IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CRIMINAL APPLICATION NO. 1370 OF 2004 TO SPECIAL CRIMINAL APPLICATION NO. 1372 OF 2004 WITH SPECIAL CRIMINAL APPLICATION NO. 1367 OF 2004 TO SPECIAL CRIMINAL APPLICATION NO. 1369 OF 2004 For Approval and Signature: HON'BLE MR.JUSTICE D.N.PATEL ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- M/S.ADANI EXPORTS LIMITED A CO.INCORPORATED UNDER CO.ACT Versus UNION OF INDIA -------------------------------------------------------------- Appearance: In Special Criminal Application No. 1370 TO 1372 of 2004 MR KM THAKOR FOR M/S TRIVEDI & GUPTA for Petitioners. CENTRAL GOVT. STANDING COUNSEL for respondent No. 1 to 4. MR HL JANI APP for Respondent No. 5 In Special Criminal Application No. 1367 TO 1369 of 2004 MR P.R. NANAVATI for Petitioners. CENTRAL GOVT. STANDING COUNSEL for respondent No. 1 to 4. MRS ML SHAH APP for Respondent No. 5 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE D.N.PATEL Date of decision: 24 /03/2005 C.A.V. JUDGEMENT 1. The present petition is filed under Article 226 of the Constitution of India as well as u/s 482 of the Code of Criminal Procedure, 1973 in connection with the complaint bearing Criminal Case No. 271/CW of 2004 in the Court of Chief Metropolitan Magistrate, Mumbai. 2. Heard the learned advocate for the petitioners, learned advocate for the respondents No.1 to 4 and learned A.G.P. for the respondent No. 5. 3. It is also submitted by the learned advocate for the petitioner that : i The said goods were received at CFS, Adalaj, Ahnmedabad; ii. The clearance of the goods also occurred in the State of Gujarat; iii. Subsequently, the show cause notices were also issued by the Commissioner of Customs at Ahmedabad/Kandla; iv. The adjudication of the show cause notices also took place in State of Gujarat by the Commissioner of Customs, Ahmedabad; v. The order-in-original was also passed in the State of Gujarat; vi. The petitioner in the present case resides within the State of Gujarat. vii. The show cause notices and the orders are served to the petitioners in the State of Gujarat, and viii. The sanction for initiating prosecution has also been given by the authority in the State of Gujarat and the impugned summons is/are also served on the petitioners in Ahmedabad. 4. Learned advocate for the petitioner submitted that on the basis of the aforesaid facts, this Court has got jurisdiction to entertain the present writ petition for quashing of the complaint filed at Mumbai in view of the decision of the Hon'ble Apex Court in the case of Navinchandra N. Majithia Vs. State of Maharashtra and others, reported in (2000) 7 SCC 640, relevant paragraphs thereof read as under : "para 22 - So far as the question of territorial jurisdiction with reference to a criminal offence is concerned the main factor to be considered is the place where the alleged offence was committed." "para 27 - Tested in the light of the principles laid down in the cases noted above the judgment of the High Court under challenge is unsustainable. The High Court failed to consider all the relevant facts necessary to arrive at a proper decision on the question of maintainability of the writ petition, on the ground of lack of territorial jurisdiction. The Court based its decision on the sole consideration that the complainant had filed the complaint at Shilong in the State of Meghalaya and the petitioner had prayed for quashing the said complaint. The High Court did not also consider the alternative prayer made in the writ petition that a writ of mandamus be issued to the State of Meghalaya to transfer the investigation to Mumbai Police. The High Court also did not take note of the averments in the writ petition that filing of the complaint at Shilong was a mala fide move on the part of the complainant to harass and pressurise the petitioners to reverse the transaction for transfer of shares. The relief sought in the writ petition may be one of the relevant criteria for consideration of the question but cannot be the sole consideration in the matter. On the averments made in the writ petition gist of which has been noted earlier it cannot be said that no part of the cause of action for filing the writ petition arose within the territorial jurisdiction of the Bombay High Court." "Para 43 - We make it clear that the mere fact that FIR was registered in a particular State is not the sole criterion to decide that no cause of action has arisen even partly within the territorial limits of jurisdiction of another State. Nor are we to be understood that any person can create a fake cause of action or even concoct one by simply jutting into the territorial limits of another State or by making a sojourn or even a permanent residence therein. The place of residence of the person moving a High Court is not the criterion to determine the contours of the cause of action in that particular writ petition. The High Court before which the writ petition is filed must ascertain whether any part of the cause of action has arisen within the territorial limits of its jurisdiction. It depends upon the facts in each case." 5. Thus. it is submitted by the learned advocate for the petitioners that part of cause of action has arisen within the territorial jurisdiction of this Court and therefore under Article 226 (2) of the Constitution of India, this Court has jurisdiction to try and entertain this petition. 6. Learned advocate for the petitioner submitted that the goods were imported at Ahmedabad and as per the Commissioner of Customs, Ahmedabad the allegation is that the present petitioner had facilitated for sale of the imported goods in domestic market, instead of being used in manufacturing export product violating the conditions of Notification No. 204/92 dated 19-5-1992, the Customs Act, 1962 and Export - Import Policy, 1992-97 and therefore show cause notice was issued by the Commissioner of Customs, Ahmedabad and the same was adjudicated at Ahmedabad and the order-in-original was also passed at Ahmedabad and subsequently the order was challenged before the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (hereinafter referred to as "CESTAT"), as penalty was imposed by the Commissioner of Customs, Ahmedabad. He has also submitted that no other allegations were made against the present petitioner, so far as evasion of duty is concerned. Only the penalty was imposed by the Commissioner of Customs, Ahmedabad and against the said order, an appeal was preferred before the CESTAT, Mumbai. Upon adjudication of the said appeal, the order of the Commissioner of Customs, Ahmedabad was quashed and set aside by giving detailed reason and relevant paragraphs No.13, 14 and 15, 17 of the order passed by the CESTAT, Mumbai are as follow : "Para 13 - Therefore up to the stage of import and clearance of the goods, nothing has been established against the appellants before us. In fact the Commissioner himself says the goods were cleared by duty free by the four firms (of Mansukhlal Desai) for use and manufacture of export products, and firms in spite of doing so these firms sold the goods in the open market. "Para - 14 : The Commissioner goes on to find Gautam Adani and Company role to penalty in view of the agreement that the importing company. We have already dealt with this aspect. The Commissioner finds that no liability to Gautam Adani to penalty with regard to the sale of the goods. Penalty therefore could not be imposed on Gautam Adani or its company. "Para - 15 : It is also difficult to conclude that by his act of introducing of Dhiren Shah to Desai, he was dealing with the goods in any of the manner specified in clause (b) of Section of the Act. Two decisions of the Tribunal cited by his advocate, are in his favour. On balance, therefore, we do not find any case for imposition of penalty on him. Para - 17 : The appeals are accordingly allowed and the impugned order imposing penalties on the appellant side aside. 7. It is also contended by the learned advocate for the petitioner that the said order of the Commissioner of Customs, Ahmedabad, has become a basis for filing the complaint before the Chief Metropolitan Magistrate, Mumbai bearing No.271/CW of 2004. The said complaint does not refer the order dated 30-6-2003 passed by CESTAT, Mumbai. The complaint is filed on 20-10-2004. The basis upon which the complaint is filed, has already been quashed and set aside by the CESTAT, Mumbai much earlier in point of time i.e. approximately 18 months before. 8. It is also submitted by the learned advocate for the petitioner that the order passed by the CESTAT, Mumbai, has attained the finality as per Section 129-B(4) of the Customs Act, 1962 and the order passed by the CESTAT, Mumbai has not been challenged before any higher forum. There is no change, in fact, between the order-in-original passed by the Commissioner of Customs. Ahmedabad and the main averments alleged in the complaint. Whatever was the basis for passing the order-in-original is also the basis for filing the complaint and therefore what is already quashed and set aside can never be a basis for filing the complaint that too after approximately 18 months from the order passed by the CESTAT, Mumbai 9. It is further submitted by the learned advocate for the petitioners that the whole criminal case is based upon the Order-In-Original passed by the Commissioner of Customs (Gujarat), Ahmedabad against the present petitioners as reference to in paragraph No.5.15 of the Order-in-Original passed by the Commissioner of Customs (Gujarat), Ahmedabad on 28-3-2002, which reads as under : "50 (A) .., (i) to (v) ..... (B) (i) to (ii) .. (iii) Having said that, however, I also find that it was M/s. Adani Exports that had rendered the services of Letter of Credit facility to M/s. GSIC for import of plastic raw material. In most of the cases, Shri Rajesh Desai had purchased goods from M/s GSIC. It is also significant to note here the terms of contract between M/s. GSIC and M/s. Adani Associates. As per their agreement, it is the second party i.e. M/s. Adani Associates which is responsible for (i) clearance of consignment at Customs, producing papers as required by Customs Authorities (ii) marketing of imported goods (iii) all liabilities whatsoever arising out of the import transactions. This clearly establishes the involvement of M/s. Adani Exports and M/s. Adani Associates in the import and post import clearance of goods in violation of the conditions of EXIM Policy and Exemption Notifications. The facts as stated above render Shri Gautam Adani and M/s. Adani Exports liable for penal action under Section 112 of the Customs Act, 1962. (iv) ... Shri Saurin Shah has replied, that Mr. Desai has informed him only for the plastic material and not any such material which was covered under advance licence scheme. This denial is not acceptable, as all process of importation, clearance and sale of the same in domestic market was made by making necessary arrangements by Shri Saurin Shah. Such acts of helping in illegal sale of duty free goods in open market ha rendered Shri Saurin Shah liable for penal action under Section 112 of the Customs Act, 1962." 10. It is submitted by the learned advocate for the petitioners that the aforesaid conclusion was arrived at by the Commissioner of Customs (Gujarat), Ahmedabad and the penalties were imposed. The said order, so far as the present petitioners are concerned, has been quashed and set aside by CESTAT. 11. The aforesaid base as held by the Commissioner of Customs (Gujarat), Ahmedabad has been accepted as base in the criminal complaint. Relevant part of paragraph No.31 of the complaint reads as under : "The complainant states that from the forgoing facts, details, submissions made by various persons involved and the scrutiny of documents obtained in the course of the investigation it appears that : (1) ..... (2) ..... (3) ..... (4) ..... (5) ..... (6) ..... (7) ..... (8) ..... Shri Gautam Adani and Shri Saureen Shah had a prior knowledge of the intention to violate actual user condition of the exemption notification under which the goods were to be cleared duty free, thereby they were aiding and actively abetting the customs duty evasion which render them liable to penal action under Section 112 of Customs Act, 1962." "32. ..... Penalty of Rs.10.00 lakhs was imposed each on M/s. Adani Exports Ltd. and Saurin D. Shah. Penalty of Rs.5 lakhs was imposed on Gautam Adani and Rs.1 lakh on Dhiren Shah." "36. The accused No. 3 and 4 are liable to be punished for their individual act of omission and commission and contravention of the provisions of the Customs Act, 1962, and the rules made thereunder, as described above. Accused No. 3 & 4 are responsible for the conduct of business of Accused No. 2, and as such are liable to be prosecuted and punished for the offences committed by Accused No.2, in view of the factual position and the provisions of Section 140 of the Customs Act, 1962 read with Section 132, 135 of the Customs Act, 1962 as all of them conspired to defraud the government and thereby committed offence under Section 132, 135 of the Customs Act, 1962 read with Section 120-B of the I.P.C." 12. Learned advocate for the petitioners submitted that looking to the aforesaid allegations referred to in the criminal complaint, the said allegations are same as that of the Order-in-Original passed by the Commissioner of Customs (Gujarat), Ahmedabad but the said order has been quashed and set aside by CESTAT, Mumbai and the penalties imposed upon the present petitioners were also quashed and set aside by coming to a conclusion that there was no knowledge that the goods were not permitted to be sold in the domestic tariff area with the present petitioners. The licences were, in fact, obtained at the behest of Mansukhlal C. Desai and his son Rajesh M. Desai as per the EXIM Policy and the licenses were utilized in order to clear the goods which were ordered by the Gujarat State Export Corporation or the Gujarat State Small Industrial Development Corporation. It is not in dispute that after the goods were purchased on the high seas and cleared through customs by its group of companies of Mansukhlal C. Desai and Rajesh M. Desai. This part of transaction has not been alleged to be contrary to law. The orders for supply of these goods were placed on the foreign supplier by Adani Associates. It has been observed by CESTAT that the Commissioner has not imposed penalty on the two corporation of government of Gujarat on whom notice has been issued. If the principal has been exonerated it would follow that Adani Exports and Adani Associates who acted as agents arranging finance and placing orders and supply would also be entitled to be exonerated. Mere introduction of Rajesh Desai with Dhiren Desai (who is broker) by one of the employees of Adani Associates for sale of the goods cannot fetch any penalty. In fact, at length CESTAT, Mumbai has discussed the facts of the case, evidence of the witnesses, law and judgment and has come to the conclusion that there was no knowledge on the part of the present petitioners that the goods imported were without payment of duty and were not permitted for sale. It is submitted by the learned advocate for the petitioners that these goods at the relevant time could be imported freely and it was on this belief that they responded to the broker. 13. In support of his contentions learned advocate for the petitioners has relied upon the following judgments : 1) 1987 (32) ELT 511 2) 1994 (73) ELT 269 3) 1974 (74) ELT 240 4) 1999 (108) ELT 16 (SC) 5) 1999 (113) ELT 37 6) 2002 (139) ELT 498 7) 2003 (152) ELT 54 8) 2003 (21) ILD 757 9) 2004 (169) ELT 145 10) 2004 (170) ELT 402 11) 2004 (178) ELT 114 12) (2004) 2 SCC 271 14. In view of the aforesaid aspects of the matter, it is submitted by the learned advocate for the petitioners that basis of the criminal case has already been quashed and set aside by CESTAT, Mumbai while adjudicating the order of the Commissioner of Customs (Gujarat), Ahmedabad and in view of the aforesaid judgments the criminal case qua the present petitioners may kindly be quashed and set aside. 15. Learned Central Govt. Standing Counsel for the respondent No.1 to 4 mainly submitted that the present petitioners had sufficient knowledge of the fact that the goods imported were required to be utilized in manufacturing product which is to be exported so as to fulfil the obligations under Section 204 of 1992 dated 19-5-1992 and the Customs Act, 1962 to be read with Export and Import Policy, 1992-95. Even show cause notice was issued and adjudicated upon. The Commissioner of Customs (Gujarat), Ahmedabad has imposed penalty upon the petitioners and merely because CESTAT, Mumbai has quashed and set aside penalty, it cannot be mathematically stated that the criminal proceedings cannot be initiated against the present petitioners for the very same facts. Former one is civil proceeding and later one is criminal proceeding. On civil side CESTAT, Mumbai may have arrived at the conclusion that the order passed by the Commissioner of Custom (Gujarat), Ahmedabad imposing penalty upon the petitioners was bad in law. But that fact alone is not sufficient for quashing and setting aside the criminal complaint against the petitioners. Standard of proof in both the proceedings i.e. criminal and civil, are altogether different. 16. Having heard the learned advocates for the parties and looking to the facts and circumstances of the case, show cause notice was issued and in the present case the order passed by the Commissioner of Customs (Gujarat), Ahmedabad which is known as "Order-In-Original" as well as the order passed by CESTAT, Mumbai in statutory appeal u/s 129-A of the Customs Act, 1962 and keeping in mind the aforesaid judgments, it is clear from the record of the case that very basis of filing of the criminal complaint, is the facts stated in show cause notice and the Order-in-Original passed by the Commissioner of Customs (Gujarat), Ahmedabad (Most of the paragraphs of Order-in-Original and the complaint are the same, line-by-line and word-by-word). No new allegation is raised in criminal complaint. "Knowledge on the part of the petitioners that the goods imported were having export objection. And inspite of this knowledge, they facilitated disposal of the said goods, in domestic tariff area is violative of Section 111 (o) of the Customs Act, 1962 and therefore, penalty was imposed by the Commissioner of Customs (Gujarat), Ahmedabad u/s 112 of the Customs Act, 1962." This Fact is the basis for the criminal offence u/ss 132 and 135 of the Customs Act, 1962 but the very basis of issuance of the show cause-notice, very basis of passing of the Order-In-Original passed by the Commissioner of Customs (Gujarat) Ahmedabad has been up set by the Appellate Authority i.e. CESTAT, Mumbai while adjudicating appeal u/s 129-A of the Customs Act, 1962. The conclusion arrived at by the Commissioner of Customs (Gujarat), Ahmedabad and thereby penalty imposed upon the present petitioners u/s 112 of the Customs Act, 1962 has been quashed and set aside by CESTAT, Mumbai. Thus, the penal action under Section 112 of the Customs Act,1962 has been adjudicated by the CESTAT, Mumbai. It is not in dispute that the order passed by the CESTAT, Mumbai has not been challenged by the respondent authority i.e. Union of India and the order has been passed on 28-2-2003/27-6-2003. The order passed by the CESTAT, Mumbai has attained its finality as per provisions of Section 129-B (4) of the Customs Act, 1962. Criminal complaint has been filed on 28-10-2004 i.e. after much time after the order passed by the Appellate Authority namely CESTAT, Mumbai. The offences alleged against the present petitioners are punishable u/s 132, 135 and 140 of the Customs Act, 1962 to be read with Section 120-B of the I.P.Code. Thus, the whole basis of the criminal complaint is the knowledge on the part of the petitioners as to nature of the goods which were having export obligation and therefore penalty u/s 112 of the Customs Act, 1962 was imposed. Very same section 112 of the Customs Act, 1962 is the basis for criminal complaint as held by the Hon'ble Supreme Court in the decision of the Supreme Court in the case of K.C. Builder and Another Vs. Assistant Commissioner of Income Tax, reported in (2004) 2 SCC 731, wherein it has been held by the Supreme Court that the Income-tax Appellate Tribunal's order not challenged became final. In such circumstances, it was held that no offence survived under the Income-tax Act, 1961 and hence the prosecution of the Assessee could not be maintainable. Relevant paragraphs of the decision said decision are paragraphs No. 23, 26, 28 and 29, which read as under : "Para 23 : The above judgment squarely applies to the facts and circumstances of the case on hand. In this case also, similarly, the application was moved by the assessee before the Magistrate to drop the criminal proceedings which were dismissed by the Magistrate and the High Court also on a petition filed under Sections 397 and 401 of the Code of Criminal Procedure, 1973 to revise the order of the Additional Chief Metropolitan Magistrate has also dismissed the same and refused to refer to the order passed by the competent Tribunal. As held by this Court, the High Court is not justified in dismissing the criminal revision vide its judgment ignoring the settled law as laid down by this Court that the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complainant following the Appellate Tribunal's order, no offence survives under the Income Tax Act and thus quashing of prosecution is automatic." (Emphasis supplied) "para 26 : In view view, once the finding of concealment and subsequent levy of penalties under Section 27 (1) (c) of the Act has been struck down by the Tribunal, the assessing officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the Tribunal. As already noticed, the subject matter of the complaint before this Court is concealment of income arrived at on the basis of the finding of the assessing officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eye of the law and, therefore, the prosecution cannot be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income-Tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration. In our view, the High Court has taken the view that the charges have been framed and the matter is in the stage of further cross-examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned Magistrate and the High Court is fallacious. In our view, if the trial is allowed to