# HIRA LAL llARI LAL 131-lAGWATI v. C.B.I

- **Citation:** [2003] 3 S.C.R. 1118
- **Court:** Supreme Court of India
- **Decided:** 2003-05-02
- **Bench:** Brijesh Kumar, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hira-lal-llari-lal-131-lagwati-v-c-b-i-19096
- **Pages:** 31

## Headnote

Penal Code, 1860-Sections 420 and 1208-Customs Act, 1962-Kar
Vivad Samadhan Scheme, 1998 under Finance (No.2) Act, 1998, Chapter
C JV-Section 95-Cancer Society importing machines for treatment of cancerAvailing customs duty exemption certificate-Collector demanding duty
however, considering philanthropic activities of society levying token
redemption fine and not launching prosecution-Order upheld-AppealDuring pendency of appeal 1998 Scheme brought, whereby persons availing
benefit thereunder was granted imn111nity from prosecution from any offence
D under Customs Act including evasion of duty-Importer paying stipulated
amount of custom duty-Issuance of full and final sel//ement certificate of tax
arrears and grant of immunity-However, CBI filing criminal proceedingsPetition seeking quashing of FIR-Dismissal by High Court-Justification
of-Held: Initiation of criminal proceedings notwithstanding immunity granted
E under 1998 Scheme not justified since the alleged criminal liability stands
compounded on a settlement with respect to civil issues, thus, FIR
unwarranted-Also no prima facie case of cheating and criminal conspiracy
made out-Criminal conspiracy and cheating-Essential Ingredients-Code
of Criminal Procedure, 1973-Section 482.
F
A cancl:r society imported machines for treatment of cancer.
Appellants-office bearers of the society availed custom duty exemption
certificate on false assertion that the machines imported are for "actual
user". Authorities raided the premises and seized the machines. Show cause
notice was issued to the society on the ground that the exemption certificate
was issued in the name of the cancer institute and not in the name of the
G cancer society and thus it was not entitled to exemption and was liable to
pay customs duty. Collector held that the society was liable to pay customs
duty. However, considering the charitable and philanthropic activities of
the society, it did not recommend prosecution and imposed a token
redemption fine of Rs. I. Appellant-office bearers of the society filed
H
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HIRA LAL llARI LAL 131-lAGWATI. v. C.B.I.
1119
appeals. Tribunal upheld the order of the Collector. Society then filed A
appeal before this Court. During pendency of the appeal, Kar Vivad
Samadhan Scheme, 1998 under Chapter IV of Finance (No.2) Act, 1998
was launched, whereby whoever takes the benefit under the said Scheme
is granted immunity from prosecution from any offence under the Customs
Act including the offence of evasion of duty. In accordance with the Scheme, B
the society deposited the stipulated amount and withdrew the appeal.
Thereafter, the society was issued certificate for full and final settlement
of tax arrears under the Scheme and was immuned from prosecution from
any offence under the Customs Act including the offence of evasion of duty.
However, the respondent-CBI registered a case under Section 1208 read
with Section 420 !PC against the appellants alleging that they cheated the C
Government by evading customs duty and obtained exemption ct:rtificate
by violating the provisions of 'actual user' condition. Appellants filed
petition for quashing the FIR. Single Judge of the High Court dismissed
the same. Hence the present appeals.
Appellants contended that the alleged criminal liability stands D
compounded on a settlement with respect to the civil issues, therefore, the
FIR was erroneously issued and was totally unwarranted; that the society
was immuned from prosecution from any offence under the Customs Act,
1962, including evasion of duty pursuant to the certificates issued under
the Kar Vivad Samadhan Scheme, 1998; that the Single Judge failed to E
appreciate that the society had taken the benefit of the Amnesty Scheme
and, therefore, implicating the appellants being office bearers of the Society
under Section 1208 read with Section 420 IPC is against the purpose and
object of the Scheme, therefore, there is no prima facie case against the
appellants in respect of the all

## Text

_Characters 0–39,433 of 78,295. This is a partial read: ask again with offset=39433 for what follows._

A
B
HIRA LAL HARi LAL BHAGWATI.
v_
C.B.I., NEW DELHI
MAY 2, 2003
[BRIJESH KUMAR AND DR. AR. LAKSHMANAN, JJ.]
Penal Code, 1860-Sections 420 and 1208-Customs Act, 1962-Kar
Vivad Samadhan Scheme, 1998 under Finance (No.2) Act, 1998, Chapter
C JV-Section 95-Cancer Society importing machines for treatment of cancerAvailing customs duty exemption certificate-Collector demanding duty
however, considering philanthropic activities of society levying token
redemption fine and not launching prosecution-Order upheld-AppealDuring pendency of appeal 1998 Scheme brought, whereby persons availing
benefit thereunder was granted imn111nity from prosecution from any offence
D under Customs Act including evasion of duty-Importer paying stipulated
amount of custom duty-Issuance of full and final sel//ement certificate of tax
arrears and grant of immunity-However, CBI filing criminal proceedingsPetition seeking quashing of FIR-Dismissal by High Court-Justification
of-Held: Initiation of criminal proceedings notwithstanding immunity granted
E under 1998 Scheme not justified since the alleged criminal liability stands
compounded on a settlement with respect to civil issues, thus, FIR
unwarranted-Also no prima facie case of cheating and criminal conspiracy
made out-Criminal conspiracy and cheating-Essential Ingredients-Code
of Criminal Procedure, 1973-Section 482.
F
A cancl:r society imported machines for treatment of cancer.
Appellants-office bearers of the society availed custom duty exemption
certificate on false assertion that the machines imported are for "actual
user". Authorities raided the premises and seized the machines. Show cause
notice was issued to the society on the ground that the exemption certificate
was issued in the name of the cancer institute and not in the name of the
G cancer society and thus it was not entitled to exemption and was liable to
pay customs duty. Collector held that the society was liable to pay customs
duty. However, considering the charitable and philanthropic activities of
the society, it did not recommend prosecution and imposed a token
redemption fine of Rs. I. Appellant-office bearers of the society filed
H
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--
HIRA LAL llARI LAL 131-lAGWATI. v. C.B.I.
1119
appeals. Tribunal upheld the order of the Collector. Society then filed A
appeal before this Court. During pendency of the appeal, Kar Vivad
Samadhan Scheme, 1998 under Chapter IV of Finance (No.2) Act, 1998
was launched, whereby whoever takes the benefit under the said Scheme
is granted immunity from prosecution from any offence under the Customs
Act including the offence of evasion of duty. In accordance with the Scheme, B
the society deposited the stipulated amount and withdrew the appeal.
Thereafter, the society was issued certificate for full and final settlement
of tax arrears under the Scheme and was immuned from prosecution from
any offence under the Customs Act including the offence of evasion of duty.
However, the respondent-CBI registered a case under Section 1208 read
with Section 420 !PC against the appellants alleging that they cheated the C
Government by evading customs duty and obtained exemption ct:rtificate
by violating the provisions of 'actual user' condition. Appellants filed
petition for quashing the FIR. Single Judge of the High Court dismissed
the same. Hence the present appeals.
Appellants contended that the alleged criminal liability stands D
compounded on a settlement with respect to the civil issues, therefore, the
FIR was erroneously issued and was totally unwarranted; that the society
was immuned from prosecution from any offence under the Customs Act,
1962, including evasion of duty pursuant to the certificates issued under
the Kar Vivad Samadhan Scheme, 1998; that the Single Judge failed to E
appreciate that the society had taken the benefit of the Amnesty Scheme
and, therefore, implicating the appellants being office bearers of the Society
under Section 1208 read with Section 420 IPC is against the purpose and
object of the Scheme, therefore, there is no prima facie case against the
appellants in respect of the alleged offence; that evasion of Customs Duty
was predominantly a civil case and that the ingredients of criminal offence F
were missing/wanting and which liability, in any case, stood settled and in
such a scenario, the appellants to undergo an agony of a long criminal trial
would be an abuse of process of Court and against the interest of justice;
that the appellants are reputed persons who had never even contemplated
committing any violation of law or thought of taking undue advantage of G
the exemption Notifications under the Customs Act; that when the Society
availed the exemption Notification, it acted bona fide in the belief that by
such importation, cancer patients would be benefited; that tlie authorities
were satisfied that there was no intention to evade the Customs Duty; that
',_
the appellants arc being prosecuted in their capacity as office bearers of
the society; that the customs duty has already been paid, the Central H
1120
SUPREME COURT REPORTS
[2003] 3 S.C.R.
A Government has not suffered any financial loss; that under the penal law,
-Ji
there is no concept of vicarious liability unless the said statute covers the
same within its ambit; and that the law which prevails in the field is the
Customs Act, under which the appellants have been wholly discharged and
the society is granted immunity from prosecution.
B
"
Respondent contended that the material gathered in the investigation
clearly show and establish commission of offences by the appellants under
-
Sections 420 and 1208 IPC; that it is not a civil dispute as has been sought
to be made out; that there is no infirmity in the order of the Magistrate
taking cognizance or in the order of the High Court declining to quash
c criminal proceedings at the interlocutory stage; that 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 Penal Code; and that the criminal proceedings
cannot be quashed merely on account of the fact the Customs Duty payment
has been settled.
D
Allowing the appeals, the Court
HELD: Per lakshmanan, J:
E
I.I. 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. In the instant case pursuant to the issuance of full and final
F settlement certificates with regard to the tax arrears under the Kar Vivad
Samadhan Scheme, 1998, the civil issue is settled, the alleged criminal
liability stands compounded and the appellants are immuned from any
criminal proceedings, therefore, the FIR was erroneously issued and was
totally unwarranted. 11140-E-G I
G
1.2. The Single Judge of High Court, has not appreciated the fact that
the continuance of the proceedings in the instant case would only
tantamount to driving the appellants to double jeopardy when they had
been honourably exonerated by the Collector of Customs and further the
society of which one of the appellants is the General Secretary in which
capacity he is accused in the instant case was granted amnesty under the
-"-
H
'
i~
HIRA LAL HARi LAL BHAGWATI. v. C.B.I.
1121
Kar Vivad Samadhan Scheme, 1998. Furthermore, the fnstant case does A
not warrant subjecting a citizen especially senior citizens of the age of 92
and 70 years to fresh investigation and prosecution on an incident or fact
situation giving rise to offence under both the Customs Act and ~he Penal
Code, despite acknowledging the fact that Customs Duty has been paid by
the appellants to the Customs Department and the matter has been settled B
and that the Central Government has not suffered any financial loss.
11140-G-H; 1141-A, Bl
1.3. Under the penal law, there is no concept of vicarious liability
unless the statute covers the same within its ambit. In the instant case, the
law which prevails in the field is the Customs Act, 1962, the appellants have C
been therein under wholly discharged and the society is granted immunity
from prosecution. It is well established principle of law that the matter
which has been adjudicated and settled need not to be dragged into the
criminal courts unless and until the act of the appellants could have been
described as culpable. The true fact and import of the Kar Vivad Samadhan
Scheme, 1998, is that once the said Scheme is availed of and all the D
formalities complied with including the payment of the duty, the immunity
granted under the provisions of the Customs 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. ll 141-E-FI
E
Sushi/a Rani (Smt.) v. Commissioner of Income Tax and Anr., 120021 2
SCC 697 and Central Bureau of Investigation, SPE, SIU (X), New Delhi v.
Duncans Agro Industries Ltd., Ca/cul/a, 1199615SCC591, relied on.
2. It is seen from the records that the exempt ion certificate contained F
necessary conditions which were required to be complied with after
importation of the machine. Since the society could not comply with it and,
therefore, it rightly paid the necessary duties without taking advantage of
the exemption certificate. The conduct of the society clearly indicates that
there was no fraudulent or dishonest intention of either the society or the G
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 IPC docs
not arise. Also there is no allegation in the FIR or the charge sheet
indicating expressly or impliedly any intentional deception of fraudulent/
dishonest intention on the part of the appellants right from the time of H
1122
SUPREME COURT REPORTS
[2003] 3 S.C.R.
A 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, 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
B profit organi:r.ation, therefore, there is no prima facie case made out in
respect of the alleged offence under Section 420 IPC and, therefore, the
charge sheet and the process issued thereunder have to be quashed. Further
for the charge of conspiracy within the ambit of Section 1208 IPC, 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
C evidence. (1144-E-H; 1141-G; 1142-A(
D
G. Sagar Suri and Anr. v. State of U.P. and Ors., (2000( 2 SCC 636,
referred to.
Per Brijesh Kumar, J (Supplementing):
1.1. According to Section 95 of the Kar Vivad Samadhan Scheme,
1998, ifa person against whom criminal proceedings were pending, relating
to offence under Chapter IX or XVII of IPC or who stood convicted under
any of the provisions of those chapters, he would not have been eligible to
E seek benefit under the Scheme. If such a condition is provided, as a
condition precedent for a settlement, and on that basis a settlement is
brought about, it does not mean that later on, one could turn around and
get the declarant convicted for a criminal offence too, after settlement of
the liability. More so, in view of Section 90 clause (iv) of the Scheme the
declarant is obliged to withdraw an appeal or proceedings regarding tax
F liability pending before the High Court or the Supreme Court, which had
also been done in the instant case. Thus, 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 bonafides. (1147-B-F(
G
1.2. In this background, it can be legally inferred that if no criminal
prosecution was pending against the dcclarant on the date of filing of the
declaration nor he stood convicted for such an offence in relation to the
matter covered under the declaration, the matter would stand finalized with
acceptance of the declaration and settlement of the matter fully and finally
H under the scheme. Later on, the declarant could not be or continued to be
lllRA LAL HARi LAL BllAGWA Tl. v. C.B.I. [DR. AR. LAKSHMANAN. J.) 1123
s_ubjected to criminal prosecution to alter the position as it stood on the A'
relevant date of the submission of declaration and get him convicted for
such offences in respect of which, if he stood convicted earlier while filing
statement he would not have been entitled to seek the benefit under the
Scheme. The appellants virtually foreclosed their right to further pursue
the proceedings before the authorities or courts of law challenging the
legality, validity or the tax liability in terms of the Scheme. Undoubtedly, B
if the appellants' appeal which was pending in this Court against the order
of the Tribunal relating to the tax liability, had been allowed it might have
affected the criminal proceeding too on merits. In certain circumstances,
it could be put up as a defence by the declarant, in the criminal case but in
terms of the scheme he was bound to withdraw his appeal. The criminal C
prosecution could not be allowed to proceed by putting an end to a possible
defence, before hand. It certainly amounts to abuse of process of law.
(1147-F-H; 1148-A-C)
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
6%~2003.
D
From the Judgment and Order dated 4.3.2002 of the Delhi High Court
in Crl. M. No. 360 of 2002.
WITH
Crl. A. No. 677 of 2003.
E
K.K. Sood, Additional Solicitor General, P. Chidambaram, Sunil Dogra,
Ms. Sayali Phatak, Ms. Rashi Malhotra, Deyang, S. Nanavati, Saurin Mehta,
Mrs. Nirmala Gupta, Rajeev Sharma and P. Panneswaran for the appearing
~~
F
The Judgments of the Court were delivered by
DR. AR. LAKSHMANAN, J. Leave granted.
These two appeals arise out of the final judgment and order passed by G
the High Court of Delhi at New Delhi in Criminal Miscellaneous (M) Nos.
360/2002 and 447/2002 filed under Section 482 of the Criminal Procedure
Code read with Article 227 of the Constitution of India by the appellants
herein seeking the invocation of the inherent powers of the High Court for
quashing the F.l.Rs and the proceedings initiated in pursuance thereto, as also H
1124
SUPREME COlJRT REPORTS
(2003 J 3 S.C.R.
A tl1e process issued by the Chief Metropolitan Magistrate, Delhi. The learned
single Judge of the Delhi High Court, by the impugned final orders, held
against the appellants that obtaining from the Ministry of Health Customs
Duty Exemption Certificate, that was meant for 'actual user' on false assertion
makes out the offence under Section 1208 read with Section 420 of the
Indian Penal Code.
B
The respondent herein (Central Bureau of Investigation, New Delhi)
initiated criminal proceedings under Section 1208 read with Section 420 of
the Indian Penal Code against the appellants on the ground that the appellants
in conspiracy with the Director of Gujarat Cancer and Research Institute, Mr.
C T.B. Patel (deceased), Secretary of the Gujarat Cancer Society, Mr. N.L.
Patel and Dr. Viral C. Shah with each other have cheated the Government of
India in terms of evasion of Customs Duty and by concealment of facts
obtained Customs Duty Exemption 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 No. 279/83 dated
D 30.9.1983 and Customs Notification No. 64/88 dated 1.3.1988 during the
year 1987-90, despite acknowledging the fact that the Customs Duty has
been paid by the appellants to the Customs Department and settled under the
Kar Vivad Samadhan Scheme, 1998. In the instant case, two machines were
imported into India by the Gujarat Cancer Society (hereinafter referred to as
E "the GCS") who availed of the duty exemption on the basis of the exemption
certificate issued in the name of the Gujarat Cancer and Research Institute
(hereinafter referred to as "the GCRI") on a bona fide premise that since all
the activities of the GCRI were funded by the GCS and all the operations of
GCS were carried out through the GCRI and that they are akin to holding any
subsidiary company, the same could be done. The Customs Authority raided
F the premises of the GCRI and seized the 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,
G Show Cause Notice was issued to the GCS which was replied to by them.
The Collector of Customs, Bombay by an order dated I 0.4.1993 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
H importer GCS and Canbank Financial Services as well as ICICI being joint
HIRA LAL HARi LAL Bl IAGWATI. v. C.B.I. [DR. AR. LAKSHMANAN. J.]1125
holder of the said imported machines. However, considering the charitable A
and philanthropic activities of the GCS, no prosecution was recommended
and only a token redemption fine of Re. I 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 extended financial
extension to the above charitable organisation for import of sophisticated B
machines. A personal penalty was imposed on Mis. Shah Diagnostic Institute
Pvt. Ltd., Ahmedabad and its Director, Dr. Viral C. Shah jointly under Section
112 A of the Customs Act, 1962.
Against the order of the Collector of Customs, the appellants preferred
appeals before the Customs, Excise and Gold (Appellate) Tribunal, West C
Regional Branch, Bombay which confirmed the findings of the Collector of
Customs. Against the order of the Customs, Excise & Gold (Appellate)
Tribunal, the GCS came up in appeal before this Court in Civil Appeal No.
31/1999. Whilst the matter was pending before this Court, the Government
of India launched the Kar Vivad Samadhan Scheme, 1998, whereby whoever
takes the benefit under the said Scheme is granted immunity from prosecution D
from any offence under the Customs Act including the offence of evasion of
duty. In accordance with the Kar Vivad Samadhan Scheme, 1998, the GCS
had agreed to deposit the stipulated amount of over Rs.98 lakhs which had
already been deposited earlier and withdrew the Civil Appeal pending before
this Comt. On 19.7.1999, a certificate for full and final settlement of tax E
arrears in respect of the Kar Vivad Samadhan Scheme, 1998 was issued to
the GCS. The said Certificate, inter a/ia, certified the receipt of payment
from the GCS towards fu II and final settlement of tax arrears determined in
the order dated I 0.2.1999 of the Designated Authority and further granting
immunity to the GCS from any proceedings for prosecution from any offence
under the Customs Act, 1962 or from the imposition of penalty under the F
said enactment, in respect of the matters covered in the declaration made by
the GCS.
However, a case was registered against the appellants on 6.1.1999 by
the respondent alleging that the appellants in conspiracy with the Director of
the GCRI, Mr. T.B. Patel (deceased), Secretary of the GCS, Mr. N.L. Patel G
and Dr. Viral C. Shah had cheated the Government of India in tenns of
evasion of Customs Duty and by violating the provisions of 'actual user'
condition as per Import Export Policy during the year 1987-88. A charge
sheet we§ prepared for commission of offence under Section 120B read with
Section 420 of the Indian Penal Code. On presentation of the said charge H
1126
SUPREME COURT REPORTS
12003) 3 S.C.R.
A sheet, the trial Court by its order took cognizance 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
B 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
C petitions. Hence these two appeals by way of special leave petitions.
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.
D
Before considering the rival submissions of the respective counsel
appearing on .either side, it is useful to reproduce the short order passed by
the learned single Judge of the High Court of Delhi on 4.3.2002 which reads
as under:
"This petition has been filed with a prayer to quash FIR No. R.C.
E
I (E)/99/EOW-l/DLI under Section 1208 r/w 420 IPC and the
proceedings initiated in pursuance thereto.
It is the case of the petitioner that petitioner has compounded the
offence by taking recourse to Kar Vivad Samadhan Scheme, 1998
and that no prosecution for offence after compounding of offence can
F
be instituted. He draws my attention to a judgment of the Supreme
Court in Smt. Sushila Rani vs. Commissioner of Income Tax & Anr.,
2002 Vol.II AD Apex Decisions, where the Supreme Court has held
that :
G
H
"The appellant in the course of the declarations filed specifically
stated that any adjustment of refunds towards tax arrears of the
appellant by the Department in the earlier years without following
the mandatory procedure of Section 245 of the Act would still
remain as tax arrears for the purpose of the K VSS and it is on that
basis the declarations were accepted by the Department. Having
accepted the claim of the appellant on that basis, it will not be
HIRA LAL HARi LAL BHAGWA Tl. v. C.B.I. [DR. AR. LAKSHMANAN. J.] 1127
permissible for the respondents now to turn around and take a A
different stand."
The case of the prosecution is that this is not a question of mere
evasion of custom duties but it is a question of obtaining custom duty
exemption certificate from the Ministry of Health by making a false
assertion that the machines imported are for actual user. The B
compounding of offence subsequent thereto only indicates that a
certificate was falsely induced from the Ministry of Health.
Having heard learned counsel for parties and having gone through
the judgment relied upon by learned counsel for the petitioner, I am
of the view that obtaining a certificate, that was meant for actual user, C
on false assertion, makes out the offence.
Crl.M.(M) 360/2002 is dismissed."
Learned senior counsel appearing for the appellants submitted that to
the show cause notice, the appellants had sent a proper reply and after hearing D
the case of the GCS, 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 jides of the Society, and considering charitable and
philanthropic activities of the Society, no prosecution was recommended and
moreover, only a token redemption fine of Re. 1/- was imposed. Thus, he
submitted that the concerned authorities were satisfied that there was no E
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 F
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
G
two machines, it acted bona fide in the belief, that since the machines were
being imported, purely for the benefit of the cancer patients of the GCRI, by H
1128
SUPREME COURT REPORTS
120031 3 S.C.R.
A such importation, cancer patients would be benefited. as they would get
diagnosis and treatment in the GCRI itself and would not have to go to
Bombay and other places. He further contended that the impugned order
passed by the High Court of Delhi is bad in law and fact inasmuch as the
learned single Judge has erred in passing the impugned order, dismissing the
B petitions filed under Section 482 of the Criminal Procedure Code on the basis
of an erroneous reading and a total misinterpretation of the judgment and
despite the well- settled principle of law cited by the petitioners. In this
context, he cited the judgment of this Court in the case of Sushi la Rani (Smt)
vs. Commissioner of Income Tax and Another, (2002) 2 SCC 697. He also
cited the judgment of this Court in the case of Central Bureau of Investigation,
C SPE, SIU(X), New Delhi v. Duncans Agro Industries Ltd., Ca/cul/a, ( 1996)
5 SCC 591. Placing reliance on the above judgments, he urged that the
alleged criminal liability stands compounded on a settlement with respect to
the civil issues and, therefore, the FIR was erroneously issued and was totally
unwarranted. He further submitted that under the penal law, there is no concept
of vicarious liability unless the said statute covers the same within its ambit.
D In the instant case, the said law which prevails in the field i . .e. the Customs
Act, the appellants have been therein under wholly discharged and the GCS
granted immunity from prosecution. He also contended that the learned single
Judge failed to appreciate that the GCS had taken the benefit of the Amnesty
Scheme of Kar Vivad Samadhan Scheme, I 998 and, therefore, implicating
E the appellants being office bearers of the Society under Section 120B read
with Section 420 of the Indian Penal Code is against the purpose and object
of the said Scheme, and, therefore, there is no prima facie case against the
appellants in respect of the alleged offence. He further submitted that evasion
of Customs Duty, in the present case, was predominantly a civil case and that
the ingredients of criminal offence were missing/wanting and which liability,
F in any case, stood settled and that, therefore, in such a scenario, the appellants
to undergo an agony of a long criminal trial would be an abuse of process
of Court and against the interest of justice.
He invited our attention to the pleadings, in particular, the F.l.R., the
G 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,
I962 and the rulings relied on by him.
Shri K.K. Sood, learned Additional Solicitor General, appearing for the
respondent, submitted that the material gathered in the investigation clearly
H show and establish commission of offences by the accused persons indicating
....
HIRA LAL HARi LAL BHAGWATI. v. C.B.I. [DR. AR. LAKSHMANAN. J.J 1129
the appellants herein under Sections 420 and 1208 of the Indian Penal Code A
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 B
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 the present case. According to him, in the present case, material on
record clearly show and establish commission of offences under the Indian
Penal Code by the appellants and since the charges are supported by C
documentary evidence which establish the same, there is no warrant or
justification or basis for seeking the relief of quashing the criminal proceedings.
He further submitted that the High Court has rightly declined to quash the
criminal proceedings and, therefore, the same does not call for any interference
by this Court. In regard to the judgments cited by Shri P. Chidambaram,
learned senior counsel appearing for the appellants, he submitted that the
reliance placed upon those judgments is also without any merit and in the
present case, material on record clearly show and establish the criminal
conspiracy to cheat the Government and actually cheating the Government of
India pursuant to the same and that it is not a civil dispute as has been sought
D
to be made out and that the conduct of the accused persons is criminal in E
nature and material on record clearly establish commission of criminal offences
by them. Thus, he would submit that the judgment in the case of Duncans
Agro Industries ltd, Calcutta (supra) has no application to the present case.
Referring to the plea that the duty payable has been subsequently paid, he
submitted, that such payment is not a ground for quashing criminal proceedings
or absolving the accused persons of their criminal liability. According to him, F
the judgment in the case of Sushi/a Rani (supra) dealt with proceedings under
the Income Tax Act and held that once the matter is settled under the Kar
Vivad Samadhan Scheme, I 998, such settlement cannot be reopened except
under specified grounds and that the stated grounds do not exist in the said
case and that there is nothing in the said judgment warranting the plea of the G
appellants, in the present case, that criminal proceedings under the Indian
Penal Code are prohibited merely because disputes concerning tax have been
settled under the Kar Vivad Samadhan Scheme, 1998. According to him,
such settlement only protects the individual from prosecution under the taxing
Statute which is a limited protection and limited to the proceedings under the
taxing Statute only. Coming to the certificate issued by the authorities under H
1130
SUPREME COURT REPORTS
[2003] 3 S.C.R.
A the Kar Vivad Samadhan Scheme, 1998, he submitted that the 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
B submitted that the criminal proceedings cannot be quashed merely on account
of the fact that Customs Duty payment has been settled.
Before proceeding to consider the rival submissions, it is beneficial to
refer to certain annexures filed along with the special leave petitions. The
C 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:
D
"(I) The Gujarat Cancer Society shall acquire ESWL and MRI
E
machines in its own name and for this Dr. Viral Shah shall make
necessary arrangements for the construction of the buildings for
housing the said two equipments by way of arranging donations
to the Society of .an amount equivalent to the total cost of
construction of premises required for the instalment of said
machines. The Society shall construct the required premises in a
portion of the land in the hospital complex and on completion the
said building, the ownership of the said premises so constructed
shall vest with the Society.
(2) The overall control in regard to appointment of all categories of
F
staff and running and maintenance of these two equipments will
be with the Gujarat Cancer & Research Institute, Ahmedabad as
per the tripartite agreement with the Govt. of Gujarat, the Gujarat
Cancer Society, and the Gujarat Cancer and Research Institute.
G
(3) Raising of loan, Dr. Shah will arrange for the Society procuring
finance from financial institutions including leasing company or
companies for meeting the cost for the matching out the purchase
of procuring such finance the said machines may be mortgaged
or leased to leasing company or financial institution which in turn
will be leased out to the Society.
H
( 4) In consideration of the Society having entrusted the running and
HIRA LAL HARi LAL BHAGWATI. v. C.B.I. [DR. AR. LAKSHMANAN. J.). ( 131
maintaining the said machine to the said Dr. Shah as herein A
provided the said Dr. Shah shall pay to the Society rental which
shall be equivalent to the amount of monthly instalment and
interest and/or hire charges payable by the Society to the financial
institutions and/or to the leasing company from whom the finances
shall have procured for the said machines.
B
(6) The Institute agrees that Dr. Shah through the Gujarat Cancer
Society shall be entitled to work, run, and maintain the said two
machines for a maximum period often years and Dr. Shah or his
nominees shall be responsible for the repairs and replacements of C
parts thereof, during the said period."
The First Information Report filed as Annexure P-2 along with the
S.L.P. is as under:
"RC. I (E)/99-EOW.l.DLI
Place of occurrence with State
Date and time of occurrence
Name of complainant and
Informant with address
Offence
Name and address of accused
06.01.1999 at 16.00 hrs.
Delhi, Mumbai and Ahmedabad
during the year 1987-90
Joint Secretary, Ministry of
Health and Family Welfare,
Government of India, New
Delhi.
120-B r/w 420 IPC
I. Sh. N.L. Patel, Director
Gujarat Cancer Research
Institute Ahmedabad.
2. Dr. Viral C. Shah, Director
Mis. Shah Diagnosis Institute
(P) Ltd., Mumbai and
Ahmedabad.
3. Sh. D.D. Patel, Secretary
Gujarat Cancer Society,
Ahmedabad.& others
D
E
F
G
H
1132
A
B
c
D
SUPREME COlJRT REPORTS
12003] 3 S.C.R.
Action taken
Investigating Officer
unknown
RC i.s registered and
investigation taken up.
Shri Rajveer Singh,
DY.SP.CBI/EOW-1/NEW
DELHI
INFORMATION
The Joint Secretary, Ministry of Health & 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 I 7'.08.1998 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 requested CBI to investigate th~ matter."
Our attention was drawn to the Rosha Committee Report dated
E 17.08.1998 and application dated 15.10.1987 for import licence for import of
LITHO ESWL Equipment by 'actual users' (Non-Industrial). There is another
application for import of another machine. The agreement copy was also
enclosed for ready reference to the Joint Chief Controller, Import and Export
Trade Organisations, Ahmedabad. Along with the application, the agreement
F between the GCS , the GCRI and the State Government of Gujarart was also
enclosed as Annexure No.4.
Our attention was also drawn to the Text of the Kar Vivad Samadhan
Scheme, 1998, UHder Chapter IV of Finance (No.2) Act, 1998. Our attention
was also drawn to Sections 86 to 98 of the said Scheme which are relevant
G for the present purpose. Our attention was further drawn to the Memorandum
to Finance (No.2) Bill, 1998 explaining the provisions of the Kar Vivad
Samadhan, 1998. The said Scheme seeks to provide a quick and voluntary
settlement of tax dues outstanding as on 31.3.1998, both in various direct tax
enactments a> well as indirect taxes enactments by offering waiver of a part
of the arrear taxes and interest and providing immunity against institution of
H prosecution and imposition of penalty. The assessee on his part shall seek to
•·
HIRA LAL HARi LAL BllAGWATI. v. C.B.I. [DR. AR. LAKSHMANAN . .l.J 1133
withdraw appeals pendirig before various appellate Authorities and Courts. A
The Kar Vivad Samadhan Scheme, 1998 comes into force on the first day of
September, 1998 and ends on 31st day of December, 1998. The Kar Vivad
Samadhan Scheme, 1998 is applicable to tax arrears outstanding as on
31.3.1998 under various direct tax enactments and indirect tax enactments.
Clauses 3 & 4 of the Memorandum to Finance (No.2) Bill, 1998 read as B
under:
"3. A person desiring to avail the scheme is required to file a
declaration in the prescribed form before the designated authority
notified for this purpose. The designated authority shall pass an order
within sixty days of the declaration determining the amount payable C
in accordance with the provisions of the Scheme and grant a certificate
indicating the particulars of tax arrears and the sum payable and
intimate the same to the declarant. The declarant will pay the sum
payable as determined by designated authority within thirty days of
the passing of such order. The order passed by the designated authority
shall be conclusive and shall not be reopened in any other proceedings D
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 E
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.
4.