2023 (10) TMI 1215 - HC - Central Excise

Grant of Sanction for prosecution - petitioners would submit that the Prosecution is bad in law since no proposal was made for prosecuting the second petitioner - HELD THAT - Any sanction required to be issued by a specified authority which would be the competent authority, the documents pertaining to the case have to be examined by such competent authority and proceedings have to be issued by giving reasons as to why prosecution has to be launched. A duty is cast upon the competent authority to apply its mind to the facts of the case to grant sanction. A statute requiring sanction to be made is for the purpose or ensuring that criminal prosecution is not launched vexatiously or improperly or in a routine manner or when no offence is made out. The competent authority has to shoulder responsibility of scrutinizing the available material and record its satisfaction to criminally prosecute a person. The Honourable Supreme Court in MANSUKHLAL VITHALDAS CHAUHAN VERSUS STATE OF GUJARAT 1997 (9) TMI 618 - SUPREME COURT held that whether a sanction is valid would depend upon the material placed before the sanctioning authority. Grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act. The prosecution instituted without a proper sanction would fail since the proceedings would be void for want of a valid sanction. The Court cannot take cognizance of an offence until pre-requisite of sanction is fulfilled by the prosecution and filed before the Court - In the present case, except the office communication dated 01.08.2014, there is no separate sanction order which is accorded by the Chief-Commissioner. A mere letter conveying that the Chief Commissioner had accorded administrative approval for launching criminal prosecution cannot be a valid document to launch prosecution against the petitioners. Since there is no valid sanction as required, the proceedings against the petitioners in CC.No.32/2015 on the file of Special Judge for Economic Offences at Hyderabad, are hereby quashed - the Criminal Petition is allowed.

Summary

Issues involved:
The judgment involves the issue of quashing criminal proceedings against the petitioners under Section 9 of the Central Excise Act, 1944, due to lack of valid sanction for prosecution.

Details of the Judgment:

1. Background and Allegations:
The Deputy Commissioner of Central Excise and Service Tax filed a complaint alleging that the petitioners evaded Central Excise duty in trading Modular Furniture, exceeding the exemption limit. The non-payment of duty amounted to Rs.32,29,153 on a valuation of Rs.1,97,86,473 during the financial year 2005-2006.

2. Appeal and Prosecution Proposal:
The petitioners appealed against the order confirming the show-cause notice. Subsequently, a proposal for prosecution was made, and administrative approval was sought for launching prosecution against the petitioners.

3. Contentions of the Parties:
The petitioners argued that the prosecution was invalid as no proposal was made for prosecuting the second petitioner, and sanction orders were not filed with the complaint. In contrast, the respondent contended that the communication and administrative approval were sufficient for prosecution.

4. Legal Provisions and Precedents:
The judgment referred to Circular No. 1009/16/2015-CX, emphasizing the requirement of obtaining sanction for prosecution from the Chief Commissioner of Central Excise. It highlighted the significance of a valid sanction for prosecution, citing relevant Supreme Court judgments.

5. Decision and Rationale:
The Court held that the mere administrative approval for prosecution without a separate sanction order from the Chief Commissioner was insufficient. It emphasized the necessity for the competent authority to scrutinize the case and provide valid sanction before initiating criminal proceedings. As a result, the proceedings against the petitioners were quashed.

6. Conclusion:
The Criminal Petition was allowed, and any pending miscellaneous applications were closed, based on the lack of a valid sanction for prosecution as required by law.