority under the law.

The Court examined Circular No. 27/2015-Customs dated 23.10.2015, specifically Clauses 4.6 and 7.1, which clarify the authorities competent to grant prosecution sanction. Clause 4.6 states that except for certain categories of cases (covered under sub-paras 4.2.1.2 and 4.2.2), prosecution may be launched after sanction by the Commissioner/Principal Commissioner or Additional Director General/Principal Additional Director General of Revenue Intelligence. The requirement of prior approval from higher authorities applies only to the specified categories.

Since the present case does not fall under the exceptions, the ADG was competent to grant sanction. Clause 7.1 further outlines the procedural requirements for investigation reports and sanction approvals, confirming the ADG's role.

The Court rejected the petitioners' contention and held the sanction by the ADG to be valid and competent.

Issue (iii): Limitation for Filing Complaint under Section 468 Cr.P.C./Section 514 BNSS

The petitioners argued that the complaint filed in August 2023 was barred by limitation under Section 468 Cr.P.C. and the corresponding Section 514 of BNSS.

The Court noted that the offences charged include Sections 132, 135(1)(a), and 135(1)(b) of the Customs Act. The offences under Sections 135(1)(i)(B) and (C) attract punishment extending up to seven years with fine.

Section 468 Cr.P.C. prescribes a limitation period of three years for offences punishable with imprisonment up to three years. For offences punishable with imprisonment exceeding three years, no limitation period is prescribed.

Therefore, since the offences here attract punishment beyond three years, the limitation period under Section 468 Cr.P.C. does not apply, and the complaint is not barred by limitation.

The petitioners' reliance on a Single Bench judgment where the market value was less than Rs. 50 lakhs was found inapplicable given the higher value in the present case. Similarly, reliance on another judgment which did not deal with goods notified under Section 123 was held to be distinguishable.

Issue (iv): Maintainability of Complaint Beyond Three Years for Offences Punishable up to Two Years

The petitioners contended that since the offences are punishable for a maximum of two years, the complaint filed after more than three years from the alleged offence date is not maintainable.

The Court observed that the offences under Sections 135(1)(a) and (b) are punishable with imprisonment extending up to seven years, as per Sections 135(1)(i)(B) and (C). Therefore, the limitation period of three years does not apply.

The Court rejected this ground as well.

3. SIGNIFICANT HOLDINGS

"Vide notification dated 25.07.2016, cigarettes and silver bullion have been notified under Section 123 of the Act. In the light of the said notification, if we read Clause 3.1(ii) it will clearly indicate that the Circular so far as the sanction for prosecution in respect of goods notified under Section 123 of the Act, the threshold value of the products have to be not more than Rs. 50.00 lakhs and it is Clause 3.1 which would be applicable in the case of the petitioners and not Clause 3.2."

"Except in respect of cases covered by sub-paras 4.2.1.2 and 4.2.2 above, in all other cases, prosecution may be launched after due sanction by the Commissioner/ Principal Commissioner (Pr.Commr.) or Additional Director General (ADGRI)/Principal Additional Director General of Revenue Intelligence (Pr.ADGRI), as the case may be."

"Section 468 Cr.P.C. prescribes that the period of limitation is only up till three years for offences punishable with imprisonment up to three years. Since the offences charged attract punishment exceeding three years, the limitation period does not apply."

The Court established the principle that the monetary threshold for launching prosecution under the Customs Department Circular must be applied in accordance with the category of goods involved, particularly taking into account notifications under Section 123 of the Customs Act.

The Court affirmed that the Additional Director General is a competent authority to grant sanction for prosecution except in specified categories.

The Court clarified that limitation under Section 468 Cr.P.C. does not bar prosecution for offences punishable with imprisonment exceeding three years, even if the complaint is filed beyond three years from the date of the offence.

Accordingly, the Court dismissed the writ petition seeking quashment of the complaint and prosecution, leaving open the petitioners' right to pursue appropriate remedies under the law.

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