OCTOBER 08, 2007

By S K Choudhury, Former Member of CBEC

RECENTLY I read the news that the Apex Court set aside the Bombay High Court order which had cancelled the bail granted by a night Magistrate to one Abinash Bhosale, a high-profile Pune-based builder, arrested by the DRI sleuths at Mumbai airport on 27 th May '07 for alleged customs duty evasion to the tune of several lakhs of rupees only to be released on bail within a matter of a few hours. And my instant reaction to this decision with great humility was - 'manifestly NOT right'!

Justice Vijay Kapse Tahilramani of Bombay HC while cancelling the bail on appeal by the DRI is quoted as having observed, 'It shocks the judicial conscience of this court, and the practice of passing such orders without hearing the other side has to be nipped in the bud. If not checked by the HC, it is likely to send wrong signals to the accused and also to the subordinate judiciary'. Ironically it was Mr Salve's turn to describe the HC order as 'absurd and shocking as it played with the liberty of a citizen' and adding that the HC has lost sight of the recent amendment to the Customs Act by which Bhosale's offence fell under the 'bailable offence' category, if what has been attributed to him by a leading national daily is correct. The Apex Court, however, accepted Mr Salve's contention that the offence was bailable one in view of the amendment and set aside the order of the HC.

Before dwelling on the issue it would be useful to quote the text of the brief order passed by the S.C. It reads as under:

'Leave granted.

On the material placed on record and the amended section ''''.of the Customs Act, 1962 it appears to us that apparently ( emphasis supplied) the offence which is alleged to have been committed is a bailable offence and that the Magistrate has rightly granted bail to the Appellant. In view of this, the order of the High Court is set aside''''.'

Has the amendment indeed made such offence bailable as argued by the Mr Salve and accepted by their Lordships? Let us examine the amendment. Section 103 of Finance Act 2007 amended Section 135 by substituting sub-section (1) as under:

'(1) Without prejudice to any action that may be taken under this Act, if any person-

(a) is in relation to any goods in any way knowingly concerned in misdeclaration of value or in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods; or

(b) acquires possession of or is any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111 or section 113,as the case may be; or

(c) attempts to export any goods which he knows or has reason to believe are liable to confiscation under section 113;or

(d) fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under this Act in connection with the export of goods, he shall be punishable ,-

(i) in the case of the offence relating to,-

(A) any goods market price of which exceeds one crore of rupees; or

(B) the evasion or attempted evasion of duty exceeding thirty lakhs of rupees; or

(C) such category of prohibited goods as the Central Government may,by notification in the Official Gazette,specify;or

(D) fraudulently availing of or attempting to avail of drawback or any exemption from duty referred to in clause (d),if the amount of drawback or exemption from duty exceeds thirty lakhs of rupees,

with imprisonment for a term which may extend to seven years and with fine :

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be less than one year.

(ii) in any other case,with imprisonment for a term which may extend to three years, or with fine ,or with both.'

Bailabilty or otherwise of an offence under the Customs Act is to be determined on the basis of period of imprisonment provided for a particular offence. When one compares period of such imprisonment for offences under pre-amended and post-amended section 135 of the Customs Act, it would be evident that there is no change in this regard for both the categories of offence i.e. 7 years / 3 years as the case may be. Assuming that the market value of undeclared goods and duty sought to be evaded was less than Rs one crore and Rs 30 lakhs respectively, still the offence would attract imprisonment that could extend to three years as provided under clause (ii) above. In that event, can it be said that the offence is bailalble.?

We don't have the benefit of a reasoned order by the SC in Bhosale's case to appreciate as to how Mr Salve succeeded in convincing the court that the offence of the kind allegedly committed by Mr Bhosale has become bailable after the amendment of section 135 of the Customs Act. We have, however, the benefit of a detailed judgment of Division Bench of Gujrat HC in the case of N.H DAVE, Inspector of Customs v. Md AKHTAR HUSSAIN ( 2003-TIOL-178-HC-AHM-CUS ). While dealing with the proposition that the offence allegedly committed by the respondent was bailable, their Lordships held as under:

'5---- We will therefore deal with this contention in the first instance. But before we do so we must advert to the following propositions which emerge from the provisions of the Act and the Code which are not disputed even by the other side, namely :-

That an offence under Section 135 of the Customs Act is a (1) non-cognizable offence, that is to say it is an offence which cannot be investigated by the police;

The Code of Criminal Procedure is applicable (2) mutatis mutandis to proceedings in relation to offences other than an offence under Indian Penal Code to the extent specified in sub-section (2) of Section 4 of the Code and that the Code would be applicable to this extent even in respect of an offence under Section 135 of the Customs Act.

So far as proposition No. (1) set out hereinabove is concerned, at one point of time there was some doubt and debate having regard to a decision rendered by a learned Single Judge of this Court in Miscellaneous Criminal Application No. 1202 of 1979 on December 10, 1979. Therein the learned Single Judge has taken the view that an offence under Section 135 of the Customs Act is a bailable offence. It however appears that the provision contained in Part II of the First Schedule entitled 'Classifications of offences against other laws' was not brought to the notice of the learned Single Judge. Part II of the First Schedule deserves to be reproduced :

The first and the second entries are relevant for our purposes. By virtue of the first entry in respect of offences against other laws, that is to say, laws other than Indian Penal Code, an offence punishable with imprisonment for a period exceeding seven years is classified as non-bailable. So also by virtue of entry No. 2 an offence punishable with imprisonment for a period of three years and upwards but not exceeding seven years is also classified as non-bailable. (see column 2). An offence under Section 135 of the Customs Act is in any event punishable with a sentence of imprisonment exceeding three years. (When the value of the goods in respect of which the offence is committed does not exceed rupees one lac the offence is punishable with imprisonment for three years. When it exceeds rupees one lac Section 123 of the Customs Act is attracted. The conditions specified therein being satisfied the offence is punishable with imprisonment for seven years). Thus, regardless of the value of the goods in any event the offence is punishable with imprisonment for three years. Such being the position the offence is non-bailable. The view taken by the learned Single Judge in Miscellaneous Criminal Application No. 1202 of 1979 is not correct. The decision has been rendered per incuriam having regard to the fact that the aforesaid provisions of the Code were not brought to the notice of the learned Single Judge. It cannot be considered as good law. Counsel for the arrested persons also concedes that such is the position and does not dispute it. That is why we have referred to proposition No. (1) as an undisputed proposition '.(emphasis supplied)

6. To the same effect is the judgment of Delhi High Court in the case of INDERJEET NAGPAL V.DRI ( 2005-TIOL-207-HC-DEL-CUS ) holding that offences under sectino135 (1) (ii) of the Customs Act providing imprisonment upto three years is non 'bailable as it does not fall under Entry 3 of the Table II to First Schedule of Code of Criminal Procedure,1973 agreeing with earlier judgment of the same court in the case of MOHAN LAL THAPAR V.Y.P.DABARA, Inspector Customs - 2002 (143) ELT 44 (Delhi) and recorded its differences with the single Bench decision of Bombay H.C. in the case of SUBHAS CHOUDHARY V.DEEPAK JAYALA and Others ( 2004-TIOL-60-HC-MUM-CUS ) For the sake of convenience the relevant portion of Delhi H.C.order in INDERJEET NAGPAL case (supra) is extracted below:

'11. The offence under Section 135 (1) (ii) of the Customs Act is punishable with imprisonment extending to three years or with fine or with both. Learned Senior Counsel for the petitioner sought to maintain that the offence punishable under Section 135 (1) (ii) would fall under Entry 3 of Table II and borrows support to his contention in this regard from the aforesaid decision of the Bombay High Court in Subhash Chaudhry ( supra).Having gone through the decision in the Subhash Chaudhary (supra),it is difficult to subscribe to the view taken therein as the same would appear to suffer from inherent contradictions. The offence punishable under Section 135 (1) (ii) providing for punishment extending to three years clearly indicate that the same is punishable with imprisonment for a period up to 3 years.In that view of the matter,the same cannot be pleaded to fall under Third Entry of Table II.In Mohan Lal Thaapr (supra),the plea if an offence under Section 135 (1) (ii) is a bailable one was examined by this Court and answered in negative.I find no reason to take a different view.'

It is relevant to mention that even though Division Bench judgment of Gujrat H.C.in N.H.DAVE case (supra) was relied upon by the department's counsel, in SUBHASH CHAUDHARY case (supra) the Court erroneously maintained that the ruling was in the context of an offence punishable with imprisonment up to seven years. This observation is factually not correct as the Gujrat H.C. in that judgment categorically held that ''' regardless of the value of the goods in any event the offence is punishable with imprisonment for three years. Such being the position the offence is non-bailable '. Bombay H.C.in subsequent case of KURESH TAHELBHAL RAJKOTWALA ( 2007-TIOL-147-HC-MUM-CUS ) followed the ratio of SUBHAS CHAUDHARY case (supra) being the judgment of a coordinate Bench.

With great respect, I would submit that these judgments of Bombay H.C. are not good laws. Once it is admitted that offences for which imprisonment may extend up to three years, it must automatically follow that such offences would be covered under the second category of offences in the Table II of the First Schedule to the Cr.PC making such offences 'non-bailable'. Since the maximum punishment provided in respect of cases falling under section 135(1) (ii) is three years, there is no valid reason to assume that while considering request for bail the magistrate competent to try such offences would not award the maximum punishment of three year imprisonment.

At the end of the discussion, one is left wondering whether the amendment of section 135 by the Finance Act 2007 has made any difference to the bailability of offence punishable under section 135 of the Customs Act as canvassed by a senior counsel of Mr Salve's stature and accepted by the Apex Court. Since this is an issue of great significance in the matters of investigation, I would like to believe that the department would have already taken up the matter for filing suitable Review Petition or any suitable petition before the S.C. for reconsidering the issue. Until then it would be treated as the law laid down by the SC and hence binding on all subordinate courts in the country frustrating the very objective of arrest of an offender. Needless to mention, the Counsel appearing before the court on behalf of the department has to do his homework well to demolish a totally untenable, if not wholly absurd and misleading, interpretation successfully advanced by Mr Salve. One must wait and watch !

(The views expressed are strictly personal)