2016 (9) TMI 1351 - HC - Central Excise

Penalty u/r 209A of the Central Excise Act, 1944 - It is contended by the petitioner that if there are allegations of fraudulent transfers under registered documents of conveyance the Criminal Court could hardly be in a position to adjudicate the same and that unless the transactions are established to be fraudulent and the transfers are set aside - Held that - If the complaint has to be proceeded with it has to be on the premise that the transfers if any were void ab initio which is impermissible unless there is a finding after adjudication that each such transaction was permitted by fraud and was intended to avoid the attachment proceedings and hence the Criminal Court would not have the jurisdiction to adjudicate on civil transactions - proceedings initiated against the petitioner is out of place - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Reduction of penalty under Rule 209A of the Central Excise Act, 1944 by the Central Excise Sales Tax Appellate Tribunal.
2. Allegations of fraudulent transfer of properties leading to criminal charges under Sections 209, 421, and 422 of the Indian Penal Code, 1860.
3. Jurisdiction of the Criminal Court in cases involving fraudulent transfers under registered conveyance documents.

Analysis:

1. The petitioners faced a penalty under Rule 209A of the Central Excise Act, 1944, which was reduced by the Central Excise Sales Tax Appellate Tribunal. An appeal was made by the petitioners, resulting in the penalty reduction and an unconditional stay in their favor.

2. The Commissioner of Central Excise demanded duty and penalty against petitioner No. 1 as the proprietor of the firm. Both petitioner Nos. 1 and 3 appealed before the Tribunal, which granted conditional stay subject to a deposit. Non-compliance led to dismissal of the appeal, prompting attachment proceedings of the petitioners' properties. Allegations of fraudulent property transfers were made to avoid penalty payment, leading to criminal charges under relevant sections of the Indian Penal Code.

3. The petitioners argued that allegations of fraudulent transfers under registered conveyance documents should be adjudicated by a Civil Court, not a Criminal Court. They contended that the transfers must be proven fraudulent and set aside by a Civil Court before criminal proceedings can presume the transactions void ab initio. The absence of the respondent's Counsel further complicated the jurisdictional issue.

4. The Court concluded that the criminal proceedings based on allegations of fraudulent transfers were premature without prior findings by a Civil Court. It was deemed necessary for a Civil Court to establish fraud before criminal proceedings could proceed on the presumption of fraudulence. Consequently, the petition was allowed, and the ongoing proceedings were quashed, emphasizing the need for Civil Court adjudication before criminal charges could be pursued.