Holding

While the Settlement Commission’s immunity under the Customs Act does not bar a separate COFEPOSA detention, the petitioner, being similarly situated to his brother whose detention was revoked for lack of sufficient cause, is entitled to revocation; therefore the detention order is quashed.

Summary

Alpesh Na Vinchandra Shah and his brother were arrested for mis‑declaring import consignments and evading customs duty. Both were detained under section 3(1) of the COFEPOSA Act. They later applied for settlement under section 1278 of the Customs Act; the Settlement Commission accepted full duty payment, granted immunity from penalty and prosecution under the Customs Act and the IPC, and ordered settlement. Despite this, the detaining authority continued the petitioner's detention, while the brother's detention was later revoked after an Advisory Board found no sufficient cause. The petitioner sought quash of his detention order, arguing that the settlement immunity rendered the detention unlawful and violative of Article 21. The Court held that the Settlement Commission's order does not affect the separate preventive‑detention power under COFEPOSA, but on the facts, since the brother—similarly situated—was released, the petitioner was entitled to the same treatment; consequently the detention order was quashed. The writ petition was allowed and the detention order set aside.

Issues considered

The settlement and immunity granted under the Customs Act affect the validity of a detention order under the COFEPOSA Act.
Whether a detention order can be continued after the applicant has obtained full settlement and immunity from prosecution.
Whether the petitioner is entitled to the same revocation of detention as his brother, who was similarly placed.
Whether the detention order violates Article 21 of the Constitution.

Legislation cited

Central Excise Act, 1944s. Section 320, s. Section 32A
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)s. Section 3(1), s. Section 8(a), s. Section 8(f)
Constitution of Indias. Article 21, s. Article 32
Customs Act, 1962s. Section 1278, s. Section 127C, s. Section 127F, s. Section 127H, s. Section 127J
Indian Penal Code, 1860

Subjects

preventive detentionsettlement commissioncustoms duty evasionimmunity from prosecutionArticle 21COFEPOSACustoms Actpre‑execution detentionadvisory boardrevocation of detention

Judgment

JI/ ALPESH NA VINCHANDRA SHAH A
v.
STATE OF MAHARASHTRA AND ORS.

FEBRUARY 26, 2007

[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ] B

~
Constitution of India-Articles 21 & 32-Customs Act, 1962-Sections
12 7B to 12 7J-Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974-Sections 3(1) and 8(a)-Detention Orders
issued to detenus, who were engaged in smuggling activities-Settlement
c
Commission granted immunity to the detenus from prosecution under the
Customs Act and the Penal Code, 1860-Detaining Authority proceeding to
detain the detenus under the Detention Orders-Writ Petition for quashing
the Detention Order-Held, on law, the order of the Settlement Commission
granting immunity from prosecution under the Customs Act have no bearing D
on the Detention Order passed by the State under the Prevention Act-
However, on facts, since the Detention order of one of the detenus was
•. revoked by the State since there was no sufficient cause for his detention, the
Detention order of the petitioner-detenu, who is similarly placed, is i1uashed.

Petitioner and his brother were arrested by Intelligence Officers for E
mis-declaration of import consignments and evading customs duty thereby.
Respondent - authorities issued two detention orders under section 3(1) of
the Conservation of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974 (COFEPOSA Act) and issued a show cause notice to both of them.
Pursuant to the show cause notice, the petitioner and his brother made an
F
J ~
application under section 1278 of the Customs Act, 1962 for settlement before
Settlement Commission. The Settlement Commission allowed the application
on payment of customs duty under section 127H of the Customs Act and
granted immunity to the applicants from payment of any penalty and
prosecution under the Customs Act and the Penal Code, 1860. The Detaining
authority proceeded to detain the petitioner in view of the Detention Order G
issued earlier under COFEPOSA Act. Hence, the Writ Petition under Article

' l. 32 of the Constitution of India filed by the petitioner before this Court to quash
the Detention Order.

223 H
224 SUPREME COURT REPORTS [2007] 3 S.C.R.

A The petitioner contended that the execution of the Detention Order by
respondent authorities despite the unconditional immunities granted by the
Settlement Commission under section 127H of the Customs Act, 1962 is mala
fide; that the Detention Order is contrary to the spirit of settlement and
legislative intent behind the scheme of Settlement enacted under the Customs
B Act; and that the detention would result in violation of Article 21 of the
Constitution oflndia.

Respondent-State contended on merits that the order of the Settlement
Commission granting immunity from prosecution under the Customs Act,
1962 have no bearing on the order passed by the Detaining Authority under
C the COFEPOSA Act; that the Detention Order cannot be revoked under
section 127(F) of the Customs Act; and that the orders of the respective
authorities cannot bind or influence each other. The respondents, however,
conceded at the time of hearing before this Court that the Detention Order
issued against the brother of the petitioner was revoked on the basis of a
report of Advisory Board constituted under the COFEPOSA Act.
D
Allowing the Writ Petition, this Court

HELD: 1.1. The Settlement Commission was constituted with the aim
and objective of settling the tax evasion issues and by virtue of disclosure by i
tax offender; they gain immunity from fine/penalty which is otherwise
E mandatory under the provisions of tax laws. But, such opportunity is only
extended to one tax offender but not available to habitual smugglers. For the
persons involved in smuggling activities, other than the provisions made for
the prosecution under the Customs Act, 1962, an equal deterrent is
emphasized under the provisions of the COFEPOSA Act, 1974. Such
F preventive detention prohibits smugglers from indulging in further smuggling
activities. The investigation reveals the consistent involvement of the petitioner
and his brother in smuggling activities, therefore, the Detaining Authority,
on the basis of evidence, felt it necessary to issue the detention orders in
respect of both the detenus in order to prevent them from pre-judicial activities
in future. Accordingly the impugned Detention Order is justifiable in the eyes
G cf law. [Para 46] [247-D, F, G]

1.2. The Settlement Commissioner's order only dealt with true and full ; ,
disclosure of the disputed duty and acceptance of the entire duty liability by
the petitioner and his brother. Nowhere it is mentioned in the Settlement
Commission's order that the petitioner would not indulge in smuggling of
H
ALPESH NA VINCHANDRA SHAH v. STA TE OF MAHARASHTRA [LAKSHMANAN, J.] 225

goods in future. Therefore, in order to prevent the detenu from indulging in A
_-,; smuggling activities, the said Detention Order was passed and there is no
illegality in the Detention Order. The final order of the Settlement Commission
has, by no means, undermined the surroundings of the offence committed by
the petitioner and his brother. Thus the matters of Settlement Commission
and the COFEPOSA are altogether different issues, the orders of the
respective authorities should not and cannot bind or influence each other. As B
such the outcome of the Settlement Commission order should not have any
bearing on the detention order. [Paras 48 and 49) [248-D, E, G; 249-8)

Hira Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003) 5 SCC 257; CIT
(Centralj v. B.N Bhattacharjee & Anr., (1979) 118 ITR 461 (SC); R.K. Garg C
v. Union of India, [1981) 4 SCC 675; Additional Secretary to Government of
India & Ors. v. Smt. Alka Subhash Gadia & Anr., [1992) SCC Supp. 1 496;
Subbash Muljimal Gandhi v. L. Himingliana & Anr., [1994) 6 SCC 14; Pawan
Bhartiya v. Union of India, [2003) 11 SCC 479 and Naresh Kumar Goyal v.
Union of India, [20051 8 SCC 276, referred to.
D
1.3. The State, in exercise of the powers conferred by Section 8(1) of
the COFEPOSA Act revoked the detention order passed against the brother
of the petitioner after considering the report of the Advisory Board and the
material on record. The writ petitioner, who is also similarly placed pursuant
to the order of the Settlement Commission and got the unconditional immunity
by the Settlement Commission, is entitled to the same treatment. [Para 56) E
(252-C-D)

V.C. Mohan v. Union of India, (2002) 3 SCC 451 and Pawan Bhartiya
v. Union ofIndia, (2003) 11SCC479, referred to.

CIVIL ORIGINAL JURISDICTION: Writ Petition (CRL) No. 114 of2006. F
Under Article 32 of the Constitution of India.

Vikram Chaudhri, S.N. Kantawala and Ajay Sharma for the Petitioner.

Ravindra Keshavrao Adsure and V.N. Raghupathy for the Respondents. G
The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. I. The above writ petition was filed under
Article 32 of the Constitution oflndia for issuance of a Writ of Habeas Corpus
or any other appropriate wri_t quashing and setting aside the order of detention H
226 SUPREME COURT REPORTS [2007] 3 S.C.R.

A dated 12.01.2005 under COFEPOSA Act, 1974 issued against the petitioner by
respondent No.2 - Principal Secretary (Appeals and Security), Government of
Maharashtra, Mumbai.

2. The petitioner was detained under Section 3(1) of the Conservation
of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
B (hereinafter referred to as "COFEPOSA Act") in pursuance of the impugned
order of detention. The petitioner by way of this writ petition is challenging
the legality and validity of the impugned order of detention passed by
respondent No.2 at pre-execution stage in the peculiar facts and circumstances
of this case. It is stated that two similar orders of detention dated 12.01.2005
C and 31.01.2005 were issued under the COFEPOSA Act by respondent No.2
against the petitioner Alpesh Navinchandra Shah and his brother Kamlesh
Shah respectively. The detention order has already been served upon Kamlesh
Shah. The grounds of detention order and the documents relied upon in the
case of the petitioner are identical in content and material.

D 3. The brief facts of the case are mentioned in seriatim as under:

4. In or about, August, 2004 M/s. Perfect Trading Co. (proprietorship
firm of Shri Rajendra Mamgaim) imported Ball bearings in five containers. On
3.9.2004, consignments of mis-declared consignments were intercepted by the
DRI officials. The petitioner and his brother were arrested on 4.9.2004 by the
E Intelligence Officers, DRI, Mumbai Zonal Unit primarily on the allegations that
they have been indulging in import of high quality and high value Ball
Bearing and were clearing the same by evading duty of custom.

5. The Addi. Chief Metropolitan Magistrate, 3rd Court, Esplanade,
Mumbai vide Order dated 23.9.2004 directed to release the petitioner and his
F brother on bail imposing conditions including their regular attendance in the
Department and the imposition of an embargo not to leave the country
without the prior permission of the Court.

6. Impugned Detention Order bearing No. PSA 1204/21 (2)/ SLP-3(A)
G dated 12.1.2005 was issued by respondent No.2 for detaining the petitioner
ostensibly under the provisions of COFEPOSA Act 1974. Similar Order No.
PSA 1204/21 (1)/SLP-3 (A) dated 31.1.2005 was also issued to detain Shri
Kamlesh Shah, the brother of the petitioner.

7. Show Cause Notice dated 23 .2 .2005 was issued to the petitioner and
H his brother by the DRI, Mumbai Zonal Unit. Pursuant to the said show cause
ALPES~NA VJNCHANDRA SHAH v. STATE OF MAHARASHTRA [LAKSHMANAN,J.] 227

notice, the application for settlement under Section 127 B of the Customs Act, A
.,. 1962, was filed on 19.4.2005 by Mis Perfect Trading Co. as Applicant and the
petitioner, his brother and others as Co-Applicants before the settlement
Commission, Mumbai.

8. During the course of the admission hearing of the aforesaid settlement
application, the petitioner came to know that the Order dated 27 .12.2005 has B
been passed by respondent No.2 for detaining him while invoking section 3( I)
of the COFEPOSA Act, 1974. Accordingly, at the stage of the admission
hearing, the Settlement Commission was urged to make recommendation to
the Detaining Authority for the revocation of the Detention Order.

9. The Settlement Commission, vide order dated 03.01.2006, rejected the C
prayer by adopting the reasoning narrated in the case ofVipul Gor, Proprietor
ofM/s Sonam Enterprises (Misc. Order No.12/2005 - CUS dated 19.12.2005)
wherein it was, inter alia, held that the Commission did not have any
jurisdiction to make a recommendation to the Detaining Authority for revocation
of a Detention order and further held that the petitioner and his brother would D
be at liberty to take recourse to any other legal remedy available to it for lifting
of the detention order whether by the sponsoring authority, detaining authority
or the courts. However, the Settlement Commission allowed the application for
settlement to be proceeded with.

10. The case was finally heard by the Settlement Commission on 1.3.2006. E
11. Vide Final Order bearing No. l 7/CUS/2006 dated 7.3.2006, the
Settlement Commission allowed the Settlement Application and settled the
case on payment of Customs Duty of Rs. 1,40,52,959/-. In terms of sub-section
(I) of section 127 Hof the Customs Act, 1962, and in view of full and true
disclosure,. the Commission granted immunity to all the Applicants including F
the petitioner from any penalty that could be levied under the Customs Act
and also from the prosecution under the Customs Act, 1962, as well as under
IPC. It is evident from the Order that a copy of the said Final Order of
complete settlement of the case, was also forwarded to the Detaining Authority
by the Settlement Commission. G
12. It is also pertinent to note that though the Settlement Commission
vide Section 127H of the Customs Act, 1962 is empowered to impose such
conditions as it may deem fit for grant of immunities, deemed it fit not to
impose any condition on the petitioner, in spite of the fact that detention
Order having been issued against the petitioner, was before the Commission H
228 SUPREME COURT REPORTS [2007] 3 S.C.R.

A and granted full immunities and settled the case giving quietus to all issues.
13. In spite of complete settlement of all disputes among the petitioner
and the Revenue, after the case was fully settled by the said Final Order dated
7.3.2006 of 'compromise"/"settlement" of the entire case, the officers ofDRl
apprehended the Petitioners brother and he was detained under the Detention
B Order dated 31.1.2005.

14. The petitioner is also relying upon the copy of order dated 5th May
2005 published in Gazette of Maharashtra Government at page 56, Page IV-
A, inter alia, showing that the Order No. PSA 1204/21(2)/ SLP-3(A) was
C issued against the petitioner on 12th January, 2005 by the respondent.

15. Being aggrieved by the said order of detention which is based upon
the same grounds as reflected in the show cause notice and which were
considered in the proceedings before the Settlement Commission, the petitioner
preferred the above writ petition for quashing of the impugned detention
D order.

16. We heard Mr. Vikram Chaudhri, learned counsel for the petitioner
and Mr. Ravindra Keshavrao Adsure, learned counsel for the contesting
respondent.

E 17. Learned counsel for the petitioner, at the time of hearing, made the
following submissions:-

18. In the light of the fact that as per provisions of Customs Act, 1962,
the case of the petitioner is 'settled' and he has been granted unconditional
immunities by the Settlement Commission, chasing the petitioner for detaining
F him under the COFEPOSA Act would be contrary to the settled proposition
of law that:

i. the personal liberty is one of the most cherished freedoms more
important than any other guaranteed under the constitution and
in a democracy governed by rule of law the drastic power to
G detain a person, without trial, must be strictly construed.
ii. Draconian power of detention must be exercised in rarest of rare
cases and only as a preventive measure and not punitive. • •
iii. The law pertaining to preventive detention must be meticulously
followed with substantively and procedurally by the detaining
H authority.
ALPESHNAVINCHANDRASHAHl'.STATEOFMAHARASHTRA[LAKSHMANAN.J.J 229

IV. Section 3( I) of the Act allows the detention of a person only if A
.-¥ the appropriate detaining authority is satisfied that with a view
to preventing such person from carrying on any of the offensive
activities enumerated therein, it is necessary to detain such person.

v. The satisfaction of the detaining authority is not a subjective one
based on the detaining authority's emotions, beliefs or prejudices. B
There must be a real likelihood of the person being able to
indulge in such activities, the inference of such likelihood being
drawn form objective data based on surrounding circumstances.
. Ao-

VI. The possibility of prosecution is having a direct bearing on the
subjective satisfaction of the Detaining Authority. c
vii. Unsuccessful judicial trial may not operate as a bar to a detention
order, but the discharge cannot be said to be entirely irrelevant
and of no significance.
viii. The detention power cannot be used to subvert, supplant or to
substitute the punitive law of penal code. D
I 9. At the time of hearing, the judgment rendered by this Court in Hira
.., Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003] 5 SCC 257 (Brijesh Kumar
and Dr. AR. Lakshmanan, JJ) was also relied on and our attention was invited
to paras 44 & 45 of the said judgment which read as under:
E
"44........ The declarant could not be dragged and chased in criminal
proceedings after closing the other opening making it a dead end. It
is highly unreasonable and arbitrary to do so and initiation and
continuance of such proceedings lack bonafides.

45. In the background given above, there is every reason to legally F
infer that the position as it stood, in regard to the criminal prosecution
and conviction on the date the declaration was filed, as conditions
precedent to settlement under the Scheme, would also stand finalized
on full and final settlement of the matter under the Scheme. That is
to say the position that no criminal prosecution was pending against
the declarant on the date of filing of the declaration nor he stood
G
convicted for such an offence in relation to the matter covered under
-- .... the declaration, it would stand finalized with acceptance of the
declaration and settlement of the matter fully and finally. Later on, the
declarant could not be or continued to be subjected to criminal
prosecution to alter the position as it stood on the relevant date of H
Z30 SUPREME COURT REPORTS (2007) 3 S.C.R.

A the submission of declaration and get him convicted for such offences
in respect of which, if he stood convicted earlier while filing statement
he would not have been entitled to seek the benefit under the Scheme.
The appellants virtually foreclosed their right to further pursue the
proceedings before the authorities or courts of law challenging the
legality, validity or the tax liability in terms of the Scheme. Undoubtedly,
B if the appellants' appeal which was pending in this Court against the
order ofCEGAT relating to the tax liability, had been allowed it might
have affected the criminal proceeding too on merits. In certain
circumstances, it could be put up as a defence by the declarant, in the
criminal case but in terms of the scheme he was bound to withdraw
c his appeal. The criminal prosecution could not be allowed to proceed
by putting an end to a possible defence, before hand. It certainly
amounts to abuse of process of law. The appeals thus deserve to be
allowed.
"·
20. Placing reliance on the above judgment, learned counsel for the
D petitioner urged that the detention order No. PSA 1204/21 (2)/SPL-3(A) issued
against the petitioner be quashed and set aside without insisting the petitioner
to undergo detention.

21. Learned counsel for the petitioner further submitted that the
impugned order of detention is contrary to the spirit of settlement and legislative
E intent behind the scheme of settlement enacted under the Customs Act, 1962.

i. The Settlement Commission came into being as a culmination of
the report submitted by the Wanchoo Committee set up for
toning up the administration of direct taxes.
F Para 2.32 of the Wanchoo Committee's report reads as:
"This however, does not mean that the door for compromise with
an errant tax-payer should forever remain closed. In the
administration of fiscal laws, whose primary objective is to raise
revenue, there has to be room for compromise and settlement. A
G rigid attitude would not only inhibit one-time tax-evader or an
unintending defaulter from making a clean breast of his affairs,
but would also unnecessarily strain the investigational resources
of the Department in cases of doubtful benefit to revenue, while
needlessly proliferating litigation and holding up collections. We
would, therefore, suggest that there should be a provision in the
H law for a settlement with the tax-payer at any stage of the
ALPESH NA VIN CHANDRA SHAH v.STATE OF MAHARASHTRA [LAKSHMANAN. J.] 23 1

proceedings. In the United Kingdom, the 'confession' method A
A has been in vogue since 1923. In the U.S law also there is a
provision for compromise with the tax payer as to his tax liabilities.
A provision of this type facilitating settlement in individual cases
will give this advantage over general disclosure schemes that
misuse thereof will be difficult and the disclosure will not nonnally
breed further tax evasion. Each individual case can be considered
B
on its merits and full disclosures not only of the income but of
the modus operandi of its build up can be insisted on, thus
.._ sealing off chances of continued evasion through similar
practices."

The recommendation of Wanchoo Committee has been quoted with approval
c
by this Court in the case of CIT (Central) v. B.N.Bhattacharjee and Anr.,
(1979) 118 !TR 461- SC.

On the above basis, in the course of the Budget Speech in 1992, Hon'ble the.
then Finance Minister announced as under:- D
"A settlement Commission was established in 1976 under the Income
Tax Act, 1961. 1 propose to set up a Settlement Commission, on similar
'"l lines, for dealing with Customs and Central Excise disputes between
the Department and the assesses. I trust this will help in speedy
settlement of tax disputes." E
22. It is submitted that in spite of the above speech of the Finance
Minister in 1992, it was only in the Finance Bill 1998 that provisions were
made to insert Chapter XIV A in the Customs Act for creation of Settlement
Commission and the provisions relating to the Settlement Commission came
into effect vide Act 21 of 1998, Section I 02 w.e.f. 01.08.1998. In the Finance F
,,_ Bill of 1998, Clause I05 seeks to insert Chapter in the Customs Act, 1962 to
"' provide for setting up of a Customs and Central Excise Settlement Commission
on the lines of a similar commission already working under the Income Tax
Act, 1961.

Learned counsel for the petitioner further submitted that: G
i. Since the legislature itself has created Settlement Commission for
. .• •' generating Revenue and has also made provisions for release of
the goods on payment of duty and has also made provisions for
granting immunity from prosecution under the Customs Act, 1962
H
232 SUPREME COURT REPORTS [2007] 3 S.C.R.

A under the Indian Penal Code and also under the other Central
Law, it is clear that the intention of the Legislature was more on '"'-
Revenue aspect rather than prosecution and punishment aspect
or in continuing with multiple litigations. He submits that it would
be unjust unfair and unreasonable if a person is made to suffer
preventive detention mainly after his application for settlement is
B allowed to be proceeded with, and after realisation of the Customs
duties not only the goods are ordered to be released, but on
considering the co-operation extended by him in the settlement
proceedings, the Settlement Commission has also granted to him
immunity from prosecution under the Customs Act, 1962 as well
~
-
c as under the !PC. He further submits that this Court in the case
of Sadhu Roy has held that, if there is cast iron case against the
person, then he should be prosecuted rather than detained under
the preventive detention law, which is softer measure. He submits
that when under the law the person is immuned from prosecution
which is a stronger deterrent than detention, there is no reason
D as to why the same person should be detained preventively
under a softer measure.
ii. the act of detaining such person whose Settlement Application
under the statutory provisions of Customs Act, 1962 has been
allowed to be proceeded with and specifically whose case has
E been settled, would be discriminative and arbitrary as against the
person who does not approach the Settlement Commission and
does not settle their case and thus continue to damage the
economy of the country. Learned counsel submits that for the
reason of discrimination and arbitrariness of the detention order
F against a person who is willing to or has settled the case against
the petitioner, the detention Order is liable to be quashed and set
aside because it would become punitive and how would the _,,
"'
punitive Order would survive when the application for settlement
of the case with prayers for immunity from prosecution has been
allowed to be proceeded with and the case has been fully settled?
G
iii. when the Settlement Commission grants immunity to a person
under Section 127H of the Customs Act, 1962, the Settlement
Commission regularizes the act of the person which was supposed .•
'
to be violative of the provisions of the Customs Act, 1962,
meaning thereby that whatever was alleged to have been
H committed by the said person becomes non-est, as if he has not
ALPESH NA VINCHANDRA SHAH 1·. STA TE OF MAHARASHTRA [LAKSHMANAN. J.J 23 3

committed any breach of the Customs Act. 1962, the person A
becomes a person who has not at all committed any act or
omission in respect of the goods under section 111 of the Customs
Act, 1962 and therefore in such a situation where there is no act
or omission on the part of the person who approaches the
Settlement Commission and gets immunity from prosecution and B
penalty, a Detention Order under any clause of section 3( 1) (i) to
3(1 )(v) cannot sustain. Learned counsel for the petitioner,
therefore, submits since the petitioner's application for settlement
of the case has been allowed to be proceeded with and his case
has been finally settled, the impugned order of detention against
the Petitioner has become an order which is not sustainable in C
law.

24. Our attention to the preamble of COFEPOSA Act, 1974 was invited
which reads as under:

"COFEPOSA Act, 1974, as per its preamble is an Act to provide for D
preventive detention in certain cases for the purpose of conservation
and augmentation of foreign exchange and prevention of smuggling
activities and for matters connected therewith because the violations
of foreign exchange regulativns and smuggling activities are having
an increasingly deleterious effect on the national economy and thereby
a serious adverse effect on the security of the state." E
25. Learned counsel for the petitioner submits that it was clear from the
preamble of the COFEPOSA Act that only in certain cases the preventive
detention is provided for conservation and augmentation of foreign exchange
and preventing the smuggling activities which have deleterious effect on the
national economy. He submits that the above objective of the COFEPOSA F
, . "' Act, 1974 is fulfilled by the Order of the Settlement Commission in as much
as when a case is settled on payment of the Customs duty, there would be
no deleterious effect on the national economy, on the contrary, even if after
settlement of case the detention order is allowed to be continued, the legislative
intent in introducing the settlement provision would be defeated which may G
have adverse and deleterious effect on the national economy.

26. It is further submitted that the Settlement Commission is a forum of
legal criterion and the powers are drawn from the enacted statutes such as
Customs Act, 1962 and Central Excise Act, 1944 in the case of eligible persons,
who in addition to fulfilling the other criteria admit additional duty liability of H
234 SUPREME COURT REPORTS [2007] 3 S.C.R.

A a minimum of Rs. 2 lacs, the option of knocking the doors of Settlement
Commission is available, inter a/ia, in the cases under the Customs Act.
According to the learned counsel, the functional mechanism of the Settlement
Commission pertaining to the customs cases can be broadly described as
follows:-

B 27. On receiving an application, the statutory report is called for by the
Settlement Commission from the jurisdictional Commissioner. The Commission
considers the report and after hearing both the sides decides on the
admissibility of the case. Again after hearing both the sides, the Settlement
•
Commission, after being satisfied that a true and full disclosure has been
C made by the applicant, determines the duty liability, redemption fine in lieu
of confiscation and the penalty on the persons. Further, the question of
extending immunity from prosecution under the Customs Act, 1962, Indian
Penal Code and any other Central Acts is also decided by the Commission.
The Commission has got power to reject any application. Further the decisions
of the Settlement are not appealable in the regular course. Above all, once
D the Commission admits a case, it is vested with the exclusive powers of all
the Customs authorities till the finalization of the case.

28. In this regard it is apt to extract Sections 1278 to 1271 of the
Customs Act, 1962 which are as under: -

E "1278. Application for settlement ofcases. -(I) Any importer, exporter
or any other person (hereinafter in this Chapter referred to as the
applicant) may, at any stage of a case relating to him make an application
in such form and in such manner as may be specified by rules, and
containing a full and true disclosure of his duty liability which has not
been disclosed before the proper officer, the manner in which such
F liability has been incurred, the additional amount of customs duty
accepted to be payable by him and such other particulars as may be
specified by rules including the particulars of such dutiable goods in
respect of which he admits short levy on account of misclassification
or otherwise of goods, to the Settlement Commission to have the case
G settled and such application shall be disposed of in the manner
hereinafter provided :

Provided that no such application shall be made unless -

(a) the applicant has filed a bill of entry, or a shipping bill, in respect
H of import or export of goods, as the case may be, and in relation to
ALPESH NAVINCHANDRA SHAH v. STATE OF MAHARASHTRA [LAKSHMANAN, J.] 23 5

such bill of entry or shipping bill or a show cause notice has been A
issued to him by the proper officer;

(b) the additional amount of duty accepted by the applicant in his
application exceeds two lakh rupees :

Provided further that no application shall be entertained by the B
Settlement Commission under this sub-section in cases which are
pending in the Appellate Tribunal or any Court:

Provided also that no application under this sub-section shall be made
in relation to goods to which section 123 applies or to goods in
relation to which any offence under the Narcotic Drugs and C
Psychotropic Substances Act, 1985 (61 of 1985) has been committed:

Provided also that no application under this sub-section shall be made
for the interpretation of the classification of the goods under the
Customs Tariff Act, 1975 (51 of 1975).

(2) Where any dutiable goods, books of account, other documents or D
any sale proceeds of the goods have been seized under section 110,
the applicant shall not be entitled to make an application under sub-
section (I) before the expiry of one hundred and eighty days from the
date of the seizure.

(3) Every application made under sub-section (1) shall be accompanied
E
by such fees as may be specified by rules.

(4) An application made under sub-section (I) shall not be allowed to
be withdrawn by the applicant.

127C. Procedure on receipt of application under section 1278. - (1) F
On receipt of an application under section 127B, the Settlement
Commission shall call fo1 a report from the Commissioner of Customs
having jurisdiction and on the basis of the materials contained in such
report and having regard to the nature and circumstances of the case
or the complexity of the investigation involved therein, the Settlement G
Commission may, by order, allow the application to be proceeded with
or reject the application :

Provided that an application shall not be rejected under this sub-
section, unless an opportunity has been given to the applicant of
being heard : H
236 SUPREME COURT REPORTS [20011 J s.c'"'.'l

A Provided further that the Commissioner of Customs shall furnish such
report within a period of one month of the receipt of the communication )'.:-

from the Settlement Commission, failing which it shall be presumed
that the Commissioner of Customs has no objection to such application;
but he may raise objections at the time of hearing fixed by the
Settlement Commission for admission of the application and the date
B of such hearing shall be communicated by the Settlement Commission
to the applicant and the Commissioner of Customs within a period not
exceeding two months from the date of receipt of such application,
unless the presiding officer of the Bench extends the said period of
two months, after recording the reasons in writing.
+. ..
c (2) A copy of every order under sub-section (I) shall be sent to the
applicant and to the Commissioner of Customs having jurisdiction.

(3) Subject to the provisions of sub-section (4), the applicant shall,
within thirty days of the receipt of a copy of the order under sub-
section (I) allowing the application to be proceeded with, pay the
D
amount of additional duty admitted by him as payable and shall
furnish proof of such payment to the Settlement Commission.

(4) If the Settlement Commission is satisfied, on an application made
under sub-section (I) that the applicant is unable for good and ~

sufficient reasons to pay the amount referred to in sub-section (3),
E
within the time specified in that sub-section, it may extend the time
for payment of the amount which remains unpaid or allow payment
thereof by instalments, if the applicant furnishes adequate security for
the payment thereof.

F (5) Where the additional amount of customs duty referred to in sub-
section (3) is not paid by the applicant within the time specified or
extended period, as the case may be, the Settlement Commission may ..: ....
direct that the amount which remains unpaid, together with simple
interest at the rate of eighteen per cent per annum or at the rate
notified by the Board from time to time on the amount remaining
G unpaid, be recovered as the sum due to the Central Government by
the proper officer having jurisdiction over the applicant in accordance
with the provisions of section 142. {

(6) Where an application is allowed to be proceeded with under sub-
section (I), the Settlement Commission may call for the relevant records
H
ALPESH NA VINCHANDRA SHAH v. STATEOF MAHARASHTRA [LAKSHMANAN, J) 23 7

from the Commissioner of Customs having jurisdiction and after A
examination of such records, if the Settlement Commission is of the
opinion that any further enquiry or investigation in the matter is
necessary, it may direct the Commissioner (Investigation) to make or
cause to be made such further enquiry or investigation and furnish
a report on the matters covered by the application and any other B
matter relatirig to the case.

(7) After examination of the records and the report of the Commissioner

. ...-
of Customs received under sub-section (I), and the report, if any, of
the Commissioner (Investigation) of the Settlement Commissioner under
sub-section (6), and after giving an opportunity to the applicant and C
to the Commissioner of Customs having jurisdiction to be heard,
either in person or through a representative duly authorised in this
behalf, and after examining such further evidence as may be placed
before it or obtained by it, the Settlement Commission may, in
accordance with the provisions of this Act, pass such order as it
thinks fit on the matters covered by the application and any other D
·matter relating to the case not covered by the application, but referred
to in the report of the Commissioner of Customs or the Commissioner
(Investigation) under sub-section (1) or sub-section (6).

(8) Subject to the provisions of section 32A of the Central Excise Act,
1944 (1 of I 944), the materials brought on record before the Settlement . E
Commission shall be considered by the Members of the concerned
Bench before passing any order under sub-section (7) and, in relation
to the passing of such order the provisions of section 320 of the
Central Excise Act, 1944 shall apply.

(9) Every order passed under sub-section (7) shall provide for the F
terms of settlement including any demand by way of duty, penalty or
interest, the manner in which any sum due under the settlement shall
be paid and all other matters to make the settlement effective and shall
also provide that the settlement shall be void if it is subsequently
found by the Settlement Commission that it has been obtained by G
fraud, or misrepresentation of facts.

j. (IO) Where any duty payable in pursuance of an order under sub-
'
section (7) is not paid by the applicant within thirty days of the
receipt of a copy of the order by him, then, whether or not the
Settlement Commission has extended the time for payment of such H
238 SUPREME COURT REPORTS [2007] 3 S.C.R.

A duty or has allowed payment thereof by instalments, the applicant
shall be liable to pay simple interest at the rate of eighteen per cen.
per annum or at such other rate as notified by the Board on the
amount remaining unpaid from the date of expiry of the period of
thirty days aforesaid.

B (11) Where a settlement becomes void as provided under sub-section
(9) the proceedings with respect to the matters covered by the
settlement shall be deemed to have been revived from the stage at
which the application was allowed to be proceeded with by the + •
Settlement Commission and proper officer may, notwithstanding
anything contained in any other provision of this Act, complete such
c proceedings at any time before the expiry of two years from the date
of the receipt of communication that the settlement became void.

127D. Power of Settlement Commission to order provisional
attachment to protect revenue. - (I) Where, during the pendency of
any proceeding before it, the Settlement Commission is of the opinion
D'
that for the purpose of protecting the interests of the revenue it is
necessary so to do, it may, by order, attach provisionally any property
belonging to the applicant in such manner as may be specified by
rules.

(2) Every provisional attachment made by the Settlement Commission
E I
under sub-section ( 1) shall cease to have effect from the date the
sums due to the Central Government for which such attachment is
made are discharged by the applicant and evidence to that effect is
submitted to the Settlement Commission.

F 127E. Power of Settlement Commission to reopen completed
proceedings. - If the Settlement Commission is of the opinion (the
reasons for such opinion to be recorded by it in writing) that, for the
proper disposal of the case pending before it, it is necessary or
expedient to reopen any proceeding connected with the case but
which has been completed under this Act before application for
G settlement under section 127B was made, it may, with the concurrence
of the applicant, reopen such proceeding and pass such order thereon
as it thinks fit, as if the case in relation to which the application for ,• •
settlement had been made by the applicant under that section covered
such proceeding also : ·

H Provided that no proceeding shall be reopened by the Settlement
ALPESHNAVINCHANDRA SHAH v. STA TEOF MAHARASHTRA [LAKSHMANAN, J] 239

-'I
Commission under this section after the expiry of five years from the A
date of application under sub-section ( l) of section I27B.

127F. Power and procedure ofSettlement Commission. - (I) In addition
to the powers conferred on the Settlement Commission under Chapter
V of the Central Excise Act, 1944 (I of 1944), it shall have all the
powers which are vested in an officer of the customs under this Act B
or the rules made thereunder.

.>c
(2) Where an application made under section 1278 has been allowed
• to be proceeded with under section 127C, the Settlement Commission
shall, until an order is passed under sub-section (7) of section 127C,
have, subject to the provisions of sub-section (6) of that section, c
exclusive jurisdiction to exercise the powers and perfonn the functions
of any officer of customs or Central Excise Officer as the case may be,
under this Act or in the Central Excise Act, 1944 (I of 1944), as the
case may be, in relation to the case.

(3) In the absence of any express direction by the Settlement D
Commission to the contrary, nothing in this Chapter shall affect the
operation of the provisions of this Act in so far as they relate to any
~· matter other than those before•the Settlement Commission.

(4) The Settlement Commission shall, subject to the provisions of
Chapter V of the Central Excise Act, 1944 (I of 1944) and this Chapter, E
have power to regulate its own procedure and the procedure of
Benches thereof in all matters arising out of the exercise of its powers,
or of the discharge of its functions, including the places at which the
Benches shall hold their sittings.

127G. Inspection, etc., of reports. - No person shall be entitled to F
~

"" inspect, or obtain copies of, any report made by any officer of the
Customs to the Settlement Commission; but the Settlement Commission
may, in its discretion, furnish copies thereof to any such person on
an application made to it in this behalf and on payment of such fee
as may be specified by rules : G
a Provided that, for the purpose of enabling any person whose case is
• +' under consideration to rebut any evidence brought on record against
him in any such report, the Settlement Commission shall, on an
application made in this behalf, and on payment by such person of
such fee as may be specified by rules, furnish him with a certified H
240 SUPREME COURT REPORTS [2007] 3 S.C.R.

A copy of any such report or part thereof relevant for the purpose. L

127H. Power of Settlement Commission to grant immunity from
prosecution and penalty. - (I) The Settlement Commission may, if it
is satisfied that any person who made the application for settlement
under section 1278 has co-operated with the Settlement Commission
B in the proceedings before it and has made a full and true disclosure
of his duty liability, grant to such person, subject to such conditions
as it may think fit to impose, immunity from prosecution for any
offence under this Act or under the Indian Penal Code (45 of 1860) 7-- ~

or under any other Central Act for the time being in force and also
either wholly or in part from the imposition of any penalty, fine and
c interest under this Act, with respect to the case covered by the
settlement:

Provided that no such immunity shall be granted by the Settlement
Commission in cases where the proceedings for the prosecution for
any such offence have been instituted before the date of receipt of
D
the application under section 1278.

(2) An immunity granted to a person under sub-section (I) shall stand
<'
withdrawn if such person fails to pay any sum specified in the order
r
of the settlement passed under sub-section (7) of section 127C within
E the time specified in such order or within such further time as may be
allowed by the Settlement Commission, or fails to comply with any
other condition subject to which the immunity was granted and
thereupon the provisions of this Act shall apply as if such immunity
had not been granted.

F (3) An immunity granted to a person under sub-section (I) may, at any
time, be withdrawn by the Settlement Commission, if it is satisfied that ..; ~

such person had, in the course of the settlement proceedings, concealed
any particulars, material to the settlement or had given false evidence,
and thereupon such person may be tried for the offence with respect
to which the immunity was granted or for any other offence of which
G he appears to have been guilty in connection with the settlement and ~

shall also become liable to the imposition of any penalty under this
Act to which such person would have been liable, had no such ....
immunity been granted.

127-1. Power of Settlement Commission to send a case back to the
H proper officer.-(!) The Settlement Commission may, ifit is of opinion
ALPESH NA VINCHANDRASHAH v. STATE OF MAHARASHTRA [LAKSHMANAN. J.] 24 J

that any person who made an application for settlement under section A
-·~ 1278 has not cooperated with the Settlement Commission in the
proceedings before it, send the case back to the proper officer who
shall thereupon dispose of the case in accordance with the provisions
of this Act as if no application under section 1278 had been made.

(2) For the purpose of sub-section (I), the proper officer shall be B
entitled to use all the materials and other information produced by the
assessee before the Settlement Commission or the results of the
inquiry held or evidence recorded by the Settlement Commission in
~

' the course of the proceedings before it as if such materials, information,
inquiry and evidence had been produced before such proper officer
or held or recorded by him in the course of the proceedings before c
him.

(3) For the purposes of the time limit under section 28 and for the
purposes of interest under section 28AA, in a case referred to in sub-
section (I), the period commencing on and from the date of the
application to the Settlement Commission under section l 27B and D
ending with the date of receipt by the officer of customs of the order
of the Settlement Commission sending the case back to the officer of
., . customs shall be excluded .
,.
127 J. Order ofsettlement to be conclusive. - Every order of settlement
passed under sub-section (.7) of section 127C shall be conclusive as E
to the matters stated therein and no matter covered by such order
shall, save as otherwise provided in this Chapter, be reopened in any
proceeding under this Act or under any other law for the time being
in force."
F
29. Learned counsel for the petitioner further submits that the Settlement
\ > Commission vide final order dated 07.03.2006 has allowed the settlement
application and granted complete immunity to the petitioner as well as his
brother from penalty and prosecution. In these circumstances, the detention
of the petitioner in pursuance to the impugned order of detention would result
in blatant infringement of Article 21 of the Constitution of India as the order G
has been rendered totally non est in the eyes of law. It is further submitted
~ .. that in view of the acceptance of the settlement Application by the Settlement
' Commission, all matters stand concluded and settled. In these circumstances,
the execution of the detention order is wholly uncalled for, unwarranted and
absolutely illegal, being based on wrong reasons and the execution would be
H
242 SUPREME COURT REPORTS [2007] 3 S.C.R.

A apparently m<,1la fide. The very constitution of the Settlement Commission and
~- --
insertion of the provisions relating to the settlement of the cases under the
Act is to achieve the twin objective of collection of evaded revenue as well
as the prevention of further evasion through similar practices. Necessarily
implying thereby that by making true and full disclosure of his liabilities and
B settling them, the prejudicial activities of the evader are put to an end.
Therefore, the detention order on the same accusations that have been
considered by the Settlement Commission would be rendered otiose and not
worthy of execution.
-j-
'
30. Learned counsel would further submit that a perusal of section! 27H
c would clearly reveal that the Settlement Commission has to arrive at a complete
satisfaction that the Applicant before it has made a full and true disclosure
of his duty liability and while granting the immunity from prosecution/penalty,
the Commission is competent to impose "such conditions as it may think fit".
It is therefore crystal clear that while allowing the settlement of the case, the
Settlement Commission has comprehensively looked into the aspect of sealing
D
the opportunity of any further indulgence of the Applicants in any such
activity of evasion of duty.

31. Section 127J of the Customs Act, 1962, categorically stipulates that
any matter that has been settled by the Commission would be conclusive and
E the same cannot be re-opened in any proceeding under the Customs Act,
1962, or "under any other law for the time being in force". Viewed in this
perspective, the detention of the petitioner on the same grounds that have
been considered by.the settlement Commission would tantamount to a gross
abuse of the process of law.

F 32. Learned counsel further submits that the deterrent effect inflicted by
the settlement Commission is more effective and is foolproof than the method
of preventive detention. Law has to select the method, which is objective,
transparent and effective in preference over the method, which is subjective,
unaccountable and ineffective.

G 33. Learned counsel further invited our attention to the law that has
been enunciated by this Court in R.K. Garg v. Union of India, (1981) 4 SCC
675 which read as under: ,.
'
"The Court must always remember that "legislation is directed to
practical problems, that the economic mechanism is highly sensitive
H
ALPESHNA VIN CHANDRA SHAH v. STATE OF MAHARASHTRA [LAKSHMANAN,J.] 24 J

and complex, that many problems are singular and contingent, that A
_., laws are not abstract propositions and do not relate to abstract units
and are not to be measured by abstract symmetry" ................ Every
legislation particularly in economic matters is essentially empiric and
it is based on experimentation or what one may call trial and error
method and therefore it cannot provide for all possible situations or
anticipate all possible abuses. There, may be crudities and inequities B
in complicated experimental economic legislation but on that account
alone it cannot be struck down as invalid ................... There may even
be possibilities of abuse, but that too cannot of itself be a ground for
invalidating the legislation, because it is not possible for any legislature
to anticipate as if by some divine prescience, distortions and abuses C
of its legislation which may be made by those subject to its provisions
and to provide against such distortions and abuses .... "

34. According to the petitioner's counsel, the case of the petitioner
squarely falls with the said exceptions and thus the impugned detention order
cleserves to be set aside. He would also further submit that the case of the D
petitioner is squarely covered by the ratio laid down by this Court in Additional
Secretary to Government of India & Ors. v. Smt. Alka Subhash Gadia & Anr.,
[1992] SCC Supp. I 496 wherein this Court, inter alia, has held as under: -

" .... Thirdly, and this is more important, it is not correct to say that the
courts have no power to entertain grievances against any detention E
order prior to its execution. The courts have the necessary power and
they have used it in proper cases as has been pointed out above,
although such cases have been few and the grounds on which the
courts have interfered with them at the pre-execution stage are
necessarily very limited in scope and number, viz., where the courts F
are Prima facie satisfied (i) that the impugned order is not passed
under the Act under which it is purported to have been passed, (ii)
that it is sought to be executed against a wrong person, (iii) that it
is passed for a wrong purpose, (iv) that it is passed on vague,
extraneous and irrelevant grounds or (v) that the authority which
passed it had no authority to do so ... " G

... 35. This Court has further analysed and discussed the ratio laid down
in Alka Subhash Gadia (supra) in the matter of Subhash Muljima/ Gandhi
v. L.Himingliana and Anr. reported in [1994] 6 SCC 14 wherein this Court has
held as under:-
H
244 SUPREME COURT REPORTS (2007] 3 S.C.R.

A "11. ..... Bound as we are by the above judgments, we must hold that
.,.•
the other contingencies, if any, must be of the same species as of the
five contingencies referred to therein ... "

36. Learned counsel submitted that the law has to adopt a progressive
approach and when an order of detention has been rendered infructuous by
B the supervening circumstances, as in the present case, permitting the execution
of the same would be a draconian measure unacceptable to the settled tenets
of justice, law and equity.
-j.
37. Learned counsel cited the case of Pawan Bhartiya v. Union of <

India, reported in [2003] 11 SCC 479 wherein this Court has held as under:
c
"4 ... the custom duty which was required to be paid was paid by them
before the execution of the detention orders. Despite this fact the
detention order passed against the appellant was not revoked even
though he has also paid the custom duty as demanded ...
D 5... the fact of payment of duty in the cases detected against these
persons may act as a deterrent against their chance of indulging in
similar prejudicial activities in future since this may adversely affect
their financial backbone ... "
(

38. Learned counsel submitted that the ratio of the aforesaid case
E wherein the detention order was quashed at the pre-detention stage especially
taking into account the need for execution of the order in view of payment
of duties etc. is also applicable to the facts of the present case and in fact
the petitioner is placed in a much better situation as his case has also been
settled by the statutory process and has been granted complete immunities
F owing to true and full disclosure and full cooperation in the settlement
proceedings. It is further submitted that the factum of settlement of the matter
as well as the consequent grant of immunities had duly been conveyed to the '(

detaining authority i.e. respondent No.2 by the Settlement Commission. The
Detaining Authority was, therefore, bound to consider the desirability and
need for execution of the impugned detention order in view of the dramatically
G changed scenario. According to the learned counsel, after the settlement of
the case, the entire controversy stands buried and settled warranting forthwith
termination of the impugned detention order. Arguing further, he submitted ;
'-·
that a citizen's right of personal liberty under Article 21 of the Constitution
cannot be deprived of by the arbitrary decision of the statutory authority and,
therefore, the order of detention so made is always subject to judicial scrutiny
H
ALPESH NA VIN CHANDRA SHAH,,, STA TE OF MAHARASHTRA [LAKSHMANAN, J.) 24 5

and review on the touchstone of relevance and reasonableness, fair play, A
natural justice, equality and non-discrimination. Considering the entire factual
matrix in juxta position with the legal issues involved, the only inference
according to the petitioner's counsel that can be legitimately drawn is that the
execution of such null and void detention orders would only be punitive and
not preventive in any manner whatsoever. Learned counsel for the petitioner B
already invited our attention to the case of Alka Gadia (supra) to the effect
that the writ petition at pre-execution stage is fully maintainable. The relevant
observation of the extract of this Court is as under:-

"Thirdly, in the rare cases where the detenu, before being served with
them, learns of the detention order and the grounds on which it is C
made, and satisfies the Court of their existence by proper affirmation,
the Court does not decline to entertain the writ petition even at the
pre-execution stage, of course, on the very limited grounds stated
above,"

39. It is, therefore, prayed that the detention order be quashed and set D
aside and directing the respondents to set the petitioner at liberty forthwith.

40. Mr. Ravindra Keshavrao Adsure, learned counsel for the second
\
respondent submitted that the Detaining Authority has exercised their powers
'\'
conferred by Section 3( I) of COFEPOSA Act and has issued detention order
dated 12.01.2005. It is submitted that the detention order was passed after E
carefully considering the entire documents of the proposal sent by the
sponsoring authority and after being subjectively satisfied that it is essential
for preventing the detenu from indulging in prejudicial activities in future and
accordingly the order of detention against the petitioner as well as his brother
was passed. Learned counsel also invited our attention to the judgment of
this Court in Naresh Kumar Goyal v. Union ofIndia, reported in [2005] 8 SCC
F
.. .... 276 wherein this Court has observed that Courts have power to entertain
grievances against any detention order prior to its execution only in proper
cases and the grounds on which the courts interfere the detention order at
the pre-execution stage are necessarily very limited and in scope and number.
G
41. Therefore, when the courts are Prima facie satisfied (i) that the
impugned order is not passed under the Act under which it is purported to
>
' have been passed (ii) that it is sought to be executed against a wrong person,
(iii) that it is passed for a wrong purpose, (iv) that it is passed on vague,
extraneous and irrelevant grounds, or (v) that the authority which passed it
had no authority to do so. Therefore, the impugned order does not suffer from H
246 SUPREME COURT REPORTS [2007] 3 S.C.R.

A any infirmity as stated above and accordingly, the present writ petition at pre-
execution stage of detention order is not maintainable. Hence, the present writ
petition is required to be dismissed.

42. Learned counsel for the respondent further submitted that the
admittance of the case and imposition/condonation of fine and/or penalty is
B the prerogative of the Settlement Commission and application praying immunity
from fine, penalty and prosecution matters pertain to the jurisdiction of
Settlement Commission. But, revocation of the detention order issued in
respect of the detenue is different issue and not governed by provisions of
-1 1
section 127F(2) of the Customs Act. It was submitted that in a representation
C made before Settlement Commission in Shri Vipul Gor v. Sonam Enterprises,
the Settlement Commission in its order dated 15.12.2005 rejected the plea of
the applicant therein, for making suitable recommendations to the Detaining
Authority for revocation of his detention order. In the present case the
petitioner relied upon the case of Hiralal Harilal Bhagvati v. C.B.l (supra).
The said relied upon case was a case of duty evasion and the appellant
D therein was booked by Customs Department and thereafter, custom duty was
paid under Kar Vivad Samadhan Scheme (K.V.S.S) and further in the criminal
proceedings under Section 1208 and 420 of I.P.C initiated by C.B.I was
quashed by this Court. The above cited case is different from the present
case, as in the case in hand, the detention order was issued under COFEPOSA
E Act against the petitioner with objective to prevent the nefarious activities
in future. Therefore the immunity is granted by Settlement Commission from
fine, penalty and prosecution under the provisions of Customs Act, 1962 and
I.P.C have no bearing on the order issued by the Detaining Authority which
is very much legal and the same needs to be upheld.

F 43. We have carefully considered the rival submissions with reference
to the entire pleadings and the provisions of Section 1278-127J of the Customs
Act and the provisions of the COFEPOSA Act. ¥ -

44. We have also perused the annexures and records filed along with
the writ petition. In our opinion, the argument advanced by learned counsel
G for the respondent merit acceptance. As rightly pointed out by learned counsel
for the respondent that the admittance of the case and imposition/condonation
of fine or penalty is the prerogative of the Settlement Commission and <
'
application praying immunity from fine/penalty and prosecution are matters
pertains to the jurisdiction of the Settlement Commission but the revocation
H of the detention order issued in respect of the detenu is different issue and
ALPESHNAVINCHANDRA SHAH r. STATE OF MAHARASHTRA [LAKSHMANAN, J.] 247

not governed by the provisions of Section l 27F(2) of the Customs Act. A
>I
45. At the time of hearing, learned counsel for the petitioner relied upon
the case of Hirata/ Hari/al Bhagwati v. C.B.I (supra). According to learned
counsel for the respondent the said relied upon case was a case of duty
evasion and apprllant therein was booked by customs authority and therefore,
customs duty was paid under KVSS and further in the criminal proceedings B
under Section I20B and 420 !PC initiated by CBI was quashed by this Court.
Therefore, it is admitted that the above cited case is different from the present
...,__
case as in the case in hand the detention order was issued under the COFEPOSA
' Act against the petitioner with objective to prevent to the nefarious activities
in future. Therefore, the Immunity granted by the Settlement Commission from c
fine, penalty and prosecution under the provisions of the Customs Act and
!PC have no bearing on the order of detention passed under the COFEPOSA
Act. Therefore, it is contended that the detention order issued by the Detaining
Authority is very much legal and the same needs to be upheld.

46. The Settlement Commission was constituted with the aim and D
objective of settling the tax evasion issues and by virtue of disclosure by tax
offender; they gain immunity from fine/penalty which is otherwise mandatory
under the provisions of tax laws. But, such opportunity is only extended to
'>
.. one tax offender but not available to habitual smugglers. For the persons
involved in smuggling activities, other than the provisions made for the E
prosecution under the Customs Act, 1962, an equal deterrent is emphasized
under the provisions of the COFEPOSA Act, 1974 i.e. provisions for preventive
detention. Such preventive detention prohibits smugglers from indulging in
further smuggling activities. In the present case the investigation reveals the
consistent involvement of the petitioner-detenue and his brother Kamlesh
F
Navinchandra Shah in smuggling activities, therefore, the Detaining Authority
on the basis of evidence placed before him felt it necessary to issue the
" detention orders in respect of both the detenues in order to prevent them from
pre-judicial activities in future. Accordingly the impugned order is justifiable
in the eyes of law and present Writ Petition deserves to be dismissed.
G
47. It is submitted that the orders of detention under COFEPOSA Act
was issued in respect of the petitioner and his brother vide orders dated
12.1.2005 and 31.1.2005 respectively whereas they had made an application
" ' before the settlement Commission under section 127B of the Customs Act,
1962 on 19.4.2005. At the time of issue of the said Detention Orders, the
H
248 SUPREME COURT REPORTS (2007) 3 S.C.R.

A Detaining Authority was not aware of the detentues' intention of approaching ·'
the Settlement Commission. The immunity from prosecution was granted to
the petitioner and his brother by virtue of final order dated 8.3.2006 of
Settlement Commission. Since the Settlement Commission is an authority to
settle the duty liability with the discretion to grant immunity in respect of fine,
B penalty and prosecution, it cannot be construed that anybody approaching
the Settlement Commission, ceases to take up Settlement Commission and the
detention order under COFEPOSA Act both are distinctly different and
objectives of both the orders are also different. Therefore, it is wrongly
construed by the petitioner that once the Settlement Commission has granted
unconditional immunities, the present detention order is contrary to the settled
C position of law.
48. Nowhere it is stated in the provisions of Section 127H of the
Customs Act, 1962 and in the order of the Settlement Commission dated
08.03.2006 that the opportunity of further indulgence in smuggling activities
D is sealed or plugged. In our view, the Settlement Commissioner's order only
dealt with true and full disclosure of the disputed duty and acceptance of the
entire duty, liability by the petitioner and his brother. Nowhere it is mentioned
in the Settlement Commission's order that the petitioner would not indulge in
smuggling of goods in future. Therefore, in order to prevent the detenu from
indulging in smuggling activities, the said detention order was passed and
E there is no illegality in the detention order. In the instant case, the customs
duty of Rs.1.4 crores was sought to be evaded by the petitioner and his
brother was accepted in full by them. This acceptance of entire duty demanded
in the impugned show cause notice was interpreted as full and true disclosure
by the Settlement Commission and as such the petitioner and the co-applicants
p were directed to pay the said amount of duty during the Settlement Commission
proceedings. The said customs duty of Rs.1.4 crores was expected to be paid
by the petitioner and others at the time of import of the impugned consignments
during September, 2004. However, the said amount of evaded customs duty •
was ordered to be paid in the month of March, 2006 by the Settlement
G Commission. The Settlement Commission, while extending the benefits as
envisaged in the true spirit of settlement, have granted immunity from fine,
penalty and prosecution under the Customs Act, 1962 and !PC. The final
order of the Settlement Commission has, by no means, undermined the
surroundings of the offence committed by the petitioner and his brother. In
the admission order No.36/Customs/2005 of the Settlement Commission dated
H 03.01.2006, the Commission also distinctly demarcated the area of jurisdiction
,' -
ALPESH NAVINCHANDRA SHAH 1•. STATE OF MAHARASHTRA [LAKSHMANAN, J ] 249

~ '.(
of the Settlement Commission and the matter ofCOFEPOSA. The Settlement A
Commission adhered strictly to the aspect of levy of customs duty and on
the basis of the full and true disclosure by the petitioner and others, in that
respect, settled the case by directing full payment of customs duty and
having done so, extended the benefit of immunity from fine, penalty and
prosecution.
B
49. Thus the matters of Settlement Commission and the COFEPOSA are
altogether different issues, the orders of the respective authorities should not
• + and cannot be binding or influencing each other. As such the outcome of the
Settlement Commission order should not have any bearing on the detention
order. Concluding his argument, learned counsel for the respondent submitted
that the preventive detention under COFEPOSA is distinctly different from
c
the prosecution under the Customs Act, 1962 and IPC, the sanctity of the
detention order issued by the second respondent as the Detaining Authority,
should be upheld and the same should be ordered to be served upon the
petitioner in the interest of justice.
D
50. Though the matter was argued by learned counsel for the respondent
on merits, learned counsel for the respondent at the time of hearing in fairness
placed before us the reported opinion dated 05.06.2006 of the Advisory Board
constituted under the COFEPOSA Act, 1974 in respect of the detenu Kamlesh
Navinchandra Shah, the brother of the petitioner.
E
51. Para 6 of the order dated 04.05.2006 of the Advisory Board
constituted under Section 8(a) of the Act 52 of 74 by the Government of
Maharashtra was placed before us. We have perused the said order. In para
6, the Advisory Board _has observed as under:

" ... After the final order passed by the Settlement Commission of F
,,;
- Customs and Central Excise, the detention order has been executed.
The detenue and his brother had extended full co-operation and full
customs duty as demanded by the Revenue has been paid and the
case finally settled. The Commission had given unconditional immunity
from prosecution as well as penalty. A copy of the order has been
G
forwarded by the Commission to the Detaining Authority and yet the
.. ~
'
detention order was executed on his brother i.e. detenue Kamlesh
Shah. He further stated that he challenged the order of his detention
at pre-execution stage in the Supreme Court and Supreme Court has
given Interim stay of the operation of impugned order."
H
250 SUPREME COURT REPORTS [2007) 3 S.C.R.

'A 52. It is thus seen that the Settlement Commission has, in its order,
under the head 'penalty' and 'prosecution' granted immunity from penalty
and prosecution to the co-applicant and in these circumstances the Advisory
Board was of the opinion that there was no sufficient cause for the continued
detention. Learned counsel for the respondent has also placed before us the
B opinion of the Advisory Board which reads thus:

"The Advisory Board is of the opinion that there is no sufficient
cause for the detention of abovenamed detenue under section 3( 1) of
COFEPOSA Act, 1974. + "'
53. The consequential communication dated 05.06.2006 and the order
C dated 05.06.2006 were also placed before us which read thus:-
"The Advisory Board has reported that there is no sufficient cause
for the detention of Shri Kamlesh Navinchandra Shah. The government
has accordingly revoked the detention order issued against him. The
revocation order (in triplicate) is enclosed herewith. One copy of
D revocation order should be served on the detenue concerned and the
duplicate copy of the same alongwith signature of the detenue with
date should be returned immediately to the undersigned. Third copy
· should be retained for your record."

"ORDER
E
Whereas, an order No. PSA-1204/21(1)/SPL-3(A), dated the 31st January
2005, has been passed by the Principal Secretary (Appeals and Security)
to the Government of Maharashtra, home Department and Detaining
Authority under section 3(1) of the Conservation of Foreign Exchange
and Prevention of Smuggling Activities Act, 1974 (52 of 1974) for the
F detention of Shri Kamlesh Navinchandra Shah,

Whereas, the case of Shri Kamlesh Navinchandra Shah was placed
before tht Advisory Board, which is of the opinion that there is no
sufficient cause for his detention; and
G
Whereas, the Government of Maharashtra has fully considered the
report of the Advisory Board and material on record;

Now, therefore, in exercise of the powers conferred by Section 8(f) of
H the aforesaid Act, the Government of Maharashtra hereby revokes the
ALPESH NA VINCHANDRA SHAH v. STATE OF MAHARASHTRA [LAKSHMANAN, J.] 251

- )' aforesaid Detention Order and further directs that said Shri Kamlesh A
Navinchandra Shah be released forthwith on receipt of this order."

54. Another decision cited by learned counsel for the petitioner in
V.C.Mohan v. Union ofIndia, reported in [2002] 3 SCC 451 and the observations
made thereunder can also be usefully applied to the facts of this case.
B
55. In the case of Pawan Bhartiya v. Union of India and Anr., [2003]
11 SCC 479, the appellant challenged the detention order dated 30.07.1996
passed under Section 3(1) of the COFEPOSA Act, 1974 before the High Court
of Delhi. That petition was rejected by the High Court by holding that it is
not a fit case where any interference is called for before the execution of the
order of detention. At the time of hearing, learned counsel for the appellant C
pointed out that similar detention orders were passed against 6 persons
during the period from 07.12.1995 to 12.08.1996 and further pointed out that
5 out of 6 detention orders were revoked by the competent authority on the
ground that the customs duty which was required to be paid was paid by
them before the execution of the detention orders. Despite this fact the D
detention order passed against the appellant was not revoked even though
he has also paid the customs duty as demanded. It has also been pointed out
that the sponsoring authority submitted its report before the Detaining
Authority to revoke the detention order which was passed against the
appellant. The Joint Secretary to the Government ciflndia, Ministry of Finance
has filed an affidavit in this case wherein it is submitted that similar 5 E
detention orders were revoked. This Court (M.B. Shah and Brijesh Kumar, JJ)
in para 6 & 7 observed as under:-

"6. In our view, there is no reason to diseriminate the appellant and
the reason givep by the authority in not revoking the detention order
could hardly be justified. It is true that normally before the execution F
of the detention order the same is not Pequ ired to be quashed and set
aside. However, considering the peculiar facts and circumstances of
the case, in our view, no purpose will be served by continuing the
detention order. It is pointed out that the appellant has ceased his
activities in the field of import or export. He has already paid the tax G

- with penalty as demanded by the authority. There is nothing on
record that since the last five years the appellant has indulged in any
such activity. It is to be noted that the purpose of passing the
detention order is to prevent the detenu from continuing his prejudicial

H
252 SUPREME COURT REPORTS [2007) 3 S.C.R.

A 7. Hence, in view of the facts and circumstances of the present case,
1' -
the impugned order dated 30-7-1996 passed by the Joint Secretary to
the Government of India under Section 3( I) of COFEPOSA is quashed
and set aside. The appeal is allowed accordingly."

56. The above judgment, in our view, squarely applies to the facts and
B circumstances of the case on hand. In the instant case, the petitioner's
brother has already been released on the ground there was no sufficient
cause for the detention of the detenu under Section 3( I) of the Act. The
Government also accordingly revoked the detention order issued against him
t ~

and the Government of Maharashtra, after considering the report of the
Advisory Board and the material on record and in exercise of the powers
c conferred by Section 8(t) of the COFEPOSA Act revoked the aforesaid
detention order and further directed that Kamlesh Navinchandra Shah be
released forthwith on receipt of the said order dated 05.06.2006. In our opinion,
the petitioner before us who is also similarly placed and who has also paid
the customs duty etc. pursuant to the order of the Settlement Commission and
D got the unconditional immunity by the Settlement Commission is entitled to
the same treatment. At the time of hearing, it is pointed out that the petitioner
has ceased his activities in the field of import or export and has already paid
the tax with penalty as demanded by the authority and there is nothing on
record that the appellant has indulged in any such activity in the recent past.
It is settled by law that the purpose of passing the detention order is to
E prevent the detenu from continuing his prejudicial activity but not to punish
him.

57. Considering the peculiar facts and circumstances of the case, no
purpose will be served by continuing the detention order and we, therefore,
F allow the writ petition and quash and set aside the detention order bearing
No. PSA 1204/21(2)/SPL-3(A) dated 12.01.2005.
,.... ._
58. The writ petition is ordered accordingly.

B.S. Writ Petition allowed.

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