2010 (8) TMI 440 - HC - Central Excise

Demand - Modvat credit - Cum-duty price - Duty evasion - Section 9AA of Central Excise Act 1944 - the criminal proceedings cannot be quashed on the ground that the writ petition challenging the order passed by CESTAT came to be allowed. - proceedings culminated by way of disposal of writ petition does not amount to a verdict of acquittal in favour of the petitioners so as to attract the rule of issue estoppel. - It is pertinent to point out at this juncture that if the criminal proceedings are quashed by virtue of the orders passed in the above writ petition and in the event of writ appeal against the said order being entertained and allowed the criminal proceedings cannot be revived - This Court taking into consideration of the said submission is not inclined to quash the proceedings in E.O.C.C.No.144 of 2006 pending on the file of Addl. Chief Metropolitan Magistrate Economic Offences Egmore Chennai.

Issues Involved:
1. Whether the criminal proceedings against the petitioners should be quashed.
2. The impact of the CESTAT order being quashed by the High Court on the criminal proceedings.
3. The validity of the criminal prosecution based on mutuality of interest.
4. The relevance of the decisions cited by both parties.

Issue-wise Detailed Analysis:

1. Whether the criminal proceedings against the petitioners should be quashed:
The petitioners sought to quash the criminal proceedings in E.O.C.C.No.144 of 2006, arguing that the findings of the CESTAT, which formed the basis of the criminal charges, had been set aside by the High Court. The petitioners contended that the criminal prosecution was solely based on the CESTAT's findings of mutuality of interest, which the High Court had invalidated. The court, however, noted that steps were being taken to challenge the High Court's order, and thus, the criminal proceedings could not be quashed solely on this basis.

2. The impact of the CESTAT order being quashed by the High Court on the criminal proceedings:
The High Court had previously set aside the CESTAT order, which had found mutuality of interest between the accused and established the evasion of Central Excise duty. The petitioners argued that this quashing should nullify the criminal proceedings. However, the court observed that the findings in the writ petition do not equate to an acquittal, and quashing the criminal case at this stage could lead to complications if the writ appeal is later allowed.

3. The validity of the criminal prosecution based on mutuality of interest:
The petitioners argued that the prosecution was based on the assumption of mutuality of interest, which the High Court had rejected. The court acknowledged this but emphasized that the criminal prosecution and adjudication proceedings operate in different fields. Therefore, the criminal case could not be quashed merely because the adjudication order was set aside.

4. The relevance of the decisions cited by both parties:
The petitioners cited several decisions to support their argument that criminal proceedings should not continue if the adjudication order is set aside, including:
- Uttam Chand v. I.T.O.: The Supreme Court quashed criminal proceedings when the Income Tax Appellate Tribunal found a firm to be genuine.
- G.L.Didwania v. Income Tax Officer: The Supreme Court quashed criminal proceedings when the appellate tribunal found no material to hold that a company belonged to the assessee.
- Swathy Chemicals Ltd. v. Union of India: The Madras High Court quashed criminal proceedings when the CESTAT's order was not challenged and had reached finality.

The respondent cited decisions to argue that criminal prosecution and adjudication can proceed simultaneously:
- Collector of Customs & Central Excise v. Paradip Port Trust: The Supreme Court held that prosecution and penalty under Customs Act can proceed concurrently.
- Standard Chartered Bank v. Directorate of Enforcement: The Supreme Court held that adjudication and prosecution under FERA can proceed simultaneously.
- Ramesh Dutt v. State of Punjab: The Supreme Court quashed criminal proceedings when the civil court's decision did not bind the criminal court.

The court noted the petitioners' reliance on these decisions but ultimately decided that the criminal proceedings should not be quashed at this stage, given that steps to challenge the High Court's order were underway.

Conclusion:
The court dismissed the Criminal Original Petitions, allowing the criminal proceedings to continue. The petitioners were granted the liberty to seek quashment of the criminal proceedings if the writ appeal is decided against the respondent. The court emphasized that quashing the criminal case at this stage could lead to complications if the writ appeal is allowed, and thus, it was not inclined to quash the proceedings based on the current status of the writ petition.

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