Judgment:
1. A vessel viz. M.T. STEREGUSHCHIY was purchased by M/s. Jesudasans Private Ltd. [Appellants in Appeal No. C/69/1999] for the purpose of ship breaking and the same was towed from Dubai to Valinokkam where the company had ship breaking facilities. The ship reached Valinokkan on 17.5.94 and the same was inspected and assessed to duty of Rs. 6,28,331/-, which was paid by the above company. Subsequently, on 18.7.94, Customs officers searched the vessel and found 1,31,076/- ball bearings [of Russian and Japanese origin] in 824 cardboard boxes having been concealed in a cavity in the hind part of the vessel. Gas cylinder and gas torch used for cutting steel plate covering the cavity were also found along with the boxes. All these goods were seized along with the vessel. Thereafter statements of some officials of the company and others were recorded. These persons included S/Shri R. Ravi [Appellant in C/1452/1998], M. Udayakumar [Appellant in C/1454/1998], N. Ramesh [Appellant in C/1453/1998], N. Suresh [Appellant in C/l455/1998], M.Muthusingaram [Appellant in C/l462/1998], S. Ramamoorthy [Appellant in C/1461/1998 and C/70/99], Duraiappa [Appellant in C/1451/1998] and T.R.Kannan [Managing Director of M/s. Jesudasans Pvt. Ltd.]. The Customs officers also searched the office premises of the company and recovered certain documents. The residential premises of some of the above persons were also searched but nothing was recovered. On the basis of the evidence gathered in the investigations, the department issued a show-cause notice to the appellants and others proposing to confiscate the seized vessel, ball bearings, etc. and to impose penalties on the noticees. The show-cause notice alleged that the vessel had been used for smuggling the ball bearings of foreign origin into India; that on its arrival at Valinokkam S/Shri R. Ravi, Duraiappa and Udayakumar cut open the cavity in the hind part of the vessel by engaging gas cutter; that the gas cylinder and gas torch employed for the purpose were brought in a jeep by Shri N. Ramesh, driver; that 175 boxes were removed from the vessel and loaded on to a lorry by 12 loading, workers with the help of Shri N. Suresh; and that one Shri Alagu, who had come with the lorry, returned with the load of 175 boxes of ball bearings at 5.00 a.m. on 17.7.94. It was also alleged that one Shri Ramesh J. Shah of the Singapore-based company from whom the vessel had been purchased by M/s. Jesudasans had concealed the ball bearings in the hind part of the ship abroad and that it was he who, in connivance with his business partner one Sh. Issac, came to India and pointed out the cavity containing ball bearings to Ramamoorthy and others. The show-cause notice alleged that the vessel was liable to confiscation under Section 115 of the Customs Act and that the ball bearings were liable to confiscation under Section 111(d) of the said Act. The show-cause notice also held all the noticees liable to penalty under Section 112 of the Act. In adjudication of the show-cause notice, the Commissioner of Customs ordered absolute confiscation of the 1,31,076 ball bearings [in 824 boxes] valued at over Rs.1.80 crores, under Section 111 (d) of the Act. He also confiscated the vessel under Section 115 of the Act, giving an option to M/s. Jesudasans Pvt. Ltd. to redeem the same on payment of a fine of Rs. 50.00 lakhs under Section 125 of the Act. The other items [gas cylinder, etc.] were confiscated under Section 118 of the Act. The Commissioner imposed penalties of Rs. 50.00 lakhs each on S/Shri S. Ramamoorthy, Muthusingaram and 3 others. He also imposed penalties of Rs. 5.00, lakhs each on S/Shri R. Ravi, Duraiappa, Udayakumar, N. Ramesh and N. Suresh. Shri T.R. Kannan [Managing Director] and other Directors of the above company were exonerated from penal liability. The present appeals are against the decision of the Commissioner.
2. Heard both sides. It was submitted by ld. Senior Advocate for the appellants that Appeal No. C/70/1999 filed by Shri S. Ramamoorthy was not being pressed. Accordingly, Appeal No. C/70/99 is dismissed.
3. In Appeal No. C/1461/1998 filed by Shri S. Ramamoorthy, who later died on 15.1.2003 as evidenced by the death certificate brought on record, an application [C/OT1/732/2004] was moved by ld. Senior Advocate seeking impleadment of the legal heirs of the deceased as appellants. We have allowed this application as per Miscellaneous Order No. 387/2005 dated 10.8.2005, by virtue of which the deceased's wife, son, daughter and mother are co-appellants in the appeal. 4. In Appeal No. C/69/1999 filed by M/s. Jesudasans Pvt. Ltd., it was submitted by ld. Senior Advocate that the confiscation of the vessel by the Commissioner was inconsistent with his own finding. The. Commissioner had found that neither the Managing Director nor any of the Directors of the company had the knowledge that the ball bearings had been concealed in, or removed from, the ship. Accordingly, ld. Commissioner exonerated them from penal liability. In this view of the matter, ld.Senior Advocate argued, there was no justification for confiscation of the vessel. After perusing the Commissioner's order, we have found the counsel's submissions to be factually correct. We have also noticed that there is no finding in the impugned order that the company had any such knowledge as above. In the absence of a finding that the vessel was used for smuggling of ball bearings with the knowledge or connivance of the company or its agents, Section 115 of the Act was not attracted. We have accordingly taken the view that the order of confiscation of the vessel under Section 115 is unsustainable. Appeal No. C/69/1999 is allowed. 5. The appellants in the remaining appeals namely S/Shri S. Duraiappa [C/1451/98], R. Ravi [C/1452/98], N. Ramesh [C/1453/98], M. Udayakumar [C/1454/98], N. Suresh [C/l455/98], S.Ramamoorthy (now represented by his legal heirs) [C/1461/98] and M.Muthusingaram.[C/l 462/98] were some of the accused [Nos. 6, 5, 8, 7, 9, 2 & 3, respectively] in C.C. No. 4/2001 on the file of the Additional Chief Judicial Magistrate's Court, Madurai, which was a criminal case instituted by the Customs department against the accused under Section 135 of the Customs Act on the same set of facts as involved in the instant appeals. After trial of the case in accordance with the provisions of the Code of Criminal Procedure, learned Additional Chief Judicial Magistrate acquitted all the accused after finding that the prosecution could not prove the charges levelled against them. English translation of the judgement dated 18.7.2002 (in Tamil) passed by the criminal court was produced by ld. Senior Counsel for the appellants and we have perused the same. We find that all the appellants were acquitted by the criminal court after assessing the evidence adduced by the prosecution and the defence. Ld. Senior Advocate Shri B. Kumar, assisted by ld. Counsel Shri. B. Satish Sundar, has argued that as the criminal court, before which the appellants were prosecuted under Section 135 of the Customs Act on charges framed on the same set of facts as involved in the present appeals, acquitted the appellants, the present appeals have to be allowed. In support of this legal proposition, ld. Senior Advocate has relied on the following decisions:Divisional Forest Officer and Anr. v. G.V. Sudhakar Rao and Ors.Capt. M. Paul Anthony v. Bharat Gold Mines Ltd. and Anr.Gopaldas Udhavadas Ahuja and Anr. v. Union of India and Ors.
2004 SCC (Cri) 1 830 : 2004 (176) ELT 3 (SC).Sulekh Chand and Salek Chand v. Commissioner of Police and Ors.
1994 Supp (3) SCC 674Rajya v. The State of Bihar (vi) State of Tamihiadu and Anr. v. M. Jayapal and Ors. 2005 Writ L.R. 314 Ld. Counsel has also cited the Tribunal's orders in Tulsidas V. Patel v. Commissioner and Kirit Parekh v. Commissioner 2001 (136) ELT 955. Relying particularly on the apex Court's judgement in Gopaldas's case, ld. Senior Advocate has argued that the appellants having rebutted the presumption under Section 138A of the Customs Act and having been acquitted by the criminal court cannot be penalised in adjudication proceedings. It was submitted that the facts and evidence in the criminal proceedings and in the adjudication proceedings were substantially the same and therefore it would be unjust, unfair and oppressive to penalise the appellants in adjudication proceedings in spite of their acquittal on merits by the criminal court. It was only when a court without evaluating the evidence on record passes a judgement of acquittal on technical grounds that the adjudication proceedings can be allowed to continue against the accused. In this connection, it was pointed out that the criminal court's judgement of acquittal giving the benefit of doubt to the accused could not be equated to a judgement of acquittal on technical grounds. The criminal court's judgement in the present appellants' case is a judgement of acquittal on merits and hence, as per the rulings of the apex Court, the appellants, after their acquittal on merits by the criminal court, cannot be proceeded against for imposition of penalty in adjudication on the same set of facts and evidence. These arguments of the ld.Senior Advocate were countered by ld. SDR Smt. R. Bhagya Devi, who submitted that the acquittal of the appellants under Section 135 of the Customs Act by the criminal court was not prejudicial to the adjudication proceedings as the two proceedings were distinct and independent of each other. In this connection, reliance was placed on the following decisions:Rekhi Road Liners (P) Ltd. v. CC (v) Great Eastern Shipping Co. Ltd. v. Union of India 2002 (150) ELT 1403 (Del) Ld. SDR also referred to para 21 of the Supreme Court's judgement in Gopaldas's case and submitted that merely because there was acquittal in the trial before the Magistrate due to paucity of evidence or otherwise, the order of confiscation of seized goods and of imposition of penalty on the persons who dealt with such goods would not get automatically nullified in every case. It was submitted that mens rea was not -required for levying a personal penalty under Section 112 of the Customs Act whereas it was a condition precedent for. conviction by a criminal court under Section 135 of the Act. The quantum and nature of proof required before the criminal court in a prosecution under Section 135 were different from those required in adjudication proceedings under Section 112 of the Act. Hence the adjudicating authority was not disabled from adjudicating the matter under Section 112 of the Custom Act on the basis of materials available on record, independent of the results of prosecution. In this connection, ld. SDR referred to the High Court's judgement in Rekhi Road Liners's case (supra) and also relied on the following decisions:Gujarat Travancore Agency v. Commissioner of Income Tax 6. Ld. SDR, thus, argued for proceeding with these appeals, regardless of the criminal court's findings. It was also pointed out that the criminal court's judgement had already been appealed against and the matter is pending with the appellate court. In the circumstances, the criminal court's judgement could not be considered to have attained finality and consequently the present proceedings were not affected by anything contained in the said judgement. In answer to this argument of ld. SDR, ld. Senior Advocate submitted that, there being no stay of operation of the acquittal of the appellants, the criminal court's judgement carried precedent value. It was also suggested that, in the event of the said judgement being set aside by the appellate court, it was open to the department to revive the present proceedings. In this connection, ld. Senior Advocate relied on the Kerala High Court's judgement in the case of Madras Spinners Ltd. v. Deputy Commissioner of Income-Tax 1993 (1) KLT 482.
7. We have carefully considered the submissions. The impugned order of the Commissioner of Customs confiscating 1,31,076 ball bearings contained in 824 boxes, under Section 111 of the Customs Act, and imposing penalties on the appellants was passed in adjudication of show-cause notice dated 4.1.1995 issued under Section 124 of the Act.
This show-cause notice alleged that the seized goods (ball bearings) had been illicitly imported into India from a foreign country in contravention of Section 11 of the Customs Act read with Section 3(2) of the Foreign Trade (Development & Regulation) Act, 1992 and hence the same were liable to confiscation under Section 111(d) of the Customs Act read with Section 10(5) of the FT (D&R) Act. It also alleged that the vessel which was allegedly used for the smuggling was liable to confiscation under Section 115 of the Customs Act read with Section 10(5) of the FT (D&R) Act. The show-cause notice also held the noticees (including the appellants) liable to be penalised under Section 112 of the Customs Act. The show-cause notice relied on the following documents: 14. Statement of S/Shri M. Muthusingaram and Ramamoorthy dated 4.8.94 After considering the evidence on record and the submissions made on behalf of the parties, the Commissioner passed the order of confiscation and penalties. The absolute confiscation of the ball bearings is under Clause (d) of Section 111 of the Customs Act, whereunder any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under the Act or any other law for the time being in force, are liable to confiscation.
The penalties are apparently under Clause (b) of Section 112 of the Customs Act, whereunder any person who acquires possession of, or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with, any goods which he knows or has reason to believe are liable to confiscation under Section 111, is liable to a penalty.
8. The criminal case was instituted by the department under Section 135 of the Customs Act through a private complaint filed by the jurisdictional Assistant Commissioner of Customs, wherein the relevant offence charged against all the accused [including the appellants] was the one punishable under Section 135(1)(b)(ii) of the Customs Act. [The offence of fraudulent evasion of duty charged against Ramamoorthy and Muthusingaram - two of the appellants - and punishable under Section 135 (1)(a)(ii) is not relevant to these appeals which are against penalties only.] The relevant provision is extracted below: SECTION 135. Evasion of duty or prohibitions -- (1) Without prejudice to any action that may be taken under this Act, if any person - (b) acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, he shall be punishable, (ii) in any other case, with imprisonment for a term which may extend to [three years], or with fine, or with both.
Obviously, the charge framed against the appellants and others for punishing them under Section 135 of the Customs Act was in no way different from what was alleged against them in the show-cause notice issued under Section 124 for the purpose of getting them penalised under Section 112 of the Act. All the documents relied upon in the show-cause notice and considered by the adjudicating authority were also relied upon by the prosecution and considered by the criminal court. The court also examined a few officers of Customs as prosecution witnesses and Shri S. Ramamurlhy (one of the accused) as defence witness. After considering the evidence on record, the court came to the conclusion that the prosecution failed to prove the charge against the accused beyond doubt. Accordingly, giving the benefit of doubt to the accused, learned Additional Chief Judicial Magistrate acquitted all of them of the offence charged under Section 135(1)(b)(ii). All the appellants thus stand acquitted. An appeal is said to have been filed by the Department against the above judgement of the Additional Chief Judicial Magistrate. We are told that there is no stay of operation of the acquittal, by the appellate court. Hence, as rightly submitted by ld. Senior Advocate, the judgement of the criminal court is in operation. Against this background, we are coming to grips with the issue whether these appeals should be disposed of in the light of the criminal court's judgement.
9. We have found that the criminal court's order of acquittal is one passed on merits after appreciating all the evidence adduced by the prosecution and the defence. It was held by the Madras High Court in the case of State of Tamilnadii v. M. Jayapal (supra) after taking into account the Supreme Court's ruling in Sulekh Chand and Paul Anthony (supra) that a judgement of acquittal giving the benefit of doubt to the accused could not be equated to judgement of acquittal on technical grounds and that it was only when a court without evaluating the evidence on record passes a judgement of acquittal on technical grounds that it could be said that the judgement was on technical grounds. On the basis of this ruling it could be safely said that the judgement passed by the learned Additional Chief Judicial Magistrate acquitting the appellants is one on merits. We shall proceed further on this basis.
10.1 The question now arising to be considered is whether the present proceedings should be wound up in the light of the criminal court's judgement. This question has been agitated before us on the strength of a plethora of decisions. In the case of Capt. M. Paul Anthony (supra), the appellant was a security officer in the respondent-company, a government undertaking. He was placed under suspension and disciplinary as well as criminal proceedings were initiated against him on the ground that, in a police raid, raining sponge gold ball weighing 4.5 grams and 1276 grams of gold-bearing sand were recovered from his house. The raid was conducted at the appellant's residence on 2.6.85.
He was placed under suspension on 3.6.85. Disciplinary proceedings were initiated against him by issuing a charge sheet on 4.6.85. On 3.2.87, the appellant was acquitted in the criminal case with a categorical finding that the prosecution had failed to establish that "raid and recovery" were made at the appellant's residence. In the meantime, the appellant had already been dismissed from service on the basis of disciplinary proceedings initiated against him. On 12.2.1987, the appellant requested for his reinstatement in service in view of his acquittal in the criminal court. This request was turned down by the respondents. The appeal filed against the respondent's decision was rejected by the appellate authority. The appellant then approached the High Court with a Writ petition challenging the validity of the order of dismissal on various grounds. In that Writ petition, he, inter alia, contended that the departmental proceedings and the criminal case against him were based on the same set of facts. The departmental proceedings should have been stayed till the outcome of the criminal case. The Writ petition was allowed by a single Judge of the High Court directing the respondents to reinstate the appellant. The High Court, however, gave the liberty to the respondents to initiate fresh proceedings against the appellant after perusing the judgement passed in the criminal case. This judgement passed by a learned single Judge was set aside by a Division Bench of the High Court in a letters patent appeal filed by the respondents. The judgement of the Division Bench was taken in appeal to the Supreme Court. The apex Court found that the appellant had been acquitted in the criminal case on the same set of facts and evidence as used in the disciplinary proceedings and accordingly, the court held that it would be unjust, unfair and oppressive to allow the departmental proceedings to stand after the order of acquittal passed by the criminal court.
10.2 In Gopaldas' case, the apex Court was considering the question whether the order of confiscation of gold passed by the adjudicating authority under the Gold (Control) Act, 1968 should be allowed to stand against an order of acquittal of the appellant passed by a criminal court. It was held that mere acquittal by a Magistrate could not in every case result in setting aside of order of confiscation passed by the competent authority. However, where the accused rebutted the statutory presumption under Section 98B of the Gold (Control) Act, the order of confiscation could not stand against the acquittal. The provisions of Section 138A of the Customs Act, referred to by ld.Senior Advocate, are pari materia with those of Section 98B of the Gold (Control) Act (since repealed). The provisions enabled the court to presume the existence of mens rea if it was a necessary ingredient of the offence charged. They also enabled the accused to rebut the presumption by proving beyond reasonable doubt that he had no culpable mental state with respect to the offence charged against him. The evidence adduced by the accused should be enough to make the court believe beyond reasonable doubt that he had no such culpable mental state. What the apex Court held in the Gopaldas' case was that, where the presumption under Section 98B of the Gold (Control) Act was rebutted by the accused, the order of confiscation of gold by the adjudicating authority under the said Act could not be allowed to stand against the order passed by the criminal court acquitting the accused after considering the same set of facts and evidences. But, at what stage was the accused to rebut the presumption? This question was also answered by the court in Gopaldas' case following its earlier decision in Inder Sain v. Stale of Punjab . It was held (vide para 18 & 19 of Gopaldas), on the facts of that case, that, once the prosecution adduced evidence of the accused having been in possession of primary gold, it was upto the accused to rebut the presumption of mens rea by proving that he did not knowingly possess the forbidden goods. In the instant case, the criminal court has held that the prosecution could not prove the charge framed against the appellants by the Customs authorities in terms of Section 135 (1)(b), i.e., they failed to show that the appellants had physically dealt with the ball bearings with the knowledge or belief that these goods were liable to confiscation under Section 111. The court doubted the veracity of the prosecution plea that the accused had physically dealt with 1,31,076 ball bearings recovered from the ship. After examining files relating to auction sale of the confiscated ball bearings, the court found that over 21,000 ball bearings in excess of the confiscated ball bearings (1,31,076) had been auctioned by the Department, which could not be explained by the prosecution witnesses. The court pointed out many other defects of investigation and flaws of prosecution and came to the conclusion that the charge against the accused had not been proved beyond doubt. Thus, it is discernible from the criminal court's judgement that the prosecution could not even prove the alleged fact that the accused physically dealt with 1,31,076 ball bearings. Hence the court had no occasion to presume anything against the accused in terms of Section 138A(1) and, therefore, the accused had no liability to rebut any presumption under the said provision. This is because, as ruled by the apex Court in Gopaldas' case, it is only after the prosecution has adduced clear evidence of the accused having physically dealt with the offending goods that the accused would assume the burden of proving that they so dealt with the goods without mens rea, i.e, without the knowledge or belief that the said goods were liable to confiscation under Section 111. Thus, for the appellants, the present case stands on a stronger footing than Gopaldas' case wherein the prosecution could prove the fact that the accused was in possession of gold but the presumption of mens rea in relation to the said fact was rebutted by the accused.
10.3 We have found that the offence charged against the appellants in both the adjudication and prosecution proceedings is substantially the same. Both the cases are based on the same set of facts. The evidence considered by the adjudicating authority and the criminal court is, by and large the same. After appreciating the evidence, the criminal court acquitted the accused after finding that the charge against them had not been proved. In the circumstances, we are of the view that the judicial approach taken in Paul Anthony's and Gopaldas' cases can he applied to this case and, accordingly, the order passed by the adjudicating authority imposing penalties on the appellants cannot stand in the face of their acquittal by the criminal court.
10.4 We have also examined the case law cited by ld. SDR. Some of the decisions (by High Courts) cited by ld. SDR (vide K.P. Abdul Majeed, V.J.A. Flynn, etc.) are to the effect that adjudication and criminal proceedings are independent of each other and that the degree of evidence required by the adjudicating authority for imposing penalty is much less than that required by criminal court for convicting the accused. There is no quarrel about this legal position, which has been upheld by the apex Court also. However, as we have already noted, the view taken consistently by the apex Court is that, notwithstanding the fact that adjudication and criminal proceeding are independent, any order of confiscation and penalty resulting from adjudication cannot be allowed to stand in the face of an order of acquittal passed by the criminal court on the same set of facts and evidence. When this ruling of the apex Court is applied to the present case, we have no option but to set aside the penalties. None of the appellants has challenged the confiscation order. Their challenge is only against the penalties.
Hence we set aside the penalties imposed on the appellants by the Commissioner.