2010 (5) TMI 166 - HC - Central Excise

Prosecution clandestine removal punishable offence tribunal observed that the allegation of clandestine removal has not been proved. In the circumstances the demand for duty amounting to Rs.4,05,256.30 is set aside - It was pleaded before the trial Court that once CEGAT had absolved the petitioners of the allegations of clandestine removal, continuation of the criminal proceedings in pursuance of complaint is misuse and an abuse of process of law Held that - before the CEGAT the charge could not be established as the department had only relied upon Dharam Kanta slips and on Dharam Kanta slips it was not indicated that the material weighed was steel ingots. - Whereas, in the complaint, various pieces of evidence have been divulged to prove the guilt of the accused petitioners. - Thus, in sum and substance, CEGAT exonerated the petitioners because of insufficiency of evidence. - This in itself, is no ground to quash the criminal proceedings, especially when there is specific material disclosed in the complaint, from which prima-facie opinion can be formulated that conviction of the petitioners can be secured. criminal prosecution to continue.

Issues Involved:
1. Whether the continuation of criminal proceedings for evasion of tax should be terminated due to the exoneration of the accused in departmental proceedings.
2. Whether the notification enhancing the monetary limit for launching prosecution applies retrospectively to the case.

Issue-wise Detailed Analysis:

1. Continuation of Criminal Proceedings Post-Exoneration in Departmental Proceedings:
The petitioners, M/s Ludhiana Steel Limited and its directors, were prosecuted for allegedly suppressing the production of steel ingots to evade central excise duty. They sought to quash the criminal complaint and subsequent proceedings, arguing that the Customs Excise and Gold (Control) Appellate Tribunal (CEGAT) had absolved them of the allegations of clandestine removal, thus rendering the criminal proceedings an abuse of process.

The trial court dismissed their application under Section 245 Cr.P.C., stating that the CEGAT's decision was not binding on the criminal court, which must independently assess the evidence. The petitioners relied on the Supreme Court's judgment in 'G.L. Didwania v. Income Tax Officer,' which held that criminal proceedings could not be sustained if the tribunal had exonerated the accused on the same allegations.

However, the respondent argued that adjudication and prosecution are distinct processes with different purposes, and both can proceed independently. The court cited 'Standard Chartered Bank v. Directorate of Enforcement,' which upheld the continuation of both adjudication and prosecution simultaneously, emphasizing that the absence of a proviso in the relevant Act indicated legislative intent to treat the two proceedings independently.

The court noted that CEGAT had exonerated the petitioners due to insufficient evidence, particularly the reliance on Dharam Kanta slips that did not specify the material weighed. In contrast, the criminal complaint contained additional evidence, including voluntary statements and observations from investigating officers. The court concluded that the exoneration by CEGAT, based on insufficient evidence, did not preclude the continuation of criminal proceedings, especially when the complaint disclosed specific material suggesting possible conviction.

2. Applicability of Notification Enhancing Monetary Limit for Prosecution:
The petitioners also argued that a notification issued on 31st December 1997, which enhanced the monetary limit for launching prosecution from Rs.1 lakh to Rs.5 lakh, should apply to their case, making the prosecution invalid.

The trial court rejected this argument, stating that the notification was issued after the complaint was filed in 1994. The court emphasized that the criminal court must decide the complaint independently of the CEGAT's decision and the subsequent notification. Therefore, the notification did not apply retrospectively to the petitioners' case.

Conclusion:
The court dismissed the petition, holding that the criminal proceedings could continue despite the exoneration by CEGAT due to the presence of additional evidence in the complaint. The notification enhancing the monetary limit for prosecution did not apply retrospectively to the petitioners' case.

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