TaxTMI 
TaxTMI 
2024 (6) TMI 1337
X X X X Extracts X X X X
X X X X Extracts X X X X
....35 (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 who had been arrested in the year 2005 by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reight 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 out 120 Mts of Red Sanders valued at Rs. 48.00 crores i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. State of Maharashtra and another (2005) 5 Supreme Court Cases 294 15. Mr. Ponda would em....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 certain provisions of the PML Act and the alleged procedure followed by the ED while inquiring into/inve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ack 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 the said case. After his release from detention, he started indulging in smuggling of Red Sanders along with one Ajit Satam. He continu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....05 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 12th Sept 2017 Till date 2 Ali Ahmed Ahmed Malik Saeed 12th Sept 2017 Till Date 3 Shehroz Zakir Husain Malik 07th June 2010 Died 4 Saeed Ahmad Zakir Husain Malik (A-3) 07th June 2010 12th Sept 2017 5 Badshah Abdul Majid Malik 07th June 2010 01st Nov 2010 6 Shaista Badshah Malik 01st Nov 2010 31st March 2016 Initially the shares were allotted as tabulated below: S.No. Name of the Person Initial allotment of shares 1 Saeed Malik 3325 2 Shehroz Malik 3325 3 Badshah Malik 3350 The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocuments 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 purpose of repayment of loan procured from Gateway Offshore and he is unaware of the details of Gateway offshore. 2. Statement of Mr. Badshah Majid Malik (A-1) Statement recorded u/s 50 of the PMLA on 21.12.2021 In this statement he has revealed that he was arrested by DRI in July, 2005 on the charges of fraudulently availing Duty Drawback and in 2007 DRI filed COFEPOSA against him in the same case. It was further revealed that he was again a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itrade 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 Exhibit XXXXI) Certificate dated 04.02.2022 submitted by HDFC Bank Through this account statement it was found that Rs. 5.39 crores have been received from Empire India Pvt Ltd (A-2) that were further transferred to M/s. Kohinoor Developers, Almasood Quereshi and other individuals for purchase of property, luxury cards and loan repayment. 18. Certified copies of Bank account statement of account bearing No. 083615300084 70 pertaining to Badshah Majid Malik (A-1) (Copy annexed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 relatives including the applicant who received a total of Rs. 9.86 Crore in his personal accounts from the accounts of M/s. Empire India Multitrade Pvt Ltd. 32. Mr. Ponda, learned senior counsel emphasized on paragraphs 253 and 281 to 284 of the judgment of the Supreme Court in case of Vijay Madanlal Choudhary (supra). The same are extracted below; "253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin 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 crime within the meaning of Section 2 (1) (u) of the 2002 Act and further it is involved in any process or activity. Not even in a case of existence of undisclosed income and irrespective of its volume, the definition of "proceeds of crime" under Section 2 (1) (u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence. It is possible that in a given case after the discovery of huge volume of undisclosed property, the authorised officer may be advised to se....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 judgment in the case of Vijay Madanlal Choudhary (supra). 35. Indubitably, investigation by the Ed is in respect of money laundering of Rs. 51.12 crores which relate to the period from 20th August, 2014 to 14th November, 2015. However, scope and ambit of investigation under the PML Act is wider in nature which can take into account the period even before the date and time of commission of the scheduled offence. As already stated, the criminal activity had been committed even before the same has been notified as a scheduled offence for the purpose of P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) (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) of the 2002 Act - so long as the whole or some portion of the property has been derived or obtained by any person "as a result of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 2 (1) (u) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 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 bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The Supreme Court has made it very clear that the offence of money laundering is not dependent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. As already stated hereinabove and the details of period unearthed by the Investigating Agency, the applicant had already ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 (supra) wherein the Supreme Court relied upon the principles laid down by it in case of Sanjay Chandra Vs. CBI (2012) 1 SCC 40 wherein it is held that in economic offences, since the punishment is seven years, the bail should be granted and that there is no bar that in any economic offence bail cannot be granted. There can be no dispute about the said principle laid down. Nevertheless, in case of Tarun Kumar (supra), apart from the fact that it involves commission of economic offence, yet the ratio laid down by the Supreme Court in case of Vijay Madanlal Choudhary (supra) would be squarely applicable to the present case....