TaxTMI 
TaxTMI 
2024 (6) TMI 1337
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....under sections 132, 135 (1) (a) (ii) and 135 (1) (b) (ii) r/w 140 of the Customs Act, 1962 (for short "Customs Act:) for false declaration of the consignment as Fabric Glue/Radiators/Assorted Colours for smuggling of Red Sanders and submitting forged/false documents of the companies situate at Special Economic Zones (for short "SEZ") as well as evasion of duty. 2. A specific intelligence was received by the Officers of the DRI Mumbai Zonal Unit that Red Sanders are being smuggled out of India in a export consignment in container No. DRYU2306380 to Jebel Ali Port on the basis of forged documents. In view of the said intelligence input, the aforesaid container was called back to cargo logistic CFS for examination. It led to recovery and seizure of 7.8 metric ton of wooden logs of Red Sanders valued at Rs. 3.12 crores on 17th November, 2015. During investigation, it revealed that the consignment of Red Senders was being smuggled by mis - declaring the same as Fabric/Glue/Radiators/Assorted Colours on the basis of forged documents located at SEZ. The investigation further revealed that the applicant was a Kingpin of the syndicate of smuggling Red Sanders. He was a history sheeter wh....
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....arder and Customs Broker (CB) by profession having freight forwarding by name M/s Marine Trans India Pvt. Ltd and CB firm viz. M/s. Srinivas Clearing & Shipping India Pvt. Ltd (hereinafter referred to as "M/s. SC&SIPL"). 7. Investigation further revealed that Vijay Subbanna Poojary had offered requisite services of shipment of Red Sanders in the guise of fabric/glue/radiators/assorted colours and, had also provided details of SEZ unit whose names were to be used for shipment of such consignments. Eighteen such consignments were arranged to be shipped by Vijay Subbanna Poojary through Harshavardhan Hegde, Managing Director of M/s. ESAIPL, who, in turn, had availed the services of his acquaintance and his employees for freight booking for those consignments. 8. After having finalized the operational issues, the applicant in association with Vijay Subbanna Poojari and their associates successfully caused shipment of seventeen consignments of Red Sanders to the United Arab Emirates/Africa. Apart from seizure of 7.8 Mts of Red Sanders valued at Rs. 3.12 crores that was attempted to be shipped out by the syndicate in the guise of Fabric Glue, the syndicate had, in the past, shipped....
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....tion that the entire case of ED for money laundering is to the tune of Rs. 51.12 crores spanning for a period commencing from 20th August, 2014 to 14th November, 2015 in view of the charge- sheet tendered by the customs officials. He would argue that the predicate offence is only for the period 2014-2015, however, ED investigated the alleged money laundering other than the transactions/consignments of the period 2014-2015 and investigated all incidents prior to 2014-2015. He questions the legality of investigating alleged money laundering for the aforesaid period by the ED by contending as to whether the Investigating Agency is empowered to investigate what is not the part of the predicate offence. Mr. Ponda would place reliance on several decisions, especially, a well-known decision of the Supreme Court in case of Vijay Madanlal Madanlal Chaudhary Vs. Union of India 2022 SCC Online SC 929, apart from the decisions in the following cases; (1) P. Chidambaram Vs. Directorate of Enforcement (2020) 13 Supreme Court Cases 791 (2) Directorate of Enforcement Vs. Deepak Mahajan and another (1994) 3 Supreme Court Cases 440 (3) Ranjitsing Brahmajeetsing Sharma Vs. ....
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....heduled offence under the Customs Act and, therefore, these properties are proceeds of crime in view of section 2 (1) (u) of the Act. Mr. Shirsat has invited my attention to the various documents on record to support his contention by emphasizing on the fact that in view of criminal antecedents of the applicant, rigours of section 45 will come into play. 18. Mr. Shirsat has also taken me through various paragraphs of the judgment in case of Vijay Madanlal Choudhary (supra), especially, paragraphs 250, 251, 252, 270 and 280. 19. Mr. Shirsat contends that the applicant has failed to discharge the burden of showing absence of reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence, if released. 20. The applicant has preferred an application for bail before the Special Court which came to be rejected on 1st July, 2022. 21. Learned Senior Counsel Mr. Ponda as well as learned Special P.P Mr. Shirsat have mainly relied upon the judgment of the Supreme Court in the case of Vijay Madanlal Choudhary (supra) wherein the Supreme Court was called upon to deal with the pleas concerning the validity and interpretation of c....
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....led by Shipping Agent, M/s. ESAIPL Andheri (West), Mumbai. In view of the said intelligence, Container No. DRYU 2306380 was called back and examined under a panchanama on 27th November, 2015. 7.800 Metric Tonnes (Mts) of wooden logs purported to be Red Sanders, approximately valued at Rs. 3.12 crores were recovered. It revealed that the freight booking for the abovesaid consignment was done by M/s. ESAIPL at the behest of M/s. Krrish Corporation having address at 6/85 Hadapsar Industrial Estate - I, Hadapsar, Pune. In fact, no firm by name "M/s. Krrish Corporation" was found at the given address. It was found that the said freight booking was done by a person namely Vijay Poojary (A-4) who was himself a Freight Forwarder and Customs Broker by profession. He was forwarding the freight by name "M/s. Marine Trans India Pvt. Ltd" and CB firm viz: "M/s. Srinivas Clearing & Shipping India Pvt. Ltd. 26. Investigation further revealed that the applicant was the kingpin of the syndicate of smuggling the Red Sanders. He was a history sheeter and had been arrested in the year 2005 by DRI in case of availing Duty Drawback on the basis of forged documents. He was detained under COFEPOSA in t....
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....A- 3) and Shehroz Malik have criminal background as all three of them were arrested by DRI in a case of availing Duty Drawback fraudulently in the year 2005 and all three of them were detained by DRI under COFEPOSA in the same case. Sh. Badshah Majid Malik (A-1) is a habitual offender and he was again arrested by DRI in the year 2015 for smuggling Red Sanders and was thereafter detained under COFEPOSA in the same case. 7.3 Empire India Multitrade Pvt. Ltd (A-2) was incorporated on 07.06.2010 and its authorized capital was Rs. 1 Crore and paid-up capital was Rs. 1 lakh and id engaged into the business of Real Estate and trading of fabric. The Directors of the Empire India Multitrade Pvt. Ltd (A-2) are detailed below: D/N Director Name Appointment Date Cessation Date 1 Aakib Badshah Malik 12^th Sept 2017 Till date 2 Ali Ahmed Ahmed Malik Saeed 12^th Sept 2017 Till Date 3 Shehroz Zakir Husain Malik 07th June 2010 Died 4 Saeed Ahmad Zakir Husain Malik (A-3) 07^th June 2010 12^th Sept 2017 5 Badshah Abdul Majid Malik 07^th June 2010 01^st Nov 2010 6 Shaista Badshah Malik 01st Nov 2010 31^st Marc....
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....d 08361530008470 of Empire India Multitrade Pvt Ltd (A- 2) were obtained and scrutinized. Analysis of the account statements revealed that an amount of Rs. 9.86 Crores has been transferred to the accounts of Badshah Majid Malik (A-1) as detailed below: 30. Pages 284 to 310 of the record is the brief summary of evidence to prove involvement of the applicant in the money laundering. Few of the material is extracted below; S.N Documents submission details Description of documents Scrutiny analysis 1 Statement of Mr Badshah Majid Malik (A-1) Statement recorded u/s 50 of the PMLA on 20.12.2021 In his statement he has revealed that he is a shareholder of Empire India Multitrade (P) (A- 2) Ltd and Empire India Multitrade (P) (A-2) Ltd is in the business of fabrics and construction and his son, Aakib Malik is the Director and authorized signatory of Empire India Multitrade (P) Ltd (A-2). He further revealed that he had received funds from Empire India Multitrade Pvt. Ltd. for the purpose of fabric purchase and investment in his company namely Classic Stone Crusher which belonged to him. He further revealed that he had made a payment of Rs. 2.5 Crores for the purp....
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.... The Prohibition of Benami Property Transaction Act, 1988 considering them as Benami companies. 8. Statement of Badshah Majid Malik (A-1) Statement recorded u/s 50 of the PMLA on 02.01.2022 In his statement he has revealed that he was authorised signatory of Empire India Multitrade Pvt Ltd (A-2) during 2010 for a period of 4-5 months. It was further revealed that he had made payments of Rs.5.83 Crores to Indivar Traders for procurement of shares of Empire India Multitrade Pvt. Ltd (A-2) from one of the 5 companies holding shares of Empire Multitrade Pvt Ltd Namely Empower, Emporis Speciality papers, Aadhar Ventures Pvt Ltd Secunderabad Healthcare Pvt Ltd. It was further revealed that that he does not know the name of the company whose shares he was proposing to procure and he was unable to to buy shares as he was not able to arrange enough funds. It was further revealed that the said amount of Rs.5.83 Crores is still laying with Indivar Traders and he has no knowledge in respect of the whereabouts of the Indivar Traders. 17. Certified copies of Bank account statement of account bearing No. 083610100007 61 pertaining to Badshah Majid Malik (A-1) (copy annexed as Ex....
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....fined under Section 3 of the PMLA, 2002 which is punishable under Section 4 of the PMLA, 2002. 31. It can thus be seen that the applicant was involved in the smuggling of Red Sanders from 2008 to 2010. He again re-entered in the smuggling of red sanders in the year 2014 and managed to smuggle seventeen containers of Red Sanders valued at 48 Crores between 2014-2015 before the interdiction and seizure of the container of Red Sanders by DRI on 27th November, 2017. The proceeds of crime in respect of smuggling of Red Sanders that were being undertaken by the applicant since 2008 was laundered in the guise of share subscription premium of M/s. Empire India Multitrade (P) Ltd (A-2) that was received from five Benami companies namely Empower India Ltd, Empower Projects Ltd, Speciality Papers Ltd, Secunderabad Healthcare Ltd and Aadhar Ventures Ltd that were controlled by Shirish Chandra Shah, C.A who was an entry operator and used to provide accommodation entries in the form of share subscription premium in lieu of cash payments. Those payments were credited to the accounts of accused No. 2 from 2011 to 2017, wherefrom those were transferred to the personal accounts of Directors and r....
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...., but all properties qualifying the definition of "proceeds of crime" under Section 2 (1) (u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2 (1) (u) as it stands today. On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter. 282. Be it noted that the authority of the Authorised Officer under the 2002 Act to prosecute any person for offence of money- laundering gets triggered only if there exists proceeds of ....
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....n derived directly as a result of criminal activity of smuggling Red Sanders relating to the scheduled offence and, as such, are proceeds of crime. It cannot be said that the authority had proceeded on an assumption that the properties recovered by them are the proceeds of crime and that scheduled offence has been committed by the applicant. The material placed on record is also sufficient to construe that the properties in question qualified the definition "proceeds of crime" under section 2 (1) (u) of the P.M.L Act. It would not be out of place to mention here that ED under the PML Act is prosecuting the applicant and the others for the offences of money laundering on the basis of its reasons to believe that the applicant has been in possession of "proceeds of crime" which is supported by tangible and credible evidence indicating involvement of the applicant in the activity connected with the proceeds of crime. A futile attempt is made to subterfuge the true nature of real activity. 34. Mr. Shirsat, learned Special P.P, as already stated hereinabove, while strongly opposing release of the applicant on bail, invited my attention to paragraphs 250, 251, 252, 270 and 280 of the j....
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....ny property is derived or obtained, directly or indirectly, as a result of criminal activity concerning the scheduled offence, the same be regarded as proceeds of crime. In other words, property in whatever form mentioned in Section 2 (1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. It must follow that the Explanation inserted in 2019 is merely clarificatory and restatement of the position emerging from the principal provision [i.e., Section 2 (1) (u)]. 251. The "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2 (1) (u) o....
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....he nature of clarification and not to increase the width of the main definition "proceeds of crime". The definition of "property" also contains Explanation which is for the removal of doubts and to clarify that the term property includes property of any kind used in the commission of an offence under the 2002 Act or any of the scheduled offences. In the earlier part of this judgment, we have already noted that every crime property need not be termed as proceeds of crime but the converse may be true. Additionally, some other property is purchased or derived from the proceeds of crime even such subsequently acquired property must be regarded as tainted property and actionable under the Act. For, it would become property for the purpose of taking action under the 2002 Act which is being used in the commission of offence of money- laundering. Such purposive interpretation would be necessary to uphold the purposes and objects for enactment of 2002 Act. 270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money-laundering to indulg....
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....sufficient and not only upon projection of the ill-gotten money as untainted money. Many members of a crime syndicate could then simply keep the money with them for years to come, the hands of the law in such a situation cannot be bound and stopped from proceeding against such person, if information of such illegitimate monies is revealed even from an unknown source". 37. A harmonious reading of the aforesaid paragraphs referred to by Mr. Ponda and Mr. Shirsat would indicate that the ED was well within it's jurisdiction to investigate continuing offence/s, irrespective of the date and time of commission of the scheduled offence as observed by the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary (supra). It is crystal clear that a criminal activity may have been committed before the same had been notified as a scheduled offence for the purpose of PML Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money laundering under the PML Act for continuing to po....
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.... obtained as a result of that crime". 283. Even though, the 2002 Act is a complete Code in itself, it is only in respect of matters connected with offence of money- laundering, and for that, existence of proceeds of crime within the meaning of Section 2 (1) (u) of the Act is quintessential. Absent existence of proceeds of crime, as aforesaid, the authorities under the 2002 Act cannot step in or initiate any prosecution. 284. In other words, the Authority under the 2002 Act, is to prosecute a person for offence of money-laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of "proceeds of crime". Only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime, action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central Government, such process initiated would be a standalone process". 39. In view of the judgment of the Supreme Court in the case of P. Chindambaram Vs. Directorate of Enforcement (sup....
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....ther (supra). It would be apposite to extract paragraph 103 of the said judgment; "103. In fact, Justice Yogeshwar Dayal speaking for the majority in Union of India v. O.P. Gupta has rightly observed thus: "The expression 'accused' used in Section 167 (2) of the Code is not in the sense of accused under Article 20(3) of the Constitution and/or Section 25 of the Indian Evidence Act with which the Supreme Court was concerned in the cases of Ramesh Chander Mehta and/or Illias. The word, 'accused' in Section 167 (2) of the Code is merely used in the sense of defining a person who has been arrested, detained and produced before a Magistrate and not in the sense of accused person under the Customs Act and/or Foreign Exchange Regulation Act since that person has been defined in the aforesaid two judgments as only that person against whom cognizance has been taken by the Magistrate on a complaint being filed. Therefore, the judgments of the Supreme Court in the cases of Ramesh Chander Mehta or Illias referred to above do not stand in the way of applicability of Section 167 (2) of the Code to the person detained and produced by competent officer before the Magist....