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Synopsis

The Supreme Court recently absolved a company from criminal charges in a case involving alleged illicit profits amounting to Rs eight crores. The company was accused of collaborating with senior officials at the Kandla Special Economic Zone between March 2001 and August 2004 to avoid paying customs and excise duties.

A bench of Justices Abhay S Oka and Augustine George Masih allowed an appeal by Baccarose Perfumes and Beauty Products Pvt Ltd against the Gujarat High Court's order of September 15, 2023 which dismissed their criminal revision application against the rejection of their discharge plea by the Special Judge, CBI Ahmedabad in 2017.

Court noted that when the appellant company had successfully claimed immunity from the prosecution under the Customs Exercise Act and the assessing authority had held the appellant as entitled to a refund of Rs 1.39 Cr out of deposits by it, taking cognizance against the appellant company ought not to have sustained.

"As the very basis of the allegation of offence against the appellant-Company was found to be non-existent, it would have amounted to misuse rather abuse of the process of law to continue the proceedings," the bench said.

Court also found that the prosecution sanction as sought against the officials of KASEZ, who were said to have committed the offences under the Prevention of Corruption Act, 1988, stood declined.

In the light of this additional fact, the application for discharge, as moved by the appellant company, ought to have been accepted by the Special Judge, the bench added.

The company, engaged in manufacturing and exporting of cosmetics and toilet preparations and having one of its units in KASEZ, was alleged to have escaped payment of countervailing duty on the clearances on account of non-disclosure of MRP as per the provisions of the Standards of Weights and Measures Act, 1976 as they had declared only the invoice value of the said goods. 

This was alleged to be a violation of the proviso to Section 3(2) of the Customs Tariff Act, 1975 read with Section 4A(2) of the Central Excise Act, 1944, and on the said ground, goods being cleared by the appellant-company into the DTA were intercepted. 

The CBI lodged the FIR under Section 120B read with Section 420 of the Indian Penal Code, 1860 and Section 13(1)(d) of the Prevention of Corruption Act, 1998 on April 04, 2005.

On the plea by the appellant, the Commissioner of Customs (Appeal) said that the declaration of MRP was necessary on packages intended for retail sale and not for bigger packages for wholesale trade. The Revenue Authorities were directed to consider the case of the concerned goods of the appellant-company afresh.

Meanwhile, the Office of the Collector of Legal Metrology and Director of Consumer Affairs, on a plea by the appellant-company, on January 4, 2006, affirmed the view by placing reliance on Rule 29 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.

However, the Settlement Commission on August 21, 2007, granted immunity to the company.

Despite this, on March 5, 2008, the CBI's investigating officer filed a closure report before the special court which on June 1, 2010, rejected it and instituted the case.

The appellant company moved the high court which on December 12, 2011, dismissed the plea. The apex court also rejected their special leave petition on July 26, 2013, saying only cognizance had been taken by the Special Judge and directed issuance of summons to the appellant-company, and thereby, it was not an appropriate stage to interfere. However, liberty was granted to the appellant-company to pursue and plead for discharge at the time of hearing of charges.

Before the top court against the rejection of the discharge application, the appellant company relied upon immunity by the Settlement Commission as per Section 32K of the CE Act 1944. 

The bench noted that these sections provided for an explicit bar from prosecution on grant of immunity in cases where the proceedings for any offence had been instituted subsequent to the date of receipt of the application seeking such immunity under the relevant law.

"A perusal of the scheme of the CrPC 1973 allows us to infer that mere registration of FIR cannot be interpreted to mean that it constitutes the initiation of such proceedings. A registration of FIR necessitates an investigation by a competent officer as per the detailed process outlined in Sections 155 to 176. It is only after a Final Report (or as referred in the common parlance, a Challan or a Chargesheet) is submitted as per the compliance of Section 173(2) of CrPC 1973, cognizance for the offence(s) concerned is taken. However, undoubtedly, the Court is not bound by the said report," the bench said.

The court pointed out that the cardinal principle that investigation and taking of cognizance operate in parallel channels, without intermingling, and in different areas was also laid down by the top court in H N Rishbud v. State (Delhi Admn) (1954) further elaborated and reiterated in Abhinandan Jha and Others v. Dinesh Mishra (1967) and State of Orissa v. Habibullah Khan (2003).

Also citing Hira Lal Hari Lal Bhagwati v. CBI, New Delhi (2003), the bench said it was not in dispute that the Commissioner of Customs (Appeals), Kandla returned a finding that the appellant-company was not required to pay the CVD (countervailing duty) on the basis of MRP, but as per the invoice value. 

On remand to the Assessing Authority for a decision afresh on the liability, it had observed that the appellant-company was entitled to a refund of Rs 1.39 Crores out of the Rs 1.51 Crores paid by it to the Revenue Authorities as per the demand made earlier for the purpose of clearance of the concerned goods. 

This position was also admitted by the respondent-Agency in its Counter Affidavit of April 19, 2024. Moreover, the said order was never challenged by the Revenue Authorities, and had, thus, attained finality.

"Furthermore, the appellant-Company had successfully claimed immunity from prosecution under the order of August 21, 2007. In such a circumstance, there was no fiscal liability on the appellant-Company, and accordingly, the order of August 01, 2010 passed by Special Judge, taking cognisance against the appellant-Company, ought not to have sustained," the bench said.

Case Title: Baccarose Perfumes and Beauty Products Pvt Ltd Vs Central Bureau of Investigation & Anr