Madras High Court
The Asst. Commissioner Of Central ... vs Beauty Dyers, Rep. By Its Partner, Uma ... on 17 June, 2004
Equivalent citations: 2004(4)CTC19, 2004(172)ELT154(MAD)
Author: R. Banumathi
Bench: R. Banumathi
JUDGMENT R. Banumathi, J.
1. Aggrieved over the acquittal of the Accused for various offences under the Central Excise Act, 1944, (relating to different periods), the Department - Central Excise has preferred these appeals.
2.Points arising for determination in all the four appears are one and the same. Hence, all the appeals were taken up and heard together and are disposed of by this common judgment.
3.The facts which led to the prosecution against the Respondent/Accused could briefly be stated thus:-
A-1 firm is holder of Central Excise license for processing cotton fabrics falling under Tariff Item No. 19(1)(b) scheduled to the Central Excise and Salt Act. A-2 is the partner and manager of A-1 firm. A-3 is one of the partners of M/s. Akshaya Hantdex, Madras-7 who procured cotton fabrics from various parties and processed the same in the machinery of A-1 firm. During May 1984, the CBI Officers, Madras searched and seized records including Central Excise statutory records from the factory premises of A-1 firm and from certain Garment exporters who have got the fabrics processed with A-1 firm and the CBI officers handed over the records to the Central Excise Department for necessary action. The officers of the Central Excise Department, Madras also searched and seized certain records from the Garment exporters, Sivam interior Exports (PW-2), Goyal Dresses (PW-3), Time Fashions and Sports Wear (PW-4) and several other Garment exporters and obtained their statements. The investigation disclosed that A-1 firm has cleared processed fabrics without payment of duty and collected processing charges through letter bills, cleared processed fabrics without payment of appropriate duty by collecting part of processing charges through regular invoices and part through letter head bills, cleared processed fabrics without payment of duty by preparing the invoices and Central Excise gate passes indicating the process as 'Scouring' which is exempted as against the actual process carried out viz., crinkling and dyeing, cleared processed fabrics without payment of duty by showing higher processing charges in the original copies of invoices and lower processing charges in factory copy meant for departmental verification and cleared processed fabrics of higher counts and lower width without payment of appropriate duty by declaring lower counts and higher width to avail lower rate of duty. The accused could not explain the discrepancies.
4. From the records seized and statement obtained from the various Garment exporters, it became clear that A-1 firm has cleared processed fabrics without payment of duty and without cover of Central Excise gate passes. A-1 firm is thus alleged to have violated the provisions of Central Excise Act under sections 9(1)(bb)(ii) of Central Excise and Salt Act r/w sec. 9(1) and 173-F of Central Excise Rules, Section 9(1)(bb)(ii) of Central Excise and Salt Act r/w Rule 52-A of Central Excise Rules, Section 9(1)(c)(ii) of Central Excise and Salt Act r/w 173-G of Central Excise Rules and section 9(1)(c)(ii) of Central Excise and Salt Act r/w Rule 226 of Central Excise Rules.
5.In the evidence of PW-15, the following five violations are alleged against A-1 firm :-
"Firstly, A-1 company have cleared the processed fabrics without payment of duty and without cover of Central Excise gate passes and collected the processing charges through letter head bills instead of in their invoices and the invoices alone were submitted to the department and the letter head bills were not submitted.
Secondly, A-1 company have cleared the processed fabrics without payment of appropriate duty by collection of part of processing charges through their own letter-head bills and part of processing charges through their invoices. The company have not submitted the letter-head bills for collection of part of processing charges and this evaded duty.
Thirdly, A-1 company have cleared the processed fabrics by indicating the process as 'scouring' instead of dyeing etc. 'Scouring' process is exempted from payment of duty. The correct process is dyeing crikling carried out by A-1 company as per the instruction of the suppliers of the fabrics to A-1 company. The correct processes indicated by suppliers is liable for duty. The suppliers M/s Jain Handloom Centre and M/s Jain Syndicate, Madras have confirmed in their statement that A-1 company have carried out the process of crinkling and dyeing required by them, and that A-1 company have not done any scouring process.
Fourthly, A-1 company have cleared processed fabrics without payment of duty by showing higher rate of processing charges in their original invoices and showing lesser rate of processing charges in the copy of the invoices sent to the Department.
Fifthly, A-1 company have cleared processed fabrics having higher court above 51 counts attracting higher rate of duty and that by showing the lesser count in the documents submitted to the Department to avail lesser rate of duty. A-1 Company have shown higher width of fabrics to avail lesser rate of duty in order to show lesser sq.meter value by which they can avail lesser rate of duty."
The period of evasion and the alleged amount of duty evaded by A-1 firm for the various periods are as noted below:-
C.A.No. E.O.C.C.No. Period of Evasion Amount
444/1996 536/90 10.07.1982 to Rs.1,96,166.03
09.05.1985
445/1996 537/90 10.07.1982 to Rs.1,96,166.03
09.05.1985
446/1996 538/90 1984-1985 Rs. 9,376.77
447/1996 539/90 10.07.1982 to Rs.1,96,166.03
09.05.1985
6. To substantiate the charges against the accused in the trial court, PW-1 to PW-26 were examined. Accepting the contention of the accused, the learned Additional Chief Metropolitan Magistrate, has acquitted the accused finding that the complaint filed by the Assistant Collector is not maintainable for want of proper authorization and that the complaint is not maintainable under section 37-A of the Central Excise Act - (for short, hereinafter referred to as 'the Act'). On appreciation of oral and documentary evidence, the trial court found that the prosecution has failed to convincingly establish the evasion of duty, by producing the original invoices and relevant documents and also on the ground of non examination of exporters and the consigners.
7. Aggrieved over the acquittal, the Department has preferred these appeals. The learned counsel for the Central Excise Mr.P.N.Prakash has drawn the attention of the court to Rule 207 which enables the Inspector of the Central Excise to file a complaint. It is contended that in view of Rule 207 and Section 4 of the Crl.P.C, the specific delegation of powers is not essential to file the complaint. The main point of attack is that section 4(2) Crl.P.C adumbrates that other laws would be the guiding factor for filing the complaints under other enactments and the trial court grossly erred in invoking section 37-A and finding that the complaint is not maintainable. In this regard, the learned counsel has relied upon (TONESTA ELECTRONICS V. ASSTT. COLLECTOR OF C. EXCISE, BANGALORE). On the factual aspects, the learned counsel submitted that the evidence adduced by the prosecution was not properly appreciated by the trial court.
8. Supporting the reasonings and findings of the trial court, the learned counsel for the Respondent/Accused submitted that in the absence of production of the original documents, viz., invoice and other relevant documents, the evasion of duty is not convincingly proved to establish the guilt of the accused in the criminal prosecution. The learned counsel further submitted that the levy of excise duty in the Departmental proceedings has nothing to do with the criminal prosecution and that there are no substantial and compelling reasons warranting interference in the judgment of the acquittal.
9. Before going into the factual aspects of the case and the correctness of the finding of the trial court, the points urged on the maintainability of the complaint could be considered. The trial court has referred to section 37-A of the Act in support of its finding that the prosecution has to prove that the Assistant Collector, Central Excise was specifically authorized to file such complaints against A-1 firm - M/s.Beauty Dyers. While so, referring to section 37-A of the Act, the trial court has ignored the points urged by the Standing Counsel for Central Excises in referring to Rule 207, on the maintainability of the complaints.
10. We may straight away point out that the above findings on the maintainability of the complaint is perverse and non-sustainable. Section 37-A of the Act deals only with the general delegation of powers. Section 37-A has nothing to do with the filing of the complaints. Rule 207 stipulates that the complaint should not be filed by an officer inferior in rank to Inspector. If that condition is complied with, the complaint will be competent. In this case, the complaint is filed by the Assistant Collector which is in proper compliance with Rule 207. No further proceedings / specific authorization, authorizing Assistant Collector to file a complaint is essential.
Section 190 Crl.P.C deals with :- Cognizance of offences by Magistrates ---
(i)Upon Police report;
(ii)Upon information received from any person other than a police officer ...
Thus under section 190 Crl.P.C, Magistrate is competent to take cognizance of the complaint filed by any person other than the police officer. It is necessary to refer to section 4 Crl.P.C which deals with trial of offences under the Indian Penal Code and other laws. Offences under Indian Penal Code shall be investigated and tried as per the provisions of Criminal Procedure Code. As per section 4(2) of the Crl.P.C, other offences under any other law shall be investigated, enquired into, tried ... subject to provisions of those enactment.
Section 4(2) Crl.P.C reads thus :-
"4(2) All offences under any other law shall be investigated, inquired into, tried and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."
For the offences arising under section 207 under the Central Excise Act, complaint shall not be filed by the officer inferior in rank to a Inspector. While so, the maintainability of the complaint filed by the Assistant Collector cannot be challenged invoking section 37-A. The learned Additional Chief Metropolitan Magistrate was not right in finding that the Complainant/Assistant Collector of Central Excise ought to have been specifically empowered to file the complaint and that finding cannot be sustained.
11. At this juncture, we may usefully refer to the Judgment of the Karnataka High Court reported in 1995 (75) ELT 456 wherein the single Judge of the Karnataka High Court has held that there is no statutory requirement of sanction of a prescribed authority for prosecuting a person, nor any specific authorization is required to file the complaint. Finding that the complaint filed by the Assistant Collector is competent, the learned Single Judge declined to quash the prosecution proceedings. The finding of the trial court about maintainability of the complainant cannot be sustained.
12. With the insertion of section 9C of the Customs, Gold (Control) and Central Excises and Salt (Amendment) Act, 1973 (Act 36 of 1973), it is not necessary to establish mens rea. On the contrary, Section 9C presumes the existence of guilty mind. But the statute with which we are concerned prescribes strict liability. Actus reus is to be proved for the violations under the Act. In the light of the arguments advanced, it is to be seen Whether the prosecution has proved that A-1 company has cleared the processed fabrics without payment of appropriate amount ? It is also to be seen, Whether the appreciation of evidence by the trial court suffers from serious infirmity ?
13. A-1 firm - M/s.Beauty Dyers is the holder of Central Excise license no.L4 No.4/82 (CEP) issued under Rule 174 of the Central Excise Rules for proceeding cotton fabrics falling under Tariff Item No.191(b).
14. The grey fabrics are supplied by different Garment manufacturers who declare the cost of raw material including the cost of transport. The said M/s.Beauty Dyers, Madras have filed the price lists representing the cost of raw material, the cost of transportation and conversion charges which include the manufacturing cost and profit. The fabrics so processed are sent to the Garment manufacturers concerned who convert the fabrics into Garments and export them to foreign countries. The price lists so far submitted under Part VII have been approved provisionally since in terms of section 2(f) of Central Excises and Salt Act 1944 the Garment manufacturers who supply the raw materials are the 'dejure manufacturers' whose profit margin would have to be included in the values declared by the said unit. It is alleged that A-1 firm had not shown the real value under section 4 of the Central Excise and Salt Act, 1944.
15. In this regard, on 05.05.1984, CBI has registered a case in R.C.No.29 of 1984 under section 120-B, 468, 471 IPC and section 5(1)(d) of the PC Act against A-1 firm and other officials of the Central Excise department. After the investigation, the allegation against the Central Excise officials were recommended for regular Departmental action. As far as the allegation against A-1 firm was concerned, it was recommended to the Central Excise to probe further and initiate departmental action and criminal prosecution.
16. A-1 firm are only independent processors. Grey fabrics are supplied by the Garment manufacturers/exporters for processing namely dyeing/bleaching. After processing, the fabrics are returned to the Garment manufacturers for ultimate manufacture of Garments. No sale transaction takes place. The grey fabrics are supplied by the processors for intermediate process namely dyeing/bleaching before they go into the manufacture of Garment. Garment manufacturers are therefore real and rightful manufacturers of the final commodity, viz., the Garments. The independent processors/ A-1 firm are doing the work on behalf of the real manufacturers. The fabrics processed are sent to the Garment manufacturers to convert the fabrics into Garments and send them to the buyers or to export them to foreign countries which include the profit margin on the manufactured Garment. Therefore, independent processors namely A-1 firm's balance sheet has to reflect the margin profit earned by the Garment manufacturers. The allegation against A-1 firm is that having failed to include the profit margin of the fabrics in their balance sheet, have committed various violations as noted above in paras (4) and (5). In this backdrop of allegations, it is to be carefully seen Whether these allegations against A-1 firm are satisfactorily proved to convict them for the violations ?
17. To prove that the Garment manufacturers have supplied the fabrics for intermediate process namely dyeing/ bleaching, it could be proved only by production of their original invoices/gate passes. In almost all the instances of Garment manufacturers, the xerox copy of, either the invoices or gate passes are produced. For instance, the Garment manufacturers - M/s.Exind Corporation is said to have sent the fabrics to A-1 firm for processing. It is the further case of the prosecution that after processing, fabrics used for manufacturing Garments are exported to foreign countries. Prosecution is reasonably called upon to substantiate these aspects by proving:-
(i)That the fabrics were sent to A-1 firm by Garment manufacturers;
-and-
(ii)The processed fabrics were sent back by A-1 firm after intermediate process, namely dyeing and bleaching, by the Garment manufacturers, which were used for making Garment for sale or export to foreign countries.;
18. Witnesses concerning the Garment manufacturers are examined. The officers who conducted the house search in the premises of Garment manufacturers are also examined by the prosecution. In almost all the instances, only the xerox copies of the Invoices/Gate passes are said to have been seized. As rightly pointed out by the trial court, absolutely no reason is forthcoming for non filing of the originals. Unless the original is produced, the exact quantity of fabrics supplied by the manufacturers and the process undertaken in A-1 firm cannot be said to have been proved. Likewise, to establish the profit earned by the Garment manufacturers, either by sale or by export, the prosecution has not adduced the original documents of the Garment manufacturers. In the absence of original records, it is not possible to ascertain whether Garment manufacturers have made any profit and whether sale ought to have been reflected in the balance sheet of A-1 firm.
19. As rightly found by the trial court, "prosecution has failed to prove the case by marking original and relevant documents and also failed to examined the exporters or consignees". That finding and appreciation of evidence by the trial court does not suffer from any infirmity.
20. In an appeal against acquittal, the High Court would not interfere with an order of acquittal unless the appreciation of evidence and the findings are proved to be palpably wrong and manifestly erroneous and unsustainable. The finding of fact by the trial court that the prosecution has failed to produce the original documents does not suffer from any perversity. Upon analysis of the evidence, this court finds that there is no ground for reversing the order of acquittal. The reasonings cannot be said to be unreasonable or suffering from glaring infirmities. These appeals have no merits and are bound to fail.
21. Crl.A.Nos.444 to 447/1996:-
In the result, all four appeals are dismissed.