TaxTMI 
TaxTMI 
2003 (5) TMI 63
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....assertion makes out the offence under Section 120B read with Section 420 of the Indian Penal Code. 3.The respondent herein (Central Bureau of Investigation, New Delhi) initiated criminal proceedings under Section 120B read with Section 420 of the Indian Penal Code against the appellants on the ground that the appellants in conspiracy with the Director of Gujarat Cancer and Research Institute, Mr. T.B. Patel (deceased), Secretary of the Gujarat Cancer Society, Mr. N.L. Patel and Dr. Viral C. Shah with each other have cheated the Government of India in terms of evasion of Customs Duty and by concealment of facts obtained Customs Duty Exemption Certificate in respect of MRI and Lithotripsy machines and by violating the provisions of 'actual user' condition as per Import-Export Policy and Customs Notification No. 279/83, dated 30-9-1983 and Customs Notification No. 64/88 dated 1-3-1988 during the year 1987-90, despite acknowledging the fact that the Customs Duty has been paid by the appellants to the Customs Department and settled under the Kar Vivad Samadhan Scheme, 1998. In the instant case, two machines were imported into India by the Gujarat Cancer Society (hereinafter referred ....
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...., the Government of India launched the Kar Vivad Samadhan Scheme, 1998, whereby whoever takes the benefit under the said Scheme is granted immunity from prosecution from any offence under the Customs Act including the offence of evasion of duty. In accordance with the Kar Vivad Samadhan Scheme, 1998, the GCS had agreed to deposit the stipulated amount of over Rs. 98 lakhs which had already been deposited earlier and withdrew the Civil Appeal pending before this Court. On 19-7-1999, a certificate for full and final settlement of tax arrears in respect of the Kar Vivad Samadhan Scheme, 1998 was issued to the GCS. The said Certificate, inter alia, certified the receipt of payment from the GCS towards full and final settlement of tax arrears determined in the order dated 10-2-1999 of the Designated Authority and further granting immunity to the GCS from any proceedings for prosecution from any offence under the Customs Act, 1962 or from the imposition of penalty under the said enactment, in respect of the matters covered in the declaration made by the GCS. 6.However, a case was registered against the appellants on 6-1-1999 by the respondent alleging that the appellants in conspiracy....
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.... of the declarations filed specifically stated that any adjustment of refunds towards tax arrears of the appellant by the Department in the earlier years without following the mandatory procedure of Section 245 of the Act would still remain as tax arrears for the purpose of the KVSS and it is on that basis the declarations were accepted by the Department. Having accepted the claim of the appellant on that basis, it will not be permissible for the respondents now to turn around and take a different stand." The case of the prosecution is that this is not a question of mere evasion of custom duties but it is a question of obtaining custom duty exemption certificate from the Ministry of Health by making a false assertion that the machines imported are for actual user. The compounding of offence subsequent thereto only indicates that a certificate was falsely induced from the Ministry of Health. Having heard learned Counsel for parties and having gone through the judgment relied upon by learned Counsel for the petitioner, I am of the view that obtaining a certificate, that was meant for actual user, on false assertion, makes out the offence. Crl.M.(M) 360/2002 is dismissed." ....
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....dgment of this Court in the case of Sushila Rani (Smt.) v. Commissioner of Income-tax and Another, (2002) 2 SCC 697. He also cited the judgment of this Court in the case of Central Bureau of Investigation, SPE, SIU(X), New Delhi v. Duncans Agro industries Ltd., Calcutta, (1996) 5 SCC 591. Placing reliance on the above judgments, he urged that the alleged criminal liability stands compounded on a settlement with respect to the civil issues and, therefore, the FIR was erroneously issued and was totally unwarranted. He further submitted that under the penal law, there is no concept of vicarious liability unless the said statute covers the same within its ambit. In the instant case, the said law which prevails in the field i.e. the Customs Act, the appellants have been therein under wholly discharged and the GCS granted immunity from prosecution. He also contended that the learned Single Judge failed to appreciate that the GCS had taken the benefit of the Amnesty Scheme of Kar Vivad Samadhan Scheme, 1998 and, therefore, implicating the appellants being office bearers of the Society under Section 120B read with Section 420 of the Indian Penal Code is against the purpose and object of th....
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....hose judgments is also without any merit and in the present case, material on record clearly show and establish the criminal conspiracy to cheat the Government and actually cheating the Government of India pursuant to the same and that it is not a civil dispute as has been sought to be made out and that the conduct of the accused persons is criminal in nature and material on record clearly establish commission of criminal offences by them. Thus, he would submit that the judgment in the case of Duncans Agro Industries Ltd., Calcutta (supra) has no application to the present case. Referring to the plea that the duty payable has been subsequently paid, he submitted, that such payment is not a ground for quashing criminal proceedings or absolving the accused persons of their criminal liability. According to him, the judgment in the case of Sushila Rani (supra) dealt with proceedings under the Income-tax Act and held that once the matter is settled under the Kar Vivad Samadhan Scheme, 1998, such settlement cannot be reopened except under specified grounds and that the stated grounds do not exist in the said case and that there is nothing in the said judgment warranting the plea of the a....
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....abad as per the tripartite agreement with the Government of Gujarat, the Gujarat Cancer Society, and the Gujarat Cancer and Research Institute. (3) Raising of loan, Dr. Shah will arrange for the Society procuring finance from financial institutions including leasing company or companies for meeting the cost for the matching out the purchase of procuring such finance the said machines may be mortgaged or leased to leasing company or financial institution which in turn will be leased out to the Society. (4) In consideration of the Society having entrusted the running and maintaining the said machine to the said Dr. Shah as herein provided the said Dr. Shah shall pay to the Society rental which shall be equivalent to the amount of monthly instalment and interest and/or hire charges payable by the Society to the financial institutions and/or to the leasing company from whom the finances shall have procured for the said machines. …………………………………………………………………………….. (6) ....
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....n, the agreement between the GCS, the GCRI and the State Government of Gujarat was also enclosed as Annexure No. 4. 15.Our attention was also drawn to the Text of the Kar Vivad Samadhan Scheme, 1998, under Chapter IV of Finance (No. 2) Act, 1998. Our attention was also drawn to Sections 86 to 98 of the said Scheme which are relevant for the present purpose. Our attention was further drawn to the Memorandum to Finance (No. 2) Bill, 1998 explaining the provisions of the Kar Vivad Samadhan, 1998. The said Scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both in various direct tax enactments as well as indirect taxes enactments by offering waiver of a part of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The assessee on his part shall seek to withdraw appeals pending before various appellate authorities and courts. The Kar Vivad Samadhan Scheme, 1998 comes into force on the first day of September, 1998 and ends on 31st day of December, 1998. The Kar Vivad Samadhan Scheme, 1998 is applicable to tax arrears outstanding as on 31-3-1998 under various direct tax enactment....
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....ax arrears payable under the indirect tax enactment. Section 89 of the Kar Vivad Samadhan Scheme, 1998 with particulars to be furnished in declaration and Section 90 of the Scheme deals with time and manner of payment of tax arrears. Clause (2) of Section 90 provides that the declarant shall pay, the sum determined by the Designated Authority within thirty days of the passing of an order by the Designated Authority and intimate the fact of such payment to the Designated Authority along with proof thereof and the Designated Authority shall thereupon issue the certificate to the declarant. Clause (3) of Section 90 of the said Scheme provides that every order passed under sub-section (1), determining the sum payable under this Scheme shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the direct tax enactment or indirect tax enactment or under any other law for the time being in force. Sub-clause (4) of Section 90 of the said Scheme provides that where the declarant has filed an appeal or reference or a reply to the show-cause notice against any order or notice giving rise to the tax arrear before any....
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....es (Prevention) Act, 1987 (28 of 1987), the Prevention of Corruption Act, 1988 (49 of 1988), or for the purpose of enforcement of any civil liability has been instituted on or before the filing of the declaration or such person has been convicted of any such offence punishable under any such enactment;" 20.Sections 166 to 177 of Chapter IX of the Indian Penal Code deal with offences relating to public servants. Likewise, Sections 378 to 462 of Chapter XVII of the Indian Penal Code deal with offences against property. Thus immunity is granted to the persons in respect of whom the offence is punishable under Chapter IX or Chapter XVII of the Indian Penal Code. 21.Annexure P-1 is the Certificate issued to the GCS under the Kar Vivad Samadhan Scheme, 1998, Form 4 [Rule 5(b)]. This certificate has been issued for full and final settlement of tax arrears under Section 90(2) read with Section 91 of the Finance (No. 2) Act, 1998 in respect of Kar Vivad Samadhan Scheme, 1998. Before issuing the certificate, the Commissioner of Customs (Adjudication) and Designated Authority (KVSS-98) takes into consideration the following facts : (a) that t....
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....by the declarant. After hearing the case of the GCS, as already noticed, the Collector of Customs, Bombay held that the GCS was liable to pay the Customs Duty but in view of the activities of the Society and the bona fides of the Society, and considering charitable and philanthropic activities of the Society, no prosecution was recommended. Moreover, only a token redemption fine of Re. 1/- was imposed. Thus it is seen that the Customs Authorities were satisfied that there was no intention to evade the Customs Duty. However, the Collector denied the GCS the concessional duty benefit under Customs Notification Nos. 279/1983 and 64/1988 and demanded the duty of Rs. 2,16,80,444/- under Section 28 of the Customs Act, 1962 read with the proviso of the said Section. The said duty was to be paid by the GCS (Importer) and Canbank Financial Services as well as ICICI being the joint holder of the said imported machines. A personal penalty of Rs. 10 lakhs was imposed on Dr. Viral C. Shah and M/s. Shah Diagnosis Institute Pvt. Ltd., Ahmedabad and Bombay jointly under Section 112(a) of the Customs Act, 1962. 24.We have carefully gone through the Kar Vivad Samadhan Scheme, 1998 and the certifi....
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....nt certifying the receipt of payments from the appellant towards full and final settlement of the tax arrears determined in the order dated 26-2-1999 and granting immunity from instituting any proceeding for prosecution of any offence under the Act or from imposing any penalty under the said Act. Thereafter, on 11-8-1999 certificate was issued by the Department to the effect that no arrears or demand of any kind is outstanding against the appellant as per the records of the respondents. On 26-10-1999, the appellant submitted a representation requesting the respondents to refund all the amounts along with interest as per the provisions of the Act upon the finalisation of the declarations made by the appellant under the provisions of the Kar Vivad Samadhan Scheme. This claim resulted in the issue of a notice on 23-6-2000 under Section 90(1) of the Kar Vivad Samadhan Scheme calling upon the appellant to explain as to why, the certificate issued under Section 90(1) of the Scheme earlier be not amended, on the ground that the determination made by the Department for the three assessment years in question was on the Department's wrong understanding of the judgment of the Allahabad High C....
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....been taken into account when calculating the tax arrears. As such there is a mistake in calculation, which needs rectification. The whole basis of the notice is only that adjustments already made had not been taken note of. If this is the basis of the issuance of the notice and not the false declaration and that information was available with the Department even at the time of the finalisation of the proceedings under Section 90 KVSS, we fail to understand as to how the matter could be reopened at this stage. That information was already available with them and there is no false declaration in that regard. In that view of the matter, the notice issued is without jurisdiction." 26.In that view of the matter, this Court allowed the appeal, set aside the order made by the High Court by allowing the writ petition filed by the appellant and quash the notice issued by the Department calling upon the appellant to explain as to why the order issued earlier under Section 90(1) KVSS be not amended. 27.On a reading of the judgment in the case of Sushila Rani (supra), it is clear to us that if an assessee takes the option under this Scheme, he obtains immediate immunity under any proceed....
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....he instant case would only tantamount to driving the present appellants to double jeopardy when they had been honourably exonerated by the Collector of Customs by their adjudication and further the GCS of which one of the appellants is the General Secretary in which capacity he is accused in the present case was granted amnesty under the Kar Vivad Samadhan Scheme, 1998. In our opinion, the present case does not warrant subjecting a citizen especially senior citizens of the age of 92 and 70 years to fresh investigation and prosecution on an incident or fact situation giving rise to offence under both the Customs Act and the Indian Penal Code when the matter has already been settled. Likewise, the respondent herein has initiated criminal proceedings against Accused No. 2 and Accused No. 1, inter alia, on the ground alleging that the appellants in conspiracy with the co-accused named therein with each other have cheated the Government of India in terms of evasion of Customs Duty and by concealment of facts obtained CDEC in respect of MRI and Lithotripsy machines and by violating the provisions of 'actual user' condition as per Import-Export Policy and Customs Notification No. 279/83 d....
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....il nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused, it is a serious matter. The Supreme Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice. Merely because the accused persons had already filed an application in the Court of Additional Judicial Magistrate for their discharge, it cannot be urged that the High Court cannot exercise its jurisdiction under Section 482 of the Code. Though the Magistrate trying a case has jurisdiction to discharge the accused at any stage of the trial if he considers the charge to be groundless but that does not mean that the accused cannot approach the High Court under Section 482 of the Code or Article 227 of the Constitution to have the proceeding quashed against them when no offence has been made out against them and still why must they undergo the agony of ....
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....of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;" 37.The question is whether the import of the machines in question was contrary to law in any manner and whether the machines are liable to be confiscated under the Customs Act, 1962, the only provision relied upon by the learned Counsel for the appellants is clause (o) in Section 111 of the Customs Act, 1962 which we have set out herein above. In our opinion, clause (o) of Section 111 of the Customs Act, 1962 is not attracted in the present case. The subsequent proceedings initiated for confiscation of the goods is of no relevance nor does it retrospectively render the import illegal. 38.This Court in Union of India & Another v. Sampat Raj Dugar and Another [A.I.R. 1992 S.C. 1417] has, while considering the scope and ambit of Clause (o) of Section 111, observed as under : "Clause (o) contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where....
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....e prosecution are unsustainable. Kar Vivad Samadhan Scheme Certificate along with the Duncan's and Sushila Rani's judgments clearly absolve the appellants herein from all charges and allegations under any other law once the duty so demanded has been paid and the alleged offence has been compounded. It is also settled law that once a civil case has been compromised and the alleged offence has been compounded, to continue the criminal proceedings thereafter would be an abuse of the judicial process. 41.In the result, both the appeals stand allowed. The orders of the High Court which are impugned in these appeals are set aside. Sd/- (A.R. Lakshmanan, J.) [Judgment per : Brijesh Kumar, J.]. -42. I have the benefit of going through the detailed and elaborate judgment prepared by brother Lakshmanan, J. I am in respectful agreement with the same. I would, however, like to emphasise yet another aspect of the matter by reason of which also it does not lie for the respondent, to initiate or continue the criminal proceedings against the appellants. 43.Since the facts have been set out in detail, in the judgment ....
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.... they stood convicted for an offence falling in Chapter IX or XVII of the IPC. Section 420 IPC falls in Chapter XVII of the IPC. The other condition of eligibility so as to be entitled to take the benefit of the scheme is that where any proceeding is pending in the High Court or the Supreme Court against any order in respect of tax arrear, the declarant is obliged to withdraw such appeal or proceeding and is further liable to furnish the proof of such withdrawal as provided under Section 90 of the Scheme of 1998. The case of the petitioner was settled, the tax liability was determined on 10-2-1999 by the Designated Authority, and the certificate of full and final settlement was issued on 19-7-1999. The appeal pending in this Court against the order of the CEGAT was withdrawn by the appellants on 16-3-1999. It is thus obvious that certificate of full and final settlement was issued in view of the fact that the conditions enumerated above were fulfilled. 45.It appears that despite the statement of settlement having been filed under Section 88 of the Act of 1998, an FIR was lodged and a case was registered on 6-1-1999 on the basis of which, later on a charge sheet was also submitte....