The Central Government headed by the Prime Minister Narendra Modi has taken some drastic steps to curb generation of black money in the system. The General Budget introduced in the Parliament on 28 February by the Union Finance Minister Shri Arun Jaitley has introduced some harsh provisions to target activities that lead to generation of black money. While some of these provisions were highlighted in the budget itself and therefore received media glare, there are certain other provisions which did not get fully highlighted. Over-invoicing or under-invoicing of the exports or imports from / to India may also now attract heavy penalties and imprisonment. As reported in one of my previous articles [Open Complaint to SIT on about $ 153 billion worth black money sent abroad via Gold imports in 5 years], a lot of black money is sent abroad from India by over-invoicing of imports of gold. Now, such over-invoicing or under-invoicing of imports or exports and/or making, signing or using any false declaration, statement or document in the transaction of any business relating to customs (i.e., exports or imports) may land a person in jail for 7 years. Here is how it is.
Section 132 of the Customs Act, 1962, creates an offence relating to false declaration, false documents, etc. This section is reproduced below:
“132. False declaration, false documents, etc.—Whoever makes, signs or uses, or causes to be made, signed or used any declaration, statements or document in the transaction of any business relating to the customs, knowing or having reason to believe that such declaration, statement or document is false in any material particular, shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.”
Thus, making, using or signing any false declaration or statement or document in the transaction of any business relating to the customs is an offence under Section 132 of the Customs Act, punishable with imprisonment for a term up to 2 years or with fine or with both. But, this was a lighter punishment (generally, only fine was imposed, even if somebody was prosecuted for this offence) and cognizance of this offence needed previous sanction of the Commissioner of Customs under Section 137 of the Customs Act.
Now, in the Finance Bill, 2015, provisions of the Prevention of Money-Laundering Act, 2002, have been sought to be amended. This Bill is yet to become law. One of the changes made is by Section 177 of the Finance Bill, 2015, vide which the aforesaid offence under Section 132 of the Customs Act, 1962, has now been included in Part B of the Schedule to the Prevention of Money Laundering Act, 2002. So, what is the consequence thereof?
Well, clause (y) of Section 2 of the Prevention of Money-Laundering Act defines “scheduled offence” as under:
“(y) “scheduled offence” means—
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is thirty lakh rupees or more; or
(iii) the offences specified under Part C of the Schedule.”
Thus, any offence specified under Part B of the Schedule, if the total value involved in such offence is Rs. 30 lakh or more, becomes “scheduled offence”.
Now, since offence under Section 132 of the Customs Act is now sought to be included in Part B of the Schedule to the Prevention of Money-Laundering Act (PMLA), therefore it may also amount to a “scheduled offence” under the latter Act (PMLA) if the total value involved is more than Rs. 30 lakh.
Further, clause (u) of Section 2 of the Prevention of Money-Laundering Act defines “proceeds of crime” as under:
“(u) “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;”
Moreover, Section 3 of the Prevention of Money-Laundering Act defines “offence of money-laundering” as under:
“3. Offence of money-laundering.—Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.”
A combined reading of these provisions shows that an offence under Section 132 of the Customs Act may now also amount to an offence of money-laundering under PMLA.
Now, Section 4 of the Prevention of Money-Laundering Act provides that whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.
Thus, it is clear that anyone indulging in the activities of over-invoicing or under-invoicing of imports or exports or making, signing or using any false declaration, statement or document in the transaction of any business relating to customs (i.e., exports or imports) may land in jail for 7 years, and in any case, the minimum punishment for such an offence would be 3 years. Moreover, the property involved may also be liable to attachment and there may be imposition of heavy fines.
Further, the offence of money-laundering is within the jurisdiction of the Enforcement Directorate (ED). Thus, it would be possible now for the ED to take action in such cases of over-invoicing or under-invoicing of imports or exports under PMLA which will be a serious offence now.
As mentioned above, it is a common knowledge that the practice of over-invoicing and under-invoicing of imports and exports (especially of certain goods, such as gold, diamonds, capital goods, etc.) is a rampant malpractice that is routinely done in active connivance or complicity of the customs officers or due to their gross negligence. It leads to generation of black money, which can be sent abroad or can be brought back whenever convenient. Now, it will become difficult for such practices to continue.
