1996 (2) TMI 145 - SC - Central Excise

Whether the value of C.F.Cs. should be included in the value of refrigerators for the purpose of value under Section 4 of the Central Excise Act? Held that - On a consideration of the relevant circumstances mentioned supra including the fact that Godrej has paid up all amounts due accepting the contentions of the Revenue, we think that an order levying penal interest would meet the ends of justice instead of the direction for prosecution made in the impugned order. Godrej and Boyce Manufacturing Company Private Ltd. shall pay penal interest at the rate of twenty per cent per annum on all the amounts which were withheld by it, for the period commencing March 1, 1979, whether on the basis of the Order of the learned Single Judge of the Bombay High Court dated March 10, 1984 allowing Writ Petition No. 1110/83 or otherwise as well as on the amounts which it had obtained by way of refund but which it ultimately paid back to the Revenue. The interest shall be payable for the period commencing from the date when the said amount/amounts became due and payable and ending with the last date of full payment. The observations in the nature of qualifications or reservations contained in the Order Minutes of the Order dated March 12, 1990, insofar as they relate to inclusion of value of C.F.Cs. in the value of refrigerators shall stand deleted. In other words, Godrej shall not dispute the inclusion of the value of C.F.Cs. in the value of refrigerators for the period covered by the demand notices impugned in Writ Petition No. 1110/83 and upto March 12, 1990, the date of Minutes of the Order aforesaid.

Summary

Issues Involved:
1. Fabrication of evidence by Godrej.
2. Procedural aspects regarding the direction to prosecute.
3. Jurisdiction of the High Court versus the Supreme Court.
4. Expediency of prosecution under Section 340 of the Criminal Procedure Code.
5. Order of penal interest as an alternative to prosecution.

Detailed Analysis:

1. Fabrication of Evidence by Godrej:
Godrej and Boyce Manufacturing Company Private Limited, along with some officers and dealers, were accused of fabricating evidence to support their claim for exclusion of the value of Corrugated Fibre Containers (C.F.Cs.) in the valuation of refrigerators under Section 4 of the Central Excises and Salt Act, 1944. The fabricated evidence included ante-dated letters from dealers, which were intended to mislead the Court. The fabrication was discovered during searches conducted in June 1987, leading to the Revenue's contention that Godrej had attempted to defraud the Court.

2. Procedural Aspects Regarding the Direction to Prosecute:
The appellants argued that the six dealers were not heard before the direction to prosecute them was made, which vitiates the direction. They also contended that the documents were tendered in the Supreme Court, not the High Court, and hence only the Supreme Court had the jurisdiction to take action under Section 340 of the Criminal Procedure Code. Additionally, they argued that only the learned Single Judge who had initially disposed of the writ petition could make such a direction, not the Division Bench.

3. Jurisdiction of the High Court Versus the Supreme Court:
The appellants submitted that the Supreme Court alone could take action under Section 340 of the Criminal Procedure Code since the documents were tendered there. They also argued that the Division Bench of the High Court did not have the jurisdiction to direct prosecution, as this power lay only with the learned Single Judge who had initially heard the writ petition.

4. Expediency of Prosecution Under Section 340 of the Criminal Procedure Code:
The appellants contended that prosecution should be ordered not merely because there is evidence indicating prima facie guilt but also because it must be found expedient in the interests of justice. They argued that the question of expediency should have been decided with notice to and after hearing the affected parties. The Division Bench was criticized for not sufficiently considering whether it was expedient to direct prosecution, given that the learned Single Judge had not made such a direction and the Revenue had remained silent for fifteen months.

5. Order of Penal Interest as an Alternative to Prosecution:
The Supreme Court considered the relevant circumstances, including the fact that Godrej had paid all amounts due, accepting the contentions of the Revenue. The Court decided that an order levying penal interest would meet the ends of justice instead of the direction for prosecution. Godrej was directed to pay penal interest at the rate of twenty percent per annum on all amounts withheld, for the period commencing March 1, 1979, until full payment was made. The observations in the "Minutes of the Order" dated March 12, 1990, regarding the inclusion of the value of C.F.Cs. in the value of refrigerators were deleted, and Godrej was not allowed to dispute this inclusion for the period covered by the demand notices.

Conclusion:
The appeals were disposed of with the substitution of the direction for prosecution with an order for Godrej to pay penal interest. The decision emphasized the importance of addressing procedural fairness and the expediency of prosecution in the interests of justice.