Offences under Central Excise and Customs

[JAMES PG]

 “Kingdoms, Oh Lord, are like flowers and fruit trees; just as flourishing plants and fruit trees being properly nourished yield flowers and fruits at the proper season, so the kingdom being protected yield taxes and revenues”

The above is from ‘Divyavadana’ or ‘Divine Stories’ which is an anthology of Buddhist tales, in which ministers advised the King on the need to protect the kingdom for better yield of taxes and revenues. 

Larger Bench of the Honourable Supreme Court propounded a land mark judgement   upholding that offences under the Customs Act and Central Excise Act are non-cognizable and bailable and if the person arrested offers bail, he shall be released on bail (Om Prakash Choith Nanikram Harchandani Vs Union of India- 2011 (9) TMI 65 - SUPREME COURT OF INDIA).

Hon’ble Court has ruled that the Customs Act, 1962 and Central Excise Act, 1944 are meant for recovery of duties and not for punishing the offenders by way of arrest. Instead of focusing on recovery of duty, the two Departments of Revenue launched criminal proceedings against number of appellant parties and accordingly 15 appeals filed by them are allowed.

Article 21 of the Constitution of India becomes relevant here which reads as under:

“No person shall be deprived of his life or personal liberty except according to procedure established by law”.

The present judgement of Hon Supreme Court appears to reinforce and uphold this fundamental constitutional right.

Earlier too, there were contrary judgements of High Courts which held that arrest without warrant as void and vice versa too. As per Code of Criminal Procedure, for all offences that are non-cognizable, arrest can be carried out after obtaining warrant from a Magistrate. Authorities exercising powers under special Acts cannot override provisions of the CPC (2002 (12) TMI 94 - HIGH COURT OF ALLAHABAD AT LUC –Allahabad HC in Rajni Vs UOI)

Offence under Sec 135 (1)(ii) of Customs Act is non-bailable as it does not fall under Entry 3 of Table II to First Schedule of Code of Cr Pc (Inderjeet Nagpal Vs DRI - 2005 (3) TMI 151 – (HIGH COURT OF DELHI )- Delhi High Court  & C.K. Boban Vs UOI (2005) –Kerala High Court)

Customs offence is bailable – no need for anticipatory bail – if arrested, the accused shall be entitled to be released on bail immediately (Sangit Krishna Kumar Agrawal Vs UOI - 2007 (2) TMI 230 – (HIGH COURT OF JUDICATURE AT BOMBAY). (Appeal filed against this order was admitted by SC)

Offences under Section 135 (1) (ii) are bailable - Subhash Chaudhary Vs. Deepak Jyala and Others in CRL W.P. 1384/2004 2004 (9) TMI 117 – (HIGH COURT OF JUDICATURE AT BOMBAY) While it is a terrible whipping to the bureaucrats who used to embezzle and harass the duty paying community for quite a long, Apex Court’s judgement goes a long way to protect the ‘subjects in the Kingdom of taxpaying community’ and to foster good relationship with the tax collectors.

Days gone by reminds us of innumerable  high handed and oppressive attempts  of intimidation by way arrest, seizure, raids , forced spot recovery etc which are being initiated either for vengeance or bribery by corrupt and greedy officers. Cases are no little wherein corporate honchos were arrested by “objective considerations and on the whims, caprices and fancies of the officers”. At the same time. sincere  and risky attempts  made by honest officers throughout the country by which miscreants are caught and put before the Court of law are not disregarded or undermined. Several leakages involving substantial revenue either by willful evasion or through the loopholes in law are brought to light and astounding sums had been amassed to the exchequer by reputed agencies like DGCEI, DRI etc.

Ironically, incidents of allegation of suppression and willful misrepresentation on account of interpretational differences of law which lead eventually to arrest and agonizing experiences in the corporate world are no history.

None can deny the fact there can be different interpretations of law and even the Apex Court have held that when two views are possible, one which favours the assessee should be adopted. (Bihar State Electricity Board and Another Vs. M/s. Usha Martin Industries and another – 1987 (2) TMI 447 - SUPREME COURT OF INDIA).

When there are two possible views, the one which favours the assessee should be accepted - (2011 (5) TMI 819 - GUJARAT HIGH COURT) Commissioner of Income Tax-II Vs Priyank Gem

While two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue- Sneh Enterprises Vs Commissioner of Customs, Delhi (2006 (9) TMI 179 - SUPREME COURT OF INDIA)

Further, very often it happens that Govt may accept the CESTAT/Court order in one particular case but may dispute in other similar case. This is further adding to woes and worries of an assessee and is being viewed as attempts of tax evasion by the Dept

When Revenue has accepted order in a particular case, it is precluded from challenging issue in case of another assessee: Supreme Court - (2008 (9) TMI 90 - SUPREME COURT - (CCE, Allahabad Vs Surcoat Paints Ltd)

When Revenue has accepted the order of Tribunal in respect of one party, on same set of facts, appeal against another party cannot be allowed – Supreme Court (2008 (9) TMI 22 - SUPREME COURT - (CCE, Kanpur Vs New Decent Footwear Industries)

Despite all these, our North Block wanted to have a sadistic pleasure in the mounting graph of unnecessary and unwanted litigations.

  Taxation laws in India are cumbersome and the law making authorities, tax collectors and the payees are put to greater confusion due to lack of clarity, contradictory judgements of various CESTATS, High Courts and even of the Apex Court. It is quite natural that an assessee may prefer to take advantage of a favourable order of an adjudicating authority or based on his good faith and own interpretation and analysis. It is gross denial of justice to brand all such things as attempts of tax evasion so as to attract the provisions and consequences of cognizable offence.

It is pertinent here to bear in mind the ranking of Transparency International on the Corruption Perceptions Index (CPI) of Indian economy by their perceived levels of corruption, as determined by expert assessments and opinion surveys. While Denmark, New Zealand and Singapore jointly shares the 1^st rank with the CPI of 9.3, and with the least level of corruption, India is  ranked 87 with the Index of 3.3 and Somalia bottoms the list with CPI of 1.1. Corruption is rampant in our society and its impact in tax collection and associated harassments are to be considered with great concern while viewing the litigations related to taxation.

As per the reply given in the Loksabha during April, 10, there are more than a lakh tax cases pending in courts and various tribunals as on 30th Sept, 2009 holding back Rs 64,244 crore in both direct and indirect taxes. The pendency is likely to grow in upward directions only ultimately causing delayed justice and tyrannies to the tax payers.

Even if the so called offences are held to be bailable, there exists lot of loopholes for harassment and infringing personal liberty. For instance, the conditions of bale prescribed for a person who is residing 400 kms away from the Excise Office by the Inspector of Central Excise is as follows: (Purusottam Das Sharma vs Manoj Kumar Pattnaik, Inspector Central Excise, Customs & Service Tax - 2010 (4) TMI 851 - ORISSA HIGH COURT)

- He shall appear before the Superintendent on all working days, for 3 weeks, starting from 26.3.2010 to give evidence and to submit records/documents called for.

- He shall be present in the waiting area (room) from 10.30 A.M. to 6.00 P.M

- He shall not leave the office on these days between 10.30 A.M. and 06.00 P.M. without the prior permission of the Superintendent/Inspector concerned.

It is learnt that CBEC is actively considering the amendment of laws in view of the present judgement. Issues involving national security, smuggling, fake currency, money laundering etc which would enervate the economic foundation shall not be given the advantage of present judgement and at the same time undue hardships and victimization during the noble task of tax collection should be avoided so as to uphold the citizen’s charter.   

 Let us hope that the law enforcing agencies will get at least some inspiration of the following quote from Arthashastra:

  “While punishment, when ill-awarded under the influence of greed and anger or owing to ignorance, excites fury even among hermits and ascetics dwelling in forests, not to speak of householders”