Letter to CBEC


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Amendment Proposed:

SECTION 104. Power to arrest. –    [(1) If an officer of Customs empowered in this behalf by general or special order of the Commissioner of Customs  not below the rank of Inspector, has reason to believe that any person in India or within the Indian customs waters has committed an offence punishable under section 132 or section 133 or section 135 or section 135A or section 136, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.]

(2) Every person arrested under sub-section (1) shall, without unnecessary delay, be taken to a magistrate or may be let off on bail subject to the conditions prescribed therefor, if any on the written direction of an officer of Customs empowered in this behalf by general or special order of the Commissioner of Customs.

(3)Where an officer of customs has arrested any person under sub-section (1), he shall, for the purpose of releasing such person on bail or otherwise, have the same powers and be subject to the same provisions as the officer-in-charge of a police-station has and is subject to under the Code of Criminal Procedure, 1898 (5 of 1898).

(4)Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), an offence under this Act shall not be cognizable.

Draft letter to the Central Board of Excise and Customs


Our Ref. No. 110403 dated 00.11.2011  
Customs, excise offences are bailable - Judgement Full TextLink]
Link to extracts of Judgement important points duly highlighted:

Subject: Arrest and Bail - Proper officer - Certain grievances - submitted.
1. Kind attention is invited to the recent Supreme Court Judgement declaring that the offences under various sections of the Customs Act, 1962 and the Central Excise Act, 1944 are bailable since the offence is non-cognizable. We understand from the media that the CBEC is seeking amendment of the law.
2. It is not known whether CBEC had objected to hearing both the Central Excise and Customs matters together by the Hon’ble Supreme Court drawing attention to Section 11 of the Customs Act, 1962 which enumerates the purpose for prohibitions on import or export and the first in the list is “the maintenance of the security of India”. At least now the amendment process may be dealt with separately. [It is pertinent to point out that on an earlier occasion we have submitted a suggestion to the CBE for amendment of Section 28 C of the Customs Act, 1962 due to another major difference with regard to clearance of goods in connection with processing of refund claims. – copy enclosed for ready reference please].
3. In the event of the CBEC seeking amendment making the offence under the Customs Act, 1962 as cognizable, we would suggest that the proper officer for effect arrest may please be specifically mentioned as ‘not below the rank of Inspector’ without any condition to get prior approval. Obtaining prior approval for arrest is not practicable in many situations especially on coastal smuggling endangering the security of India. If the detecting officer does not have the power to arrest, the offender may protest to move from the place of occurrence to the nearest safe or convenient place, even for drawing a panchanama or for conducting interrogation. If the documentation is continued on the spot in cases detected in mid-sea or at remote coastal areas during the night would pose serious danger to officers to the extent of losing the case. If the detecting officer does not have power to arrest, nothing can be done but to submit to the whims and fancies of the offender. The pros and cons of this are brought out separately as an enclosure to this letter for consideration please.
Yours faithfully,


Enclosure: 1.
Justification for prescribing the rank of proper officer to arrest as ‘not below the rank of Inspector’ in the Customs Act, 1962 without prior approval:
1. In most of the Central Excise cases the main reason for arrest is the gravity of the offence and not to prevent tampering with evidence or witness. Moreover, after recording of the statement or completion of the investigation, if the officer has reason to believe that the offender is liable to be arrested under the Central Excise Act, 1944, a proposal could be sent to the Commissioner for getting prior approval and the offender could be sent away. On getting such approval to arrest, the offender could be secured without any difficulty.
2. On the contrary, in Customs, almost all the time, securing the offender will be a great difficulty even for drawing the seizure mahazar or panchanama. Address provided by the offender could not be verified and the offender may not turn up for summons.
3. Moreover, if any proposal is sent for getting approval to arrest, a record is created that investigation in respect of that offender is completed. Thereafter the offender cannot be detained any further without having been arrested since as per the s.104(2) the arrested person should be taken to a magistrate without unnecessary delay. If request for prior approval is sent before completion of investigation, the reasonable belief would be questioned. In the event of such detention awaiting prior approval is questioned in the court of law, there are ample chances that COFEPOSA detention or SAFEMPOPA proceedings if any would be vitiated and the offender would escape from all legal consequences.
4. In the event of a higher level of officer is made as the proper officer to arrest the offender, then s/he need to go to the spot, touch the offender and say to him the fact of his arrest. Moreover, officer arresting the offender may have to appear in the Court to give evidence later. As such, as in Sec. 13 of the Central Excise Act, 1044, an officer not below the rank of an Inspector / EO / PO may be made as proper officer to arrest. There is no reason why the department should not repose confidence on the detecting/investigating officer in matters of arrest. In majority of cases of outright smuggling and even in import and export, the officers have to work with commitment and dedication against an environment of great risk to life. The department should not doubt their sense of proportion and judgement of the detecting / investigating officer to arrest an offender. Arrest no longer is a taboo, since it is resorted to only for purpose of preventing the offender in destroying evidence or to ensure his availability in the trial. Moreover, as transfer of a government servant is not treated as punishment, arrest too is not a punishment and no undue stigma need be attached to arrest.
5. In case the CBEC still has any reservations, executive instructions may be issued that immediately after arrest but well before the offender is taken to the magistrate a preliminary report may be asked to be sent to any specified officer either through proper channel or in a specified manner so that instructions could be issued to the officer who made the arrest not to object to letting off the offender on bail when producing before the magistrate for judicial custody or in serious offences to request the court to demand solvent surety to the extent of the value involved plus the maximum penalty imposable under the law for the time being in force. Where it is apprehended that the offender may jump bail, the sureties are to give undertaking to produce them for the trial or face consequences as imposed by the court.

Relevant Sections of the Customs Act, 1962 and the Central Excise, 1944


SECTION 104. Power to arrest
. – [(1) If an officer of Customs empowered in this behalf by general or special order of the Commissioner of Customs has reason to believe that any person in India or within the Indian customs waters has committed an offence punishable under section 132 or section 133 or section 135 or section 135A or section 136, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.]
(2)Every person arrested under sub-section (1) shall, without unnecessary delay, be taken to a magistrate.
(3)Where an officer of customs has arrested any person under sub-section (1), he shall, for the purpose of releasing such person on bail or otherwise, have the same powers and be subject to the same provisions as the officer-in-charge of a police-station has and is subject to under the Code of Criminal Procedure, 1898 (5 of 1898).
(4)Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), an offence under this Act shall not be cognizable.
SECTION 135
.Evasion of duty or prohibitions. – [“(1) Without prejudice to any action that may be taken under this Act, if any person —
(a) is in relation to any goods in any way knowingly concerned in misdeclaration of value or in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods; or
(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 or Section 113, as the case may be; or
(c) attempts to export any goods which he knows or has reason to believe are liable to confiscation under Section 113; or
(d) fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under this Act in connection with export of goods, he shall be punishable, —
(i) in the case of an offence relating to, —
(A) any goods the market price of which exceeds one crore of rupees; or
(B) the evasion or attempted evasion of duty exceeding thirty lakh of rupees; or
(C) such categories of prohibited goods as the Central Government may, by notification in the Official Gazette, specify; or
(D) fraudulently availing of or attempting to avail of drawback or any exemption from duty referred to in clause (d), if the amount of drawback or exemption from duty exceeds thirty lakh of rupees, with imprisonment for a term which may extend to seven years and with fine :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than one year;
(ii) in any other case, with imprisonment for a term which may extend to three years, or with fine, or with both.”]
[(2)If any person convicted of an offence under this section or under sub-section (1) of section 136 is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to seven years and with fine : Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for less than [one year]. (3)For the purposes of sub-sections (1) and (2), the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than [one year], namely :-
(i) the fact that the accused has been convicted for the first time for an offence under this Act;
(ii) the fact that in any proceeding under this Act, other than a prosecution, the accused has been ordered to pay a penalty or the goods which are the subject matter of such proceedings have been ordered to be confiscated or any other action has been taken against him for the same act which constitutes the offence;
(iii) the fact that the accused was not the principal offender and was acting merely as a carrier of goods or otherwise was a secondary party to the commission of the offence; (iv) the age of the accused.]
SECTION 2. Definitions.
 (34)“proper officer”, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the [Commissioner of Customs].
SECTION 13 of the Central Excise Act, 1944
13. Power to arrest: - Any Central Excise Officer not below the rank of Inspector of Central Excise may, with the prior approval of the Commissioner of Central Excise, arrest any person whom he has reason to believe to be liable to punishment under this Act or the rules made thereunder.”
SECTION 9A. Certain offences to be non-cognizable.-
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), offences under section 9 shall be deemed to be non-cognizable within the meaning of that Code.
(2) Any offence under this Chapter may, either before or after the institution of prosecution, be compounded by the Chief Commissioner of Central Excise on payment, by the person accused of the offence to the Central Government, of such compounding amount as may be prescribed.

Media Reports:


MUMBAI: The Central Board of Excise and Customs will suggest amendment of laws after the Supreme Court said that arrests under Customs Act and Central Excise Act are bailable.
Department officials said that the September 30 SC order has considered that all offences under the two Acts involve only duty evasion. The aspect of money laundering and national security that arises from cases of smuggling has not been appreciated by the SC, officials said.
The SC, while hearing a group of petitions challenging arrest, said that offences under the two Acts are non-cognizable and hence bailable.
Officials said that they make arrests only in cases of mis-declaration causing money laundering. ''When there is a dispute on the interpretation of the existing laws to arrive at the duty, we do not arrest. It's more of a technical issue,'' a customs official said. The bigger issue involves national security and prevention of smuggling. ''For instance, the SC order allows fake currency smugglers caught by the Customs to be released on bail immediately. The fake currency will damage the economy and also fund the terror network,'' the official added.
The SC order is also applicable to smugglers arrested with contraband, arms, ammunition, explosives, goods falling under endangered categories. Officials said that undervaluation and overvaluation of trade transactions are linked to hawala, money laundering and black money generation. The Financial Action Task Force, an inter-governmental body aimed at combating money laundering and terrorist funding, has said that trade-based money laundering is dominant across the globe.
Last month, officials found a case of money laundering in the exports or banned red sanders declared as permissible goods like guava pulp and plastic. ''The real value of the red sanders is sent by the Dubai-based buyers through hawala. The amount runs into a few hundred crores,'' a Directorate of Revenue Intelligence official said. They said that the secret manufacture and clearance of goods without paying central excise duty is not a simple case of evasion but creates a parallel economy.
Officials said the SC, at one point in its order, has treated the Customs Act and Central Excise Act on the same platform but considered it differently while hearing another set of arguments.
http://timesofindia.indiatimes.com/city/mumbai/Customs-excise-board-wants-duty-evasion-laws-amended/articleshow/10381743.cms


'Make duty evasion a non-bailable offence'

Manish Pachouly, Hindustan Times Mumbai, October 18, 2011
After the Supreme Court made offences under the Customs Act bailable, the Central Board of Excise and Customs (CBEC) is seeking an amendment to the law to make offences under the act non-bailable. Sources in the customs said the CBEC would soon submit a proposal to the Central government, asking it to take up the issue before the cabinet committee.
On September 30, the SC ruled that offences under section 135 of the Customs Act (duty evasion) are bailable and if the person arrested offers bail money, he shall be released on bail.
Officials said the SC interpreted the provision and declared the offences under the act to be bailable and non-cognisable. Customs sources said officials now want to make offences under the act cognisable and non-bailable. Senior customs authorities said the demand to amend the law has been made so that the act’s shortcomings are permanently addressed.
“The SC has interpreted the provision and now declared the law as it is correctly to be understood,” said senior counsel Sujay Kantawala who handles customs-related cases. Kantawala said the government could either unconditionally follow the law or amend it to make it specifically non-bailable.
Advocate Ravi Hirani who also deals with customs related-cases said that with the SC ruling, all those booked under Customs Act would get bail immediately after they are arrested and produced in court. Hirani said the government had another option — to file an appeal before a larger bench of the SC for revision of the order. Officials said that the department’s working has been affected by the SC ruling.
“So far, the judicial custody of the accused under this section ensured that he remained behind bars for few days, which worked as deterrent. Now, the accused would be out on bail immediately,” said a customs officer on condition of anonymity.
http://www.hindustantimes.com/News-Feed/mumbai/Make-duty-evasion-a-non-bailable-offence/Article1-758554.aspx

Customs, excise offences are bailable - Judgement Full TextLink

Swati Deshpande, TNN | Oct 2, 2011, 12.10AM IST Article http://goo.gl/1HtMh MUMBAI: The Supreme Court has held that Customs and central excise duty evasions and other offences, which are non-cognizable, are also bailable.
In two petitions, the question placed before the SC was: "As all offences under the Central Excise Act, 1944 and Customs Act, 1962, are non-cognizable, are they bailable?" On Friday, a three-judge bench of Justice Altamas Kabir, Justice Cyriac Joseph and Justice S S Nijjar said if the offence was non-cognisable then, it was also bailable under the two special statutes. Evasion of excise duty of over Rs 1 lakh is non-cognizable and now, bailable.
For instance, following the landmark verdict, customs duty evaders at airports will not be immediately sent to judicial custody if they pay bail. Legal experts say the implications are that agencies such as the DRI and AIU, which seek judicial custody of offenders in every case, will now have to release them on bail, even if the amount evaded is high. The punishment for some offences is jail for up to 7 years.
Petitioners' lawyers Mukul Rohtagi and Sujay Kantawala argued that as Section 9A of the Excise Act and Section 104(4) of the Customs Act make certain offences non-cognizable (police cannot probe or arrest without a warrant from a magistrate), they have to be bailable. But government counsel P P Malhotra and additional solicitor-general Mohan Parasaran opposed saying they were special enactments where officers had powers to affect arrests even in non-cognizable offences but cannot release on bail. "Only a magistrate can release on bail," argued Parasaran, adding that merely being non-cognizable did not make the offences bailable. "Nature of the offence" was of "paramount importance" in deciding the bailability as the aim was to curb smuggling, he said.
But the SC bench held "...offences under both the acts would be non-cognizable". "The language of the Scheme of Central Excise Act seems to suggest that the main object is the recovery of excise duties and not really to punish for infringement of its provisions. The introduction of Section 9A into Act reveals the thinking of the legislature that offences under the 1944 Act should be non-cognizable and, therefore, bailable," the SC said. "...an excise officer cannot arrest without obtaining a warrant," it stated, adding, that the law indicated the offences were bailable as the in-charge of a police station could grant bail to a person arrested and brought to him.
The SC held as both were special enactments, "...offences under Section 135 of the Customs Act, 1962, are bailable and if a person offers bail, he shall be released if not wanted in other cases."
The impact of the judgment was immediately felt in Mumbai on Saturday when a magistrate released on bail an offender, Mustafa Shaikh Mohammed, arrested by the DRI for allegedly evading duty of Rs 80 lakh.
http://timesofindia.indiatimes.com/city/mumbai/Customs-excise-offences- cbi.nic.in/aboutus/manuals/Chapter_12.pdf