2009 (3) TMI 138 - HC - Central Excise

Prosecution order of acquittal power of lower court under central excise - the point for consideration is as to whether a finding of guilt recorded by learned Magistrate could be set at naught simply because the respondents were exonerated from the penal consequences by virtue of a subsequent order passed by the Tribunal held that - mere failure to take out licence or pay duty, in absence of a contrary evidence that the respondents knew that the product was excisable, was not sufficient to attract criminal liability under Section 9(1)(d) of the Act - even though it was not legally permissible to wipe out the impugned conviction consequent upon exoneration of the respondents in the adjudication proceedings yet, even on merits, a dishonest intention of evading payment of duly was not attributable to the respondents in view of aforesaid facts. Thus, in effect, the impugned order of acquittal does not require any interference.

Issues Involved:
1. Legality and propriety of the respondents' convictions under Section 9(1)(d)(i) of the Central Excise and Salt Act, 1944.
2. Impact of the Tribunal's findings on the criminal proceedings.
3. Requirement of mens rea for the offence under Section 9 of the Act.
4. Applicability of statutory presumption under Section 9C of the Act.

Issue-Wise Detailed Analysis:

1. Legality and Propriety of the Convictions:
The respondents, including a company and its Chief Executive, were initially convicted by the Additional Chief Judicial Magistrate (Economic Offences), Indore, for manufacturing Cast Iron Anti Creep Bearing Plates (CIACBP) without obtaining a Central Excise Licence and evading excise duty. The trial court sentenced the company to pay a fine of Rs. 25,000 and the Chief Executive to undergo rigorous imprisonment for six months and pay a fine of Rs. 2,000. The respondents appealed against this conviction, and the First Additional Sessions Judge, Indore, acquitted them based on the Tribunal's findings that the omission to apply for a licence was based on a bona fide belief.

2. Impact of the Tribunal's Findings on the Criminal Proceedings:
The Tribunal, while disposing of the respondents' appeal against the adjudication order, set aside the penalty on the grounds that the respondents' failure to apply for a Central Excise Licence was based on a bona fide belief. The Tribunal found that the respondents believed that the CIACBP was classifiable under a different sub-heading, which did not require a licence. The High Court noted that the appellate court had primarily relied on the Tribunal's findings without independently analyzing the evidence on record, which was an error. However, the High Court also acknowledged that the Tribunal's findings could influence the criminal proceedings if the exoneration was on merits and the facts were identical.

3. Requirement of Mens Rea for the Offence under Section 9 of the Act:
The appellant contended that mens rea was not a constituent part of the offence under Section 9 of the Act. However, the High Court referred to Section 9C of the Act, which presumes the existence of a culpable mental state but allows the accused to prove otherwise. The court cited the Apex Court's decision in Noor Aga v. State of Punjab, which held that the burden of proof on the accused is not as high as that on the prosecution. The High Court concluded that the respondents' bona fide belief negated the presence of mens rea, thus absolving them of criminal liability.

4. Applicability of Statutory Presumption under Section 9C of the Act:
Section 9C of the Act presumes a culpable mental state in any prosecution under the Act, but the accused can rebut this presumption by proving the absence of such a mental state. The High Court found that the respondents had a bona fide belief that no licence was required for CIACBP, supported by the facts that the product was previously classified under a different heading and the complete alignment of the Central Excise Tariff with the HSN took place only in 1986. Additionally, there was no possibility of wrongful gain to the respondents as the duty was ultimately to be borne by the Railways. These factors led the court to conclude that the respondents did not have the requisite mens rea for the offence.

Conclusion:
The High Court dismissed the appeal against acquittal, holding that the respondents' bona fide belief and the absence of mens rea absolved them of criminal liability under Section 9(1)(d) of the Act. The court emphasized that while the Tribunal's findings influenced the appellate court's decision, the respondents' convictions were not sustainable on merits due to the lack of dishonest intention to evade duty.

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