Calcutta High Court (Appellete Side)
Court No.2 vs Item No. (Cav) on 13 December, 2013
Author: Toufique Uddin
Bench: Toufique Uddin
CRR 360 of 2000
13.12.2013
Ravi Bhootalingam
Court No.21 Vs
Item No. (CAV)
Parag Chakor Borkar
(ALLOWED)
Mr. Milan Mukherjee, Advocate
Mr. Kaushik Gupta, Advocate
Mr. Saurav Bhagat, Advocate
.... For the Petitioner
This revision has been filed under Sections 482 of the Code of
Criminal Procedure inter alia praying for quashing of Criminal
Complaint No. C/2714 of 1998 pending before the learned
Metropolitan Magistrate, 11th Court, Calcutta.
The short background of this case is that ITC Limited is a widely
held public limited company duly incorporated under the provisions of
the Companies Act having its registered office at 37, J.L. Nehru
Road, Kolkata - 700071. The said Company inter alia is also
engaged in the manufacture of cigarettes sold under various brand
names. The petitioner was a Director of ITC Limited from April 1986
to January 1988. Prior to that the petitioner was a Member
(Personnel) of the India Tobacco Division Board and was involved in
the board policy matters of the Company and was in no way
connected with the running of the day to day business of the
Company.
Prior to the year 1983, central excise duty was levied on cigarettes
based on the wholesale price of cigarette. During the period 1983-
1987 various Notifications were issued by the Central Government
whereby the basis of levy which was earlier based on wholesale
price, was changed to be the maximum price printed on the cigarette
packets. As trade margin i.e. the (margins given to the retailers)
became chargeable to excise duty for the first time, the same led to
sn widespread overcharging by the retailers.
The company made various representations to the Central
Government highlighting the various irrationalities in the Notifications,
which led to large scale overcharging by the retailers. The Company
also requested the Central Government to change the system of levy
to the length of cigarette, which was eventually accepted by the
Government and is currently the basis on which excise duty is levied
on cigarettes.
These facts were also noticed by the Learned Public Accounts
Committee (1985-86) of the Eighth Lok Sabha in the report tabled
before it by the Central Government (Ministry of Finance).
The learned Committee took note of the complaints received by it
and was pleased to observe that overcharging by the retailers would
be a violation of the provisions of the Standards of Weights &
Measures (Packaged Commodities) Rules, 1977 the enforcement of
which was the duty of the various State Governments and the
question of violation of the Excise Act would arise only if it came to
light that there was flow-back of the extra price to the manufacturer.
On 27th March, 1987 a Show Cause Notice (SCN) was issued by
the Central Excise Department alleging that the Company had short
paid excise duty as the same was paid on the price of the cigarette
packets whereas it should have been levied on the basis of the price
at which the cigarettes where sold in the market. Apart from the
demand of duty, penalty was also sought to be levied on the
Company as also the Directors of the Company, including the
petitioner herein.
On 29.12.1995, the learned Adjudicating Authority i.e. the
Commissioner of Central Excise, New Delhi vide his order in Original
No. 3/95, confirmed the demands made against the Company and
also imposed penalties on the Company as well as the six Directors
including the present petitioner. The Company filed the some
appeals against the said order-in-original dated 29.12.1995 before the
then Central Excise and Gold Control Appellate Tribunal, New Delhi
(CEGAT) which is now know as the Central Excise and Service Tax
Appellant Tribunal (CESTAT).
By its consolidated Final Order in those appeals (filed by the
petitioner), the Hon'ble CEGAT was pleased to set aside the
quantification of duty demand on the Company, and remanded the
case to the adjudicating authority for fresh quantification of duty
demand on the Company in accordance with the guidelines given in
the said order. CEGAT was also pleased to set aside the penalties
on the Company as well as the concerned Directors (including the
petitioner). The relevant portion of the CEGAT's order dated
04.09.1998 is reproduced hereinbelow:-
235. In view of our conclusions recorded above, we find it
unnecessary to refer to the submissions made by the aforesaid
individuals on the merits of the controversy regarding imposition of
penalty and lack of evidence against each of the Directors. The
penalties imposed on the above named individuals are set aside.
236. For the reasons indicated in this order, we allow the appeals as
indicated hereunder:-
1) Confirmation of demand on the appellant who are job-workers is
set aside.
2) Penalties imposed on ITC, job-workers officers of ITC are set
aside.
3) Quantification of duty demand on ITC is set aside.
4) The impugned order is set aside to the extent indicated above and
the case is remanded to Adjudicating Authority concerned for fresh
quantification of duty demand on ITC in accordance with our
findings on points (xxiii) and (xxiv) which are summarized in
paragraph 193 of this order. Fresh quantification shall be done
after giving ITC opportunity of personal hearing.
Aggrieved by the aforesaid order of CEGAT remanding the matter
for fresh adjudication, the Company i.e. ITC Limited, preferred Civil
Appeal No. 70 of 1999 before the Hon'ble Supreme Court of India.
The Central Excise Department also preferred several Appeals i.e.
Civil Appeals Nos. 6101 to 6113 of 1998 (Commissioner of Central
excise Delhi Vs. ITC Limited and Ors.) against the order of the
CEGAT dated 04.09.1998. One of the above-mentioned Appeals
filed by the Central Excise Department before the Hon'ble Supreme
Court was also filed challenging the setting aside of the penalty
against the petitioner by the CEGAT.
Days before the order of the Hon'ble CEGAT was pronounced,
prosecution was launched by the Central Excise Department on
31.08.1998 by filling complaint cases under Section 9 and 9AA of the
Central Excise and Salt Act, 1944 before the learned Courts in five
cities, namely, Bangalore, Calcutta, Bombay, Patna and Meerut; after
a delay of more than 11 years. On the very next date, an Amnesty
Scheme (Kar Vivadh Samadhan Scheme) was to come into effect.
Immediately after launching prosecution, Member (Legal) of Central
Board of Excise and Customs went public to declare that the
Government wanted to dispel the impression that it is trying to help
any particular corporate. This shows that authorities acted mala fide,
considered extraneous factors and launched the prosecution with
ulterior motives.
The Hon'ble Supreme Court vide its order dated 15.01.1999
admitted two of the aforementioned appeals against the Company i.e.
CA 6101/98 and CA 70/99 and ordered that while fresh adjudication
as directed by the CEGAT may go on, no final orders would be
passed.
In so far as the findings on penalty recorded by CESTAT on the
individual appeal of Directors were concerned all the Departmental
appeals were dismissed 'in limine' by the Hon'ble Supreme Court on
15.01.1999 itself.
It is thus apparent that in so far as the petitioner is concerned the
judgment of the CEGAT exonerating him from the penalty levied on
him has become final inter parties. It is pertinent to state here that
the penalty was sought to be levied on the Company as well as the
Directors for violation or Rule 9, 52A(5)(c) and 209 of the Central
Excise Rules, 1944 and that the CEGAT had held in its order dated
04.09.1998 that not penalty was leviable on the petitioner as well as
other officers of the Company.
It is also relevant to mention here that now the pending appeals of
the Department in (Civil Appeals No. 6101 of 1998) as well as the
Company (in Civil Appeal No. 70 of 1999) have been disposed of by
the Hon'ble Supreme Court of India vide its judgment and order dated
10.09.2004 which stands report in (2004) volume 7 Supreme Court
Cases page 591 wherein the Hon'ble Apex Court held "We therefore
allow civil appeal no. 70 of 1999 (ITC Ltd. Vs. CCE) and dismiss civil
appeal no. 6101 of 1998 (CCE Vs. ITC Ltd.). The impugned
demands raised against the applicant are set aside without any order
as to costs.
Accordingly, the learned lawyer of the petitioner the following facts
stands admitted:-
a. The instant complaint is based solely upon the findings retained in the
order-in-original passed by the Commission of Central Excise, New
Delhi dated 29.12.1995.
b. The said order dated 29.12.1995 stands set aside by the CEGAT vide
its judgment and order dated 04.09.1998.
c. The aforesaid order in so far as it set aside imposition of penalty has
since become final inter parties upon dismissal of Department appeals
by the order of the Hon'ble Supreme Court of India dated 15.01.1999.
d. In so far as the order of CEGAT remanding the matter for a fresh
adjudication, the same stands set aside and all demands against the
Company were quashed by the final judgment and order of the
Supreme Court of India dated 10.09.2004.
So from the above narration of facts it is clear that the very
foundation on which the present complaint rested has been set at
naught by an authoritative pronouncement of the Hon'ble Supreme
Court of India and that no demand survives in this matter. Even the
CEGAT in its order dated 04.09.1998 has categorically returned
findings that the imposition of penalty on the officers and agents of
ITC Limited was without any foundation and that no liability under the
Act could be imposed on the officers of ITC Limited. This was
affirmed by the Hon'ble Supreme Court vide its order date
15.01.1999, whereby they refused to entertain the appeal filed by the
Department against the order of the learned CEGAT dated
04.09.1998.
As on dated the demand of the Department having been effaced
by the judgment of Hon'ble Supreme Court of India, the continuance
of the proceedings is unwarranted and even otherwise does not have
sanction of law.
The Hon'ble Supreme Court has held in the cse of Uttam Chand
and Ors. Vs. ITO as report in 1982 Vol-2 SCC 543 that if the core
allegations made against the assessee are set aside in the
departmental proceedings, the criminal Complaint based on the same
allegations should be quashed.
Further theHon'ble Supreme Court in the case of Radheshyam
Kejriwal Vs. State of West Bengal & Anr. as reported in 2011 Vol-3
SCC 581 has laid down the following principles:-
The ratio which can be culled out from these decisions can be
broadly stated as follows:-
i) Adjudication proceedings and criminal proceedings can be
launched simultaneously;
ii) Decisions in adjudication proceedings is not necessary before
initiating criminal proceedings;
iii) Adjudication proceedings and criminal, proceedings are
independent of each other;
iv) The findings against the person facing prosecution in the
adjudication proceedings is not binding on the proceedings for
criminal prosecution;
v) Adjudication proceedings by the Enforcement Directorate is not
prosecution by a competent court of law to attract the provisions of
Article 20(2) of the Constitution of Section 300 of the Cr.P.C.
vi) The findings in the adjudication proceedings in favour of the
person facing trial for identical violation will depend upon the
nature of the findings. If the exoneration in adjudication
proceedings is on technical ground and not on merit, prosecution
may continue; and
vii) In case of exoneration, however, on merits where the allegation is
found not to be sustainable at all and the person held innocent,
criminal prosecution on the same set of facts and circumstances
can't be allowed to continue, the underlying principle being higher
standard of proof in Criminal cases;
In our opinion, therefore, the yardstick would be to judge as to
whether the allegations in the adjudication proceedings as well as
proceedings for prosecution is identical and the exoneration of the
person concerned in the adjudication proceedings is on merits. In
case it is found on merit that there is no contravention of the
provisions of the Act in the adjudication proceedings, the trial of the
person concerned shall be an abuse of the process of the Court.
It was argued that it is settled law that levy of penalties and
prosecution are simultaneous, both initiated on the basis that there
was an alleged violation of the Act. Hence, once the penalties are
cancelled by the Tribunal and further upheld by the Hon'ble Supreme
Court of India, the prosecution under Section 9 of the Central Excise
Act cannot continue. The Hon'ble Supreme Court of India was
pleased to make such observations in the case of K.C. Builders and
Anr. Vs. Assistant Commissioner of Income Tax reported in (2004)
Vol-2 SCC 731.
It was argued that the petitioner ought not to be made to suffer and
face the rigors of criminal trial when the same cannot be sustained in
the eye of law in view of the conclusive finding of the CEGAT that no
penalties could be levied and which finding was not interfered with by
the Hon'ble Supreme Court, the prosecution cannot be proceeded
with by the Department and further proceedings will be illegal and
without jurisdiction.
Arising out of the same show cause notice dated 27.03.1987, the
Department filed and identical complaint against the Company and
six of its Directors before the Special Court of Economic Offences,
Bangalore being CC No. 488/98. The six Ex-Directors filed a
petitioner under Section 482 of the Code of Criminal Procedure
before the Karnataka High Court. The petitioner came up for
consideration before the Karnataka High Court, which after
considering the judgment rendered by the Hon'ble Supreme Court of
India was pleased to allow the petitioner on the ground that the very
basis of the complaint did not survive and therefore, it was
appropriate to quash the registration of cases in CC No. 488/98. No
appeal was preferred by the Respondent against the said order,
which has hence become final.
The complaint was quashed by the Hon'ble Karnataka High Court on the ground that in view of the order of the Hon'ble Supreme Court reported in (2004) Vol-7 SCC 591, the impugned criminal proceedings against the Company in CC No. 488/98 cannot be continued.
The complaint filed in Bangalore also arose out of the same show cause notice against the same set of accused with the same set of allegations. The complaint before the CJM, Kolkata deals with removal of excisable goods from the Company's Kidderpore factory, while the Complaint filed before the Special Court of Economic Offences, Bangalore, deals with removal of excisable goods from the Company's erstwhile Pulakesinagar (Bangalore) factory. Since no appeal was filed by the respondent authorities against the order of the Karnataka High Court, the said position has become final as per judgment of the Hon'ble Supreme Court in Union of India & Ors. Vs. Kumidini Narayan Dalal & Anr. (2001) Vol-10 SCC 231.
Hon'ble Supreme Court of India while allowing the Civil Appeal No. 70 of 1999 filed by the ITC Limited against the CEGAT order dated 04.09.1998 (reported in 1998 (104) ELT 151), was pleased to hold that the notification does not envisage an inquiry into the correctness of the maximum retail price printed on the packages by the Excise officer. By the said order the Hon'ble Supreme Court has put to rest any alleged dispute in respect of the interpretation of the notification which is the subject matter of the Complaint. Hence the very basis of launching the prosecution has been removed by virtue of the order passed by the Hon'ble Supreme Court of India.
The Learned Lawyer of the applicant submits that the complaint has been filed for a period from March 1983 to February 1987. The said demand has been raised on the applicant under certain exemption notifications which have to be read with the First Schedule to the Central Excise Act, 1994. It prescribes the rate at which duty could be charged for the period up to 28.02.1986. The Central Excise Act, 1985 came into force on 01.03.1986. bY the enactment, the entire First Schedule of the central Excise Act, 1944 was omitted with effect from 01.03.1986. It is of utmost importance to note that the Central Excise Tariff Act does not contain any saving clause, permitting initiation of proceedings after 01.03.1986 for recovery of excise duty under the earlier First Schedule to the Central Excise Act, which stood omitted with effect from 01.03.1986. In the present case, it was only on 27.03.1987 when the First Schedule was no longer in existence that a SCN was issued by the Central Excise Department raising a demand under The First Schedule of the Central Excise Act. The petitioner submits that applying the ratio of the judgment of Constitution Bench of the Supreme Court in the case of Kolhapur Cane Sugar Works Limited Vs. Union of India as reported in (200) Vol-2 SCC 536, to the present case, it is clear that after 28.06.1986, no proceedings could be initiated against any Assessee for raising any demand for central excise duty under the First Schedule to the Central Excise Act and the notifications issued there under in respect of the period up to 28.06.1986. The demand for excise duty in respect of the period up to 28.02.1986, is not maintainable, without jurisdiction and therefore, liable to be quashed on this ground alone.
With effect from 01.03.1986, the First Schedule of the Central Excise Act, 1944 and the Notification issued thereunder ceased to exist and were obliterated from the statute books completely as if they never existed, hence, with effect from 01.03.1986, no demand for excise duty could be raised under the First Schedule of the Central Excise Act and the Notifications issued thereunder.
The company and other Directors of the Company stand in the same footing as that of the petitioner and the benefit of the order of quashing should go to the similarly situated other accused persons. Reference in this regard may be made to the decision of the Calcutta High Court in J.Th.Zwart & Ors. Vs. Indrani Mukherjee reported in (1990) 1 CLT 99 (HC).
In view of the above, when the Department has absolutely no case to fasten even a civil liability on the petitioner as well as the Company, it cannot claim to have a case to proceed against the petitioner by initiating criminal prosecution. In fact, it would amount to persecution and abuse of process of the criminal law.
In view of the facts mentioned herein above, the petitioner prays that this Hon'ble Court may graciously be pleased to quash the proceedings of Complaint Case No.. C02714/98 (Mr. Parag Chakor Borkar, Asst. Commissioner of Central excise, Barasat Division Vs. ITC & Ors.) pending before the Court of ld. Metropolitan Magistrate, 11th Court, Kolkata under Section 9 and 9AA of the Central Excise and Salt Act, in the light of the judgment of the Hon'ble Supreme Court dated 10.09.2004 and the judgments of the Hon'ble Kanataka High Court dated 13.04.2005 and 09.01.2008.
I have duly considered the submission made by the learned lawyer of the petitioner. Over the self-same matter in another forum, in the Hon'ble High Court at Karnataka such type of complaint was quashed in the light of the decision given by the Hon'ble Supreme Court (supra). Moreover, active role of the present petitioner for alleged commission of the offence is wanting in this case. He does not appear to have been responsible for the day to day affairs. The argument laid before me appears not only be exhaustive but also forceful. There is little scope in absence of any counter say from the other side, to dispute the argument.
This being the position, I have to accept the contention of the learned lawyer of the petitioner.
Accordingly, I find merit in the revision and the same stands allowed.
Therefore, the proceedings in Criminal Complaint No. C/2714 of 1998 pending before the learned Metropolitan Magistrate, 11th Court, Calcutta stands quashed.
Urgent Xerox Certified copy of this order be given to the parties, if applied for, upon compliance of necessary formalities.
(Toufique Uddin, J)