In India, for centuries there has been a craze for gold due to various reasons. But it’s a highly taxed and expensive commodity in India. There are a lot of customs duties and other types of taxes on imported gold and foreign currencies. To evade this many premium items and gold are smuggled by organised rackets of smugglers from places where they sell cheap. And then they sell it to gain profits but at a rate much lower than the market price. For example, smuggling gold from UAE to India through various means is possible. With a total import volume of 800-900 tonnes, IMPACT estimates that around 200 to 225 tonnes of gold arrive in India through smuggling. This has deleterious consequences for the government in the form of loss of revenue and customs duties. When the government became aware of the extent of the problem the parliament passed The Conservation Of Foreign Exchange And Prevention Of Smuggling Activities Act, of 1974 short COFEPOSA referred to hereinafter. It is the economic adjunct of the dreaded Maintenance of Internal Security Act, of 1971.
CONSERVATION OF FOREIGN EXCHANGE AND PREVENTION OF SMUGGLING ACTIVITIES ACT, 1974
Before we dwell into the different aspects of COFEPOSA, we need to understand its ambit and who can be detained under the COFEPOSA Act.
- “The Central Government or the State Government or any officer of the Central Government, not below the rank of a Joint Secretary to that Government, specially empowered for the purposes of this section by that Government, or any officer of a State Government, not below the rank of a Secretary to that Government, specially empowered for the purposes of this section by that Government, may, if satisfied, with respect to any person (including a foreigner), that, with a view to preventing him from acting in any manner prejudicial to the conservation or augmentation of foreign exchange or with a view to preventing him from-
(i) smuggling goods, or
(ii) abetting the smuggling of goods,
(iii) engaging in transporting or concealing or keeping smuggled goods, or
(iv) dealing in, smuggled goods otherwise than by engaging in transporting or concealing or keeping smuggled goods, or
(v) harbouring persons engaged in smuggling goods or in abetting the smuggling of goods”.
“A detention order may be executed at any place in India in the manner provided for the execution of warrants of arrest under the Code of Criminal Procedure, 1973 (2 of 1974).”
SUCCESS OF COFEPOSA
There have been a lot of successes in using this stringent act on organized economic crime and smuggling rackets. It has been effective against such gangs and criminals by using a comprehensive strategy that consists of the following:
- Deterrence: This act has been a strong deterrent against people involved in cases of smuggling and manipulation of foreign exchange because it consists of provisions for detention for a very long time. Such provisions have significantly reduced the number of cases involving smuggling and prevented undue flow of foreign exchange from the country.
- Confiscation of assets: COFEPOSA and other allied acts like the Smugglers and Foreign Exchange Manipulators Act (SAFEMA) give wide powers to government officials to seize assets of people involved in such cases. Because of this, the government can recover a large amount of black money and other proceeds of serious economic crimes. This has a plus point: it helps the government increase revenue.
- Improved border security: This act and other allied acts have led to the increase and strengthening of border security, which has reduced the blind spots in borders and significantly reduced the scope and made it difficult for serious economic offenders to commit illegal activities. Currently, in India, the government has significantly increased vigilance in ports, airports, private helipads and other border entry points using modern technology which has prevented smuggling and often led to seizures of incriminating materials like gold and other premium items.
- Reduction of organized crime: Unlike the common perception that there is organized crime indulges only in the trade of narcotic drugs, it also involved in the trade and smuggling of premium items. This act specifically has helped the government break organized rackets that thrive on smuggling through poor and illiterate mules.
The implementation of COFEPOSA is carried out by a lot of different agencies like the police, the Directorate of Revenue Intelligence (DRI), the Customs Department, the Central Bureau of Investigation, and the Central Economic Intelligence of Bureau. But, as this is a financial crime it falls within the purview of the Finance Ministry, the Department of Revenue is the nodal agency for the implementation of COFEPOSA under which the Enforcement Directorate (ED) functions as the main enforcement agency. Like other agencies, ED has the power to issue detention orders, looks after the overall national implementation of the act, and works in coordination with multiple agencies. If there is credible intelligence that the smuggling is facilitated by non-state actors and extremist organisations and that the proceeds of crime will be used for terror funding, then the National Investigation Agency can also investigate under the Unlawful Activities Prevention Act, of 1967.
REASONS FOR THE FAILURE OF COFEPOSA
Although there have been significant successes under COFEPOSA to curb the illegal trade of premium items and foreign exchange all has not been well. There have been glaring cases where the law failed to achieve its objectives. The detenu get released from preventive detention on the ground of procedural irregularities and other reasons. As our country follows uncompromising evidence laws where the government must prove its case beyond a reasonable doubt. Let us examine the reasons in detail.
1) Delayed Action: In a lot of cases, stringent action is taken after a lot of undue delay which gives the criminal enough time to hide his assets and materials. Or in some cases, even destroy them. This delays the implementation of the act which significantly reduces its effectiveness.
2) Legal Loopholes: The accused often use legal loopholes to challenge the detention orders passed against them under COFEPOSA, which significantly delays the effective implementation of the act and results in a prolonged legal battle. If the detenu is financially well and stable, then they can even invest all resources to hire an expensive senior counsel to get a favourable verdict. Not every time success is guaranteed but it is worth the fight.
3) Corruption: Corruption perhaps is the biggest problem impairing the well-functioning of government and law enforcement. Corruption can seriously affect the implementation and effectiveness of COFEPOSA. In some cases, people entrusted with investigations have themselves been involved in committing serious felonies. That can use an undue hindrance and, in some cases, block effective implementation of the act. To combat corruption dedicated investigation agencies and special courts have been set up but how effective they are exactly is again a point of debate.
4) Lack of coordination: Coordination between different agencies responsible for implementing COFEPOSA can also be a challenge because of unhealthy professional competition and excessive political pressure on agencies. Sometimes, there are clear-cut cases of conflict of interest between different agencies, which can lead to undue delays and affects effectiveness.
5) Misuse of Act: Since the onset of different investigative agencies and special acts with specific purposes. Every subsequent party in opposition has alleged that the ruling party misuses executive powers meant for maintaining law order to seek political vendetta. Similarly, in COFEPOSA, it has happened in some cases that people have been detained for political and personal reasons, rather than preventing the illegal trade of premium items and foreign exchange manipulation. We need to address these issues effectively and as soon as possible to ensure the effective implementation of COFEPOSA.
Preventing gold smuggling and foreign exchange manipulation to maintain economic security is a valid state aim as enshrined in the act, but it should not be at the altar of fundamental rights. Any procedure under the act should be just, fair and reasonable. This has been successively laid by the Supreme Court in different judicial precedents. But still, it is a reality, that state and its authorities have thoroughly misused their powers of preventive detention sometimes at the behest of political powers. Sometimes, undue delays let the guilty walk free. The loss of liberty and other cherished rights of innocent people is the worst thing that can happen in a constitutional democracy.
Author(s) Name: Anuj Swapnil Shah (National Law Institute University, Bhopal)