1994 (11) TMI 135 - HC - Central Excise

Issues Involved:

1. Vicarious liability under Section 9AA of the Central Excises and Salt Act.
2. Prosecution of a company that cannot be sentenced to imprisonment.
3. Validity of the sanction order passed by the Collector.
4. Requirement of notice for composition of offences before prosecution.

Issue-wise Detailed Analysis:

1. Vicarious Liability under Section 9AA of the Central Excises and Salt Act:

The petitioners sought quashing of proceedings on the ground that Section 9 of the Act only holds the person who commits the offence liable, and does not extend vicarious liability to others unless there is a specific averment under Section 9AA. The complaint did not mention Section 9AA or indicate that the other accused were in charge of and responsible for the conduct of the business. The court referred to the Supreme Court's decision in Municipal Corporation of Delhi v. Ramkishan Rohatgi, which emphasized that proceedings could only be quashed if no offence is constituted on the face of the complaint. The court found that the complaint and accompanying documents prima facie indicated that the second petitioner was managing the entire factory, thus making him liable under Section 9AA. However, there was no material to indicate that A-3 and A-4 were responsible for the conduct of the business, leading to the quashing of proceedings against them.

2. Prosecution of a Company that Cannot be Sentenced to Imprisonment:

The petitioners argued that since the company cannot be sentenced to imprisonment, the proceedings should be quashed. The court distinguished this case from previous cases under Section 277 of the Income Tax Act, where imprisonment is mandatory. Under Section 9 of the Central Excises and Salt Act, imprisonment is not obligatory in all cases, as the court has discretion. Therefore, the court held that the proceedings against the company could not be quashed solely on this ground.

3. Validity of the Sanction Order Passed by the Collector:

The petitioners contended that the sanction order was invalid as it did not show proper application of mind by the Collector. The court noted that there is no statutory requirement for a sanction for prosecution under the Act. The complaint was filed by an Assistant Collector, which is in compliance with Rule 207. Therefore, even if the sanction order was defective, it did not affect the validity of the proceedings.

4. Requirement of Notice for Composition of Offences Before Prosecution:

The petitioners argued that they should have been given an opportunity to compound the offence before prosecution, citing the principles of natural justice. The court distinguished this case from P.V. Pai v. R.L. Rinawngma, which dealt with the Income Tax Act requiring sanction for prosecution and providing for compounding. The Central Excises and Salt Act does not require sanction for prosecution and follows the procedure under the Cr. P.C. for investigation. Therefore, there was no requirement to issue a notice for compounding before lodging the complaint. The court held that the proceedings could not be quashed on this ground.

Conclusion:

The petition was rejected for the petitioners, but the order of the Magistrate issuing process to A-3 and A-4 was set aside, and proceedings against A-3 and A-4 were quashed. The Magistrate was directed to proceed with the case against the petitioners.

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