Karnataka High Court
M/S Tonesta Electronics And Another vs The Assistant Collector Of Central ... on 29 November, 1994
Equivalent citations: ILR1994KAR3680, 1995(4)KARLJ379
ORDER
1. This petition is filed by accused-1 and 2 in C.C. 72/88 before the special court for economic offence for quashing those proceedings initiated on a complaint filed by the respondent for offences punishable under Sections 9(1)(a), 9(1)(b) and 9(1)(bb) of the Central Excises and Salt Act. ('the Act' for short).
2. The respondent has filed a complaint in the lower court against M/s. Tonesta Electronics, which is a registered firm, represented by its managing partner, the second accused and A-3 and A-4 are the partners of the first accused firm for above offences. It is alleged that central excise duty is payable for the products manufactured and clearned under T.I. 68 in respect of T.V. cabinets, that on inspection of the factory of the first accused revealed that the first accused was manufacturing T.V. cabinets and supplying the same to M/s. Relectronics Pvt. Ltd. without either obtaining a licence as required under Section 6, of the Act, that the accused had removed/cleared T.V. cabinets liable to payment of excise duty without making such payment and without issue of gate pass and that the accused had also not maintained daily stock account and current account with the collector of central excise.
3. The Magistrate has taken cognizance of the offences and has issued process to the accused persons including the present petitioners.
4. The learned Counsel for the petitioners has sought for quashing of the proceedings on various grounds. The first ground urged by him in that that under Section 9 of the Act it is only the person who commits the offence who is liable to be punished, as Section 9(1) begins with the words "whoever commits any of the following offences," that under Section 9(1) there cannot be vicarious liability for the offence committed by the another and that in the present case admittedly the offence is committed by the company and that unless the complaint discloses that the other accused persons are vicariously liable under Section 9AA, they, cannot be prosected for the offence committed by the company. He pointed out that there is no reference to Section 9AA in the complaint and that there is also no averment in the complaint to indicate that accused-2 to 4 were in-charge of and responsible to the conduct of the business to the company. He has cited some authorities in support of his contention that where the offence is committed by a company or a firm unless there are averments in the complaint to show that the other accused persons were in-charge of and responsible to the conduct of the business to the company or the firm they cannot be prosecuted.
5. Section 9AA of the Act reads as hereunder :
"Offences by companies. - (1) where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. - For the purposes of this section, -
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm."
6. It is not disputed that the offences alleged in the complaint are stated to have been committed by the first petitioner company. The question is whether on the averments in the complaint and the material placed on record the Magistrate could have issued process to accused 2 to 4.
7. In Kedarnath Goenka v. Superintendent of Central Excise 1978 ELT (J) 538 : (1979 Cri LJ 421) the Calcutta High Court held that the words, "whoever commits" in Section 9(1) of the Act indicates that the person is made liable personally for the offence, that the liability cannot be extended to another person merely by virtue of an office or position he holds in a company or firm unless it is specifically averred in the complaint that he is guilty of an act of commission or omission which amounts to offence punishable under the Act, in that case though it had been averred in the complaint that the accused had committed the offence inasmuch as they were responsible to the company for the conduct of the business of the company at the relevant time when the offence was committed, the proceedings were quashed on the ground that there was no averment that the petitioners were guilty of any specific act of commission or omission. The learned Counsel for the petitioners strongly relied on this decision and contended that in the present case there was not even an averment that the other accused persons were incharge of and responsible for the conduct of the business to the firm. He also relied on the decision of Kishore Lal v. State of Karnataka wherein this Court, while dealing with a case under Section 10 of Essential Commodities Act, which is similar to Section 9AA of the Act, has held that that a partner cannot be proceeded against simply on the ground that he is the partner of that company. The prosecution must first show that the partner of the firm to be prosecuted was in charge of and was responsible for the conduct of the business to the company, that it is only after the prosecution establishes this fact the burden shifts on the partner prosecuted to prove that the cantravention took place without his knowledge or that he exercised all due diligence to prevent any such contravention. As in that case it was not averred in the complaint that the petitioners were managing the affairs of the firm during the relevant time, this Court held that they cannot be proceeded with against and quashed the proceedings under Section 482 Cr.PC The learned Counsel for the petitioner has also cited decisions of other high courts on this point.
8. There can be no doubt that where the provisions of the Act are violated by a company which term includes a registered partnership firm, it is the company which actually commits the offence. A person cannot be made vicariously liable for the offence committed by another unless the statute specifically makes another vicariously liable. Section 9AA provides for vicarious liability of certain persons for the offence committed by the company. As such were certain persons are sought to be prosecuted for the offence committed by the company, then there must be some material on record to prima facie indicate that those others are liable under Section 9AA for the offence committed by the company, before process could be issued to such accused person. In this connection it is sufficient if a reference is made to the decision of the Supreme Court in Municipal Corporation of Delhi v. Ramkishan Rohatgi . That was a case where for an offence under Prevention of Food Adulteration Act committed by a company some directors and managers of the company were prosecuted. In the complaint it was alleged that the accused-3 was the manager of the accused-2 and that accused-4 to 7 were the directors of the second accused and as such they were in charge of and responsible for the conduct of business of accused-2 at the time of sampling. In that case the Supreme Court while holding that proceedings against an accused in the initial stages can be quashed only if on the face of the complaint or the accompanying the same no offence is constituted, held that there was no clear averment in the complaint that the directors were really in charge of the manufacture and responsible for the conduct of the business and that the complainant had merely presumed that the directors of the company must be guilty because they are holding particular office. As such the Supreme Court upheld the judgment of the High Court quashing the proceedings against the directors. But so far as the manager was concerned the Supreme Court held that from the very nature of his duties it can be safely inferred that he would be vicariously liable for the offence and an such the proceedings would not be quashed against him.
9. In another connected case in Municipal Corpn. of Delhi v. Purushothamdass Jhunjunwala which was heard by the Supreme Court along with the above case, the Supreme Court held that the averment that the accused were managing director and directors of the mill and were in charge of and responsible to it for the conduct of its business at the time of commission of the offence was sufficient and that the proceedings could not be quashed against them. In view of this decision the contention of the petitioners counsel that even if there is an averment that the accused were in charge of and responsible to the company for the conduct of the business that would not be sufficient and that there must be allegations of specific acts done by the accused persons to indicate that they were in charge of and responsible to the company for the conduct of the business cannot be accepted. Another point which is worth taking note of is that, in Ramkishan Rohatgi's case (1983 Cri LJ 159) (SC) the Supreme Court held that the proceedings could be quashed at the initial stage only if on the face of the complaint or the papers accompanying the same no offence is constituted. In fact even in Pratibha Rani v. Suraj the Supreme Court has held that it is well settled by a long course of decisions that for the purpose of exercising its power under Section 482 Cr.PC to quash the F.I.R. or a complaint, the High Court would have to proceed entirely on the basis of the allegations made in the complaint or the documents accompanying the same per se. This shows that even if there are no clear averments in the complaint that the accused were in charge of and responsible to the company for the conduct of its business, still if the papers accompanying the complaint disclosed the same, this court cannot in exercises of powers under Section 482 Cr PC quash those proceedings. It is not necessary that the complaint should specificially state that the accused were in charge of and responsible to the company for the conduct of the business at the relevant time. If the complaint read as a whole indicates that fact that would be sufficient. The full Bench of the Patna High Court in Ramkripal Prasad v. State it has been pointed out that that a complaint or an F.I.R. in a criminal case is not to be an encyclopaedia of all the facts and that the petition of complaint is to be looked up in its totality.
10. In T. J. Stephen v. M/s. Parle Bottling Co. (P) Ltd. a company and managing director were prosecuted for an offence under the Imports and Exports (Control) Act. It was contended that the offence was committed by the company and that there were no allegations against the managing director. The supreme court repelled that argument by holding that the company cannot act by itself and it has to act through someone, that the managing director of the company prima facie would be in charge of and responsible for the conduct of the business. This shows that even if there is some material in the complaint from which prima facie it could be inferred that the accused must have been in charge of and responsible for the conduct of the business, that would be sufficient at this stage and the proceedings cannot be quashed merely on the ground that there is no specific allegation.
11. We have to see whether in the present case the material on record, at this stage, prima facie indicates that the other accused persons are vicariously liable for the offence committed by the first petitioner company. It is no doubt true that there is no specific averment in the complaint that A-2 to A-4 were in charge of and responsible to the company for the conduct of the business at the time of the commission of the offence. But in the complaint the first accused firm is shown as being represented by Kanthilal K. Pankhania, Managing Partner. Kanthilal K. Pankhania is also impleaded as a second accused showing himas the managing partner. The other two accused persons are merely described as partners. In para 8 of the complaint it is alleged that when the officers of the central excise visited the factory premises on 17-12-85 the second accused was present there, that he took the officers and panchas to the basement floor where the T.V. cabinets were manufactured, that the second accused also intimated the officer that he had another premises at Subramanyanagar and took them to the said premises, that there also they found 50 boys engaged in the manufacture of T.V. cabinets, that a copy of the mahazar prepared was given to the second accused. In para 9 of the complaint it is stated that during the course of the investigation the second accused gave a voluntary statement on 18-12-85 in his own hand writing, that in that statement he has stated that both their premises were being used for manufacture of T.V. cabinets, that they had installed cutting machine in one premises and drilling machine, etc. In that statement the second accused is alleged to have given various particulars regarding the business that was being carried on. It is further alleged that the second accused in that statement stated that they did not know that they had to take up central excise licence for manufacture of T.V. cabinets and that he was ready to pay central excise duty on the goods if found necessary. In para 10 of the complaint there is reference to another voluntary statement given by the second accused giving further particulars regarding the business done by them. In that para it is stated that A-2 told that he did not take a licence for 1985-86 because he did not keep a watch on the turnover during the period and that he had supplied the entire production to M/s. Relectronics Pvt. Ltd. and that he did not follow the procedure under Rule 56-C with regard to the receipt of raw-materials from M/s. Relectronics Pvt. Ltd. In that para it is also stated that the second accused stated that he had paid Rs. 1 lakh under challan No. Nil on 24-12-85 towards duty to be demanded and was prepared to pay the remaining amount.
12. The above averments in the complaint prima facie indicate that the second petitioner (second accused) is the managing partner of the firm, that he was not only present in the factory when the officers inspected it but he also took the officers to the places where the manufacture was going on and sought to explain why they did not take licence and that he also admitted that he had supplied the products to M/s. Relectronics Pvt. Ltd. The averments also show that the second accused expressed his readiness to pay central excise duties if found necessary. The averments, prima facie, show that the second petitioner was actually in charge of the entire business and that it was he who was managing the affairs of the firm.
13. The complaint shows that two statements made by the second petitioner in his own hand writing are produced along with the complaint as annexures. The lower court records show that those two statements are annexed to the complaint as annexures-C and D. In Annexure-C which purports to be the statement of the second petitioner he has clearly stated as hereunder :
"My name and address is as stated above. Tonesta Electronics is a partnership concern with 3 partners (1) Myself, (2) K. H. Pankhania (3) N. K. Pankhania, Nos. 2 & 3 are my father and my younger brother. These two partners are staying in London and are employed there. I am managing the entire factory."
In view of this specific statement which is alleged to have been made by the second petitioner in his statement which accompanies the complaint, there is enough material at this stage to prima facie indicate that he has been managing the entire factory and that he has been in charge of and responsible for the conduct of the business at the relevant time. In view of the averments in the complaint and in the alleged voluntary statement of the second petitioner enclosed to the complaint it cannot be said that there was no material on record to indicate that the second petitioner was in charge of and responsible to the firm for the conduct of the business, on the other hand there is sufficient material to prima facie indicate that he was entirely managing the affairs of the firm. As such the proceedings cannot be quashed against the second petitioner.
14. So far as A-3 and A-4 are concerned, though they have not filed this petition, neither averments in the complaint nor the documents produced along with complaint in any way indicate that they were in charge of and responsible to the firm for the conduct of the business of the firm at the relevant time. On the other hand the statement of the second accused which is relied on by the complaint shows that A-3 and A-4 are actually living in London where they are employed. In fact in the trial Court summons issued to A-3 and A-4 were returned several times on the ground that they had gone abroad and that their whereabouts were not known. This circumstance also supports the version given in the statement enclosed to the complaint. In the circumstances it would be an abuse of the process of court to allow the proceedings against A-3 and A-4 to be continued. Though they have not filed this petition obviously because they have not yet been served with the summons, as the defect in the order of the trial court issuing process to those accused persons has come to the notice of this Court, there is no bar for quashing the proceedings against them.
15. The learned Counsel for the petitioners next contended that as the first petitioner-company cannot be sentenced to imprisonment, the proceedings against it will have to be quashed. In this regard he relied on the decision in Vijaya Commercial Credit Ltd v. Income Tax Officer . In that case this Court has held that since there is no statutory compulsion to prosecute a company alongside the officers or persons in charge of and responsible to the company and as the criminal proceedings instituted against a company under Section 277 of the Income Tax Act would be futile, the proceedings against the company should be quashed.
16. The learned Counsel for the respondent contended that in a later decision of this Court in M/s. Shankar and Company v. Income Tax Officer, Bangalore (1991) 2 Kant LJ 576, it has held that the proceedings against a company cannot be quashed only on the ground that the company cannot be sentenced to imprisonment. In this case though the decision in Vijaya Commercial Credit Ltd's case (1988 Tax LR 26) (Kant.) was noticed, it was held that in view of the decisions of the Supreme Court in Sheorathan Agarwal v. State of M.P. and T. J. Stephen v. M/s. Parle Bottling Co. (P.) Ltd. (1988) 64 Comp. Cas 151, (1988 Cri LJ 1095), the prosecution of the company cannot be quashed on the ground that the company cannot be sentenced to imprisonment.
17. However in P. V. Pai v. R. L. Rinwma , a Division Bench of this Court has held that, when the court finds the company guilty and imposition of sentence of imprisonment is compulsory, the prosecution of the company becomes unpurposeful as the company cannot be sentenced to imprisonment and the court cannot levy a sentence of fine only in view of the provisions of Section 277 of IT Act.
18. All the above decisions deal with Section 277 which expressly stipulates that a person found guilty shall be punished with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine or with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 3 years and with fine depending upon the quantum of tax evaded. Under that provision no discretion is given to the court and imposition of a minimum sentence and imprisonment of either 6 months or 3 months is obligatory. But under Section 9, of the Act it is provided that if the duty leviable exceeds Rs. 1 lakh then the offence shall be punishable with imprisonment which may extend to 7 years and with fine provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for a term of less then six months. This shows that the imposition of minimum sentence of imprisonment is not made obligatory in all cases and a discretion is given to the court in that regard. As such I do not think that the above decision could be applied to the present case for quashing the proceedings against the first petitioner firm.
19. The learned Counsel for the petitioner Sri Chanderkumar next contended that the sanction order is passed by the Collector without applying his mind and as such it is invalid. He pointed out that though in the early part of the order the collector states that the firm and the other three persons have committed the offences, in the concluding portion he has given sanction for filing complaint only against the firm and the second accused and that this shows that the collector has not applied his mind while passing the order.
20. The learned Counsel for the respondent contended that the Act done not stipulate that any sanction has to be obtained from the Collector before a complaint with regard to the offences under the Act is filed, that Rule 207 only stipulates that charge shall not be made except by an officer not inferior in rank to an inspector that a complaint in this case is filed by an Assistant Collector and that as such there is no defect in the complaint. He further contended that the Collector has passed an order of sanction authorising the Assistant Collector to file the complaint only in pursuance of departmental guidelines to prevent abuse of power and that as such the validity or otherwise of that sanction has no relevance.
21. Sri Chanderkumar conceded that there is no provision in the Act requiring any sanction for prosecution in respect of offences under the Act. However, he contended that it is by virtue of that sanction order the complaint is filed by the Assistant Collector, that if that sanction order is to be ignored then the Assistant Collector would have no competence to file the complaint and that the Collector being the aggrieved party he alone should have filed the complaint. I do not find much substance in this submission.
22. As there is no statutory requirement of a sanction of any prescribed authority for prosecuting a person for an offence under the Act, the validity or otherwise of the sanction order which is passed in pursuance of administrative instructions would not arise for consideration. Even if that order can be said to be bad the proceedings cannot be quashed on that ground. The Act does not stipulate that the complaint for an offence under the Act should be filed only by the Collector. All that Rule 207 stipulates in that the complaint should not be filed by an officer inferior in rank to an inspector. If that condition is complied with the complaint will be competent. As in this case the complaint is filed by the Assistant Collector there is compliance with Rule 207 and the proceedings cannot be quashed even if there is some defect in an order passed by the Collector authorising the Assistant Collector to file the complaint as that order is superfluous. It is only where there is statutory bar for prosecution unless it is sanctioned by a prescribed authority, the questions as to whether that authority had applied its mind while according the sanction and as to whether the sanction order is a valid sanction order would arise for determination. Hence the contention that the sanction order passed by the Collector is invalid cannot be advanced in this case.
23. It was lastly contended that Rule 210-A contains a provision for composition of the offences, that before launching the prosecution an opportunity ought to have been given to the petitioners by issuing a notice to compound the offence if possible and save the ignominy of the prosecution that, it is now well settled by the decisions of the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner and Maneka Gandhi v. Union of India , that rules of natural justice apply as much to administrative action which entails civil consequences as to quasi judicial and judicial functions and that as the decision to prosecute entails civil consequence namely the ignominy of a prosecution, it was necessary for the authorities to issue a notice especially in view of the provision for composition of the offences. He contended that there has been violation of principles of natural justice and that as such the proceedings have to be quashed. In support of this contention he strongly relied on the Division Bench ruling of this Court in P. V. Pai v. R. L. Rinawma .
24. In P. V. Pai's case this Court was dealing with Section 279 of the Income Tax Act. Sub-section (1) of that section lays down that a person shall not be proceeded against for the offences mentioned therein except with the previous sanction of the Chief Commissioner or Director General or Commissioner. Sub-section (1A) provides that in certain contingencies a person shall not be proceeded against for an offence under Section 276C or 277. Sub-section (2) of that Section lays down that any offence under that chapter may either before or after the institution of the proceedings be compounded by the authorities mentioned therein. This Court while dealing with the above provision has held that if the provisions of Sections 269 of the Act are read in totality together with the provisions of Section 278 regarding abetment of assessee or person abeting the commission of offence under Section 276C, the intention of the legislature becomes clear namely, to give an opportunity to the assessee or the person charged with abetment to satisfy the sanctioning authority about his bona fides or about the circumstances under which certain statements were made. It was also held that an assessee may be anxious to offer composition even before prosecution to save himself from the disgrace and ignominy of the prosecution and that as such the stage at which such offer may be considered could be at the time sanctioning authority considers according a sanction to prosecute. On this ground it was held that if a notice at this stage is not issued to the accused persons then there would be a violation of principles of natural justice and the proceedings are liable to be quashed.
25. The Central Government Standing Counsel contended that the decision is based entirely on the provisions of the Income-tax Act and that has no application to the present case where the petitioners are being prosecuted for an offence under the Act. He contended that while in the Income-tax Act there was a provision for compounding the offence in the Act itself, there was no such provision for compounding in the Central Excise and Salt Act. In the absence of a provision for compounding in the Act, he contended that a provision in the rules regarding compounding cannot override the section. According to him the provision in Rule 210-A does not apply to an offence which is punishable under Section 9 of the Act. He pointed out that Rule 210-A comes in Chapter XII dealing with "penalties and confiscations" and contended that the composition contemplated in Rule 210-A is only with regard to the confiscation that could be ordered by the Collector or the penalty that could be imposed by the Collector during the adjudication proceedings and that it does not apply to a criminal offence.
26. Sri Chanderkumar pointed out that Section 37(xv) of the Act empowers the Central Government to make rules to authorise and regulate the composition of offences against or liabilities incurred under this Act or the rules made thereunder and that as Rule 210-A has been framed in exercise of that power it cannot be said that that rule would apply only to confiscation proceedings or the penalty to be levied by the Collector.
Rule 210-A reads as hereunder :
"Composition of offences. - The Collector may accept from any person whose property is liable to confiscation under the Act or is reasonably suspected of having committed an offence under the Act or under the Rules a sum of money not exceeding two thousand rupees in lieu of confiscation of goods or punishment for breach of any provision of the Act or of the Rules."
It is no doubt true that the above rule comes in Chapter dealing with penalties and confiscations but that alone cannot be decisive in finding out whether it applies to an offence punishable under Section 9 of the Act. It is also true that the above provision fixes a ceiling with regard to the amount which could be accepted in lieu of confiscation of goods or for punishment and this amount may have no comparison to the punishment actually prescribed for an offence under Section 9 under which if there are no sufficient and adequate reasons imprisonment of 6 months is compulsory. But the wording of Rule 210-A shows that it applies even in respect of an offence under the Act and not only under the rules. Further the amount to be collected could be in lieu of punishment, as such it is difficult to accept the contention that Rule 210-A is restricted in its operation only for confiscation of the property or for the penalty to be imposed in the adjudication proceedings. But the main point is, assuming that Rule 210-A is applicable even in respect of an offence punishable under Section 9, of the Act, whether the prosecution could be quashed on the ground that no notice had been issued to the accused persons before launching the prosecution.
27. In P. V. Pai's case the provision for compounding the offence is made in the very provision stipulating sanction for prosecution. Under that Act before a person could be prosecuted for certain offences sanction of the prescribed authority is made mandatory. No limitations have been prescribed regarding the terms under which the offence could be compounded. The court after taking into consideration other provisions of the Income-tax Act found that the intention of the legislature was that the accused in a case under that Act should be given an opportunity to explain the circumstances under which statements were made and demonstrate his bona fides. While granting sanction, the authority is required to apply his mind to the facts of the case and decide whether launching of prosecution should be sanctioned or not. This Court has held that, while granting sanction for prosecution, though there was no statutory requirement of giving notice to the accused, the principles of natural justice require that a notice to be given to the accused so that at that stage he could demonstrate his bona fides or avail himself of the opportunity to make an offer for compounding the offence. This Court has not purported to lay down in the above decision that in all cases where an offence is compoundable a notice has to be issued before launching prosecution or that in all cases where sanction is required notice has to be issued. This is clear from the following observations in P. V. Pai's case :
".... In the instant case we are not very much concerned with the powers of sanction that could be exercised under Section 197 of the Code of Criminal Procedure where it is in the absolute discretion of the Government to consider whether sanction to prosecute for an offence should be accorded or not keeping in view the nature of the offence committed and where no such provision as under Section 279 of the Income Tax Act exists. For example where sanction is required to prosecute for offences under Anti Corruption Act, the Penal Code and such other legislations, where there is no provision for compounding, the question for consideration would not be the same. It would be in the absolute discretion of the sanctioning authority to consider whether the sanction should be accorded or not on the material placed before it. But where particular enactments do provide an opportunity to the person intended to be prosecuted to avail of the benefit of a provision regarding compounding either before or after institution of the proceedings the provision of sanction cannot be viewed in the same perspective as that under other enactments or the Code of Criminal Procedure.
In our considered opinion the view taken by the learned single Judge of the Rajasthan High Court in the case of Shree Singhvi in the matter of applicability of principles of natural justice while according sanction under Section 279 of the Act appears to be the correct view. We have extracted the observations of the learned Judge at the commencement of our discussion on this point and we are of the view that these observations made a correct approach towards the course to be followed while according sanction under Section 279(1) of the Act. In Gangasagar v. Emperor (1929) 4 ITC 97 : (1930 (31) Cri LJ 88) it was pointed out that the provision for compounding is not meant to enable the Department to obtain as much money as possible by holding out a threat of prosecution. However when it is for the benefit of the assessee he may avail of the benefit by making an offer even before the prosecution is launched and the discretion vests in the sanctioning authority whether to accept or not. In the instant case the department is at liberty to consider the question of sanction afresh after giving opportunity to the petitioners (A-2 & A-5) of being heard."
The observations clearly show that the emphasis with regard to the need of issue of notice where the statute contemplates sanction of a prescribed authority for prosecution and there is also a provision for compounding of the offence.
28. Under the provisions of the Act there is no need for any sanction of any authority for launching prosecution. As such the question of issue of notice at the stage of sanction for prosecution does not arise at all in this case. When once an offence is committed under the provisions of the Act investigation will have to be held and the filing of the complaint and initiation of adjudication proceedings follows. In this regard I may point out that Section 21 indicates as to how enquiry has to be conducted by the central excise officers against arrested persons forwarded to them under Section 19. Section 13 authorises a central excise officer duly empowered in that behalf to arrest any person whom he has reason to believe to be liable to punishment under the Act. Section 19 lays down that every person arrested under the Act shall be forwarded to the nearest central excise office empowered to send persons so arrested to a Magistrate or to the officer in charge of the nearest police station. Section 21, lays down that where any person is forwarded under Section 19 to a central excise officer he shall proceed to enquire the charge against him and he may exercise the same powers and shall be subject to the same provisions as the officer in charge of the police station may exercise and is subjected to under the Code of Criminal Procedure when investigating a cognizable case. If the Central Excise Officer is of the opinion that there is sufficient evidence or reasonable ground of suspicion against the accused person then he should admit the accused to bail to appear before the Magistrate having jurisdiction in the case or forward him to the Magistrate. This provision shows that the central excise officer has to follow the same procedure prescribed under the Cr.PC for investigation of cognizable offence by a police officer. After the enquiry is concluded he has to subject the complaint before the Magistrate instead of final report which is required to be submitted by a police officer under Section 173 Cr PC. There is no provision under the Act which requires some other authority to determine whether prosecution should be launched or not. As such there is no scope to contend that a notice should be issued to the accused before deciding to prosecute him, or failure to issue such notice would amount to violation of principles of natural justice. Merely because there is a provision under which the Collector can collect not exceeding Rs. 2,000/- in lieu of punishment for breach of any provision of the Act or the rules, it cannot be said that the accused re entitled to issue of a notice before the complaint is lodged. The accused, when arrested under the provisions of the Act, would have notice of the fact that the proceedings have been initiated against him in respect of an offence under the Act. He would therefore have the opportunity to make an offer for compounding if he so desires and it would be entirely for the officer concerned to accept the offer or not.
29. After careful consideration of the provisions of the Act and the provisions of the Income Tax Act on the basis of which the decision in P. V. Pai's case is rendered I am convinced that the principle laid down in P. V. Pai's case is not applicable to this case. The proceedings in this case cannot be quashed on the ground that notice have not been issued to the accused persons before the complaint was lodged.
For the above reasons, while rejecting the petition filed by the petitioners, the order of the Magistrate issuing process to A-3 and A-4 is set aside and proceedings against only A-3 and A-4 are quashed. The Magistrate shall now proceed with the case against the petitioners.
30. Order accordingly.