2008 (2) TMI 389 - HC - Central Excise

Imposition of penalty on Director - At the time of framing the charge, it cannot be said that there is a strict onus on the part of the prosecution to prove that the petitioner in no way was connected with the affairs of the company - Simply because at the pre-charge stage, no evidence has come, prosecution cannot be precluded to improve its case U/S 9(c) of CEA, mental state on the part of the accused is to be presumed and there shall be a defence known to each accused to prove that there was no such mental state petition dismissed

Summary

Issues:
1. Evasion of central excise duty by a company.
2. Whether the petitioner, as a Director, can be held liable under Section 9 of the Central Excise Act.
3. Presumption of mental state under Section 9(c) of the Central Excise Act.
4. Burden of proof on prosecution at the pre-charge stage.
5. Director's role and liability in company affairs.

Analysis:
1. The case involved the discovery of evasion of central excise duty amounting to Rs. 2,29,034.15 by a company during a verification by the Central Excise Preventive Staff.

2. The petitioner, a Director of the company, sought to quash the charge-sheet arguing that there was no evidence or allegation to hold him liable under Section 9 of the Central Excise Act. The court noted that unlike the Indian Penal Code, the Central Excise Act presumes the mental state of the accused, making it a matter of evidence to establish the Director's role and liability.

3. The court highlighted that under Section 9(c) of the Central Excise Act, the mental state of the accused is presumed, but this presumption is rebuttable. It emphasized that the burden of proof on the prosecution at the pre-charge stage does not require them to prove the Director's lack of connection with the company's affairs.

4. The judgment clarified that the role of each Director in the company is a subject matter of evidence that needs to be presented. The court stated that the lack of evidence at the pre-charge stage does not prevent the prosecution from improving its case later, subject to the court's evaluation of the evidence at the final stage.

5. Considering the totality of the circumstances, the court dismissed the revision petition, emphasizing that the Director's liability under the Central Excise Act is a matter of evidence and that the court cannot intervene to rescue the petitioner at this stage.