Holding

A wrongful claim for duty drawback falls within the prohibition limb of Section 135(1)(a) of the Customs Act, so the complaint prima facie discloses an offence and the High Court correctly refused to quash the proceedings.

Summary

Gurcharan Singh, a customs officer, along with others, created fictitious firms to claim a duty drawback of Rs 1.04 crore for allegedly exported readymade garments that were over‑invoiced and of inferior quality. A complaint under Sections 132 and 135 of the Customs Act led to cognizance by a magistrate; the appellant’s discharge application and a subsequent petition to quash the proceedings were dismissed by the Delhi High Court. The appellant argued that Section 135, as amended in 2003, did not cover wrongful drawback claims and that the amendment created a new offence, rendering the High Court’s order erroneous. The Supreme Court held that Section 135(1)(a) comprises two disjunctive parts – duty evasion and prohibition – and that a wrongful claim of drawback falls within the prohibition limb, especially under Section 113. The complaint therefore prima facie disclosed an offence, and the High Court was correct in refusing to quash the case. The appeal was dismissed.

Issues considered

The scope of Section 135 of the Customs Act, 1962, after the 2003 amendment, especially whether it covers wrongful claims for duty drawback.
Whether the amendment to Section 135 is merely clarificatory or creates a new offence, affecting its retrospective application.
Whether the allegations in the complaint prima facie disclose an offence under Section 135, justifying the High Court's refusal to quash the proceedings.

Legislation cited

Customs Act, 1962s. 109, s. 11, s. 113, s. 132, s. 135, s. 135(1)(a), s. 135(1)(b), s. 136, s. 14, s. 2(33), s. 50, s. 8
Finance Act, 2003s. 109
Foreign Exchange Regulation Act, 1973s. 18

Subjects

duty drawbackcustoms fraudSection 135prohibited goodsfalse firmsover‑invoicingcriminal procedurequash of proceedingspenal statute interpretationcircumstantial evidence

Judgment

[2008) 5 S.C.R. 856

A GURCHARAN SINGH "!' ."....
v.
DIRECTORATE OF REVENUE INTELLIGENCE
(Criminal Appeal No. 576 of 2008)
APRIL 1, 2008
B ,...
[S.B. SINHA AND V.S. SIRPURKAR, JJ.]
)><

Customs Act, 1962: s.135 - Floating of fictitious firms
with intention to obtain duty drawback- Cognizance of offence
c taken under s. 135 - High Court refused to quash proceedings
under s.482 of the Code - Correctness of- Held: Correct as
allegation made in complaint prima facie disclosed offence
under s.135 - Code of Criminal Procedure, 1973 - s.482.
Accused No. 5 was a Customs Officer. He floated
D various firms in false and fictitious names. A claim for duty
drawback amount was made for alleged export of
readymade garments by the said firms under certain
~ .. '
assumed names to the extent of Rs.1.04 crores. Appellant
alongwith other accused made statements under s.8 of
E the Customs Act corroborating the allegations made
against them that they had conspired with each other in
regard to export of inferior quality of readymade garments
which had been over-Invoiced.
Cognizance of the said offence was taken by the
F Additional CMM. An application for discharge was filed
by the appellant which was dismissed. An application for 'f -
quashing of the said order was thereafter filed before the
High Court, which was also dismissed.

G In appeal to this Court, appellant contended that duty
drawback having not been included in s.135 of the
Customs Act prior to Its insertion in 2003, the impugned
judgment cannot be sustained; that by insertion of the
said provision, a new type of offence was created and ~·

H 856
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 857
INTELLIGENCE

-~ ... thus, it cannot be held to be clarificatory in nature; and A
that if importation of some goods are prohibited, no duty
could be paid thereon and in that view of the matter the
provisions of s.135 of the Act would have no application.
Dismissing the appeal, the Court
B
HELD : 1. S.135 (1 )(a) of the Customs Act, 1962 is in
-.1..
two parts. The first part relates to evasion of duty. .The
second part relates to prohibitions, which in turn relates
to "prohibited goods". The words have to be assigned
the same meaning as contained in s.2(33) of the Act. It c
not only takes withi.n its sweep the goods which are
prohibited under the Customs Act but al.so under other
Acts. It cannot be accepted that prohibition must have a
nexus with the payment of duty and in the event some
goods are imported which are prohibited goods vis-a-vis
D
payment of duty, then and then only the rigours of s. 135
.... ~ would be attracted. The word "or" has been used therein .
It must be read disjuhctively and not conjunctively. This
nature of prohibition would attract the provisions of s. 113
of the Customs Act. S.113(d) uses the words "contrary to
any prohibition imposed by or under this Act or any other E
law for the time being in force". Clause (i) of Section 113(h)
is in two parts, one is in relation to goods entered for
exportation under the claim for drawback; The said words
were inserted by Act25of1978 w.e.f.1stJuly, 1978. Clause
(ii) of s.113 (h), which is in the second part, however, refers F
to the claim of drawback which does not correspond in
y
any material particular to any information furnished by the
exporter or manufacturer under the Act. A wrongful claim
of drawback was, therefore, covered both under clause
(i) and (ii), one dealing with dutiable or prohibited goods G
and the other with the entry of goods which was even
otherwise covered. [Paras 13-14] [864-D, E, G, H; 865-A, BJ
• ."'4 2. A penal statute must receive strict construction.
· The Court while interpreting a statute must consider the
H
858 SUPREME COURT REPORTS [2008] 5 S.C.R.

A purpose for which the Act has been enacted. [Paras 17-
18] [870-B, C]
Indian Handicraft Emporium and others v. Union of
India and others (2003) 7 SCC 589; Bairam Kumawat v.
B Union of India (2003) 7 SCC 628 - relied on.
3. A person is said to have done anything
fraudulently if he does that with an intent to defraud but
not otherwise. The requisite guilty knowledge or mens
rea under clauses (a) and (b) of s.135(1) of the Customs
c Act can be established by circumstantial evidence. As
the allegations made in the complaint prima facie
discloses an offence under s.135 of the Act, the High
Court, has correctly refused to quash the proceeding.
[Paras 16, 19] [858-G, 859-A, D, E]
D Om Prakash Bhatia v. Commissioner of Customs, Delhi
(2003) 6 SCC 161; Commissioner of Central Excise &
Customs, A.P v. Suresh Jhunjhunwala and others 2006 (10)
SCALE 480; Commissioner of Customs (EP}, Mumbai v.
Prayag Exporters Pvt. Ltd. (2003) 155 ELT 4 (SC);
E Commissioner of Customs, New Customs House, Mumbai
v. Mis. Vishal Exports Overseas Limited 2007 (3) SCALE
19; Sanjeev Kumar Gupta v. Commissioner of Customs 2001
CRI. L.J. 1963 - referred to
CRIMINAL APPELLATE JURISDICTION : Criminal
F Appeal No. 576 of 2008.
From the final Judgment and Order dated 25.1.2007 of
the High Court of Delhi at New Delhi in Crl. Misc. Case. No.
4594/2003
G Dr. Ashutosh, H. Singh, Ameet Singh and Praveen Swarup
for the Appellant.
Goolam E. Vahanvati, S.G., Dr. R. G. Padia, Alka Sharma
and B.V. Balramdas for the Respondent.
H The Judgment of the Court was delivered by
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 859
INTELLIGENCE [S.B. SINHA, J.]

S.B. SINHA, J. 1. Leave granted. A
2. This appeal is directed against a judgment and order
dated 25th January, 2007 passed by a learned Single Judge of
the Delhi High Court in Crl. M.C. No.4594 of 2003 dismissing
an application under Section 482 of the Code of Criminal
procedure filed by the appellant and three others. B

3. A complaint was filed by the Intelligence officer attached
to the Directorate of the Revenue Intelligence alleging that the
accused named therein committed offences punishable under· ·
Sections 132 and 135 ·of the Customs Act, 1962 (for short the c
Act).

4. OneA.K. Saxena figured as accused No.5 therein. He
was a Customs Officer. He floated various firms in false and.
fictitious names. Duty drawback amount was claimed for alleged
export of readymade garments by the said firms under certain D
assumed names to the extent of Rs.1,04,62,596/- Appellant
herein alongwith others Pawan Kumar, Govind Jha, Radhey Lal
made statements under Section 8 of the Act corroborating the
allegations made against them that they had conspired with each
other in regard to export of inferior quality of readymade E
garments which had been over-invoiced.
5. Cognizance of the said offence was taken by the
Additional· Chief Metropolitan Magistrate on 16th April, 2003.
An application for discharge was filed inter alia by the appellant
,_ herein which was dismissed by the learned trial judge by his F
...... order dated 1st October, 2003 .
6. An application for quashing of the said order was
thereafter filed before the High Court. One of the contentions
raised before the High Court was that Shri A.K. Saxena being a G
Customs Officer could not have been proceeded against under
Section 135 of the Act and, thus, the complainant committed a
serious illegality in exercising his power of arrest as against
. him which is not contemplated under Section 104 thereof. It
was further more contended that the allegations made in the H
860 SUPREME COURT REPORTS [2008) 5 S.C.R.

,,., .....
~

A complaint petition even if taken to be correct in its entirety do
not disclose an offence under Section 135 of the Act.
7. Indisputably, Section 135 of the Act was amended in
the year 2003. The High Court having regard to the explanatory
-
notes to the legislative changes as per the Budget Bulletin 2003
B opined that amendment being clarificatory in nature will have
,..
retrospective effect.
8. Dr. Ashutosh, learned counsel appearing on behalf of
the appellant would submit that duty drawback having not been
c included in Section 135 of the Customs Act prior to its insertion
in 2003, the impugned judgment cannot be sustained. It was ~
,
urged that by insertion of the said provision, a new type of offence
was created and thus, it cannot be held to be clarificatory in
nature. It was urged that if importation of some goods are '-
'
prohibited, no duty could be paid thereon and in that view of the
D
matter the provisions of Section 135 of the Act will have no
~ >
application.
9. Mr, G.S. Vahanvati, the learned Solicitor General of India,
on the other hand, would submit that the allegations made as
E against the appellant being covered by Section 135(b)(i) of the
Act, the complaint petition discloses an offence within the
meaning of Section 135 of the Act.
10. Before embarking on the rival contentions raised at
the Bar, we may notice the relevant provisions of the Customs
F Act, as they stood prior to enactment of Customs Amendment
Act, 2003. -y
,,.
Section 2(33) of the Act defines "prohibited goods" as
under:-
G "2.(33) "prohibited goods" means any goods the import
or export of which is subject to any prohibition under this
Act or any other law for the time being in force but does
not include any such goods in respect of which the ~ ' '
conditions subject to which the goods are permitted to be
H imported or exported, have been complied with."
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 861
INTELLIGENCE [S.8. SINHA, J.]

.-~
'i Section 11 empowers the Central Government by issuing A
a Notification to prohibit either absolutely or subject to such
conditions to be fulfilled before or after clearance as may be
specified in the Notification, the import or export of goods of
any specified description. The Notification can be issued for
the purpose mentioned in sub-section (2). 8

- .... Section 50 provides for presenting the entry of goods
for exportation.

"50. Entry of goods for exportation. - (1) The exporter of
any goods shall make entry thereof by presenting to the c
proper officer in the case of goods to be exported in a
vessel or aircraft, a shipping bill, and in the case of goods
to be exported by land, a bill of export in the prescribed
form.
(2) The exporter of any goods, while presenting a shipping D
bill or bill of export, shall at"the foot thereof make and
. ~ subscribe to a declaration as to the truth of its contents."
Section 113 of the Act provides for confiscation of goods
attempted to be improperly exported, clause (d) whereof reads
as under:- E

"113. Confiscation of goods attempted to be improperly
exported, etc.- The following export goods shall be liable
to confiscation:-

(d) any goods attempted to be exported or brought within F
the limits of any customs area for the purpose of being
'-
'< exported, contrary to any prohibition imposed by or under
this Act or any other law for the time being in force.".
Section 1358 of the Act reads :-
G
"1358. Power of court to publish name, place of business,
etc., of persons convicted under the Act:
4 ~ (1) Where any person is convicted under this Act for
contravention of any of the provisions thereof, it shall be
H
862 SUPREME COURT REPORTS [2008] 5 S.C.R.

y -;
A competent for the court convicting the person to cause the
name and place of business or residence of such person,
nature of the contravention, the fact that the person has
been so convicted and such other particulars as the court
may consider to be appropriate in the circumstances of
B the case, to be published at the expense of such person
in such newspapers or in such manner as the court may
direct.
,.. -
(2) No publication under sub-section (1) shall be made
until the period for preferring an appeal against the orders
c of the court has expired without any appeal having been
preferred, or such an appeal, having been preferred, has
been disposed of.

(3) The expenses of any publication under sub-section (1)
shall be recoverable from the convicted person as if it
D
were a fine imposed by the court."
12. By reason of the 2003 Amendment, Section 135 was ..... ~

amended, which

reads as under:-
E
· "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
F concerned 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
y
-
respect to such goods, or
G
(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
H
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 863
INTELLIGENCE [S.B. SINHA, J.)

- ..,. under section 111 or section 113, as the case may A
be, or,
(c) attempts to export any goods which he knows or
has reason to believe are liable to confiscation under
section 113,

- ~
he shall be punishable,-
(i) in the case of an offence relating to any of the
B

goods to which section 123 applies and the market
price whereof exceeds one lakh of rupees, with
imprisonment for a term which may extend to seven c
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 sha)I not be for less
D
than three years;
~ )<- (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 E
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: F

..... "r' 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.
G
(3) For the purposes of sub-section (1) and (2), the following
shall not be considered as special and adequate reasons
for awarding a sentence of imprisonment for a term of
I ....I
less than one year namely:-
H
864 SUPREME COURT REPORTS [2008] 5 S.C.R.

A (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
B 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;
-
c (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."
D
13. Section 135 (1 )(a) of the Act is in two parts. The first
part relates to evasion of duty. The second part relates to
prohibitions, which in turn relates to "prohibited goods". The
words have to be assigned the same meaning as contained in
E Section 2(33) of the Act. It not only takes within its sweep the
goods which are prohibited under the Customs Act but also
under other Acts.

14. It is difficult to accept the submissions of the learned
counsel for the appellant that prohibition must have a nexus with
F the payment of duty and in the event some goods are imported
which are prohibited goods vis-a-vis payment of duty, then and
then only the rigours of Section 135 would be attracted.
As stated earlier Section 135 deals with two types of
offences first relates to evasion of duty and the second
G prohibitions. The word "or" has been used therein. It must be
read disjunctively and not conjunctively. This nature of prohibition
which would attract the provisions of Section 113 of the Customs
Act also has been noticed by us hereinbefore. Section 113(d)
uses the words "contrary to any prohibition imposed by or under ).._ '
H this Act or any other law for the time being in force".
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 865
INTELLIGENCE [S.S. SINHA, J.]
... '(
Clause (i) of Section 113(h) is in two parts, one is in relation A
to goods entered for exportation under the claim for drawback.
The said words were inserted by Act 25 of 1978 w.e.f. 1st July,
1978. Clause (ii) of Section 113 (h), which is in the second part,
however, refers to the claim of drawback which does not
correspond in any material particular to any information furnished B
~.
by the exporter or manufacturer under the Act. A wrongful claim
of drawback was, therefore, covered both under clause (i) and
(ii), one dealing with dutiable or prohibited goods and the other
with the entry of goods which was even otherwise covered. It is
in that contingency that Section 109 of the Finance Act, 2003 c
provided :-

"109. In Section 113 of the Customs Act, -

(a) in clauses (c), (e), (f), (g) and (h), the words "dutiable
or prohibited", wherever they occur, shall be omitted;
D
~ )>..
(b) for clause (i) , the following clause shall be substituted,
namely,-

"(i) any goods entered for exportation which do not
correspond in respect of value or in any material
E
particular with the entry made under this Act or in the
case of baggage with the declaration made under
Section 77."

(c) in clause (k), the words "under a claim for drawback"

. ~
shall be omitted. "

15. It is significant to note that clause (ii) of Section
113(h)(i), which was inserted by Finance (No.2) Act, 1991 w.e.f.
F

27th September, 1991 remained in the statute book. As there
was a duplication, one of the clauses, namely clause (i) of
Section 13(h) was sought to be substituted by the other. G

16. The amendments made in Section 135 of the Act by
• _..J reason of the Amending Act, 2003 must be viewed from that
angle.

We have noticed hereinabove that the allegations made H
866 SUPREME COURT REPORTS (2008] 5 S.C.R.

A against the appellant in the complaint petition refer to illegal
claim of drawback.
The effect of the interpretation of the words "prohibited
goods" came up for consideration before this Court in Om
Prakash Bhatia vs. Commissioner of Customs, Delhi : (2003)
8 6 SCC 161 wherein a Division Bench of this Court observed :-
)..

"6. At the outset, we would state that the learned counsel
for the appellant has not pressed for the drawback in view
of the specific provision of Section 76 which inter alia
c provides that no drawback shall be allowed "(b) in respect
of any goods the market price of which is less than the
amount of drawback due thereon". Therefore, for the
purpose of getting drawback, the relevant consideration
is the market price of the goods prevailing in the country
and not the price of the goods which the exporter expects
D
to receive from the overseas purchaser."
-JI/. ;
The Court opined that the prohibition of importation and
exportation could be subject to certain prescribed conditions to
be .fulfilled before or after clearance of goods and in the event
E the conditions are not fulfilled, it may amount to prohibited goods.
17. Noticing that such a Notification had been issued by
the Central Government in terms of Section 18 of the Foreign
Exchange Regulation Act, 1973 viz-a-viz Section 14 thereof
providing for valuation of goods for the purposes of assessment,
F it was held:

"16. The aforesaid section would be applicable for y' -

determining the value of goods for the purposes of
assessment of tariff under the Act or any other law for the
G time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value. In
the present case, on export of goods in question, no duty
was payable under the Act. It was, therefore, contended ).. •
that there is no scope of application of Section 14 tor
determining the value of goods by applying the criterion
H
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 867
INTELLIGENCE [S.B. SINHA, J.]

laid down in the said section. In our view, this submission A
cannot be accepted. For determining the export value of
the goods, we have to refer to the meaning of the word
"value" given in Section 2(41) of the Act, which specifically
provides that value in relation to any goods means the
value thereof determined in accordance with the provisions B
of sub-section (1) of Section 14. Therefore, if the export
value of the goods is to be determined, then even if no
duty is leviable, the method (mode) for determining the
value of the goods provided under Section 14 is required
to be followed. Section 14 specifically provides that in c
case of assessing the value for the purpose of export,
value is to be determined at the price at which such or like
goods are ordinarily sold or offered for sale at the place
of exportation in the course of international trade, where
the seller and the buyer have no interest in the business
0
of each other and the price is the sole consideration for
sale. No doubt, Section 14 would be applicable for
determining the value of the goods for the purpose of tariff
or duty of customs chargeable on the goods. In addition,
by reference it is to be resorted to and applied for
determining the export value of the goods as provided E
under sub-section (41) of Section 2. This is independent
of any question of assessability of the goods sought to be
exported to duty. Hence, for finding out whether the export
value is truly stated in the shipping bill, even if no duty is
leviable, it can be referred to for determining the true export F
value of the goods sought to be exported."
The question came up for consideration again in
Commissioner of Central Excise & Customs, A.P vs. Suresh
Jhunjhunwala and others: 2006 (10) SCALE 480 wherein this G
Court not only noticed Om Prakash Bhatia (supra) but also
Commissioner of Customs (EP}, Mumbai vs. Prayag
Exporters Pvt. Ltd. : (2003) 155 ELT 4 (SC) to hold :-
"18. However, it appears, the same Bench considered the
matter at some length in Om Prakash Bhatia (supra) and H
868 SUPREME COURT REPORTS [2008] 5 S.C.R.

)' ,
A opined that the exporters were obliged to declare the value
of the goods. In a detailed judgment, this Court not only
took into consideration the provisions of the Customs Act,
but also the provisions of Section 15 of the Foreign
Exchange Regulation Act and the rules framed thereunder,
B as also the notifications issued by the Central Government
from time to time. The Court opined that for determining
the export value of the goods, it is necessary to refer to the
meaning of the word "value" as defined in Section 2(41)
of the Act, and the same must be determined in
c accordance with the provision of Sub-section (1) of Section
14, stating:

'-Section 14 specifically provides that in case of
assessing the value for the purpose of export, value
is to be determined at the price at which such or like
D goods are ordinarily sold or offered for sale at the
place of exportation in the course of international
,..l( •
trade, where the seller and the buyer have no interest
in the business of each other and the price is the
sole consideration for sale. No doubt, Section 14
E would be applicable for determining the value of the
goods for the purpose of tariff or duty of customs
chargeable on the goods. In addition, by reference it
is to be resorted to and applied for determining the
export value of the goods as provided under Sub-
F section (41) of Section 2. This is independent of any
question of assessability of the goods sought to be
exported to duty. Hence, for finding out whether the y --
export value is truly stated in the shipping bill, even
if no duty is leviable, it can be referred to for
determining the true export value of the goods sought
G
to be exported.' "
This Court after noticing the finding of Om Prakash Bhatia
(supra) in paragraph 18, observed as under : )... ..
"20, This Court did not stop there, but also took into
H
GURCHARAN SINGH v. DIRECTORATE OF REVENUE 869
INTELLIGENCE [S.B. SINHA, J.]
~

" consideration the provision of Rule 11 of the Foreign Trade A
(Development and Regulation) Rules, 1993, holding:

'Hence, in cases where the export value is not
correctly stated, but there is an intentional over-
invoicing for some other purpose, that is to say, not
mentioning the true sale consideration of the goods, B
then it would amount to violation of the conditions for
import/export of the goods. The purpose may be
money-laundering or some other purpose, but it would
certainly amount to illegal/unauthorised money
transaction. In any case, over-invoicing of the export c
goods would result in illegal/irregular transactions in
foreign currency.'"

21. It may be true that the said decision related to a matter
concerning a drawback scheme, but a decision of this
D
Court interpreting a different section by itself cannot, in
• )L our opinion, be brushed aside, only on the groun.d that the
decision of the same bench in Prayag Exporters (supra)
is applicable being related to DEPB Scheme. The
question, in our opinion, has to be considered having
regard to the provisions of the definition of the 'prohibited E
goods', 'entry of goods' together with the provisions of the
Foreign Exchange Regulation Act."

The question came up for consideration yet again in
Commissioner of Customs, New Customs House, Mumbai vs. F
Mis. Vishal Exports Overseas Limited : 2007 (3) SCALE 19
~ wherein one of us (Sirpukar, J) was a Member. In that case
also Om Prakash Bhatia (supra) was noticed. It was, however,
found that the factual scenario therein in regard to applicability
of the decision had not been established.
G
It may also be noticed that in Sanjeev Kumar Gupta vs.
Commissioner of Customs : 2001 CRI. L.J. 1963 a learned
~
~ Single Judge of the Delhi High Court held :-
"A person is said to have done anything fraudulently if he
H
870 SUPREME COURT REPORTS [2008] 5 S.C.R.

,
A does that with an intent to defraud but not otherwise. The 'f

requisite guilty knowledge or mens rea under clauses (a)
and (b) of Section 135(1) of the Customs Act can be
established by circumstantial evidence. Here the petitioner
is alleged to have floated fictitious firms with dishonest
B intention to obtain the duty draw back. In my view on the
facts alleged, offence under section 135 of the Act is prima
facie made out."
We are not unmindful of the proposition of law that a penal
statute must receive strict construction.
c
18. But it is also a trite law that the Court while interpreting
a statute must consider the purpose for which the Act has been
enacted. (See - Indian Handicraft Emporium and others vs.
Union of India and others : (2003) 7 SCC 589 and Bairam
Kumawat vs. Union of India : (2003) 7 SCC 628.
D
19. At this stage the court is concerned with establishment
of a prima facie case. As the allegations made in the complaint ..>( -
prima facie discloses an offence under Section 135 of the Act,
the High Court, in our view, has correctly refused to quash the
E proceeding.
20. Applying the said principle to the fact of the present
case, we have no hesitation in holding that the High Court has
not committed any error whatsoever in passing the impugned
judgment.
F
21. For the aforesaid reasons we do not find any merit in
this appeal which is dismissed accordingly. ~
--
D.G. Appeal dismissed.