TMI Blog2007 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion. The petitioner by way of this writ petition is challenging the legality and validity of the impugned order of detention passed by respondent No. 2 at pre-execution stage in the peculiar facts and circumstances of this case. It is stated that two similar orders of detention dated 12-1-2005 and 31-1-2005 were issued under the COFEPOSA Act by respondent No. 2 against the petitioner Alpesh Navinchandra Shah and his brother Kamlesh Shah respectively. The detention order has already been served upon Kamlesh Shah. The grounds of detention order and the documents relied upon in the case of the petitioner are identical in content and material. 3.The brief facts of the case are mentioned in seriatim as under : In or about, August, 2004 M/s. Perfect Trading Co. (proprietorship firm of Shri Rajendra Mamgaim) imported Ball bearings in five containers. On 3-9-2004, consignments of mis-declared consignments were intercepted by the DRI officials. The petitioner and his brother were arrested on 4-9-2004 by the Intelligence Officers, DRI, Mumbai Zonal Unit primarily on the allegations that they have been indulging in import of high quality and high value Ball Bearing and were clearing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Settlement Commission allowed the Settlement Application and settled the case on payment of Customs Duty of Rs. 1,40,52,959/-. In terms of sub-section (1) of Section 127H of the Customs Act, 1962, and in view of full and true disclosure, the Commission granted immunity to all the Applicants including the petitioner from any penalty that could be levied under the Customs Act and also from the prosecution under the Customs Act, 1962, as well as under IPC. It is evident from the Order that a copy of the said Final Order of complete settlement of the case, was also forwarded to the Detaining Authority by the Settlement Commission. 11.It is also pertinent to note that though the Settlement Commission vide Section 127H of the Customs Act, 1962 is empowered to impose such conditions as it may deem fit for grant of immunities, deemed it fit not to impose any condition on the petitioner, in spite of the fact that detention Order having been issued against the petitioner, was before the Commission and granted full immunities and settled the case giving quietus to all issues. 12.In spite of complete settlement of all disputes among the petitioner and the Revenue, after the case was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such activities, the inference of such likelihood being drawn form objective data based on surrounding circumstances. vi. The possibility of prosecution is having a direct bearing on the subjective satisfaction of the Detaining Authority. vii. Unsuccessful judicial trial may not operate as a bar to a detention order, but the discharge cannot be said to be entirely irrelevant and of no significance. viii. The detention power cannot be used to subvert, supplant or to substitute the punitive law of penal code. 17.At the time of hearing, the judgment rendered by this Court in Hira Lal Hari Lal Bhagwati v. CBI, New Delhi, 2003 (5) SCC 257 (Brijesh Kumar and Dr. AR. Lakshmanan, JJ) was also relied on and our attention was invited to paras 44 45 of the said judgment which read as under : "44........The declarant could not be dragged and chased in criminal proceedings after closing the other opening making it a dead end. It is highly unreasonable and arbitrary to do so and initiation and continuance of such proceedings lack bona fides. 45. In the background given above, there is every reason to legally infer that the position as it stood, in regard to the criminal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is however, does not mean that the door for compromise with an errant tax-payer should forever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit one-time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to revenue, while needlessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the tax-payer at any stage of the proceedings. In the United Kingdom, the 'confession' method has been in vogue since 1923. In the U.S law also there is a provision for compromise with the tax payer as to his tax liabilities. A provision of this type facilitating settlement in individual cases will give this advantage over general disclosure schemes that misuse thereof will be difficult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the IPC. He further submits that this Court in the case of Sadhu Roy has held that, if there is cast iron case against the person, then he should be prosecuted rather than detained under the preventive detention law, which is softer measure. He submits that when under the law the person is immuned from prosecution which is a stronger deterrent than detention, there is no-reason as to why the same person should be detained preventively under a softer measure. ii. the act of detaining such person whose Settlement Application under the statutory provisions of Customs Act, 1962 has been allowed to be proceeded with and specifically whose case has been settled, would be discriminative and arbitrary as against the person who does not approach the Settlement Commission and does not settle their case and thus continue to damage the economy of the country. Learned counsel submits that for the reason of discrimination and arbitrariness of the detention order against a person who is willing to or has settled the case against the petitioner, the detention Order is liable to be quashed and set aside because it would become punitive and how would the punitive Order would survive wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national economy, on the contrary, even if after settlement of case the detention order is allowed to be continued, the legislative intent in introducing the settlement provision would be defeated which may have adverse and deleterious effect on the national economy. 27.It is further submitted that the Settlement Commission is a forum of legal criterion and the powers are drawn from the enacted statutes such as Customs Act, 1962 and Central Excise Act, 1944 in the case of eligible persons, who in addition to fulfilling the other criteria admit additional duty liability of a minimum of Rs. 2 lacs, the option of knocking the doors of Settlement Commission is available, inter alia, in the cases under the Customs Act. According to the learned counsel, the functional mechanism of the Settlement Commission pertaining to the customs cases can be broadly described as follows :- On receiving an application, the statutory report is called for by the Settlement Commission from the jurisdictional Commissioner. The Commission considers the report and after hearing both the sides decides on the admissibility of the case. Again after hearing both the sides, the Settlement Commission, after b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed : Provided also that no application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975). (2) Where any dutiable goods, books of account, other documents or any sale proceeds of the goods have been seized under Section 110, the applicant shall not be entitled to make an application under sub-section (1) before the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules. (4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. 127C. Procedure on receipt of application under Section 127B. - (1) On receipt of an application under Section 127B, the Settlement Commission shall call for a report from the Commissioner of Customs having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of Section 142. (6) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner of Customs having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (7) After examination of the records and the report of the Commissioner of Customs received under sub-section (1), and the report, if any, of the Commissioner (Investigation) of the Settlement Commissioner under sub-section (6), and after giving an opportunity to the applicant and to the Commissioner of Customs having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for the purpose of protecting the interests of the revenue it is necessary so to do, it may, by order, attach provisionally any property belonging to the applicant in such manner as may be specified by rules. (2) Every provisional attachment made by the Settlement Commission under sub-section (1) shall cease to have effect from the date the sums due to the Central Government for which such attachment is made are discharged by the applicant and evidence to that effect is submitted to the Settlement Commission. 127E. Power of Settlement Commission to reopen completed proceedings. - If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act before application for settlement under Section 127B was made, it may, with the concurrence of the applicant, reopen such proceeding and pass such order thereon as it thinks fit, as if the case in relation to which the application for settlement had been made by the applicant under that section covered such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of any such report or part thereof relevant for the purpose. 127H. Power of Settlement Commission to grant immunity from prosecution and penalty. - (1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under Section 127B has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his duty liability, grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force and also either wholly or in part from the imposition of any penalty, fine and interest under this Act, with respect to the case covered by the settlement : Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under Section 127B. (2) An immunity granted to a person under sub-section (1) shall stand withdrawn if such person fails to pay any sum specified in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 127J. Order of settlement to be conclusive. - Every order of settlement passed under sub-section (7) of Section 127C shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." 29.Learned counsel for the petitioner further submits that the Settlement Commission vide final order dated 7-3-2006 has allowed the settlement application and granted complete immunity to the petitioner as well as his brother from penalty and prosecution. In these circumstances, the detention of the petitioner in pursuance to the impugned order of detention would result in blatant infringement of Article 21 of the Constitution of India as the order has been rendered totally non est in the eyes of law. It is further submitted that in view of the acceptance of the settlement Application by the Settlement Commission, all matters stand concluded and settled. In these circumstances, the execution of the detention order is wholly uncalled for, unwarranted and absolutely illegal, being based on wrong reasons and the execution would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"................Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid...................There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses...." 34.According to the petitioner's counsel, the case of the petitioner squarely falls with the said exceptions and thus the impugned detention order deserves to be set aside. He would also further submit that the case of the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in future since this may adversely affect their financial backbone..." 38.Learned counsel submitted that the ratio of the aforesaid case wherein the detention order was quashed at the pre-detention stage especially taking into account the need for execution of the order in view of payment of duties etc. is also applicable to the facts of the present case and in fact the petitioner is placed in a much better situation as his case has also been settled by the statutory process and has been granted complete immunities owing to true and full disclosure and full cooperation in the settlement proceedings. It is further submitted that the factum of settlement of the matter as well as the consequent grant of immunities had duly been conveyed to the detaining authority i.e. respondent No. 2 by the Settlement Commission. The Detaining Authority was, therefore, bound to consider the desirability and need for execution of the impugned detention order in view of the dramatically changed scenario. According to the learned counsel, after the settlement of the case, the entire controversy stands buried and settled warranting forthwith termination of the impugned detention order. Arguing furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfere the detention order at the pre-execution stage are necessarily very limited and in scope and number. 41.Therefore, when the courts are prima facie satisfied (i) that the impugned order is not passed under the Act under which it is purported to have been passed (ii) that it is sought to be executed against a wrong person, (iii) that it is passed for a wrong purpose, (iv) that it is passed on vague, extraneous and irrelevant grounds, or (v) that the authority which passed it had no authority to do so. Therefore, the impugned order does not suffer from any infirmity as stated above and accordingly, the present writ petition at pre-execution stage of detention order is not maintainable. Hence, the present writ petition is required to be dismissed. 42.Learned counsel for the respondent further submitted that the admittance of the case and imposition/condonation of fine and/or penalty is the prerogative of the Settlement Commission and application praying immunity from fine, penalty and prosecution matters pertain to the jurisdiction of Settlement Commission. But, revocation of the detention order issued in respect of the detenue is different issue and not governed by provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms authority and therefore, customs duty was paid under KVSS and further in the criminal proceedings under Section 120B and 420 IPC initiated by CBI was quashed by this Court. Therefore, it is admitted that the above cited case is different from the present case as in the case in hand the detention order was issued under the COFEPOSA Act against the petitioner with objective to prevent to the nefarious activities in future. Therefore, the immunity granted by the Settlement Commission from fine, penalty and prosecution under the provisions of the Customs Act and IPC have no bearing on the order of detention passed under the COFEPOSA Act. Therefore, it is contended that the detention order issued by the Detaining Authority is very much legal and the same needs to be upheld. 46.The Settlement Commission was constituted with the arm and objective of settling the tax evasion issues and by virtue of disclosure by tax offender; they gain immunity from fine/penalty which is otherwise mandatory under the provisions of tax laws. But, such opportunity is only extended to one tax offender but not available to habitual smugglers. For the persons involved in smuggling activities, other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner and his brother. Nowhere it is mentioned in the Settlement Commission's order that the petitioner would not indulge in smuggling of goods in future. Therefore, in order to prevent the detenu from indulging in smuggling activities, the said detention order was passed and there is no illegality in the detention order. In the instant case, the customs duty of Rs. 1.4 crores was sought to be evaded by the petitioner and his brother was accepted in full by them. This acceptance of entire duty demanded in the impugned show cause notice was interpreted as full and true disclosure by the Settlement Commission and as such the petitioner and the co-applicants were directed to pay the said amount of duty during the Settlement Commission proceedings. The said customs duty of Rs. 1.4 crores was expected to be paid by the petitioner and others at the time of import of the impugned, consignments during September, 2004. However, the said amount of evaded customs duty was ordered to be paid in the month of March, 2006 by the Settlement Commission. The Settlement Commission, while extending the benefits as envisaged in the true spirit of settlement, have granted immunity from fine, penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution as well as penalty. A copy of the order has been forwarded by the Commission to the Detaining Authority and yet the detention order was executed on his brother i.e. detenue Kamlesh Shah. He further stated that he challenged the order of his detention at pre-execution stage in the Supreme Court and Supreme Court has given Interim stay of the operation of impugned order." 52.It is thus seen that the Settlement Commission has, in its order, under the head 'penalty' and 'prosecution' granted immunity from penalty and prosecution to the co-applicant and in these circumstances the Advisory Board was of the opinion that there was no sufficient cause for the continued detention. Learned counsel for the respondent has also placed before us the opinion of the Advisory Board which reads thus : "The Advisory Board is of the opinion that there is no sufficient cause for the detention of abovenamed detenue under Section 3(1) of COFEPOSA Act, 1974." 53.The consequential communication dated 5-6-2006 and the order dated 5-6-2006 were also placed before us which read thus :- "The Advisory Board has reported that there is no sufficient cause for the detention of Shri Kamleah Navinchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the detention order passed against the appellant was not revoked even though he has also paid the customs duty as demanded. It has also been pointed out that the sponsoring authority submitted its report before the Detaining Authority to revoke the detention order which was passed against the appellant. The Joint Secretary to the Government of India, Ministry of Finance has filed an affidavit in this case wherein it is submitted that similar 5 detention orders were revoked. This Court (M.B. Shah and Brijesh Kumar, JJ) in para 6 7 observed as under :- "6. In our view, there is no reason to discriminate the appellant and the reason given by the authority in not revoking the detention order could hardly be justified. It is true that normally before the execution of the detention order the same is not required to be quashed and set aside. However, considering the peculiar facts and circumstances of the case, in our view, no purpose will be served by continuing the detention order. It is pointed out that the appellant has ceased his activities in the field of import or export. He has already paid the tax with penalty as demanded by the authority. There is nothing on record that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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