# [2008) 7 S.C.R. 1000 >' M. NATARAJAN '-t v. STATE BY INSPECTOR OF POLICE, SPE, CBI, ACB CHENNAI

- **Citation:** [2008] 7 S.C.R. 1000
- **Court:** Supreme Court of India
- **Decided:** 2008-05-07
- **Case number:** Criminal Appeal No. 834 of 2008
- **Bench:** P.P. Naolekar, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2008-7-s-c-r-1000-m-natarajan-t-v-state-by-inspector-of-police-spe-cbi-acb-24621
- **Pages:** 25

## Headnote

Penal Code, 1860 - ss. 102 B rlw s. 420, 467 and 471 -
c Evasion of custom duty by one of the accused - By producing
fabricated documents - Appellant-accused alleged to have
helped in preparation of some fabricated documents -
Prosecution under the provisions of /PC - Petitions for
discharge and quashing of criminal proceedings filed by
D appellant-accused- Dismissal of by courts below- On appeal,
r
plea that the evader of the duty having entered final settlement
in terms of Kar Vivad Samadhan Scheme, 1998, earned
complete immunity from the transaction and no one could be
prosecuted - Held: Criminal proceedings not liable to be
E quashed against the appellant-accused - Immunity under the
Scheme refers to only direct and indirect tax enactments and
not to the offences under /PC - Merely because the accused
had been tried uls 132 of Customs Act, it does not preclude
trial for offences under /PC - Finance Act (No.2), 1998 - Kar
Vivad Samadhan Scheme, 1998 - Customs Act, 1962 - s.
.
'
F 132.
A charge-sheet was filed against the appellantaccused and five other accused, u/s. 120 B r/w s. 420, 467,
471 IPC. Prosecution case was that accused No. 3 sent a
G car from England to India. Accused No. 4, in order to take
advantage of Transfer of Residence Scheme used
fabricated documents for clearance of the car. Appellantaccused had helped in preparation of the fabricated
doc.uments. Appellant-accused filed a discharge
H
1000

1002
SUPREME COURT REPORTS
[2008] 7 S.C.R.
"
A
Commissioner of Income Tax 2004 (2) SCC 731; Duncans
Agro Industries Ltd. Calcutta v. Commissioner of Central
Excise, New Delhi 2006 (7) SCC 642; Alpesh Navinchdnara
Shah v. State of Maharashtra and Ors. 2007 (2) SCC 777referred to.
B
2. It is not correct to say that the only offence which
.I.
could have been alleged against any of the accused was
.,.
under Section 132 of the Customs Act, 1962, i.e., of making
a false declaration, since the offence complained of,
related to the false declaration and false documents and
c the appellant could be prosecuted only under Section 132
of the Customs Act and not under the offences covered
tunder IPC. Merely because there may be some
overlapping in the two offences, it does not mean that the
appellant cannot be tried under the offences covered
D under IPC. The Court would proceed to decide the
question on the basis of the evidence led before it. Merely
'
1
because the appellant could be tried under Section 132
of the Customs Act, it does not mean that he could not be
tried for the offence committed under the IPC. There is no
E such provision. [Para 27] (1023-H; 1024-A,B,E,-F]

## Text

_Characters 0–39,899 of 51,001. This is a partial read: ask again with offset=39899 for what follows._

, [2008) 7 S.C.R. 1000
>'
M. NATARAJAN
'-t
V.
STATE BY INSPECTOR OF POLICE, SPE, CBI, ACB
CHENNAI
(Criminal Appeal No. 834 of 2008 etc.)
B
MAY 7, 2008
[P.P. NAOLEKAR AND V.S. SIRPURKAR, JJ.]
Penal Code, 1860 - ss. 102 B rlw s. 420, 467 and 471 -
c Evasion of custom duty by one of the accused - By producing
fabricated documents - Appellant-accused alleged to have
helped in preparation of some fabricated documents -
Prosecution under the provisions of /PC - Petitions for
discharge and quashing of criminal proceedings filed by
D appellant-accused- Dismissal of by courts below- On appeal,
r
plea that the evader of the duty having entered final settlement
in terms of Kar Vivad Samadhan Scheme, 1998, earned
complete immunity from the transaction and no one could be
prosecuted - Held: Criminal proceedings not liable to be
E quashed against the appellant-accused - Immunity under the
Scheme refers to only direct and indirect tax enactments and
not to the offences under /PC - Merely because the accused
had been tried uls 132 of Customs Act, it does not preclude
trial for offences under /PC - Finance Act (No.2), 1998 - Kar
Vivad Samadhan Scheme, 1998 - Customs Act, 1962 - s.
.
'
F 132.
A charge-sheet was filed against the appellantaccused and five other accused, u/s. 120 B r/w s. 420, 467,
471 IPC. Prosecution case was that accused No. 3 sent a
G car from England to India. Accused No. 4, in order to take
advantage of Transfer of Residence Scheme used
fabricated documents for clearance of the car. Appellantaccused had helped in preparation of the fabricated
doc.uments. Appellant-accused filed a discharge
H
1000

1002
SUPREME COURT REPORTS
[2008] 7 S.C.R.
"
A
Commissioner of Income Tax 2004 (2) SCC 731; Duncans
Agro Industries Ltd. Calcutta v. Commissioner of Central
Excise, New Delhi 2006 (7) SCC 642; Alpesh Navinchdnara
Shah v. State of Maharashtra and Ors. 2007 (2) SCC 777referred to.
B
2. It is not correct to say that the only offence which
.I.
could have been alleged against any of the accused was
.,.
under Section 132 of the Customs Act, 1962, i.e., of making
a false declaration, since the offence complained of,
related to the false declaration and false documents and
c the appellant could be prosecuted only under Section 132
of the Customs Act and not under the offences covered
tunder IPC. Merely because there may be some
overlapping in the two offences, it does not mean that the
appellant cannot be tried under the offences covered
D under IPC. The Court would proceed to decide the
question on the basis of the evidence led before it. Merely
'
1
because the appellant could be tried under Section 132
of the Customs Act, it does not mean that he could not be
tried for the offence committed under the IPC. There is no
E such provision. [Para 27] (1023-H; 1024-A,B,E,-F]
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 834 of 2008.
From the final Judgment and Order dated 3.10.2005 of
F the High Court of Judicture at Madras in Criminal Revision Case
No. 538 of 2005.
• •
WITH
Criminal Appeal No. 835 of 2008.
G
K. Subramaniam, R. Jayaseelan, E.C. Agrawala, Mahesh
Agarawal, Rishi Agrawala, Gaurav Goel, Amit Kumar Sharma
and Ashutosh Garg for the Appellant.
'l
Vikas Singh, ASG, Vikas Sharma. Ranjana Narayan, B.K.
H Prasad and V. K. Verma for the respondent.
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1003
SPE, CBI, ACB CHENNAI [V.S. SIRPURKAR, J.]
The J~dgment of the Court was delivered by
A
V.S. SIRPURKAR, J. 1. Leave granted.
2. The challenge in these appeals is to the common
judgment of the learned Single Judge of the Madras High Court
j
whereby the High Court has dismissed the Criminal Revision
Case No.538 of2005 and Criminal O.P. No.21636 of2005 filed
B
by the appellant herein.
3. Following facts will highlight the controversy involved.
4. One Dr.S. Balakrishnan, purchased the Toyota Lexus c
Car which was sent by Ship to Madras Port in July, 1994. His
son Yogesh Balakrishnan presented certain documents for
getting clearance of the said car from the Customs Department.
One such document was a letter dated 8.9.1994 authored by
the appellant herein Shri M. Natarajan who is the publisher of a
magazine called "Tamilarasi" which publication had commenced D
in the year 1992. He is also the author of bi-monthly magazine
"Pudiya Paarvai" which surfaced in the year 1993. One Baskaran
was said to be assisting the appellant being the incharge of
these publications. The said letter dated 8.9.1994 wf)ich was E
used by accused Yi5gesh _Balkrishnan was authored by the
appellant and addressed to the Manager, Indian Bank,
Abiramapuram, Madras on behalf of Tamilarasi publication to
the following effect:
"We invite reference to the various remittances made by F
' ~
our purchase creditors on 22.6.94 into our account, and
would like to inform you that a sum of Rs.12 lacs remitted
relates to the remittances made by our Foreign buyers of
our weekly and fortnightly magazines.
Kindly issue a Foreign Inward certificate for this sum of G
Rs.12 lacs."
~
,..
On the basis of this letter the Foreign Inward Certificate,
'
as sought for by the appellant, was issued by the bank. Ultimately
1
the said car was cleared and was allowed to be imported.
H
A
1004 .
SUPREME COURT REPORTS
[2008] 7 S.C.R. .
5. A First Information Report came to be lodged at the .
·instance of Central Bureau of Investigation, Chennai for offences
under Sections 120B read with Section 420, 468, 471 IPC and
Section .13(2) read with Section 13(1)(d) of the Prevention of
Corruption Act. In that First Information Report, four accused
~ B were arrayed, they being, (i) Shri S. Senthivef, Commissioner
of Customs (Reid.), Chennai, (ii) Shri Hariharan, former Asst!.
Collector Customs, Chennai, (iii) Shri Raja Manoharan, Former
·Apprising Officer, 'customs, Chennai and (iv) Shri Bafakrishnan.
ft was suggested in the report that in the year 1994 the four
. c accused persons entered into a criminal conspiracy in Chennai
fo cheat the Department' of Customs, Government of India in
the matter of assessment of duty on a car imported by fourth
accused and in pursuance of the said conspiracy, the fourth
accused, in connivance with Accused Nos.1 to 3 imported
0 · Toyata lexus Car CS 300 of engine capacity 3000 CC bearing
Engine No.2320283150 and Chassis No. JT 153-Jse. 7...:
000727250 and had sought customs clearance under the
condition of transfer of residence to India for permanent
"settlement by producing forged and fabricated invoice
. E
LEX00077 dated 13.7.1993.showing the value of ?21405 as if
· the car was purchased in 1993 for that value. In pursuance of
this conspiracy A 1 to A3 fraudulently and dishonestly abused
. their· official position and cleared the car on 8.9.1994 after
. allowing 19% depreciation on the cost of the car, knowing fully
well that firstly the car was not purchased in the year 1993 and
F
the original cost of the car was more than the declared value
and further that the importer was producing forged docu'ments
and thereby had caused wrongful loss of Rs.4 fakhs to the
Government of India by way of customs duty. On the basis of
this the inves_tigation was started by the CBI.
·
G.
·. s: Ultimately, however, the charge-sheet was fifed against
· . the present appellant and the four other accused, namely, (i)
Shri V. Bhaskaran, ·(ii) Shri S. Bafakrishnan, (iii) Shri Yogesh
Bafakrishnan and (iv) Smt.Sujaritha Sundarajan. In the chaigesheet it was stated that the first accused (appellant herein) was
H
...
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1005
SPE, CBI, ACS CHENNAI [VS. SIRPURKAR, J.)
Director of Tamilarasi Publication, the second accused was a A
private individual and authorized signatory to operate the current
account of M/s.Tamilarasi Publication, the third accused was a
private individual, the fourth accused was also a private
individual and the fifth accused was the Branch Manager, Indian
Bank, Abiramipuram Branch, Chennai and Smt.R. Bhavanai, 8
~
Approver was working as the Assistant Manager, Indian Bank,
Abiramipuram, Chennai in the year 1994. In the charge-sheet it
was stated that the accused had conspired to cheat the
Government of India and to commit act of criminal misconduct
and in furtherance of the conspiracy, the appellant and the c
second accused fabricated documents for the purpose of
clearing the imported Lexus Car which was imported by the
third and fourth accused in order to take advantage of the
provisions of Transfer of Residence and pay less customs duty,
though they fully knew that the car was manufactured in the year D
"'
1994 which was mis-declared to be manufactured in the year
'
1993 and in pursuance of the said conspiracy, the fifth accused
misued and abused her official position as the Branch Manager
of the Indian Bank, issued the Foreign Inward Remittance
Certificate to the effect that the Lexus Car which was imported E
would be released by the Customs Department on the basis of
the same, knowing very well that the Current Account No.872 of
M/s.Tamilarasi had not received any foreign remittance, though
it was one of the pre-condition that only foreign remittances could
be used for payment of customs duty, thereby the accused had
F
caused loss to the Customs Department of Rs.1,06,20,472/-. It
•· 'f
was suggested further that third accused had fraudulently and
dishonestly imported the Lexus Car by ship while the fourth
accused Yogesh Balakrishna has handed over five documents
to Shri Janaki Raman of Mis.Samba Sivam & Company,
Chennai for getting the car cleared. It was further stated in the G
charge-sheet that the original sale invoice of the car dated
13. 7 .1994 was replaced and substituted with another photocopy
r'
of fabricated invoice by changing the date to 13. 7 .1993 for the
purposes of clearing the car under the provisions of Transfer of
Residence since otherwise the car could not be cleared under H
-
1006
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A
the said provisions This was done by the fourth accused in
connivance with the first accused. It was suggested that the
assessment of the car was done on the basis of the fabricated
documents. Thi.; assessment was made on Oost Insurance
Freight value wh: ~h suggested that consignmentwas imported
B directly by the manufacturer to the country of the buyer as a new
car. It was further suggested that the third accused falsely
declared and showed that the car was one year old, when in
fact, it we:.s not. He had also filed a false affidavit that the car
was in use for more than one year before he came to India for
c permanent settlement. The accused had also filed fake First
Registration Certificate showing the first registration on
15.7.1993 whereas the car itself was manufactured in March,
1994. It was, therefore stated that Accused Nos.1 to 4 had
submitted documents for the clearance of the car imported by
0
the third and fourth accused knowing them to be false documents
for taking advantage of the provisions of Transfer of Residence
scheme. It was clarified ti .at for taking advantage of the scheme
of Transfer of Residence, the Customs duty has to be paid in
foreign exchange or otherwise it should be through an account
E where there is foreign inward r.emittances and for this purpo~e
the Branch Manager of the Bank in which the account lies has
to issue a certificate mentioning that the concerned account is
receiving or had received foreign remittances. While the
appellant herein and second accused Shri Balakrishnan very
well knew that the Current Account bearing No.872 at Indian
F
Bank, Abiramipu'ram, Chennai did riot receive any foreign
inward remittance, got a false certiticate issued by Smt.Sujarita
Sudararajan, the fifth accused, Branch Manager 0fthe bank on
the basis of a false letter presented by the first accused and on
the basis of that the Branch Manager had issued foreign inward
G remittance certificate dated 8.9.1994 to the effect that the Lexus
Car can be cleared from the Customs. She had also directed
her Assistant Manager Smt.Bhaval)i to modify the certificate
and issue the same to Shri M. Natarajan, appellant and Shri
Bhaskaran, s~cond accused. Thus the 1;ertificate was used by
. ti the four accused persons (A 1. to A4) for the purposes of clearing
,J
1
¥ '
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1007
SPE, CBI, ACB CHENNAI [VS. SIRPURKAR, J]
"'('
the imported car, knowing fully well that the Current Account A
No.872 did not receive any foreign exchange remittance.
7. The charge-sheet, therefore, went to show that the acts
of accused Nos.1 to 5 constituted offences punishable under
Section 120B IPC read with Sections 420, 467, 471 IPC and
B
t
Section 13(2) read with Section 13(1 )(d) of the Prevention of
.~
Corruption Act, 1988. It was pointed out further that the other
accused persons named in the FIR, who were government
officials, were not sent for trial as the Departmental action for
major penalty was recommended against them. It was further c
pointed out that Smt.Bhavani, original Accused No.6 was
granted tender of pardon by the 2nd Metropolitan Magistrate,
Egmore, Chennai while fifth respondent was already dismissed
from service and as such no sanction order was required under
the law.
8. This charge-sheet was filed on 30th January, 2004 and D
't
the case was posled in the month of April, 2004 for receiv;;1g
copies by the accused. The case was split up as Non Bailable
Warrant was pending against the third accused and had
remained unexecuted. The trial commenced against the other E
accused in which 22 witnesses were examined, 82 documents
were marked and the case stood posted for 5.9.2005 for
examination of the Defence Witnesses. However, in the
meantime, the present appellant filed a discharge application
vide Criminal M.P. No.146 of 2005 on the file of the learned
Principal Special Judge for CBI Cases, Chennai. This Criminal
F
, . .,
M.P. was dismissed on 18.4.2005 against which order a
Revision Petition being Criminal Revision No.538 of 2005 came
to be filed. Besides this the appellant also filed a Criminal
Original Petition being Criminal O.P. No.216~6 of 2005 for
quashing the proceeding under trial. It seems that the appellant G
had approached this Court also and this Court had issued a
Jl
direction on 13.5.2005 for the early disposal of the Criminal
Revision Petition. The High Court ultimately came to decide
and dispose off the Criminal Revision Petition as well as
Criminal Original Petition by a common judgment which is H
1008
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A impugned before us.
9. In the application for discharge as also in the Revision
Petition before the High Court as well as in the Criminal O.P.,
the contention of the appellant was firstly that he had no role
B with respect to the production of documents for clearance of
the car, secondly in a scheme, namely, Kar vivad Samadhan
Scheme, 1998 (KVSS) floated vide Finance Act No.2 of 1998
~
which commenced from 1.9.1998, it was clearly provided that if
a tax-payer settles his dues regarding the direct and indirect
c
taxes and once a final settlement is arrived at in pursuance of
the scheme and once the payment is made as per the settlement,
the tax-payer earns a complete immunity in respect of the
transaction which includes the prosecution from all or any of the
offences. It was pointed out that third accused in pursuance of
Rule 3(1)(b) of the Rules had filed a declaration in Form 1-B
D under Section 88 of the Finance Act and the Customs
Department had issued a certificate of intimation under Section
,
i
90(1) of the Finance Act and determined the tax under Section
88(f) of the Act as being Rs.2,84,325/- which was remitted by
the third accused on 18.3.1999. This final settlement was arrived
E at between the parties as against the original claim arrears of
tax of Rs.5,68,649/-. In short, the appellant prayed that in respect
of the transaction in question no prosecution could have been
launched against the third accused or for that matter any other
accused. For this the appellant relied on the reported decisions
F of this Court in Central Bureau of Investigation, SPE, SIU (X),
New Delhi v. Duncans Agro Industries Ltd., Calcutta [(1996) 5 .
'
SCC 591] and Sushi/a Rani (Smt.) v. Commissioner of Income
Tax & Anr. [(2002) 2 SCC 697] and Hira Lal Hari Lal Bhagwati
v. CBI, New Delhi [(2003) 5 SCC 257].
G
10. As against this, it was argued before the learned Single
Judge by the Public Prosecutor that firstly the Revision Petition
under Section 239 Cr.P.C. could not co-exist with the Criminal
"'
Original Petition under Section 482 of the Cr.PC. It was secondly
suggested that the law laid down by this Court in Duncans Agra's
H case and Sushi/a Rani's case (supra) was no more a good law
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1009
SPE, CBI, ACS CHENNAI [V.S. SIRPURKAR, J.]
because of the decision of this Court in State of Orissa v.
A
Debendra Nath Padhi [(2005) 1 SCC 568]. It is also suggested
by the Public Prosecutor that for the purposes of framing charges
under the provisions of Cr. P.C. what may be seen is the material
produced by the prosecution in charge-sheet and no other
"
material. It was, therefore suggested by the learned Public B
Prosecutor that the court could not have looked into the KVSS,
1998 to find out as to whether there was an absolute immunity
to the tax-payer and other granted by that scheme and whether
the appellate court utilized the alleged immunity.
11. Learned Single Judge went into the details of the c
scheme. In that the learned Judge considered Sections 88, 90,
91 and 95 of the KVSS 1998 and also referred to the case law
cited and posed before him a question in the following words:
~
"Thus the crux of the question is whether "KVSS" is 0
applicable to the present facts of the case or not, and if
not applicable, how the present case is different from the·
facts in issue of Hiralal's case."
In short the learned Judge came to the conclusion that it is
permissible to look into the KVSS 1998 though it was not the E
part and parcel of the charge-sheet and for that purpose in order
to decide as to whether the prosecution was legally launched or
not and could continue or not, the court could look into the KVSS
I i
1998. For this, the learned Judge relied on the decision of this
Court in State of Haryana & Ors. V Bhajan Lal & Ors. [1992
F
Supp (1) sec 335) and more particularly on the following
observations regarding the circumstances under which
interference under Section482 Cr. P.C. was possible:
"Where there is an express legal bar engrafted in any of
the provisions of the Code or the concerned Act (under G
which a criminal proceeding is instituted) to the institution
and continuance of the proceedings and/or where there is
a specific provision in the Code or the concerned Act,
providing efficacious redress for the grievance of the
aggrieved party."
H
1010
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A
In our opinion, the learned Judge was right in examining
the KVSS 1998 to decide whether it provided complete immunity
from the prosecution since that was the mainstay of appellants
attack against the prosecution.
B
12. The learned Judge then undertook the detailed
.,.
examination of the KVSS 1998 as also the case law and came
to the conclusion that the acts complained of against the
appellant were outside the declaration statement under Section
88 made by third accused. The acts complained of in the charge
c
sheet did not have any connection with the declaration of
statement (by accused no. 3) and the letter dated 8.9.1994 which
was the basis for iss:iance of Foreign Inward Remittance
certificate amounted to misrepresentation and false
representation and it had no connection with the scheme
whatsoever and as such the learned Judge came to dismiss
i'
D the Revision Petition as well as Criminal O.P. under Section
482 Cr.P.C.
13. It is on this background that we have to proceed to
decide the present appeals.
E
14. Shri K. Subramaniam, Senior Advocate, appearing
on behalf of tt:ie appellant very heavily relied on the decision in
Hiralal's case (supra). He pointed out that the law laid down in
Duncans Agro's case and Sushi/a Rani's case (supra) was
reiterated in Hirala/'s case, more particularly in para 27 thereof.
r '
F Para 27 reads as under:
"On a reading of the judgment in the case of Sushi/a Rani,
it is clear to us that if an assessee takes the option under
this scheme, he obtains immediate immunity under any
proceeding under any and all laws in force. As such the
G
present proceedings initiated under Section 1208 read
with Section 420 of the lrdian Penal Code are bad and
ought to have been quashed with immediate effect"
Learned counsel points out that the observations made in
H this paragraph and more particularly the user of the terms "unde~
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1011
SPE CBI, ACS CHENNAI [V.S. SIRPURKAR, J]
any and all laws in force" would go to suggest that the concerned A
accused earns an absolute immunity for the prosecution of all
the offences including under Sections 1208 and 420 IPC which
were also alleged against the appellant herein in the present
case. Learned counsel further very painstakingly took us through
~
the provisions of KVSS 1998 as engrafted in the Finance Act B
""'
and invited our attention to Sections 90, 91 and 95 of the same
which are the relevant sections. It was further contended that
the criminal act complained of against the appellant was so
inextricably connected with the Customs transactions that it had
to be held a part and parcel of the same and, therefore, all and c
every prosecution related to the customs transaction not only
against the person who had made the declaration but also
against each and every person connected with the transaction
were covered in the immunity provided under Section 91 of the
'
Act. Our attention was further invited to the judgment of this Court D
'/"
in K. C. Builders & Anr V Assistant Commissioner of Income
Tax [(2004) 2 SCC 731] and also Duncans Agro Industries
Ltd. Calcutta V Commissioner of Central Excise, New Delhi
[(2006) 7 sec. 642]. Learned counsel also relied on the
judgment of this Court in Alpesh Navinchdnara Shah v State
E
of Maharashtra & Ors. [(2007) 2 SCC 777] where this Court
had reiterated the law laid down in Hiralal's case.
1?. As against this Shri Vikas Singh, learned Additional
Solicitor General very carefully sifted the facts. He firstly
·-(
suggested that.at this stage the court should not interfere in the
F
matter as the trial was complete and only the judgment had to
be delivered. He then points out that the act complained of
against the appellant is an independent offence inasmuch as
he had made a false representation to the bank, knowing it to
be false. He had known that there were no foreign remittances G
in Account No.872 of M/s.Tamilarasi and that his request for
issuance of certificate to that effect was totally unfounded. On
the basis of this letter, a certificate which was essentially false
came to be issued by the B.ranch Manager and, therefore, this
act is independent offen~e. though ultimately the said certificate
H
1012
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A had been used by the third accused for getting the clearance of
the car. Our attention was invited to the provisions suggesting
that under the scheme the remittance is either to be made in
foreign currency or atleast on the basis of the remittance by an
NRI credited in the account held in the Indian Bank. He further
B points out that the provisions of Sections 90, 91, 95 and more
particularly Section 91 were clear and couched in the language
which admitted of no doubts. Relying heavily on the language of
Section 91, the learned ASG suggests that this immunity has to
be restricted to the offence under the Act and it could not be
c viewed as general immunity providing immunity covering all the
other offences cover ad by different Acts which are distinct and
separate from the tax laws. Further the learned counsel urged
that the immunity was not available to a totally non connected
persons like the appellant. In that behalf he pointed out that the
0 third accused had not claimed immunity before the trial court or
before the High Court. The learned counsel also suggested that
the observations made in para 27 of the Hirala/'s case were
entirely based on the observations in Sushi/a Rani's case.
However, considering the narrow scope and the factual scenario
in Sushi/a Rani's case, the broad observations made in para
E 27 in Hiralal's case were not justified. He further points out that
those observations were ultimately diluted by Hon'ble
Lakshmanan, J. in the subsequent decision in Alpesh
Navinchdnara Shah's case. Learned counsel further invites our
attention to the two judgments both by Hon'ble Sinha, J. reported
F in State, CBI v. Sashi Ba/asubramanian & Anr [(2006) 13 SCC
252 and Master Cables (P) Ltd. V State of Kera/a & Anr [(2007)
5 SCC 416]. According to learned counsel both these are direct
judgments wherein the earlier judgments in Duncans Agro's
case, Sushi/a Rani's case, Hirala/'s case and K. C. Builders's
G case have been explained and this Court has drifted away from
the broad propositions laid down in those judgments. He,
therefore, urges for the dismissal of the appeals.
16. It will be, therefore, our task first to examine the
H provisions of KVS Scheme and more particularly,
. ,
>
J..,
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1013
-~
SPE, CBI, ACB CHENNAI [VS. SIRPURKAR, J.]
Section 90, 91 and 95. Sections 88 to 98 which are included in
A
Chapter IV of the Finance Act (No. 2) of 1998 cover the entire
'
Kar vivad Samadhan Scheme. The basic object of the Scheme,
1
undoubtedly, is to recover the taxes both direct as well as indirect.
"
Section 87 U) specifically brings into the fold of the Scheme the
•
Customs Act, 1962, which is the concerned Act for the purpose B
~
of the present controversy. Section 87 (a) gives the definition of
declarant as- "declarant means a person making a declaration
under Section 88". Section 88 provides that a declarant has to
make the declaration during the period from 1.9.1998 to
31.12.1998. The said declaration has to be in respect to the tax c
payable either under direct tax enactment or indirect tax
· enactment or any other provision of any law. Section 88 then
provides the modality for settlement of such tax. There is no
dispute that in the present case, it was the third accused and
..
not the appellant who actually gave a declaration statement D
't
under section 88, in respect of the tax liability which was attracted
--f
on a;:;count of the import of the car. There is a Isa no dispute that
on the basis of this declaration under Section 88, the authorities
went on to decide the liability on the part of third accused and
ultimately, the tax liability was satisfied and the car was allowed E
to be imported. Section 90 provides for the time and manner of
payment of tax arrear which have been settled on the basis of
the declaration under Section 88. Indisputably, a certificate in
the prescribed form was granted in favour of the third accused
in which particulars of the tax arrear and the sum payable after
• 1.
such determination was mentioned being a full and final
F
settlement of the tax arrears. Section 91 is the real crux of the
matter. It provides immunity from prosecution and imposition of
penalty in certain cases:
"91. Immunity from prosecution and imposition of penalty G
in certain cases- The designated authority shall, subject
to the conditions provided in Section 90, grant immunity
from instituting any proceeding for prosecution for any
offence under any direct tax enactment or indirect tax
enactment, or from the imposition of penalty under any of H
1014
SUPREME COURT REPORTS
[2008] 7 S.C.R ,..
A
such enactments, in respect of matters covered in the
declaration under Section 88".
It is this Section 91, which has been relied upon by the
appellant suggesting that the language is broad enough to cover
B
not only the declarant but any other person and the prosecution
not only under the direct tax enactment or indirect tax enactment
•
..
but any and every other offence also. It is for this purpose, that
the learned senior counsel, Shri K. Subramanian heavily relied
upon the observations in paragraph 27 of Hira/al's case. The
c
learned counsel also relied on the concurring and supplementing
observations by Hon'ble Brijesh Kumar, J., in which, the learned
Judge has made a specific reference to Section 95 after quoting
that Section.
17. We were taken extensively through this judgment by
D the learned counsel who was at pains to urge that the factual
scenario in Hiralaf's case is comparable to the present case, if
..,
not idemical. There also, the High Court in a pdition under
Section 482 Cr.P.C. had refused to quash the FIR and the
proceedings which were taken against the Director of Gujarat
E
Cancer & Research Institute (for short "GCRI"), Secretary of
Gujarat Cancer Society (GCS) and one Dr. Viral C. Shah. It
was the case of the prosecution that the three had cheated the
Government of India in terms of the evasion of customs duty
and by concealment of facts obtained customs duty exemption
F
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. In that case also, the
customs duty had been paid by the appellant and was settled
under the KVSS 1998. The charge against the appellant was
that the machines were imported into India by the GCS who
G availed of the duty exemption on the basis of the exemption
certificate issued in the name of the GCRI on a bona fide
premise that since all the activities of the GCRI were funded by
1..,
the GCS and all the operations of GCS were carried out through
the GCRI, such imports could be made. The Customs Authority
H
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1-015
SPE, CBI, ACB CHENNAI [V.S. SIRPURKAR, J.]
raided the premise of the GCRI and seized the machines on
A
the ground that the exemption certificate was issued in the name
of the GCRI and not in the name of GCS and, therefore, GCS
was not entitled to the exemption and was, therefore, liable to
pay customs duty. The GCS was held liable to pay the customs
duty, thus, denying the concessional duty benefit demanded from
8
..
it under Section 28 of the Customs Act, 1962 read with the
_.(
proviso to the said Section. Against the order imposing the duty
by the Collector of Customs, the appeals were filed before
Customs, Excise and Gold (Control) Appellate Tribunal, West
Regional Branch, Bombay which confirmed the findings of the c
Collector of Customs. Against that, the GCS filed an appeal
before this Court and while the matter was pending before this
Court, the Government of India launched a Kar Vivad Samadhan
Scheme, 1998, and in accordance thereof, the GCS had agreed
to deposit a stipulated amount of over Rs.98 lakhs and also D
"-t
withdrew the civil appeal pending before this Court. On
19.7.1989, a certificate for full and final settlemeilt of the tax
arrears was issued to the GCS. The said certificate provided
the final settlement of tax arrears and also granted the immunity
to the GCS from any proceedings for prosecution for any offence
E
under the Customs Act, 1962 or from the imposition of penalty
under the concerned enactments. However, a case was
registered against the appellants on the ground that the
appellants in conspiracy with the Director of the GCRI, Secretary
of the GCS and others had cheated the Government of India.
The prosecution was for the offence under Section 120-8 read
F
, 1
with Section 420 of the IPC. It was this prosecution which was
challenged and after the challenge, failed at the High Court level,
and the party had successfully approached this Court where
the proceedings were ordered to be quashed.
18. In Hiralal's case heavy reliance seems to have been G
placed on the judgment of Sushi/a Rani (Smt.) Vs.
Commissioner of Income Tax & Anr. and of Central Bureau of
Investigation, SPE, SIU (X}, New Delhi Vs. Duncans Agro
Industries Ltd, Calcutta. The learned Judges in their separate
H
1016
SUPREME COURT REPORTS
[2008) 7 S.C.R.
A
but concurrent judgments upheld the challenge and had quashed
the proceedings relying on the KVSS 1998. The learned Judges
noted the various provisions of the Scheme from Sections 86
to 98. It was also noted that FIR in that case was filed on 6.1.1999,
while the certificate under KVSS 1998 was issued on
B
19. 7.1999. Hon'ble Lakshmanan, J. in paragraph 23 observed:
c
D
E
"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
under the said enactment, in respect of matters covered
in the aforesaid declaration made by the dec/arant. 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 Socir:ty, and
considering the charitable and philanthropic activities of
the Society, no prosecution was recommended. Moreover,
only a token redemption fine of Re.1 was imposed."
(Emphasis supplied).
19. In paragraph 25, the learned Judge analyzed the
judgment in Sushi/a Rani's case (supra), which was also under
the KVSS 1998. Paragraph 6 and 8 of Sushi/a Rani's case
F
were quoted by the learned Judge which suggested that once a
certificate was granted under Section 90 (1 ), it was absolutely
conclusive as to the matter stated and no matter covered could
be reopened in any other proceeding under any law for the time
being in force. It is. probably on the basis of observations in
. G paragraph 6 of Sushi/a Rani's case, that the learned Judge
made the observation in paragraph 27 which we have already
quoted in para 13 of this judgment. We may at this stage itself
point out that the observations 1n paragraphs 6 and 8 in Sushi/a
Rani's case seem to have been made only in the pursuance of
H tax laws. The question of prosecution under some other offences
•
i '
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1017
...,_
SPE, CBI, ACB CHENNAI [V.S. SIRPURKAR, J.]
(not under the Indirect Tax Act or the Direct Tax Act) was not A
there.
20. A reference must be made, at this stage, to the
judgment of this Court reported in Alpesh_Navinchandra 's case
,;..
(cited supra) which was again decided by the Division Bench
B
consisting of Hon'ble Lakshman and Kabir, JJ., the judgment
was, however, authored by Hon'ble Lakshmanan, J. This was
the case of immunity granted under Sections 127H of the
Customs Act, 1962, however, the appellant and his brother were
preventively detained under COFEPOSA. The detention was
challenged on the ground that once the immunity under Section c
127H of the Customs Act was granted in respect of customs
offences, after settling the taxes finally by the Settlement
Commissioner, the preventive detention could not have been
ordered by the authorities for the same reasons. The case of
·!-
Hirata! (cited supra) was relied upon, which is clear from a D
reading of raras 17 and 46. This Court proceeded to hold in
paras 46 and 47 of its judgment as under:
"46. At the time of hearing, learned counsel for the petitioner
relied upon Hira Lal Bhagwati Vs. CBI. According to E
learned counsel for the respondent the said relied upon
case was a case of duty evasion and the appellant therein
was booked by Customs Authority and therefore, customs
duty was paid under KVS Scheme and further in the
, i
criminal proceedings under Sections 120-B and 420 IPC
F
initiated by CBI was quashed by this Court. Therefore, iJ
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 the nefarious activities
in future. Therefore, the immunity granted by the Settlement G
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
H
-
1018
SUPREME COURT REPORTS
[2008] 7 S.C.R
'r
A
the same needs to be upheld.
47. The Settlement Commission was constituted with the
aim and objective of settling the tax evasion issues and by
virtue of disclosure by tax offender, they gain immunity
B
from fine/penalty which is otherwise mandatory under the
,._
provisions of tax laws. But, such opportunity is only extended
to one-time tax offenders but not available to habitual
smugglers. For the persons involved in smuggling activities,
other than the provisions made for the prosecution under
the Customs Act, 1962, an equal deterrent is emphasized
c
under the provisions of the COFEPOSA Act, 1974 i.e.
provisions for preventive detention. Such preventive
detention prohibits smugglers from indulging in further
smuggling activities. In the present ca$t:: the investigation
reveals the consistent involvement of the petitioner detenu
i
D
and his brother, Kamlesh Navinchandra Shah in smuggling
activities, therefore, the detaining authority on the ba<>is of
evidence placed before him felt it necessary to issue the
detention orders in respect of both the detenus in order to
prevent them from prejudicial activities in future.
E
Accordingly, the impugned order is justifiable in the eye of
the law and the present writ petition deserves to be
dismissed."
In our opinion, the rigour of the observations made in
paragraph 27 in Hira/a/'s case is removed by the observations
r •
F made in paragraphs 46 and 47 in Alpesh Navinchandra Shah's
case. It was contended that the legislature had created a
Settlement Commission for generating revenue and had also
made provisions for release of the goods on payment of duty
and had also made provisions for granting immunity from
G prosecution under the Customs Act, 1962 under the Penal Code
and also under the other Central law and, therefore, it was clear
~.
that the intention of the legislature was more on revenue aspect
rather than prosecution and punishment aspect or in continuing
with multiple litigations. And, therefore, it would be unjust, unfair
H and unreasonable if a person is made to suffer preventive
,.
M. NATARAJAN v. STATE BY INSPECTOR OF POLICE,
1019
.....,,
SPE, CBI, ACB CHENNAI [V.S. SIRPURKAR, J.]
detention mainly after his application for settlement is allowed A
to be proceeded with, and after realization of the customs duties
not only the goods are ordered to be released but on considering
the cooperation extended by him in the settlement proceedings,
the Settlement Commission had also granted to him immunity
J.
from prosecution under the Customs Act, 1962 as well as under B
IPC. The reliance there, however, was being made not on KVSS
1998, but on the Scheme under Section 127-H of the Customs
Act, 1962 which provided the immunity not only from the Customs
Act offences but also from the Indian Penal Code and other
central enactmen~s. We must hasten to point out that at this c
juncture itself, the immunity under the KVSS 1998 does not refer
to the offences under the Penal Code or under any other central
law, but restricts itself under Section 90 (1) only to the offences
·Linder the direct tax enactment or indirect tax enactment and as
.
~
such Section 127H of the Customs Act is much broader than
D
Section 90(1) of Finance Act in its operation.
21. The Court then in paragraph 46 of the above case held
that the immunity granted by the Settlement Commission under
the provisions of Customs Act and IPC had no bearing on the
order of detention passed under the COFEPOSA Act.