Summary
The Supreme Court quashed CBI proceedings for conspiracy and cheating against a company accused of paying countervailing duty on invoice value instead of MRP. The company had been granted immunity by the Settlement Commission; registering an FIR does not by itself institute a prosecution; the appellate customs authority had held that duty was payable on invoice value and the company was owed a refund; and sanction to prosecute the officials had been refused. With the basis of the allegation gone, continuing the prosecution was an abuse of process and the company should have been discharged.
Issues
- Whether immunity granted by the Settlement Commission under the Central Excise Act, 1944 and the Customs Act, 1962 barred the criminal prosecution of the appellant company, given that an FIR had been registered earlier.
- Whether the registration of an FIR amounts to the institution of proceedings for an offence.
- Whether the prosecution could continue when the appellate customs authority had found no liability to pay duty on MRP, the company was found entitled to a refund, and sanction to prosecute the public servants had been declined.
Provisions considered
- Section 32K, Central Excise Act, 1944As described by the Court, the provision expressly bars prosecution once immunity is granted, where proceedings for an offence are instituted after the date the immunity application was received. The company relied on the immunity granted to it under this provision. (¶¶ 18, 22)
- Section 127H, Customs Act, 1962Treated as pari materia with Section 32K of the Central Excise Act and having the same text, providing the same bar on prosecution after immunity is granted. (¶ 18)
- Sections 155 to 176 and Section 173(2), Code of Criminal Procedure, 1973Registering an FIR only sets investigation in motion under Sections 155 to 176. Cognizance comes after a final report under Section 173(2). Investigation and cognizance run in separate channels, so mere registration of an FIR does not amount to initiating proceedings. (¶ 19)
Held
- Mere registration of an FIR does not mean that proceedings for an offence have been instituted. The FIR leads to investigation, and cognizance is taken only after a final report under Section 173(2) CrPC, which does not bind the court. Investigation and cognizance operate in separate fields. (¶ 19)
- Applying Hira Lal Hari Lal Bhagwati v. CBI, a prosecution that is inconsistent with a settlement already reached under the fiscal statute cannot continue. (¶¶ 20, 21)
- The Commissioner of Customs (Appeals) held that CVD was payable on invoice value, not MRP. On remand the assessing authority held the company entitled to a refund of about Rs. 1.39 crores, and that order became final without challenge. Together with the immunity granted by the Settlement Commission under the Customs Act, the Central Excise Act and the IPC, this left the company with no fiscal liability. (¶¶ 21, 22)
- As the very basis of the alleged offence was found not to exist, and sanction to prosecute the KASEZ officials had been declined, continuing the prosecution would be an abuse of the process of law. The Special Judge should have allowed the company's discharge application. (¶ 22)
Result
Appeal allowed. The proceedings against the appellant company were quashed, and the High Court's order and the Special Judge's order directing registration of the special case and taking cognizance were set aside.