TMI Blog2003 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... e out in respect of the alleged offence under Section 120B read with Section 420 of the Indian Penal Code and, therefore, the charge sheet and the process issued thereunder has to be quashed. As the Customs Duty has been paid by the GCS, there is no fraudulent or dishonest intention on the part of the GCS or its office bearers to retain the property. Moreover, there is no inducing on the part of the GCS or its office bearers intentionally to retain the property in view of the fact that the Customs Duty has been paid by the GCS and, therefore the ingredients of the offence of cheating are missing for issuing the process against the appellants and, therefore, the same, in our view, is liable to be quashed and set aside. 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. - 676 of 2003 - - - Dated:- 2-5-2003 - Brijesh Kumar and A.R. Lakshmanan, JJ. [Judgment per : A.R. Lakshmanan, J.]. - Leave granted. 2.These two appeals arise out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e machines and necessary paper work on the ground that the exemption certificate was issued in the name of the GCRI and not in the name of the GCS and thus the GCS was not entitled to exemption and was, therefore, liable to pay Customs Duty. The machines were immediately released on giving a usual undertaking. On 11-10-1991, Show Cause Notice was issued to the GCS which was replied to by them. The Collector of Customs, Bombay by an order dated 10-4-1993 held that the GCS was liable to pay the Customs Duty, thus denying the concessional duty benefit under Customs Notification Nos. 279/1983 and 64/1988 and demanded a duty of Rs. 2,16,80,444/- under Section 28 of the Customs Act, 1962 read with the proviso to the said Section. The said duty was to be paid by the importer - GCS and Canbank Financial Services as well as ICICI being joint holder of the said imported machines. However considering the charitable and philanthropic activities of the GCS, no prosecution was recommended and only a token redemption fine of Re. 1/- was imposed. No penalty was imposed on the above said financial organisations, namely, Canbank Financial Services and ICICI as they were acting as a lessor, who had e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnizance and summoned the appellants. The appellants were furnished copies of the charge sheet. In the meantime, the appellants preferred Special Criminal Applications before the High Court of Gujarat at Ahmedabad seeking quashing of the FIR. However, the same was disposed of as withdrawn on the ground of jurisdiction with a liberty to file a fresh petition before an appropriate Court. Thereupon the appellants filed Criminal Miscellaneous (Main) Petitions under Section 482 of the Code of Criminal Procedure read with Article 227 of the Constitution of India in the High Court of Delhi at New Delhi seeking an appropriate order/directions to the respondent quashing the FIR concerned. The learned Single Judge of the High Court of Delhi, by his final order, dismissed the said petitions. Hence, these two appeals by way of special leave petitions. 7.We have heard Shri P. Chidambaram, learned Senior Counsel, appearing for the appellants in both the appeals and Shri K.K. Sood, learned Additional Solicitor General, appearing for the respondent. 8.Before, considering the rival submissions of the respective Counsel appearing on either side, it is useful to reproduce the short order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, he submitted that the concerned authorities were satisfied that there was no intention to evade the Customs Duty as stated by the authorities. It was further submitted that the GCS was immuned from any criminal proceedings pursuant to the Certificates issued under the Kar Vivad Samadhan Scheme, 1998 and the present appellants are being prosecuted in their capacity as office bearers of the GCS. As the Customs Duty has already been paid, the Central Government has not suffered any financial loss. Moreover, as per the Kar Vivad Samadhan Scheme, 1998, whoever is granted the benefit under the Kar Vivad Samadhan Scheme, 1998 is granted immunity from prosecution from any offence under the Customs Act, 1962, including the offence of evasion of duty. In the circumstances, the complaint filed against the appellants is unsustainable and that the appellants are reputed persons who had never even contemplated committing any violation of law or thought of taking undue advantage of the exemption Notifications under the Customs Act and that when the Society availed of the exemption Notification in respect of the two machines, it acted bona fide in the belief, that since the machines were bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.He invited our attention to the pleadings, in particular, the F.I.R., the Annexures of the S.L.Ps, the provisions of the Kar Vivad Samadhan Scheme, 1998, the relevant provisions of the Indian Penal Code, the Customs Act, 1962 and the rulings relied on by him. 11.Shri K.K. Sood, learned Additional Solicitor General, appearing for the respondent, submitted that the material gathered in the investigation clearly show and establish commission of offences by the accused persons indicating the appellants herein under Sections 420 and 120B of the Indian Penal Code and that there is no infirmity in the order of the Chief Metropolitan Magistrate taking cognizance or in the order of the High Court declining to quash criminal proceedings at the interlocutory stage. He further submitted that the criminal proceedings in respect of which cognizance has been taken by the Court can be interfered with or quashed only if the allegations even if taken on their face value do not satisfy or make out the ingredients of offences alleged and no offence is at all made out or there is legal or statutory impediment in prosecuting the accused person. He submitted that none of these grounds exist in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he certificate issued by the authorities under the said Scheme cannot be the ground and basis for quashing the criminal proceedings. According to him, a perusal of the certificate would show that the settlement under the Kar Vivad Samadhan Scheme, 1998 gives immunity only from prosecution under relevant taxing Statute and not under the Indian Penal Code. Concluding his arguments, he submitted that the criminal proceedings cannot be quashed merely on account of the fact that Customs Duty payment has been settled. 12.Before proceeding to consider the rival submissions, it is beneficial to refer to certain annexures filed along with the special leave petitions. The true copy of the agreement dated 28-4-1988 between the GCS and Dr. Viral C. Shah has been filed. This agreement was made at Ahmedabad on 28-4-1988 as an addendum to the original agreement dated 24-2-1987 entered into between the GCS on the one part and Dr. Viral C. Shah as the second part. The relevant clauses of the agreement are extracted below : "(1) The Gujarat Cancer Society shall acquire ESWL and MRI machines in its own name and for this Dr. Viral Shah shall make necessary arrangements for the construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Name and address of accused 1. Sh. N.L. Patel, Director Gujarat Cancer Research Institute, Ahmedabad. 2. Dr. Viral C. Shah, Director M/s. Shah Diagnosis Institute (P) Ltd., Mumbai and Ahmedabad. 3. Sh. D.D. Patel, Secretary Gujarat Cancer Society, Ahmedabad and others unknown. Action taken RC is registered and investigation taken up. Investigating Officer Shri Rajveer Singh, DY. SP.CBI/EOW-I/NEW DELHI. INFORMATION The Joint Secretary, Ministry of Health and Family Welfare, Government of India, New Delhi vide his D.O. No. C-18011/5/96-VIG(PT), dated 22/24-12-98 has sent a copy of the report dated D.O. F. No. IMP/CDE/1/1/97-RC (GUJ-4), dated 17-8-1998 submitted by Sh. P. Rosha, Chairman of Special Committee appointed by Hon'ble High Court, Delhi to inquire into the import of equipments against Customs Duty exemption certificate for use in Charitable Hospitals. The Hon'ble High Court, Delhi has approved the suggestion to refer the matter to CBI for registration of case and investigation. Accordingly, the Joint Ministry of Health and Family Welfare, Government of India, New Delhi has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusive and shall not be reopened in any other proceedings or under any law for the time being in force. Where the declarant has filed an appeal or reference before any Authority, Tribunal or Court, notwithstanding anything contained in any other provision of law for the time being in force, such appeal, reference or reply shall be deemed to have been withdrawn. Where writ petitions have been filed before the High Court or Supreme Court the declarant shall move an application for withdrawing such petitions and furnish the proof of the same along with the intimation. Any amount paid in pursuance of declaration made under the Scheme shall not be refundable under any circumstances. The designated authority shall subject to4. the conditions provided in the Scheme grant immunity from prosecution or penalty under the relevant Acts in respect of matters covered in the declaration." 16.Section 87(h) of the Kar Vivad Samadhan Scheme, 1998 defines "direct tax enactment" which reads thus : "direct tax enactment" means the Wealth-tax Act, 1957 (27 of 1957) or the Gift-tax Act, 1958 (18 of 1958) or the Income-tax Act, 1961 (43 of 1961) or the Interest-tax Act, 1974 (45 of 1974) or the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Scheme, in a case where prosecution for any offence punishable under any provisions of any indirect tax enactment has been instituted on or before the date of filing of the declaration under Section 88, in respect of any tax arrear in respect of such case under such indirect tax enactment, this Scheme shall not apply. Clauses (ii) and (iii) of Section 95 of the Kar Vivad Samadhan Scheme, 1998, which are relevant for our purpose are reproduced hereunder : in respect of tax arrear under any"(ii) indirect tax enactment, - (a) in a case where prosecution for any offence punishable under any provisions of any indirect tax enactment has been instituted on or before the date of filing of the declaration under Section 88, in respect of an tax arrear in respect of such case under such indirect tax enactment; (b) in a case where show cause notice or a notice of demand under any indirect tax enactment has not been issued; (c) in a case where no appeal or reference or writ petition is admitted and pending before any appellate authority or High Court or the Supreme Court or no application for revision is pending before the Central Government on the date of declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions contained in the proviso to sub-section (4) of Section 90. (e) The declarant has paid Rs. 98,40,222/- being the sum determined by the Designated Authority. 22.In exercise of the powers conferred by sub-section (2) of Section 90 read with Section 91 of the Finance (No. 2) Act, 1998, the Designated Authority issued the certificate to the declarant in the following terms : (a) Certifying the receipt of the payment from the declarant towards full and final settlement of tax arrears determined in the order dated 10-2-1999 on the declaration made by the aforesaid declarant; (b) Granting immunity, subject to the provisions contained in the Kar Vivad Samadhan Scheme, 1998, from instituting any proceeding for prosecution for any offence under the Customs Act, 1962, or from the imposition of penalty under said enactment, in respect of matters covered in the aforesaid declaration made by the declarant. 23.It is thus crystal clear that the Commissioner of Customs (Adjudication) and Designated Authority (KVSS-98) granted immunity from instituting any proceeding for prosecution for any offence under the Customs Act, 1962, or from the imposition of penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal. The appellant requested the Department to indicate or compute the tax arrears as per the Kar Vivad Samadhan Scheme, 1998 so that all disputes in relation to these three assessment years can be resolved. As there was no response from the Department, the appellant submitted three separate declarations under Sections 88 and 89 of the Kar Vivad Samadhan Scheme, 1998 and also pointed out the mandatory nature of Section 245 of the Act. Respondent 1, on receipt of the declarations for the three assessment years evaluated and verified the same in accordance with the provisions of the Kar Vivad Samadhan Scheme, 1998 and on being satisfied with the correctness of the declaration in every respect, issued on 26-2-1999 a statutory certificate prescribed in Form 2A and Rule 4(a) under the provisions of Section 90(1) of the Kar Vivad Samadhan Scheme, 1998. On receipt of the said certificate under Section 90(1) of the Kar Vivad Samadhan Scheme, 1998, the appellant deposited the sum determined and demanded the issue of certificate under Section 90(2) of the Scheme for the deemed withdrawal of the appeal filed by the appellant for these years which were pending adjudication. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards full and final settlement of the tax arrears within a period of sixty days. Thereafter, except on ground of false declaration made by the declarant, every order passed under sub-section (1) of Section 90 determining the sum payable under the scheme, is absolutely conclusive as to the matters stated thereunder and no matter covered by such order can be reopened in any other proceeding under any law for the time being in force. After this determination under Section 90(1) KVSS, another certificate is issued under Section 91 KVSS on the basis of which immunity is granted to the declarant from instituting any proceeding for prosecution for any offence under any direct tax enactment or indirect tax enactment. 8.We may notice that a certificate issued under Section 90(1) KVSS making a determination as to the sum payable under KVSS, is conclusive as to the matter stated therein and cannot be reopened in any proceedings under any law for the time being in force, except on the ground of false declaration by any declarant. Therefore, before issue of a notice, there should be satisfaction that the declarant has made a false declaration. There is no such allegation in the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Banks have been compromised on receiving payments, we do not think that the said complaints should be pursued any further. In our view, proceeding further with the complaints will not be expedient." 29.In our view, in the present case, the alleged criminal liability stands compounded on a settlement with respect to the civil issues and, therefore, the First Information Report was erroneously issued and was totally unwarranted. From the aforesaid judgment, the proposition that follows in the instant case is that the Kar Vivad Samadhan Scheme, 1998 issued by the Government of India was a voluntary Scheme whereby if the disputed demand is settled by the Authority and pending proceedings are withdrawn by an importer, the balance demand against an importer shall be dropped and the importer shall be immuned from penal proceedings under any law in force. We are, therefore, of the opinion that this judgment squarely comes in the face of any argument sought to be propounded by the respondent that the Kar Vivad Samadhan Scheme, 1998 does not absolve the appellants from criminal liability under the Indian Penal Code. The learned Single Judge of the High Court of Delhi, in our opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Act, 1962 also extends to such offences that may prima facie be made out on identical allegations i.e. of evasion of Customs Duty and violation of any Notification issued under the said Act. 31.In our view, there is no prima facie case made out in respect of the alleged offence under Section 120B read with Section 420 of the Indian Penal Code and, therefore, the charge sheet and the process issued thereunder has to be quashed. 32.To bring home the charge of conspiracy within the ambit of Section 120B of Indian Penal Code, it is necessary to establish that there was an agreement between the parties for doing an unlawful Act. It is difficult to establish conspiracy by direct evidence. 33.Likewise the ingredients of Section 420 of the Indian Penal Code are also not made out. There is no reason as to why the appellants must be made to undergo the agony of a criminal trial as has been held by this Court in the case of G. Sagar Suri Anr. v. State of U.P. Ors. (2000) 2 SCC 636. In this case, this Court held that, "Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived. In the first class of cases, the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. 35.In view of the aforesaid provisions of law, as the Customs Duty has been paid by the GCS, there is no fraudulent or dishonest intention on the part of the GCS or its office bearers to retain the property. Moreover, there is no inducing on the part of the GCS or its office bearers intentionally to retain the property in view of the fact that the Customs Duty has been paid by the GCS and, therefore the ingredients of the offence of cheating are missing for issuing the process against the appellants and, therefore, the same, in our view, is liable to be quashed and set aside. 36.Section 111 of the Customs Act, 1962 which provides for confiscation of improperly imported goods, etc. insofar as it is relevant reads thus : "Section 111. Confiscation of improperly imported goods, etc. - The following ………. goods brought from a place outside India shall be liable to confiscation - (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the GCS could not comply with it and, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as office bearers right at the time of making application for exemption. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 of the Indian Penal Code does not arise. We have read the charge sheet as a whole. There is no allegation in the First Information Report or the charge sheet indicating expressly or impliedly any intentional deception or fraudulent/dishonest intention on the part of the appellants right from the time of making the promise or misrepresentation. Nothing has been said on what those misrepresentations were and how the Ministry of Health was duped and what were the roles played by the appellants in the alleged offence. The appellants, in our view, could not be attributed any mens rea of evasion of customs duty or cheating the Government of India as the cancer society is a non-profit organization and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1973), the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Terrorists and Disruptive Activities (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; xxx"xxxxxx 44.According to the above provision, a person will not be eligible or entitled to take benefit of the Scheme against whom a prosecution for punishment of an offence under Chapter IX or XVII of the IPC is pending on or before the date of the declaration or such person has been convicted for any of such offences indicated above. There is no dispute on the fact that on the date the appellants submitted their declaration under Section 88 no prosecution was pending nor 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pending before the High Court or the Supreme Court, which had also been done in the case in hand. That is to say on one hand declarant is not permitted to pursue the remedy, regarding tax liability, which is already pending before the courts of law, as they are either deemed to be withdrawn by operation of law or they have to be withdrawn by a positive act of the party and yet prosecute such persons for their conviction as well. 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. 46.In the background given above, there is every reason to legally infer that the position as it stood, in regard to the criminal prosecution and conviction on the date the declaration was filed, as conditions precedent to settlement under the Scheme, would also stand finalized on full and final settlement of the matter under the Scheme. That is to say the position that no criminal prosecution was pending against the declarant on the date of filing of the declaration nor he stood convicted for such an offence in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X
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