2006 (12) TMI 533 - HC - Customs

Foreign exchange - Search and seizure - Prosecution and penalty - Statement u/s 108 of the Customs Act - foreign currency was recovered from the brief case - challenging the confiscation of the currency - HELD THAT - Perusal of this order passed by CEGAT would show that petitioner had filed appeal against the common adjudication order whereby Maruti Zen Car bearing Registration was confiscated with option to redeem the same on payment of redemption fine and personal penalty. It was this order passed in the appeal which was challenged before the CEGAT. Order clearly records that foreign currency was recovered from the brief case and the petitioner as well as other co -accused were not claiming the seized currency nor were they challenging the confiscation of the currency. This appeal was allowed and imposition of penalty was set aside on the ground that it was based on the solitary statement of Sunil Gulati and even when Sunil Gulati had retracted his statement. It is clear from the above that in the departmental proceedings the petitioner is not exonerated on merits and it would still be open to the criminal court as to whether the statement of Sunil Gulati u/s 108 of the Customs Act should be believed or not. Therefore the impugned order of the learned trial court is valid and proper though the discussion on the issue namely relevance of adjudication proceedings on the criminal cases may not be fully correct which is stated by the learned trial court in the earlier part of the order. Since the conclusion of the learned trial court in the impugned order is otherwise proper and meets the legal test this petition is devoid of merits and is dismissed. Complaint u/s 135 - Customs Clearing Agent - filed the bill of entry himself declaring the goods - importers for the smuggling of the goods - There was nothing on record to show that he had given the description different from the one given in the import documents. On this ground the imposition of penalty was set aside. Once such a finding is given and if these facts are taken on record obviously the charge of abetment against the petitioner also cannot be made out as that is on the same facts on the basis of which penalty was imposed and which has been set aside by the CEGAT. Therefore this would be a case where after exoneration of the petitioner by the CEGAT on merits prosecution against the petitioner cannot continue on the same allegations and facts. The impugned order of the learned trial court is accordingly set aside and the petitioner is discharged in the complaint. Contravention of Sections 18(2) r/w Section 18(3) of the Foreign Exchange Regulation Act - Chief Enforcement Officer in the Enforcement Directorate in these circumstances cannot maintain the proceedings alleging same violation and continue with the complaint. It would be of interest to note that Section 18(2) of the Act spells out the circumstances under which the contravention can be said to have been committed so as to attract the penal provisions in addition to proving that export proceeds have not been realised. It is also to be shown that needful is not done within the prescribed period of time or extended period of time granted by the Reserve Bank of India. Rule 8 of the aforesaid Regulation Rules empowers Reserve Bank of India to extend the period of time as prescribed in the Act for realising the export proceeds. Further proviso to Sub -Section 2 of Section 18 in no uncertain terms stipulates that no proceedings in respect of any contravention of the provisions of the said Sub -Section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period. Thus if the RBI itself has granted the extension or has ultimately waived the requirement there cannot be any infraction of the said proceedings. Thus where RBI has itself waived and allowed the petitioner No. 1 to write off the realising of the export proceeds and on that basis when Department has itself dropped adjudication proceedings the criminal proceedings against the petitioners are also required to be closed. This petition is accordingly allowed. The summoning order dated 28.5.2002 is quashed and impugned order dated 19.4.2005 is set aside and the complaint is dismissed against the petitioners.

Issues Involved:
1. Adjudication proceedings versus criminal proceedings.
2. Impact of exoneration in adjudication proceedings on criminal prosecution.
3. Legal standards and principles applicable to simultaneous adjudication and criminal proceedings.

Detailed Analysis:

1. Adjudication Proceedings versus Criminal Proceedings:
The court examined whether adjudication proceedings and criminal prosecution are independent and whether the outcome of one affects the other. The petitioner argued that since the adjudication order was quashed, the criminal proceedings should also be dismissed. The court referred to various judgments, including the Supreme Court's decision in *Standard Chartered Bank and Others v. DRI*, which clarified that adjudication and criminal proceedings are separate and can be initiated simultaneously. The court held that criminal proceedings do not have to wait for the outcome of adjudication proceedings and are independent in nature.

2. Impact of Exoneration in Adjudication Proceedings on Criminal Prosecution:
The court analyzed whether exoneration in adjudication proceedings impacts criminal prosecution. The petitioner cited cases like *G.L. Didwania & Another v. Income Tax Officer & Another*, where the Supreme Court held that if a person is exonerated in adjudication proceedings on merits, criminal prosecution cannot continue on the same facts. The court distinguished between exoneration on technical grounds and on merits. If exoneration is on merits, indicating no contravention of the law, criminal proceedings should not continue. However, if exoneration is due to technicalities or lack of evidence, criminal proceedings may still be valid.

3. Legal Standards and Principles Applicable to Simultaneous Adjudication and Criminal Proceedings:
The court delineated the principles from various judgments:
- Both adjudication and criminal proceedings can be initiated simultaneously.
- Findings in departmental proceedings do not amount to res judicata and do not constitute double jeopardy.
- Criminal proceedings must be determined on their own merits, regardless of the outcome of adjudication proceedings.
- If exoneration in adjudication is on merits and the facts are identical, criminal prosecution should not continue.

Case-Specific Analysis:

Crl. M.C. No. 2173/2004 & Crl. M.C. No. 991/2004:
The petitioner was accused under Section 135 (1) (a) of the Customs Act. The court noted that the exoneration by CEGAT was not on merits but due to lack of corroboration of the petitioner's retracted statement. Therefore, the criminal proceedings could continue as the exoneration was not substantive.

Crl. M.C. No. 1183/2004:
The petitioner, a Customs Clearing Agent, was exonerated by CEGAT on merits. The Tribunal found that the petitioner could not have identified the goods differently based on the import documents. The court held that since the exoneration was on merits, the criminal prosecution could not continue.

Crl. M.C. No. 2274-76/2005:
The petitioner company was accused of not realizing export proceeds. The adjudicating authority dropped the proceedings after being satisfied with the petitioner's explanation and the RBI's write-off. The court noted that since the adjudication proceedings were dropped on merits, the criminal prosecution could not continue.

Conclusion:
The court concluded that while adjudication and criminal proceedings can be initiated simultaneously, the outcome of adjudication proceedings can impact criminal prosecution. If exoneration in adjudication is on merits and the facts are identical, criminal prosecution should not continue. The court dismissed the petitions where exoneration was not on merits and allowed those where exoneration was substantive.

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