This article pertaining to “Economic Offences – The Law Commission Report” is written by A.Rangadham, Superintendent [Authorized Representative], Customs Excise and Service Tax Appellate Tribunal, Hyderabad.
Meaning of Economic offences
The Economic offences means –
- Motive of the criminal is avarice or rapaciousness
- Background of the crime is un-emotional (unlike murder, rape, defamation etc.).
- The Victim is usually the State or a section of the public.
- Mode of operation of the offender is fraud, not force.
- Usually the act is deliberate and wilful.
- Interest protected is twofold –
- Social interest in the preservation of –
- The property or wealth or health of its individual members, and national resources, and
- The general economic system as a whole, from
- Exploitation, or
- Waste by individuals or groups
- Social interest in the augmentation of the wealth of the country by enforcing the laws relating to taxes and duties, foreign exchange, foreign commerce, industries and the like.
- Social interest in the preservation of –
The most important aspect of economic offences is that they ordinarily do not involve an individual direct victim but are punished because they harm the whole society. If an individual is robbed, there is some person who is interested in getting the offender prosecuted. Offences like this have an immediate and direct impact, and social vengeance is likely to be aroused. This element is absent when prohibited goods are imported. But the criminal act is potentially capable of harming a large number of persons and that is the principal object behind punishing it. In economic offences, the injury to society predominates.
Most of the economic offences are also termed as white-collar crimes. It may be described as a crime committed in the course of one’s occupation by a member of the upper class of society. Example is a big corporation guilty of fraudulent evasion of tax. However, a person who illegally smuggles (for his personal use) gold bars is not a white-collar criminal in the above sense, there being no connection between his occupation and the crime committed by him. But all of them are guilty of social or economic offences. In short, economic offences are those which affect the country’s economy, and not merely the wealth of an individual victim.
It is important to suppress economic crimes in modern society. In a developing economy, it assumes great importance. To build a sound and healthy social structure, economic integrity is paramount. The harm caused by economic offences are indirect and remote and there is no immediate tangible object of harm visible. For example, smuggling carried on systematically at the borders also provides for espionage. Hence, smuggling, spying and sabotage could be found in the company of each other.
The nature of economic offences is that they are planned and executed in secrecy by shrewd and dexterous persons with sophisticated means, and therefore detection is unusually difficult.
How To Suppress Economic Offences?
To suppress economic offences, some of the tools provided by the Legislature in Economic laws are-
- Confiscation of goods imported/exported in violation of the Act
- Confiscation of property obtained by fraudulent economic gains
- Imposition of penalty to wipe out the pecuniary gains made on illegal transactions
- Punishment of public censure (publication in media) in white-collar crimes
- Setting up of Special Courts for speedy trials
- Prosecution and imprisonment as a deterrent
To arrest economic offences, effective investigation is required, which in turn requires an array of powers, which are not restrictive in nature. The Customs Act, 1962 confers power to call for information, to search premises, to arrest, to examine persons, to summon persons to give evidence, to produce documents, custody of documents, inspection etc. There is also the insertion of provision which modify the burden of proof, viz., Sec. 123. The elimination or modification of the element of mens rea can be found in Sec. 112(a), 114, 117, 134(a), 134(b), 136(1) of the Act. The Customs Act, 1962 provides for summary trial (Sec.138). Also, Sec. 139 of the Act provides for special rules of evidence. Sec.140 provides for offences by companies.
In economic offences, proportionality of punishment is necessary, since the object in punishing economic offences is to prevent harm caused to national economy. Therefore, a pecuniary test would be justifiable, and the severity of the maximum punishment could be dependent on the relative seriousness of the harm caused as expressed in monetary term. The punishment under the Customs Act, 1962 follows the pecuniary test. Under the Act, the maximum punishment of imprisonment is seven years if the amount of duty evaded is Rs. 50 lakh; or the market price of the goods exceeds Rs. One crore; or the goods involved or prohibited goods; or the fraudulent duty drawback availed exceeds Rs. 50 lakh. For other cases, the punishment of imprisonment is three years. Section 135 of the Act also provides for minimum period of imprisonment.
Having said that there needs to be proportionality of punishment of economic offences, a proper sentence is a composite of many factors viz., extenuating or aggravating circumstances; prior criminal record; the background of the offender; the present need of the community etc. However, singularly, or together these factors cannot be a ground for mild punishment.
In economic offences the plea of first conviction is fallacious. This is for the reason that what has been detected and brought before the court, is more often than not, a surface manifestation of habitual misconduct running underground. The penalty and fine imposed in departmental proceedings cannot be a ground for mild punishment as administrative penalties and criminal prosecutions have different objectives. Sometimes, under Customs Act, 1962 the plea of the offender being a mere carrier is taken. Considering the special nature of the offences, even the carriers should be given a substantial punishment.
Source: – Central Law Commission Forty-Seventh Report on “The Trial and Punishment of Social and Economic Offences”
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