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Issues Involved:
1. Whether the criminal proceedings can continue after the appellate authority set aside the adjudication order. 2. Whether the confessional statements of co-accused under Section 108 of the Customs Act can be used as substantive evidence against the petitioners. Issue-wise Detailed Analysis: 1. Continuation of Criminal Proceedings Post Adjudication Order: The petitioners argued that the criminal proceedings should be quashed because the appellate authority, CEGAT, set aside the adjudication order that formed the basis of the criminal complaint. The court examined the appellate order and clarified that the CEGAT set aside the order because the primary authority imposed a higher penalty upon remand, which is against established legal principles. The appellate authority did not determine that the entire proceedings were invalid or that no case was made out against the accused. The court referred to the Supreme Court ruling in Assistant Customs Collector, Bombay v. L.R. Melwani, which established that the dropping of adjudication proceedings does not bar prosecution under Section 135 of the Customs Act. Hence, the criminal proceedings could not be quashed on this ground. 2. Use of Confessional Statements of Co-accused: The petitioners contended that there was no material implicating them except the confessional statements of A2 and A4 recorded under Section 108 of the Customs Act, which had been retracted. The court considered the admissibility of such statements, noting that while statements under Section 108 are admissible, they do not constitute substantive evidence against co-accused under Section 30 of the Evidence Act. The court cited the Supreme Court's decision in K.I. Pavunny v. Asstt. Collector (HQ), Central Excise Collectorate, which confirmed the admissibility of such statements but emphasized that they only have corroborative value. The court also referenced the Supreme Court's ruling in Haricharan Kufrmi v. State of Bihar, which stated that a confession of a co-accused cannot be treated as substantive evidence and can only be used to lend assurance to other evidence. The court found that the prosecution's case relied solely on the confessional statements of A2 and A4, with no other substantive evidence against the petitioners. The court held that the confessions of co-accused cannot constitute the sole basis for conviction and that continuing the proceedings would be an abuse of the process of law. Conclusion: The petition was allowed, and the proceedings against A1 and A3 in C.C. No. 3 of 1997 on the file of the Special Judge for Economic Offences, Hyderabad, were quashed.
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