Bombay High Court
Jagannathrao Punjajirao Pagar vs Dipak Dubari on 9 February, 1990
Equivalent citations: 1990(3)BOMCR233, 1991(52)ELT36(BOM)
JUDGMENT
1. These are cross-proceedings arising out of an order passed by the Addl. Chief Metropolitan Magistrate on 2nd August 1982 in a Complaint attributing to 7 persons the commission of offences punishable under Sections 132 and 135 of the Customs Act, 1962.
2. The complaint before the Magistrate is by an Assistant Collector of Customs, Kandla Free Trade Zone (KFTZ), Gandhidham, Gujarat, against two concerns (accused 1 and 5), the alleged partners of accused No. 1, who are arraigned as accused Nos. 2 to 4 and a Customs House Agent (Accused 5) with its officers being Accused Nos. 6 and 7. The impugned order arose upon an application moved by Counsel for Accused Nos. 5 to 7 seeking the dismissal of the complaint because of various infirmities which disabled the Magistrate from trying the matter. The application was opposed by the Complainant and after hearing the parties, the Magistrate passed the impugned order. Criminal Revision Application No. 464 of 1982 is against the rejection by the Magistrate of the prayer to dismiss the compliant as against Accused No. 5. The contention is that for various reasons, the complaint as against Accused No. 5 was not maintainable. The appeal aforementioned is by the Complaint taking exception to the dismissal of the complaint vis-a-vis Accused Nos. 2, 4, 6, 7. Accused No. 3 could not be served and therefore, the prosecution so far as it relates to him is virtually on the dormant file. Complainant's grievance is that there was no warrant for holding that the sanction on the basis of which the complaint had been filed did not enable the prosecution of Accused Nos. 2, 4, 6 and 7.
3. For a proper understanding of the issues to be resolved in this order, it is necessary to narrate the background :-
M/s. Hanspa-Knit Pvt. Ltd. is based in the KFTZ and is engaged in the manufacture and assembly of electrical/electronic goods meant for 100 per cent export. For the purpose of its business Hanspa required an import of components of foreign make. Persons engaged in this type of business which fetches precious foreign exchange to the Country, are exempted from the liability of paying import duty, though they have to execute a security bond. This bond is meant to ensure the payment of the import duty in case the components are not used for the manufacture of goods which goods have to be exported within 30 days of their leaving the KFTZ. As soon as the export within the stipulated 30 days period takes place, the bond taking authority is intimated and there is a cancellation of the said bond. Stringent conditions are imposed upon the movement of the goods from the KFTZ to the Port of export. This is with a view to prevent misuse of the facility.
Accused No. 1 has been dealing with Hanspa since long. Hanspa had imported components used for the manufacture of radio cassettes, car-radios, and tape-recorders. They received an order through accused No. 1 for the export of the finished products to Yugoslavia. The goods were sent by Hanspa to accused No. 1 in January, 1979. Accused No. 1 was to get the goods exported, the exporter to be Hanspa acting through Accused No. 1. Initially, accused No. 5 who are Custom House Agents engaged by Accused No. 1 prepared 9 ex-bond shipping bills. This bond is to be used by those exporters, who have used the components over which import duty has not been paid, though security has been given. Eventually, the goods were not exported through these documents. Instead accused No. 5 substituted the ex-bond shipping bills with free-shipping bills. The latter are used by those exporters who claim no facility. Upon a complaint made by Hanspa, the Customs authorities at Gandhidham made enquiries and learnt of the export of the consignment per free-shipping bills. Complaint's case is that Accused Nos. 1 and 5 had acted illegally in exporting goods in the making of which imported duty free components had been utilised. Accused Nos. 1 and 5 acted through its partners and officers respectively. The prosecution was based upon a sanction accorded by the Development Commissioner, KFTZ vide his order dated March 19, 1980. Accused No. 3 could not be served and the others after service pressed for a discharge. The application moved by Accused No. 5 to 7 contended that no Court could take cognizance of a complaint under the Customs Act without an appropriate sanction vide Section 137(1) of the Customs Act. The sanction relied upon by the Complaint had been given by the Development Commissioner and not a Collector of customs as required by the aforementioned section. Assuming that the signatory to the sanction held the post of the Development Commissioner and not a collector of customs as required by the aforementioned section. Assuming that the signatory to the sanction held the post of the Development commissioner as also the collector of customs, it was only in the latter capacity that he can accord sanction. He had however purported to act as a Development commissioner and that vitiated the sanction. The sanction did not give the impression of the authority having applied his mind to the relevant materials on the basis of which alone sanction could be accorded. It spoke of "unauthorised export of bonded goods". However, the complaint spoke of "evasion of payment of import duty". This was not covered by the sanction. In Fact the factual allegations mentioned in the complaint did not disclose any evasion if import duty. There was no knowing whether Hanspa had executed or got cancelled a security bond. The offence ascribed to the accused had been committed in Bombay and therefore sanction to try the alleged offenders could have been accorded only by a Collector of customs at Bombay. In the instant case the sanctioning authority was an officer based in KFTZ. No part of the offence had been committed at Kandla. The sanction order referred only to Accused Nos. 1 and 5 and therefore, the joinder of Accused Nos. 2 to 4 and 6 and 7 to the complaint was without jurisdiction. For the reasons aforesaid, the complaint deserved to be dismissed.
4. In the impugned order the Magistrate sustained the objection in regard to the sanction to covering the complaint against accused Nos. 2, 4, 6 and 7. Therefore, these four persons were discharged. The other contentions raised by a caused Nos. 5 to 7 were relegated for consideration to a later stage of negatived. Having regard to the cross-proceedings, the controversy is at large and I proceed to a consideration of the objections raised in the application of Accused Nos. 5 to 7.
5. The sanction is signed by one Niranjan Singh, describing himself as a Development commissioner of the KFTZ. The argument is that it is not known if Niranjan Singh is also a Collector of Customs as defined under the Customs Act. It is possible that he is holding both the posts, viz. the Development Commissioner as also a Collector of customs. If that be so, and, if he was exercising the powers of a Collector of customs, that should have been expressed in the sanction. As the sanction stood, it appears that the sanction had been accorded by Niranjan Singh in his capacity as the Development Commissioner. Statutory vesting of power was always in favour of an authority and not in any individual as such. Here, the sanction had been accorded by Niranjan Singh as a Development Commissioner and not as Collector of customs. Section 137(1) precluded a Court from taking cognizance to any offence punishable under Sections 132 to 135, except with the previous sanction of the "Collector of Customs". There is an element of plausibility in the contention. Section 3 of the Customs Act enumerates the classes of Officers of Customs. Sub-section (a) of Section 3 places Collectors of customs in the first category. Section 6 empowers the Central Government by notification in the Official Gazette to entrust either conditionally or unconditionally to any officer of the Central or the State Government, any functions of any officer of Customs under the Act. An Officer of the Central government empowered under Section 6 to discharge the functions of a Collector of customs would be an officer entitled to accord sanction spoken of by Section 137 in relation to the offences punishable under Sections 132 to 135. Niranjan Sigh has signed as the Development Commissioner of KFTZ which appears to be under the administrative supervision of the Government of India, Ministry of Commerce and Civil Supplies. This I deduce from the address at the top of the sanction order. If Niranjan Singh has been empowered under Section 6 of the Customs Act, prima facie, it would appear that the objection under consideration cannot survive. There is of course a possibility that Niranjan Singh may be holding both the posts, viz. the Development commissioner and the Collector of Customs, in which case in the former capacity he could not have exercised powers attached to the latter capacity. This would raise questions not necessarily excluding ones of fact. At the stage at which the present complaint is, it is not possible to give an answer one way or the other. Therefore, this contention's consideration should be relegated to a later stage.
6. It is next contended that the sanction makes no reference to Niranjan Singh having applied his mind to the facts and materials relevant to the prosecution sanctioned by him. Again, this involves consideration of a point which in the absence of facts cannot be properly determined. It is well-settled that a defect in the sanction order can be removed by leading parole evidence. What material Niranjan Singh had taken into consideration for according sanction can thus be established at a later stage.
7. The third defect pointed out in the sanction is the variation in certain words used therein as compared to the complaint. The sanction is said to be in relation to "unauthorised export of bonded goods". As against this, the complaint ascribes to the accused offences punishable under Sections 132 to 135 of the Customs Act. These deal with the making of a false declaration and false documents etc. and evasion of duty or prohibitions. The contention has a technical merit, but only that Mr. Patwardhan appearing for the Customs rightly points out that Section 2(39) defines smuggling in a broad and wide sense. The meaning given to the expression is, "any act or omission in relation to goods which will render such goods liable to confiscation under Section 111 or 113". Export of goods comprising in and made of imported components without payment of import duty, may attract action under Section 113 of the Act. At this stage, it cannot be said that the variation between the complaint and the sanction is such as to render the latter not maintainable in law.
8. The fourth argument advanced is that the complaint makes no reference to Hanspa having executed a security bond. If they have executed such a bond, the liability to pay the import duty initially exempted is upon them. In all probability they must have either not executed the security bond or paid the import duty. That being the position, the very foundation of the complaint is taken away. But this again necessitates an enquiry into the factual position. Hanspa appears to have executed a security bond, for that is so averred, though not in explicit terms in the complaint. As to whether or not they paid the import duty seeing that the goods were not exported in 30 days remains to be seen. A non-averment on this point in the complaint would not render the same untenable at the threshold.
9. Mr. Desai submits that the offences ascribed to accused viz. evasion of duty etc. were committed, if at all, at Bombay. When Section 137 speaks of the requirement of sanction from the Collector of Customs, that functionary must be of the region where the offence took place. In the present case no part of the transaction constituting the offence took place at Kandla. Niranjan Singh's sanction was thus of no avail. Mr. Desai is right in the contention to the extent that there be a territorial nexus between the situs of the offence and the authority according sanction. But can it be said that the entire cause of action took place at Bombay ? After all the components came duty free to KFTZ. It was that Port which was entitled to collect import duty. At this stage one need not go into details to ascertain whether the acts constituting the offence have or do not have any connection with the event of import. If not, perhaps the contention raised by Mr. Desai may require to be sustained.
10. The complaint's grievance vis-a-vis the discharge of accused 2, 4, 6 and 7 has now to be considered. Mr. Patwardhan submits that accused 2 to 4 and 6 and 7 are integrally connected with accused Nos. 1 and 5. Sanction naming the latter necessarily included the former. Reliance in support of this connection is placed upon Section 140 of the Act. What this section lays down is no more than that when a company, which expression is made to include a firm or other association of individuals, commits an offence, every person then in charge and responsible to the company for the conduct of its business, shall be deemed to be guilty of the offence. But this is subject to the said person being 'proceeded against'. The proceeding contemplated is of course a prosecution. The condition precedent for such a prosecution is the Collector's sanction under Section 137(1). If there be no sanction vis-a-vis 'the person in charge of and responsible to the company for the conduct of the business of the company', he cannot be proceeded against. Section 140 does not lay down that a prosecution against a company shall be deemed to cover every person in charge of and responsible to the company for the conduct of the company's business, at the time the offence was committed. Neither does it provide for the execution of the sentence, passed in regard to a company, as against the natural person spoken of by the section. What Section 140 permits, is the launching of the prosecution against the natural persons and not permitting them to put forth the company as the only entity liable to receive the sentence prescribed by law. At one stage I was of the view that the sanction covering as it did Section 135 showed either non-application of mind or alternatively that by necessary implication it covered the partners and officers of accused Nos. 1 and 5 respectively. A company cannot undergo the minimum, sentence of imprisonment provided by Section 135(1)(i). But the minimum sentence can be departed from for special and adequate reasons to be recorded in the judgment. Consequently it is not that non-inclusion of the companies is by itself a reason to hold that there was non-application of the mind. Seeing that Section 140 requires the natural persons to be specifically proceeded against, there can be no recourse to an inference that the sanction vis-a-vis accused 1 and 5 necessarily covers accused 2, 4, 6 and 7. Therefore however looked at the Magistrate's discharging these accused cannot be faulted.
11. Mr. Desai has raised two grounds in addition to those set out in his clients' application. The first is that having regard to the result of the collateral proceedings, the complaint deserves to be quashed in the interest of justice. Show cause notices were issued to accused Nos. 1 and 5 for action under the - for want of a better expression - disciplinary powers of the Customs authorities. The Collector of Customs imposed a penalty of Rs. 1,00,000/- upon accused No. 1 on 2-1-1981. Accused No. 1 preferred an appeal to the Central Board of Excise and Customs. The Board on 24-7-1981 set aside the penalty imposed. Accused 5 was notice to show cause against the contemplated action for conniving at the illegal export by accused No. 1 and violating various regulations of the Custom house Agents Licensing Regulations, 1965. The Collector of Customs exonerated accused 5 having regard to the absolution of accused No. 1 by him and the Board. Mr. Desai contends that the department had proceeded on the very same set of facts as figure in the complaint. That being the background, the exoneration afore mentioned means an automatic discharge or acquittal. Where this be a foregone conclusion the interest of justice require that accused should not be subjected to the ordeal of a trial which is bound to be a protracted one. To rule on this plea it will be necessary to consider two questions : The first is whether the exoneration in the disciplinary or adjudicatory proceeding is by itself a reason for quashing a pending complaint ? Second, what is the effect of the exoneration ? Mr. Desai relied upon decisions reported in 145 ITR 109 and 133 ITR 909. Shortly stated, these decisions are to the effect that where the basis of a prosecution was knocked out by the order of a competent departmental authority, it would not be in the interests of justice to permit a pending criminal prosecution to continue. Mr. Patwardhan relies upon Melwani's case to contend that an exoneration in adjudication proceedings does not bar a prosecution for alleged smuggling. In the instant case what should not be lost sight of is the fact the exoneration of accused No. 5 was because of - at least to a large extent - the exoneration of accused No. 1 Next. accused No. 1 was given the benefit of doubt and not honourably exonerated. The Board's order is full of unanswered questions indicating the existence of a grave suspicion against accused No. 1 and possibly the assistance received by it from an unnamed Customs Officer. And at this stage it cannot be said that such an exoneration would knock out the very basis of the complaint moved against the accused persons.
12. Last there is the contention of Mr. Desai that whatever import duty was payable has been recovered. This being the position and the prosecution relating to a sale contravention, should be stopped from going any further. Reliance has been placed upon certain decision indicating the impermissibility of prosecutions being allowed to drags on for years together. A decision in point is the State of Bihar v. Uma Shankar Kotriwal and Others 1981 Cri. L.J. 159. I agree that prosecutions should not be allowed to linger on for years together. But in this case the facts are gross-if the complaint be any indication of what could have happened. A very large consignment was allowed to be exported apparently in violation of the law. Next, there is the other side of the picture viz. the possibility of the complainant acting at the behest of Hanspa. Either way, justice, requires that the law be allowed to take its due course.
12A. The result of the foregoing discussion is that the appeal and the revision both fail. Confirming the order passed by the Magistrate, I dismiss the appeal and the revision. Complainant, accused Nos. 1 and 5 to put in appearance through their authorised representatives before the Magistrate on 2-3-1990 so that the case can be further proceeded with.