2017 (1) TMI 480 - HC - Central Excise

Prosecution proceedings against the central excise officers - allowing conditional exemption to the unit illegally - Issuance of forged document in favour of the Company though there was no commercial production by the Company - Criminal misconduct - compromise or compounding of offence - Held that - under Section 13(1)(d), the basic requirement is to the effect that the accused himself should have obtained either for himself or for any other person either any valuable thing or pecuniary advantage either by corrupt or illegal means or by abusing his position and without any public interest. Therefore, when there is no allegation about any such fact, it can be said that there is no prima-facie evidence regarding criminal misconduct as alleged. Once main offence is compounded then there is catana of judgments by Supreme Court that when the department has compounded the offences then there is no reason to continue the criminal proceedings, more particularly when offences are either in the form of breach of rules or technical offences In the present case, though some documents are alleged to be forged practically there is no forgery of any documents. It is submitted by the petitioners that, in fact an advance appreciation of work by the Company as per project report happens as per fixed schedule was disclosed. However for one reason or another if such time schedule could not be adhered to either during installation or during production it may not amount to committing offence of forgery, since there is no mens rea and practically there is no financial benefit accrued in favour of the petitioners. Revision application allowed - charge-sheet to proceed further against petitioners are hereby quashed and set aside - decided in favor of petitioner.

Issues Involved:
1. Connection of the petitioners with the alleged tax benefit fraud.
2. Validity of allegations against petitioner James Samuel.
3. Validity of allegations against petitioner Babubhai Chhotalal Makwana.
4. Impact of the alleged fraud on the company and its financial benefits.
5. Applicability of Prevention of Corruption Act, 1988 to Babubhai Chhotalal Makwana.
6. Requirement of sanction for prosecution under the Indian Penal Code and Prevention of Corruption Act.
7. Compounding of the alleged offense by the Central Excise Department.
8. Legal precedents regarding compounding of offenses and their impact on criminal prosecution.
9. Role of the petitioners in the alleged offense.
10. Judicial evaluation of evidence at the stage of framing charges.

Detailed Analysis:

1. Connection of the petitioners with the alleged tax benefit fraud:
The petitions arise from the same FIR, involving allegations of fraudulent tax benefit claims by a company. The petitioners were implicated based on their roles and actions related to the company's application for excise duty exemption.

2. Validity of allegations against petitioner James Samuel:
James Samuel was accused of issuing a forged document favoring the company. However, the court found no substantial evidence supporting the claim of forgery. The discrepancy in product thickness and dates did not amount to an offense under the cited sections of the Indian Penal Code (IPC).

3. Validity of allegations against petitioner Babubhai Chhotalal Makwana:
Makwana, a retired Assistant Commissioner of Central Excise, was accused of submitting a false report about the company's production status. The court noted that another officer, Mr. S.P. Gawade, had certified the production date, and thus, Makwana's reliance on existing documents did not constitute an offense. The court emphasized the absence of prima facie evidence of criminal misconduct under the IPC and the Prevention of Corruption Act, 1988.

4. Impact of the alleged fraud on the company and its financial benefits:
The court highlighted that the company did not receive any financial benefit from the alleged fraud. The company had declared its ineligibility for the tax benefit and paid penalties, indicating no wrongful gain.

5. Applicability of Prevention of Corruption Act, 1988 to Babubhai Chhotalal Makwana:
The court found no elements in the FIR or charge sheet to attract the provisions of the Prevention of Corruption Act. Specifically, there was no evidence that Makwana obtained any valuable thing or pecuniary advantage through corrupt means.

6. Requirement of sanction for prosecution under the Indian Penal Code and Prevention of Corruption Act:
The court referenced the necessity of a sanction for prosecuting a government servant under IPC and the Prevention of Corruption Act. Since the allegations pertained to Makwana's official duties, and there was no sanction, the prosecution could not proceed.

7. Compounding of the alleged offense by the Central Excise Department:
The Chief Commissioner of Central Excise had compounded the offense, granting immunity from prosecution under Section 9 of the Central Excise Act. This compounding, along with the payment of penalties, indicated that the criminal proceedings should not continue.

8. Legal precedents regarding compounding of offenses and their impact on criminal prosecution:
The court cited several Supreme Court judgments establishing that once an offense is compounded, further criminal proceedings are unnecessary. This principle applied to the present case, where the company and its officers had settled the matter with the excise department.

9. Role of the petitioners in the alleged offense:
The court found no specific allegations or evidence against the petitioners that they forged documents or gained wrongful benefits. The involvement of the petitioners was limited to their official capacities, and no individual wrongful gain was established.

10. Judicial evaluation of evidence at the stage of framing charges:
The court emphasized the need for prima facie evidence linking the accused to the alleged offense before framing charges. In the absence of such evidence, the court ruled that the petitioners should be discharged from the charges.

Conclusion:
The court quashed the FIR and charge sheet against the petitioners, highlighting the lack of evidence, the compounding of the offense by the excise department, and the absence of any wrongful gain by the petitioners. The court reiterated the legal principles regarding the necessity of prima facie evidence and the impact of compounding on criminal proceedings.

← Previous Next →