# JI/ ALPESH NA VINCHANDRA SHAH v. STATE OF MAHARASHTRA AND ORS

- **Citation:** [2007] 3 S.C.R. 223
- **Court:** Supreme Court of India
- **Decided:** 2007-02-26
- **Bench:** Dr. Ar. Lakshmanan, Al Tamas Kabir
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ji-alpesh-na-vinchandra-shah-v-state-of-maharashtra-and-ors-22592
- **Pages:** 30

## Headnote

B
~
Constitution of India-Articles 21 & 32-Customs Act, 1962-Sections
12 7 B to 12 7 J-Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974-Sections 3(1) and 8(a)-Detention Orders c
issued to detenus, who were engaged in smuggling activities-Settlement
Commission granted immunity to the detenus from prosecution under the
Customs Act and the Penal Code, 1860-Detaining Authority proceeding to
detain the detenus under the Detention Orders-Writ Petition for quashing
the Detention Order-Held, on law, the order of the Settlement Commission
granting immunity from prosecution under the Customs Act have no bearing D
on the Detention Order passed by the State under the Prevention ActHowever, on facts, since the Detention order of one of the detenus was
•.
revoked by the State since there was no sufficient cause for his detention, the
Detention order of the petitioner-detenu, who is similarly placed, is i1uashed.
Petitioner and his brother were arrested by Intelligence Officers for E
mis-declaration of import consignments and evading customs duty thereby.
Respondent - authorities issued two detention orders under section 3(1) of
the Conservation of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974 (COFEPOSA Act) and issued a show cause notice to both of them.
Pursuant to the show cause notice, the petitioner and his brother made an F
J
~
application under section 1278 of the Customs Act, 1962 for settlement before
Settlement Commission. The Settlement Commission allowed the application
on payment of customs duty under section 127H of the Customs Act and
granted immunity to the applicants from payment of any penalty and
prosecution under the Customs Act and the Penal Code, 1860. The Detaining
authority proceeded to detain the petitioner in view of the Detention Order G
'
l.
issued earlier under COFEPOSA Act. Hence, the Writ Petition under Article
32 of the Constitution of India filed by the petitioner before this Court to quash
the Detention Order.
223
H
224
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A
The petitioner contended that the execution of the Detention Order by
respondent authorities despite the unconditional immunities granted by the
Settlement Commission under section 127H of the Customs Act, 1962 is mala
fide; that the Detention Order is contrary to the spirit of settlement and
legislative intent behind the scheme of Settlement enacted under the Customs
B Act; and that the detention would result in violation of Article 21 of the
Constitution oflndia.
Respondent-State contended on merits that the order of the Settlement
Commission granting immunity from prosecution under the Customs Act,
1962 have no bearing on the order passed by the Detaining Authority under
C the COFEPOSA Act; that the Detention Order cannot be revoked under
section 127(F) of the Customs Act; and that the orders of the respective
authorities cannot bind or influence each other. The respondents, however,
conceded at the time of hearing before this Court that the Detention Order
issued against the brother of the petitioner was revoked on the basis of a
report of Advisory Board constituted under the COFEPOSA Act.
D
Allowing the Writ Petition, this Court
HELD: 1.1. 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 from fine/penalty which is otherwise
E mandatory under the provisions of tax laws. But, such opportunity is only
extended to one tax offender but not available to habitual smugglers. For the
persons involved in smuggling activities, other than the provisions made for
the prosecution under the Customs Act, 1962, an equal deterrent is
emphasized under the provisions of the COFEPOSA Act, 1974. Such
F preventive detention prohibits smugglers from indulging in further smuggling
activities. The investigation reveals the consistent involvement of the petitioner
and his brother in smuggling activities,

## Text

_Characters 0–38,695 of 74,183. This is a partial read: ask again with offset=38695 for what follows._

JI/
ALPESH NA VINCHANDRA SHAH
A
v.
STATE OF MAHARASHTRA AND ORS.
FEBRUARY 26, 2007
[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ]
B
~
Constitution of India-Articles 21 & 32-Customs Act, 1962-Sections
12 7 B to 12 7 J-Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974-Sections 3(1) and 8(a)-Detention Orders c
issued to detenus, who were engaged in smuggling activities-Settlement
Commission granted immunity to the detenus from prosecution under the
Customs Act and the Penal Code, 1860-Detaining Authority proceeding to
detain the detenus under the Detention Orders-Writ Petition for quashing
the Detention Order-Held, on law, the order of the Settlement Commission
granting immunity from prosecution under the Customs Act have no bearing D
on the Detention Order passed by the State under the Prevention ActHowever, on facts, since the Detention order of one of the detenus was
•.
revoked by the State since there was no sufficient cause for his detention, the
Detention order of the petitioner-detenu, who is similarly placed, is i1uashed.
Petitioner and his brother were arrested by Intelligence Officers for E
mis-declaration of import consignments and evading customs duty thereby.
Respondent - authorities issued two detention orders under section 3(1) of
the Conservation of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974 (COFEPOSA Act) and issued a show cause notice to both of them.
Pursuant to the show cause notice, the petitioner and his brother made an F
J
~
application under section 1278 of the Customs Act, 1962 for settlement before
Settlement Commission. The Settlement Commission allowed the application
on payment of customs duty under section 127H of the Customs Act and
granted immunity to the applicants from payment of any penalty and
prosecution under the Customs Act and the Penal Code, 1860. The Detaining
authority proceeded to detain the petitioner in view of the Detention Order G
'
l.
issued earlier under COFEPOSA Act. Hence, the Writ Petition under Article
32 of the Constitution of India filed by the petitioner before this Court to quash
the Detention Order.
223
H
224
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A
The petitioner contended that the execution of the Detention Order by
respondent authorities despite the unconditional immunities granted by the
Settlement Commission under section 127H of the Customs Act, 1962 is mala
fide; that the Detention Order is contrary to the spirit of settlement and
legislative intent behind the scheme of Settlement enacted under the Customs
B Act; and that the detention would result in violation of Article 21 of the
Constitution oflndia.
Respondent-State contended on merits that the order of the Settlement
Commission granting immunity from prosecution under the Customs Act,
1962 have no bearing on the order passed by the Detaining Authority under
C the COFEPOSA Act; that the Detention Order cannot be revoked under
section 127(F) of the Customs Act; and that the orders of the respective
authorities cannot bind or influence each other. The respondents, however,
conceded at the time of hearing before this Court that the Detention Order
issued against the brother of the petitioner was revoked on the basis of a
report of Advisory Board constituted under the COFEPOSA Act.
D
Allowing the Writ Petition, this Court
HELD: 1.1. 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 from fine/penalty which is otherwise
E mandatory under the provisions of tax laws. But, such opportunity is only
extended to one tax offender but not available to habitual smugglers. For the
persons involved in smuggling activities, other than the provisions made for
the prosecution under the Customs Act, 1962, an equal deterrent is
emphasized under the provisions of the COFEPOSA Act, 1974. Such
F preventive detention prohibits smugglers from indulging in further smuggling
activities. The investigation reveals the consistent involvement of the petitioner
and his brother in smuggling activities, therefore, the Detaining Authority,
on the basis of evidence, felt it necessary to issue the detention orders in
respect of both the detenus in order to prevent them from pre-judicial activities
in future. Accordingly the impugned Detention Order is justifiable in the eyes
G cf law. [Para 46] [247-D, F, G]
i
1.2. The Settlement Commissioner's order only dealt with true and full
;
,
H
disclosure of the disputed duty and acceptance of the entire duty liability by
the petitioner and his brother. Nowhere it is mentioned in the Settlement
Commission's order that the petitioner would not indulge in smuggling of
ALPESH NA VINCHANDRA SHAH v. STA TE OF MAHARASHTRA [LAKSHMANAN, J.] 225
goods in future. Therefore, in order to prevent the detenu from indulging in A
_-,;
smuggling activities, the said Detention Order was passed and there is no
illegality in the Detention Order. The final order of the Settlement Commission
has, by no means, undermined the surroundings of the offence committed by
the petitioner and his brother. Thus the matters of Settlement Commission
and the COFEPOSA are altogether different issues, the orders of the
respective authorities should not and cannot bind or influence each other. As B
such the outcome of the Settlement Commission order should not have any
bearing on the detention order. [Paras 48 and 49) [248-D, E, G; 249-8)
Hira Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003) 5 SCC 257; CIT
(Centralj v. B.N Bhattacharjee & Anr., (1979) 118 ITR 461 (SC); R.K. Garg C
v. Union of India, [1981) 4 SCC 675; Additional Secretary to Government of
India & Ors. v. Smt. Alka Subhash Gadia & Anr., [1992) SCC Supp. 1 496;
Subbash Muljimal Gandhi v. L. Himingliana & Anr., [1994) 6 SCC 14; Pawan
Bhartiya v. Union of India, [2003) 11 SCC 479 and Naresh Kumar Goyal v.
Union of India, [20051 8 SCC 276, referred to.
D
1.3. The State, in exercise of the powers conferred by Section 8(1) of
the COFEPOSA Act revoked the detention order passed against the brother
of the petitioner after considering the report of the Advisory Board and the
material on record. The writ petitioner, who is also similarly placed pursuant
to the order of the Settlement Commission and got the unconditional immunity
by the Settlement Commission, is entitled to the same treatment. [Para 56)
E
(252-C-D)
V.C. Mohan v. Union of India, (2002) 3 SCC 451 and Pawan Bhartiya
v. Union of India, (2003) 11SCC479, referred to.
CIVIL ORIGINAL JURISDICTION: Writ Petition (CRL) No. 114 of2006. F
Under Article 32 of the Constitution of India.
Vikram Chaudhri, S.N. Kantawala and Ajay Sharma for the Petitioner.
Ravindra Keshavrao Adsure and V.N. Raghupathy for the Respondents. G
The Judgment of the Court was delivered by
DR. AR. LAKSHMANAN, J. I. The above writ petition was filed under
Article 32 of the Constitution oflndia for issuance of a Writ of Habeas Corpus
or any other appropriate wri_t quashing and setting aside the order of detention H
226
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A dated 12.01.2005 under COFEPOSA Act, 1974 issued against the petitioner by
respondent No.2 - Principal Secretary (Appeals and Security), Government of
Maharashtra, Mumbai.
2. The petitioner was detained under Section 3(1) of the Conservation
of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
B (hereinafter referred to as "COFEPOSA Act") in pursuance of the impugned
order of detention. The petitioner by way of this writ petition is challenging
the legality and validity of the impugned order of detention passed by
respondent No.2 at pre-execution stage in the peculiar facts and circumstances
of this case. It is stated that two similar orders of detention dated 12.01.2005
C and 31.01.2005 were issued under the COFEPOSA Act by respondent No.2
against the petitioner Alpesh Navinchandra Shah and his brother Kamlesh
Shah respectively. The detention order has already been served upon Kamlesh
Shah. The grounds of detention order and the documents relied upon in the
case of the petitioner are identical in content and material.
D
3. The brief facts of the case are mentioned in seriatim as under:
4. In or about, August, 2004 M/s. Perfect Trading Co. (proprietorship
firm of Shri Rajendra Mamgaim) imported Ball bearings in five containers. On
3.9.2004, consignments of mis-declared consignments were intercepted by the
DRI officials. The petitioner and his brother were arrested on 4.9.2004 by the
E Intelligence Officers, DRI, Mumbai Zonal Unit primarily on the allegations that
they have been indulging in import of high quality and high value Ball
Bearing and were clearing the same by evading duty of custom.
F
5. The Addi. Chief Metropolitan Magistrate, 3rd Court, Esplanade,
Mumbai vide Order dated 23.9.2004 directed to release the petitioner and his
brother on bail imposing conditions including their regular attendance in the
Department and the imposition of an embargo not to leave the country
without the prior permission of the Court.
6. Impugned Detention Order bearing No. PSA 1204/21 (2)/ SLP-3(A)
G dated 12.1.2005 was issued by respondent No.2 for detaining the petitioner
ostensibly under the provisions of COFEPOSA Act 1974. Similar Order No.
PSA 1204/21 (1)/SLP-3 (A) dated 31.1.2005 was also issued to detain Shri
Kamlesh Shah, the brother of the petitioner.
7. Show Cause Notice dated 23 .2 .2005 was issued to the petitioner and
H his brother by the DRI, Mumbai Zonal Unit. Pursuant to the said show cause
ALPES~NA VJNCHANDRA SHAH v. STATE OF MAHARASHTRA [LAKSHMANAN,J.] 227
notice, the application for settlement under Section 127 B of the Customs Act, A
.,.
1962, was filed on 19.4.2005 by Mis Perfect Trading Co. as Applicant and the
petitioner, his brother and others as Co-Applicants before the settlement
Commission, Mumbai.
8. During the course of the admission hearing of the aforesaid settlement
application, the petitioner came to know that the Order dated 27 .12.2005 has B
been passed by respondent No.2 for detaining him while invoking section 3( I)
of the COFEPOSA Act, 1974. Accordingly, at the stage of the admission
hearing, the Settlement Commission was urged to make recommendation to
the Detaining Authority for the revocation of the Detention Order.
9. The Settlement Commission, vide order dated 03.01.2006, rejected the C
prayer by adopting the reasoning narrated in the case ofVipul Gor, Proprietor
ofM/s Sonam Enterprises (Misc. Order No.12/2005 - CUS dated 19.12.2005)
wherein it was, inter alia, held that the Commission did not have any
jurisdiction to make a recommendation to the Detaining Authority for revocation
of a Detention order and further held that the petitioner and his brother would D
be at liberty to take recourse to any other legal remedy available to it for lifting
of the detention order whether by the sponsoring authority, detaining authority
or the courts. However, the Settlement Commission allowed the application for
settlement to be proceeded with.
10. The case was finally heard by the Settlement Commission on 1.3.2006. E
11. Vide Final Order bearing No. l 7/CUS/2006 dated 7.3.2006, the
Settlement Commission allowed the Settlement Application and settled the
case on payment of Customs Duty of Rs. 1,40,52,959/-. In terms of sub-section
(I) of section 127 Hof the Customs Act, 1962, and in view of full and true
disclosure,. the Commission granted immunity to all the Applicants including
the petitioner from any penalty that could be levied under the Customs Act
and also from the prosecution under the Customs Act, 1962, as well as under
IPC. It is evident from the Order that a copy of the said Final Order of
complete settlement of the case, was also forwarded to the Detaining Authority
by the Settlement Commission.
12. It is also pertinent to note that though the Settlement Commission
F
G
vide Section 127H of the Customs Act, 1962 is empowered to impose such
conditions as it may deem fit for grant of immunities, deemed it fit not to
impose any condition on the petitioner, in spite of the fact that detention
Order having been issued against the petitioner, was before the Commission H
228
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A and granted full immunities and settled the case giving quietus to all issues.
13. In spite of complete settlement of all disputes among the petitioner
and the Revenue, after the case was fully settled by the said Final Order dated
7.3.2006 of 'compromise"/"settlement" of the entire case, the officers ofDRl
apprehended the Petitioners brother and he was detained under the Detention
B Order dated 31.1.2005.
14. The petitioner is also relying upon the copy of order dated 5th May
2005 published in Gazette of Maharashtra Government at page 56, Page IVA, inter alia, showing that the Order No. PSA 1204/21(2)/ SLP-3(A) was
C issued against the petitioner on 12th January, 2005 by the respondent.
15. Being aggrieved by the said order of detention which is based upon
the same grounds as reflected in the show cause notice and which were
considered in the proceedings before the Settlement Commission, the petitioner
preferred the above writ petition for quashing of the impugned detention
D order.
16. We heard Mr. Vikram Chaudhri, learned counsel for the petitioner
and Mr. Ravindra Keshavrao Adsure, learned counsel for the contesting
respondent.
E
17. Learned counsel for the petitioner, at the time of hearing, made the
following submissions:-
18. In the light of the fact that as per provisions of Customs Act, 1962,
the case of the petitioner is 'settled' and he has been granted unconditional
immunities by the Settlement Commission, chasing the petitioner for detaining
F him under the COFEPOSA Act would be contrary to the settled proposition
of law that:
i.
the personal liberty is one of the most cherished freedoms more
important than any other guaranteed under the constitution and
in a democracy governed by rule of law the drastic power to
G
detain a person, without trial, must be strictly construed.
H
ii.
Draconian power of detention must be exercised in rarest of rare
cases and only as a preventive measure and not punitive.
•
•
iii.
The law pertaining to preventive detention must be meticulously
followed with substantively and procedurally by the detaining
authority.
ALPESHNAVINCHANDRASHAHl'.STATEOFMAHARASHTRA[LAKSHMANAN.J.J 229
IV .
Section 3( I) of the Act allows the detention of a person only if A
. -¥
the appropriate detaining authority is satisfied that with a view
to preventing such person from carrying on any of the offensive
activities enumerated therein, it is necessary to detain such person.
v.
The satisfaction of the detaining authority is not a subjective one
based on the detaining authority's emotions, beliefs or prejudices. B
There must be a real likelihood of the person being able to
indulge in such activities, the inference of such likelihood being
drawn form objective data based on surrounding circumstances.
. AoVI.
The possibility of prosecution is having a direct bearing on the
subjective satisfaction of the Detaining Authority.
c
vii. Unsuccessful judicial trial may not operate as a bar to a detention
order, but the discharge cannot be said to be entirely irrelevant
and of no significance.
viii. The detention power cannot be used to subvert, supplant or to
substitute the punitive law of penal code.
D
I 9. At the time of hearing, the judgment rendered by this Court in Hira
..,
Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003] 5 SCC 257 (Brijesh Kumar
and Dr. AR. Lakshmanan, JJ) was also relied on and our attention was invited
to paras 44 & 45 of the said judgment which read as under:
E
"44 ........ The declarant could not be dragged and chased in criminal
proceedings after closing the other opening making it a dead end. It
is highly unreasonable and arbitrary to do so and initiation and
continuance of such proceedings lack bonafides.
45. In the background given above, there is every reason to legally F
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 G
the declarant 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, it would stand finalized with acceptance of the
.
declaration and settlement of the matter fully and finally. Later on, the
declarant could not be or continued to be subjected to criminal
prosecution to alter the position as it stood on the relevant date of H
Z30
A
B
c
SUPREME COURT REPORTS
(2007) 3 S.C.R.
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,
if the appellants' appeal which was pending in this Court against the
order ofCEGAT 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 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. The appeals thus deserve to be
allowed.
20. Placing reliance on the above judgment, learned counsel for the
D petitioner urged that the detention order No. PSA 1204/21 (2)/SPL-3(A) issued
against the petitioner be quashed and set aside without insisting the petitioner
to undergo detention.
21. Learned counsel for the petitioner further submitted that the
impugned order of detention is contrary to the spirit of settlement and legislative
E intent behind the scheme of settlement enacted under the Customs Act, 1962.
i.
The Settlement Commission came into being as a culmination of
the report submitted by the Wanchoo Committee set up for
toning up the administration of direct taxes.
F
Para 2.32 of the Wanchoo Committee's report reads as:
G
H
"This however, does not mean that the door for compromise with
an errant tax-payer should forever remain closed. In the
administration of fiscal laws, whose primary objective is to raise
revenue, there has to be room for compromise and settlement. A
rigid attitude would not only inhibit one-time tax-evader or an
unintending defaulter from making a clean breast of his affairs,
but would also unnecessarily strain the investigational resources
of the Department in cases of doubtful benefit to revenue, while
needlessly proliferating litigation and holding up collections. We
would, therefore, suggest that there should be a provision in the
law for a settlement with the tax-payer at any stage of the
"·
ALPESH NA VIN CHANDRA SHAH v.STATE OF MAHARASHTRA [LAKSHMANAN. J .] 23 1
proceedings. In the United Kingdom, the 'confession' method A
A
has been in vogue since 1923. In the U.S law also there is a
provision for compromise with the tax payer as to his tax liabilities.
A provision of this type facilitating settlement in individual cases
will give this advantage over general disclosure schemes that
misuse thereof will be difficult and the disclosure will not nonnally B
breed further tax evasion. Each individual case can be considered
on its merits and full disclosures not only of the income but of
the modus operandi of its build up can be insisted on, thus
.._
sealing off chances of continued evasion through similar
practices."
The recommendation of Wanchoo Committee has been quoted with approval c
by this Court in the case of CIT (Central) v. B.N.Bhattacharjee and Anr.,
(1979) 118 !TR 461- SC.
On the above basis, in the course of the Budget Speech in 1992, Hon'ble the.
then Finance Minister announced as under:-
D
"A settlement Commission was established in 1976 under the Income
Tax Act, 1961. 1 propose to set up a Settlement Commission, on similar
'"l
lines, for dealing with Customs and Central Excise disputes between
the Department and the assesses. I trust this will help in speedy
settlement of tax disputes."
E
22. It is submitted that in spite of the above speech of the Finance
Minister in 1992, it was only in the Finance Bill 1998 that provisions were
made to insert Chapter XIV A in the Customs Act for creation of Settlement
Commission and the provisions relating to the Settlement Commission came
into effect vide Act 21 of 1998, Section I 02 w .e.f. 01.08.1998. In the Finance F
,,_
"'
Bill of 1998, Clause I 05 seeks to insert Chapter in the Customs Act, 1962 to
provide for setting up of a Customs and Central Excise Settlement Commission
on the lines of a similar commission already working under the Income Tax
Act, 1961.
Learned counsel for the petitioner further submitted that:
G
•
i.
Since the legislature itself has created Settlement Commission for
. . •
'
generating Revenue and has also made provisions for release of
the goods on payment of duty and has also made provisions for
granting immunity from prosecution under the Customs Act, 1962
H
232
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A
under the Indian Penal Code and also under the other Central
Law, it is clear that the intention of the Legislature was more on
'"'-
Revenue aspect rather than prosecution and punishment aspect
or in continuing with multiple litigations. He submits that it would
be unjust unfair and unreasonable if a person is made to suffer
B
preventive detention mainly after his application for settlement is
allowed to be proceeded with, and after realisation of the Customs
duties not only the goods are ordered to be released, but on
considering the co-operation extended by him in the settlement
proceedings, the Settlement Commission has also granted to him
~ -
immunity from prosecution under the Customs Act, 1962 as well
c
as under the !PC. He further submits that this Court in the case
of Sadhu Roy has held that, if there is cast iron case against the
person, then he should be prosecuted rather than detained under
the preventive detention law, which is softer measure. He submits
that when under the law the person is immuned from prosecution
D
which is a stronger deterrent than detention, there is no reason
as to why the same person should be detained preventively
under a softer measure.
ii.
the act of detaining such person whose Settlement Application
under the statutory provisions of Customs Act, 1962 has been
E
allowed to be proceeded with and specifically whose case has
been settled, would be discriminative and arbitrary as against the
person who does not approach the Settlement Commission and
does not settle their case and thus continue to damage the
economy of the country. Learned counsel submits that for the
reason of discrimination and arbitrariness of the detention order
F
against a person who is willing to or has settled the case against
the petitioner, the detention Order is liable to be quashed and set
aside because it would become punitive and how would the
"'
_,,
punitive Order would survive when the application for settlement
of the case with prayers for immunity from prosecution has been
allowed to be proceeded with and the case has been fully settled?
G
iii.
when the Settlement Commission grants immunity to a person
under Section 127H of the Customs Act, 1962, the Settlement
Commission regularizes the act of the person which was supposed
.• '
to be violative of the provisions of the Customs Act, 1962,
meaning thereby that whatever was alleged to have been
H
committed by the said person becomes non-est, as if he has not
ALPESH NA VINCHANDRA SHAH 1·. STA TE OF MAHARASHTRA [LAKSHMANAN. J.J 23 3
committed any breach of the Customs Act. 1962, the person A
becomes a person who has not at all committed any act or
omission in respect of the goods under section 111 of the Customs
Act, 1962 and therefore in such a situation where there is no act
or omission on the part of the person who approaches the
Settlement Commission and gets immunity from prosecution and B
penalty, a Detention Order under any clause of section 3( 1) (i) to
3(1 )(v) cannot sustain. Learned counsel for the petitioner,
therefore, submits since the petitioner's application for settlement
of the case has been allowed to be proceeded with and his case
has been finally settled, the impugned order of detention against
the Petitioner has become an order which is not sustainable in C
law.
24. Our attention to the preamble of COFEPOSA Act, 1974 was invited
which reads as under:
"COFEPOSA Act, 1974, as per its preamble is an Act to provide for D
preventive detention in certain cases for the purpose of conservation
and augmentation of foreign exchange and prevention of smuggling
activities and for matters connected therewith because the violations
of foreign exchange regulativns and smuggling activities are having
an increasingly deleterious effect on the national economy and thereby
a serious adverse effect on the security of the state."
E
25. Learned counsel for the petitioner submits that it was clear from the
preamble of the COFEPOSA Act that only in certain cases the preventive
detention is provided for conservation and augmentation of foreign exchange
and preventing the smuggling activities which have deleterious effect on the
national economy. He submits that the above objective of the COFEPOSA F
, . "'
Act, 1974 is fulfilled by the Order of the Settlement Commission in as much
as when a case is settled on payment of the Customs duty, there would be
no deleterious effect on the national economy, on the contrary, even if after
settlement of case the detention order is allowed to be continued, the legislative
intent in introducing the settlement provision would be defeated which may G
have adverse and deleterious effect on the national economy.
26. It is further submitted that the Settlement Commission is a forum of
legal criterion and the powers are drawn from the enacted statutes such as
Customs Act, 1962 and Central Excise Act, 1944 in the case of eligible persons,
who in addition to fulfilling the other criteria admit additional duty liability of H
234
SUPREME COURT REPORTS
[2007] 3 S.C.R.
A a minimum of Rs. 2 lacs, the option of knocking the doors of Settlement
Commission is available, inter a/ia, in the cases under the Customs Act.
According to the learned counsel, the functional mechanism of the Settlement
Commission pertaining to the customs cases can be broadly described as
follows:-
B
27. On receiving an application, the statutory report is called for by the
Settlement Commission from the jurisdictional Commissioner. The Commission
considers the report and after hearing both the sides decides on the
admissibility of the case. Again after hearing both the sides, the Settlement
•
Commission, after being satisfied that a true and full disclosure has been
C made by the applicant, determines the duty liability, redemption fine in lieu
of confiscation and the penalty on the persons. Further, the question of
extending immunity from prosecution under the Customs Act, 1962, Indian
Penal Code and any other Central Acts is also decided by the Commission.
The Commission has got power to reject any application. Further the decisions
of the Settlement are not appealable in the regular course. Above all, once
D the Commission admits a case, it is vested with the exclusive powers of all
the Customs authorities till the finalization of the case.
E
F
G
28. In this regard it is apt to extract Sections 1278 to 1271 of the
Customs Act, 1962 which are as under: -
"1278. Application for settlement of cases. -(I) Any importer, exporter
or any other person (hereinafter in this Chapter referred to as the
applicant) may, at any stage of a case relating to him make an application
in such form and in such manner as may be specified by rules, and
containing a full and true disclosure of his duty liability which has not
been disclosed before the proper officer, the manner in which such
liability has been incurred, the additional amount of customs duty
accepted to be payable by him and such other particulars as may be
specified by rules including the particulars of such dutiable goods in
respect of which he admits short levy on account of misclassification
or otherwise of goods, to the Settlement Commission to have the case
settled and such application shall be disposed of in the manner
hereinafter provided :
Provided that no such application shall be made unless -
(a) the applicant has filed a bill of entry, or a shipping bill, in respect
H
of import or export of goods, as the case may be, and in relation to
ALPESH NA VINCHANDRA SHAH v. STA TE OF MAHARASHTRA [LAKSHMANAN, J.] 23 5
such bill of entry or shipping bill or a show cause notice has been A
issued to him by the proper officer;
(b) the additional amount of duty accepted by the applicant in his
application exceeds two lakh rupees :
Provided further that no application shall be entertained by the B
Settlement Commission under this sub-section in cases which are
pending in the Appellate Tribunal or any Court:
Provided also that no application under this sub-section shall be made
in relation to goods to which section 123 applies or to goods in
relation to which any offence under the Narcotic Drugs and C
Psychotropic Substances Act, 1985 (61 of 1985) has been committed:
Provided also that no application under this sub-section shall be made
for the interpretation of the classification of the goods under the
Customs Tariff Act, 1975 (51 of 1975).
(2) Where any dutiable goods, books of account, other documents or D
any sale proceeds of the goods have been seized under section 110,
the applicant shall not be entitled to make an application under subsection (I) before the expiry of one hundred and eighty days from the
date of the seizure.
(3) Every application made under sub-section (1) shall be accompanied
by such fees as may be specified by rules.
( 4) An application made under sub-section (I) shall not be allowed to
be withdrawn by the applicant.
E
127C. Procedure on receipt of application under section 1278. - (1) F
On receipt of an application under section 127B, the Settlement
Commission shall call fo1 a report from the Commissioner of Customs
having jurisdiction and on the basis of the materials contained in such
report and having regard to the nature and circumstances of the case
or the complexity of the investigation involved therein, the Settlement G
Commission may, by order, allow the application to be proceeded with
or reject the application :
Provided that an application shall not be rejected under this subsection, unless an opportunity has been given to the applicant of
being heard :
H
236
SUPREME COURT REPORTS
[20011 J s.c'"'.'l
A
Provided further that the Commissioner of Customs shall furnish such
report within a period of one month of the receipt of the communication
)'.:-
from the Settlement Commission, failing which it shall be presumed
that the Commissioner of Customs has no objection to such application;
but he may raise objections at the time of hearing fixed by the
B
Settlement Commission for admission of the application and the date
of such hearing shall be communicated by the Settlement Commission
to the applicant and the Commissioner of Customs within a period not
exceeding two months from the date of receipt of such application,
unless the presiding officer of the Bench extends the said period of
+. ..
two months, after recording the reasons in writing.
c
(2) A copy of every order under sub-section (I) shall be sent to the
applicant and to the Commissioner of Customs having jurisdiction.
(3) Subject to the provisions of sub-section (4), the applicant shall,
within thirty days of the receipt of a copy of the order under subD
section (I) allowing the application to be proceeded with, pay the
amount of additional duty admitted by him as payable and shall
furnish proof of such payment to the Settlement Commission.
(4) If the Settlement Commission is satisfied, on an application made
under sub-section (I) that the applicant is unable for good and
~
E
sufficient reasons to pay the amount referred to in sub-section (3),
within the time specified in that sub-section, it may extend the time
for payment of the amount which remains unpaid or allow payment
thereof by instalments, if the applicant furnishes adequate security for
the payment thereof.
F
(5) Where the additional amount of customs duty referred to in subsection (3) is not paid by the applicant within the time specified or
extended period, as the case may be, the Settlement Commission may
..:
....
direct that the amount which remains unpaid, together with simple
interest at the rate of eighteen per cent per annum or at the rate
G
notified by the Board from time to time on the amount remaining
unpaid, be recovered as the sum due to the Central Government by
the proper officer having jurisdiction over the applicant in accordance
with the provisions of section 142.
{
(6) Where an application is allowed to be proceeded with under subH
section (I), the Settlement Commission may call for the relevant records
. ...-
j.
'
ALPESH NA VINCHANDRA SHAH v. STA TEOF MAHARASHTRA [LAKSHMANAN, J) 23 7
from the Commissioner of Customs having jurisdiction and after A
examination of such records, if the Settlement Commission is of the
opinion that any further enquiry or investigation in the matter is
necessary, it may direct the Commissioner (Investigation) to make or
cause to be made such further enquiry or investigation and furnish
a report on the matters covered by the application and any other B
matter relatirig to the case.
(7) After examination of the records and the report of the Commissioner
of Customs received under sub-section (I), and the report, if any, of
the Commissioner (Investigation) of the Settlement Commissioner under
sub-section ( 6), and after giving an opportunity to the applicant and C
to the Commissioner of Customs having jurisdiction to be heard,
either in person or through a representative duly authorised in this
behalf, and after examining such further evidence as may be placed
before it or obtained by it, the Settlement Commission may, in
accordance with the provisions of this Act, pass such order as it
thinks fit on the matters covered by the application and any other D
·matter relating to the case not covered by the application, but referred
to in the report of the Commissioner of Customs or the Commissioner
(Investigation) under sub-section (1) or sub-section (6).
(8) Subject to the provisions of section 32A of the Central Excise Act,
1944 (1 of I 944), the materials brought on record before the Settlement . E
Commission shall be considered by the Members of the concerned
Bench before passing any order under sub-section (7) and, in relation
to the passing of such order the provisions of section 320 of the
Central Excise Act, 1944 shall apply.
(9) Every order passed under sub-section (7) shall provide for the F
terms of settlement including any demand by way of duty, penalty or
interest, the manner in which any sum due under the settlement shall
be paid and all other matters to make the settlement effective and shall
also provide that the settlement shall be void if it is subsequently
found by the Settlement Commission that it has been obtained by G
fraud, or misrepresentation of facts.
(IO) Where any duty payable in pursuance of an order under subsection (7) is not paid by the applicant within thirty days of the
receipt of a copy of the order by him, then, whether or not the
Settlement Commission has extended the time for payment of such H
238
A
B
c
D'
E
F
G
SUPREME COURT REPORTS
[2007] 3 S.C.R.
duty or has allowed payment thereof by instalments, the applicant
shall be liable to pay simple interest at the rate of eighteen per cen.
per annum or at such other rate as notified by the Board on the
amount remaining unpaid from the date of expiry of the period of
thirty days aforesaid.
(11) Where a settlement becomes void as provided under sub-section
(9) the proceedings with respect to the matters covered by the
settlement shall be deemed to have been revived from the stage at
which the application was allowed to be proceeded with by the
Settlement Commission and proper officer may, notwithstanding
anything contained in any other provision of this Act, complete such
proceedings at any time before the expiry of two years from the date
of the receipt of communication that the settlement became void.
127D. Power of Settlement Commission to order provisional
attachment to protect revenue. - (I) Where, during the pendency of
any proceeding before it, the Settlement Commission is of the opinion
that for the purpose of protecting the interests of the revenue it is
necessary so to do, it may, by order, attach provisionally any property
belonging to the applicant in such manner as may be specified by
rules.
(2) Every provisional attachment made by the Settlement Commission
I
under sub-section ( 1) shall cease to have effect from the date the
sums due to the Central Government for which such attachment is
made are discharged by the applicant and evidence to that effect is
submitted to the Settlement Commission.
127E. Power of Settlement Commission to reopen completed
proceedings. - If the Settlement Commission is of the opinion (the
reasons for such opinion to be recorded by it in writing) that, for the
proper disposal of the case pending before it, it is necessary or
expedient to reopen any proceeding connected with the case but
which has been completed under this Act before application for
settlement under section 127B was made, it may, with the concurrence
of the applicant, reopen such proceeding and pass such order thereon
+ •
as it thinks fit, as if the case in relation to which the application for
,•
•
settlement had been made by the applicant under that section covered
such proceeding also : ·
H
Provided that no proceeding shall be reopened by the Settlement
ALPESHNAVINCHANDRA SHAH v. STA TEOF MAHARASHTRA [LAKSHMANAN, J] 239
-'I
Commission under this section after the expiry of five years from the A
date of application under sub-section ( l) of section I 27B.
127F. Power and procedure of Settlement Commission.