·  Last year, Tughlakabad Customs issued Rajinder Arora of Amritsar and his friends a show cause notice for alleged misdeclaration and misuse of duty benefits in export of goods worth over Rs 370 crore. The show-cause notice runs into 560 pages.

·  The Directorate of Revenue Intelligence, Mumbai, issued a show cause notice to Delhi resident Sunil Gupta for alleged misdeclaration of imported electronic goods with a duty demand of Rs 712 crore.

·   An importer of expensive pesticides who misdeclared his goods as food-grade sodium bicarbonate to save on duty, is being investigated by DRI, Delhi for 70 such consignments he has brought in the past.

In all these cases, the alleged offenders have used the better part of their time and resources to keep out of jail. In Arora’s case, when raids were conducted by customs officials in November 2010, he moved the supreme court immediately. The SC granted him a stay on arrest while ordering him to appear before the authorities for investigation.

While seeking ‘no arrest’ orders from the courts, Arora was telling the courts a different story from the one he was telling customs — that the papers related to his business were lost. The show-cause actually contains a chart of summons evaded by Arora and his friends for weeks together.   

After the supreme court ruled last year in the Om Prakash case that all customs cases are bailable, the finance ministry seemed to have realised how the Act would become almost unworkable. So, amendments were sought to be introduced in April when parliament met to pass the Finance Bill.

The SC’s order and the amendments are discussed a little later.

But finance minister Pranab Mukherjee further altered the amendments on May 7 to make all customs offences bailable. This has been passed by both houses of parliament and now awaits the president’s assent (see box at the bottom).

The role of Arun Jaitley, leader of the opposition in the Rajya Sabha, and a famed lawyer himself who asked for customs offences to be made bailable also seems curious. He likened the amendments to no-bail provisions in anti-terror laws like the Prevention of Terrorism Act (POTA) and the Terrorist and Disruptive Activities (Prevention) Act (TADA).

Jaitely did not reply to this correspondent despite phone calls and an email seeking his views.

But field officers in customs who have anti-smuggling experience think the law is being seriously compromised.

The SC held in Om Prakash and Choith Nanikram Harchandrai cases in September 2011 that all cases under section 135 of the Customs Act, 1962, are bailable by a reading of the subsections (3) and (4) of section 104.

The SC took these sections quite literally, rejecting the arguments of the additional solicitors general, Mohan Parasaran and PP Malhotra, that non-cognisability as laid down in subsection 104 (4) means that a police officer cannot take cognisance, but customs officers, specially empowered by the Act, can.

But left, right and centre the offenders started moving courts seeking orders that investigations cannot be started without permission from a magistrate.

The SC further rejected the argument of the government’s lawyers that even the code of criminal procedure provides for some offences listed in the IPC to be “non-cognizable but not bailable”. These are sections 194 and 195 (giving false evidence), 274 (adulteration of drugs or medical preparations), 466, 467 and 476 (all related to forgery), 493 (cohabitation by a man – with a woman – with false promise of marriage), and section 505 (statements conducing to public mischief).

Since the SC’s Om Prakash order created a situation where nobody could be kept in custody while a customs offence is being investigated, the government introduced these sections in the Finance Act 2012 so as to amend the Customs Act, 1962.

121. Insertion of new section 104A: After section 104 of the Customs Act, the following section shall be inserted, namely:––

“104A. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence punishable for a term of imprisonment of three years or more under section 135 shall be released on bail or on his own bond unless —

(i) the public prosecutor has been given an opportunity to oppose the application for such release; and

(ii) where the public prosecutor opposes the application, the Magistrate is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person who is under the age of eighteen years or is a woman or is sick or infirm, may be released on bail if the Magistrate so directs.

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, no police officer shall, save as otherwise provided under this Act, investigate into an offence under this Act unless specifically authorised by the Central Government by a general or special order, and subject to such conditions as may be specified in the order.”

The amendments, in fact, sought to clarify the existing subsections of 104 which were seemingly confusing. They kept the distinction of the offences on the lines of difference in sentence – of three years’ or seven years’ imprisonment. Thus, the government had put more serious offences in the category of cognisable and not-bailable unless the magistrate had gone through a procedure.

Instead, what the FM has read out in parliament on May 7 is this:

“The House would recall that certain amendments were proposed in the Customs and Central Excise Law in respect of the classification of offences as cognizable and non-bailable. In response to concerns expressed by Members that the proposal regarding grant of bail only after hearing the public prosecutor is too harsh, I propose to omit this provision entirely.

“In addition, only serious offences under the customs law involving prohibited goods or duty evasion exceeding Rs 50 lakh, shall be cognizable. However, all these offences shall be bailable.” 

This has two implications: Only an offender who has brought in prohibited goods or has evaded or tried to evade duty of Rs 50 lakh and above can be arrested without warrant. And when he is produced before a magistrate, he will be entitled to bail.

What the FM has said is effectively this: The magistrate will have no choice under the Customs Act but to grant bail even if the person brought before him is a smuggler of RDX or firearms.

It seems that between April and May 7, powerful lobbies of smugglers and their advisers have prevailed upon the finance ministry to get such a massive dilution of the provisions introduced.  Customs officers who spoke to this correspondent on condition of anonymity said that not only will magistrates have to be present at ports and airports round the clock, but the likelihood of small operators of smuggling syndicates absconding after bail has risen. “How will we track the real, big operators behind the scenes if we do not get custody of the man in the operation?” one officer remarked.

The finance minister perhaps expects smugglers to cooperate in a ‘10 am to 5 pm’ investigation in an air-conditioned room in a Customs House, and to willingly pay up duty.

The finance minister pretends to be oblivious that even today an alleged offender is arrested only after clearance from an officer of the rank of commissioner. Passengers at airports are arrested only if the smuggling is very big, or the passenger is suspected to be a regular carrier operating for a gang, or the item smuggled is a sensitive one.   

The provisions now passed will make gold smuggling easier (now that duty on gold has been raised to 4 percent per tola) as also fake indian currency notes (FICN), which is plaguing India’s shores, not to talk of misdeclaration in all goods, be they luxury goods, electronic, chemical, mechanical etc.

The finance ministry has completely overlooked the fact that often it is hardened criminals who run customs rackets, even if they are not your regular stereotype of smugglers. Ironically, IPC offences of cheating (section 420) and breach of trust (section 406) of less amounts are non-bailable.

It amounts to reducing the Customs Act to a law to deal with only revenue violations. Section 11 of the Customs Act, however, clearly shows it is a law to first safeguard India”s shores and skies.

On the other hand, perpetrators of these frauds have become so bold that a set of petitions has now been filed in the supreme court to challenge another amendment effected by the government last year.

This was the amendment which sought to retrospectively do away with the effect of the supreme court’s order in Sayed Ali’s case stating that officers who were not in  assessment roles (but are in fact, specialised investigative units) — like the Directorate of Revenue Intelligence, Marine and Preventive and Rummaging and Intelligence units — could not issue show-cause notices.

While there is such a din about retrospective amendments to the Income Tax law, the utter dilution of the Customs law has been completely ignored. Where will this lead law enforcement to?

The provisions as passed by both houses of parliament:

In section 104 of the Customs Act, for subsection (4), the following subsections shall be substituted, namely

“(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, any offence relating to –

(a)  Prohibited goods or

(b) Evasion or attempted evasion of duty exceeding fifty lakh rupees, shall be cognizable.

(5) Save as otherwise provided in subsection (4) all other offences under the Act shall be non-cognisable.

(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 all offences under the Act shall be bailable.