Holding

The detention order is vitiated and set aside because one of its grounds was based on irrelevant material, rendering the entire order invalid.

Summary

The appellants, husband and brother of the petitioner, were detained under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities (COFEPOSA) Act on the grounds of alleged misdeclaration of an export consignment (claimed as alloy steel forging but allegedly metal scrap) and over‑invoicing. The allegations were initially based on a self‑incriminatory statement which was later retracted. A show‑cause notice later disclosed a chemical analysis report confirming the samples were alloy steel, not scrap. The Supreme Court held that the detention order was passed in haste without waiting for the analysis, rendering the first ground irrelevant, and that when any ground for detention is based on irrelevant material, the entire order is vitiated. Consequently, the detention orders were set aside. The appeal was allowed.

Issues considered

Whether a detention order under COFEPOSA can be sustained when one of the grounds is based on irrelevant or insufficient material.
Whether the over‑invoicing allegation alone can uphold the detention if another ground is invalid.
Whether the chemical analysis report negates the misdeclaration allegation.
Whether the retraction of a self‑incriminatory statement affects the legality of the detention.

Legislation cited

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974s. 3(1), s. 8(3)
Customs Act, 1962s. 108, s. 113(d), s. 113(i)
Foreign Trade (Regulation) Rules, 1993s. 11, s. 14

Subjects

COFEPOSAdetentionmisdeclarationover‑invoicingchemical analysisforeign exchangesmugglingevidentiary materialvitiated ordercustoms law

Judgment

MADHU GARG A
v.
UNION OF INDIA AND ANR.

SEPTEMBER 21, 2004

[N. SANTOSH HEGDE AND S.B. SINHA, JJ.) B

Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 1974-Section 3(1)-Detention under-On grounds of
misdeclaration of export consignment and over-invoicing of goods-
Misdeclaration not proved by report of chemical analysis of goods-:- C
Detention upheld by High Court-On appeal, held: Detention on first ground
was without there being adequate material-The entire order of detention
stands vitiated in law as one of the grounds was found to be based on
irrelevant materials.

Husband o( appellant (detenu), his brother and their manager were D
detained under Section 3(1) of Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974 on the grounds that (1) the
export consignment was misdeclared stating it to be alloy steel forging
(machined) although ·actually the same was metal scrap and (2) the
goods were over invoiced. Allegations were based on self-inculpatory E
statements. However, the same was retracted later. Central Advisory
Board Approved the detention orders of the detenu and his brother, but
detention of their manager was not approved. Writ petitions against the
detention order were dismissed. A show cause notice was served upon
detenu wherein it was stated that report of chemical analysis by CRCL
showed that the alleged samples were made up of alloy steel. F
In appeal to this Court, appellant contended that the detention
order was not sustainable in view of the averments in the show cause
notice that goods were made up of alloy steel.

Allowing the appeals, the Court
G

HELD: 1. A bare perusal of the averments in the show cause
notice do not leave any manner of doubt whatsoever that upon chemical
analysis of materials, it was found that the samples were made up of
alloy steel. .flt has not been disputed that the alleged goods which are H
581
582 SUPREME COURT REPORTS (2004] SUPP. 4 S.C.R.

A subject matter of the export were seized in presence of the detenu and
were sent for chemical analysis before CRCL. The subject matter of the
consignment, therefore, was not scrap metal. Had the detaining Authority
waited for the results of the said chemical analysis before issuing the
impugned order of detention, the first ground stated therein could not
B have been made a basis therefor. The order of detention was passed in
haste without there being adequate materials. [586-B-D]

2. Even though over invoicing of the goods is the subject matter
of the adjudication proceedings, but when one of the grounds of detention
is found to be based on irrelevant materials not germane for passing the
c order of detention, the entire order of detention shall stand vitiated in
law. [586-E] .

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 821
of 2004.
D
From the Judgment and Order dated 6.4.2004 of the Punjab and
Haryana High Court in Cr!. W.P. No. 1397 of 2003.

WITH

E Cr!. A. No. 822 of 2004.

Gopal Subramaniam, Vikram Chaudhary, Rakesh Dahiya,
Ms. Madhusmita Bora, Nikhil Jain, Mahabir Singh and C.D. Singh for the
Appellants.
F
T. S. Doabia, Manish Sharma, Arun K. Sinha and Rakesh Singh, Manoj
Saxena, S. K. Mitra and Ms. Naresh Bakshi for the Respondents.

The Judgment of the Court was delivered by

G S.B. SINHA, J: These appeals arising out of the judgments and orders
dated 04.04.2004 passed by the High Court of Punjab and Haryana at
Chandigarh in Criminal Writ Petition Nos.1397 and 1432 of2003 involving
similar questions of law and fact were taken up for hearing together and are
being disposed of by this-common judgment. However, the factual matrix
H of the matter is being noticed from Criminal Appeal No. 821 of 2004.
MADHU GARG v. U.0.1. [SINHA, J.] 583

The Appellant is. the wife of the detenu Vinod Kumar Garg who was A
detained by an order dated 20th October, 2003 passed by the Joint Secretary
to the Government of India, Ministry of Revenue, New Delhi purported to
be under Section 3(1) of the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974 (for short 'the COFEPOSA
Act').
B
The grounds of detention indicate that the said order of detention was
passed primarily on two allegations, viz.,:

(a) the export consignment was misdeclared stating it to be alloy steel
forging (machined) although actually the same was a me~al scrap; C
and

(b) the goods were over invoiced as the value thereof was declared
by the exporter to be Rs. 170-175 per kg instead and place of its
actual value being only Rs. 4-5 per kg.
D
The allegations in support of the said grounds of detention were
primarily based on the self-inculpatory statement of the detenu recorded by
the Directorate of Revenue Intelligence purported to be in tenns of Section
108 of the Customs Act. The said statements, however, were retracted by
the detenu before the learned ACMM on or about 26th August, 2003.
E
The learned ACMM in his order dated 20th August, 2003 also recorded
the statement that the detenu had made his statement involuntarily and had
also been tortured. It was directed:

"At the request of accused it is directed to the 1.0. Sh. Mukesh Gaur F
to allow the accused person to talk to their family members on STD/
Telephone. .Accused have also stated that at this moment their
advocates are not present hence they may be remanded to J.C. till
morning so that they can take the services of their advocates.

"I have gone through the file, produced before me by the 1.0. S.S.P. G
made a request for 14 days J.C. of both the accused. However after
considering all the statements made before me by the accused

.. persons, they have been remanded till 2 p.m. on
26/8/2003 in J.C. with the directions to produce both the accused
in the court bw 2 p.m. to 4 p.m." H
584 SUPREME COURT REPORTS [2004) SUPP. 4 S.C.R.

A Along with the said Vinod Kumar Garg, orders of detention were also
passed against his brother Narsi Dass Garg and their manager, Mudit Kumar
Tiwari. However, _when the matter was placed before the Central Advisory
Board in terms of Sub-section (3) of Section 8 of the COFEPOSA Act, the
Board although approved the order of detention of Vinod Kumar Garg and
B Narsi Dass Garg, the detention of Mudit Kumar Tiwari was not approved.

Questioning the said order of detention, the Appellant herei.n as also the
aforementioned Narsi Dass Garg filed two writ petitions before the Punjab
and Haryana High Court. Both the petitions were dismissed by reason of
the impugned order. Hence this appeal.
c . -
Mr. Gopal Subramaniam, learned senior counsel appearing on behalf
oqhe Appellant had raised a number of contentions in support of this appeal.
The learned counsel would firstly submit that from the averments made in
the show-cause notice dated 20th August, 2004 issued by the Authorities
upon the detenue it would be evident that the goods of the exporter were made
D up of alloy steel and in that view of the matter the order of detention cannot
be sustained only on the basis of his purported self-inculpatory statement
recorded by the official of Directorate of Revenue Intelligence under Section
I 08 of the Customs Act.

The learned counsel would further submit that keeping in view of the
E
fact that the self-inculpatory statement has been retracted, the same could not
have been the basis for issuing the order of detention.

Mr. Subramaniam would contend that having regard to the fact that the
grounds of detention both in relation to the detenu as also his brother Narsi
F Dass Garg being the verbatim copy of each other, non-application of mind
on the part of the detaining authority is apparent. In any event, as the relevant
documents relating to the duty drawback cash incentive scheme and particularly
the reply of the detenu forming part of adjudication proceedings were not
placed before the detaining authority, the impugned order of detention is
vitiated in law.
G
Mudit Kumar Tiwari who had also been detained on the ground of
hatching a conspiracy with the detenu and his brother but the order of

..
detention against him having been revoked, there is absolutely no reason, Mr.
Subramaniam would contend, as to why the detaining authority had not
H revoked the order of detention passed against the detenu.
MAOHU GARG v. U.O.I. [SINHA, J.] 585

It was also contended that no purported illegal activity at the hands of A
the detenu in future is possible as he had already surrendered his 'exporter
importer code' before the authorities incapacitating himself from doing
export import business.

Mr. T.S. Doabia, learned senior counsel appearing on behalf of the
Respondents, however, supported the order of detention.
B

In view of the fact that we find force in the first contention of Mr.
Spbramaniam, it may not be necessary for us to advert to the other
submissions advanced by the learned counsel.

It is not in dispute that one of the allegations made against the detenu
c
in the grounds of detention was that he had exported consignment upon
misdeclaration to the effect that alloy steel forging (machined) was being
exported whereas actually the same was metal scrap.

However, it is not denied that the detenu had been served with a show- D
cause notice dated 20th August, 2004 by the Directorate of Revenue
Intelligence, New Delhi; the paragraph 48 whereof reads as under:

"48. Two samples drawn from the seized export consignment ofM/
s National Steel Products Co. were sent to CRCL, New Delhi for
chemical analysis. CRCL, vide its test report No. 35-Chem/Cus/
E
2002/CL/197-198 DRI dated 23.10.2003, informed that the samples
were made up of alloy steel. The test report, however, could not
throw any light as to whether the goods were forgings (machined),
as declared by the exporter."
F
In the said notice, the detenu had been asked to show cause inter alia
on the following terms:

"58(i) Mis National Steel Products Co, New Delhi exported the
goods by willfully mis-stating/misdeclaring the FOB value as Rs.
7,60,88,864 (the details of which are given in Annexure-A annexed G
to this Show Cause Notice) and by suppressing the actual value with
a malafide intention to defraud the Government by fraudulently
claiming/ availing undue DEPB credits to the tune of Rs. 1, 70,01,015.

... Misdeclaration in value has, therefore, rendered the exported goods
liable to confiscation under section 113(d) and l 13(i) of the Customs H
586 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A Act, 1962 read with section 50(1) of the Customs Act, 1962 as well
as Rules 11 and 14 of the Foreign Trade (Regulation) Rules, 1993."

A bare perusal of the aforementioned averments in the said notice do
not leave any manner of doubt whatsoever that upon chemical analysis of
materials, it was found that the samples were made up of alloy steel. It has
B
not been disputed before us that that the alleged goods which are subject
matter of the export were seized in presence of the detenu and were sent for
chemical analysis before CRCL. Upon obtaining a report dated 23.10.2003,
it appears, that the samples were made up of alloy steel although the test
report could not throw any light as to whether the goods were alloy steel
c forging (machined), as declared by the exporter. The subject matter of the
consignment, therefore, was not scrap metal. Had the detaining authority
waited for the results of the said chemical analysis before issuing the
impugned order of detention, the first ground stated therein could not have
been made a basis therefor.
D The order of detention, therefore, in our considered opinion, was passed
in haste without there being adequate materials.

Mr. Doabia, however, contended that the allegation against the detenu
as regard over invoicing of the goods is the subject matter of the adjudication
E proceedings. That may be so but it is now well-settled that when one of the
grounds of detention is found to be based on irrelevant materials not gennane
for passing the order of detention, the entire order of detention shall stand
vitiated in law.

For the aforementioned reasons, we are of the opinion that the impugned
F orders of detention cannot be sustained which are set aside accordingly.
These appeals are allowed with aforementioned observations. No costs.

K.K.T. Appeals allowed.

....