PROSECUTION CANNOT BE CONTINUED WHEN PROCEEDINGS ARE DROPPED IN ADJUDICATION ORDER ON MERITS

[Mr. M. GOVINDARAJAN]

Contravention of the provisions of Customs law and also of the connected import/export and foreign exchange laws are punishable departmentally by way of confiscation of goods and imposition of penalty. Such adjudication is done by officers of and above the rank of an Asst. Commissioner, powers being delegated to them on the basis of duty involved.  Prosecution proceedings may be taken simultaneously along with the Adjudication process. In both the proceedings either of them may come to end first and the other in the later period. What would be the effect of prosecution proceedings if the adjudication process is completed first? What would be the effect of adjudication proceedings if the prosecution process is completed first? 

The legal position in this regard was succinctly set out by the Supreme Court in 'Sunil Gulati V. R.K. Vohra and other connected cases' - 2007 (1) JCC 220.  There were four eventualities discussed and the principles culled out from the various judgments were set out as under:

1.      On the same violation alleged against a person, if adjudication proceedings as well as criminal proceedings are permissible, both can be initiated simultaneously. For initiating criminal proceedings, one does not have to wait for the outcomes of the proceedings are independent in nature.

2.      The findings in the departmental proceedings would not amount to res judicata and initiation of criminal proceedings in these circumstances can be treated as double jeopardy as they are not in the nature or 'prosecution'.

3.      In case adjudication proceedings are decided against a person who is facing prosecution as well and the tribunal has also upheld the findings of the adjudicators/assessing authority, that would have no bearing on the criminal proceedings and the criminal proceedings are to be determined on its own merits in accordance with law, uninhibited by the findings of the tribunal. It is because of the reason that in so far as criminal action is concerned, it has to be proved as per the strict standards fixed for criminal cases before the criminal court by producing necessary evidence.

4.      In case of converse situation namely where the accused persons are exonerated by the competent authorities/tribunal in adjudication proceedings, one will have to see the reasons for such exoneration to determine whether these criminal proceedings could still continue. If the exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on merits or the adjudication proceedings were on different facts, it would have no bearing on criminal proceedings. If, on the other hand, the exoneration in the adjudication proceedings is on merits and it is found that allegations are not substantiated at all and the concerned person(s) is/are innocent, and the criminal prosecution is also on the same set of facts and circumstances, the criminal prosecution cannot be allowed to continue. The reason is obvious criminal complaint is filed by the departmental authorities alleging violation or contravention of the provisions of Act on the part of the accused persons. However, if the departmental authorities themselves, in adjudication proceedings, record a categorical and unambiguous finding that there is no such contravention of the provisions of the Act, it would be unjust for such departmental authorities to continue with the criminal complaint and say that there is sufficient evidence to foist the accused persons with criminal liability when it is stated in the departmental proceedings that ex facie there is no such violation. The yardstick would, therefore, be to see whether charges in the departmental proceedings as well as criminal complaint are identical and the exoneration of the concerned persons in the departmental proceedings is on merits holding that there is no contravention of the provisions of any Act.

In 'M/s Bihariji Manufacturing Company (P) Limited and others V. Commissioner of Central Excise, Anti Evasion, Delhi' - 2007 (212) ELT 183 (Del), it was held that where adjudicatory proceedings culminated in orders favoring the accused/assessee and where in exercise of independent powers of prosecution, complaints were lodged.  It was pointed out that there was a distinction between saying that two proceedings can be maintained as a matter of law and to say that after suffering an adjudication order on the same facts, the Department or prosecuting agencies ought not to be allowed to proceed and prosecute the assessee having failed to establish the basic facts.

                        In 'Anil Mahajan V. Union of India'- 2009 (235) ELT 430 (Del) the High Court held that the charges cannot be framed and the criminal prosecution cannot be permitted to continue against the petitioners once the adjudication proceedings on merits have been found in favor of the petitioners. The details of the case are as follows:

                        A search was carried out by the customs authorities in the premises of New India Agencies, a partnership concern which was engaged in the business of import in trading of textiles and some other consumable goods. The petitioners are the Executive cum caretaker of the said concern.   The statement of both the petitioners were recorded and the petitioners were arrested for the offences under Sec. 132 and 135 of the Customs Act, 1962 on account of alleged false declaration, false documents and evasion of customs duty.  Simultaneously adjudication proceedings were also initiated under the Act.

                        On the written request of the petitioners, the Commissioner of Customs, in adjudication process, appointed three officers to examine the goods afresh in order to find out whether the goods were co-related with the documents produced. The Committee submitted its report. The Commissioner found against the petitioners and directed confiscation of goods and imposed penalty. It was held by the Commissioner that the report of the Committee lent no support to the contention of the petitioners that the goods seized are covered under the documents produced by him. The petitioners filed appeal before CESTAT which found in favor of the petitioners.  In the tribunal it was concluded that the documents tallied with the particulars of the case and there was no justification for confiscation of the goods and imposition of penalty. The goods, however, were not released. Hence the petitioners filed the writ petition before the High Court. The High Court gave directions to release the goods.

                        The Department moved to the tribunal for rectification of mistake. It was rejected by the tribunal. There was no further challenge and thus the adjudicatory proceedings rested at that.

                        The criminal proceedings were carried on simultaneously.  The complaint was alleging that the accused persons had illegally imported into India goods, which were covered under Sec. 123 of the Act and had acquired possession and were concerned in carrying, removing, storing, deposition, harboring, transporting, keeping, selling, purchasing or dealing with the seized goods which they knew or had reasons to believe were liable to confiscation under Sec. 111 of the Act and thus, committed offence punishable under Sec.132 and 135(1) (b) of the Act. It is not disputed that it is these very goods which form the subject matter of adjudication proceedings. 

                        The petitioners contended that once the adjudicatory process in relation to the same subject matter has come to the conclusion that there was no illegality committed by the petitioners under the said Act, the prosecution against the petitioners would not survive. The petitioners relied on the judgments in 'Sunil Gulati V. R. K. Vohra and other connected cases' (supra) and 'M/s Bihariji Manufacturing Company (P) Limited and others V. Commissioner of Central Excise, Anti Evasion, Delhi' (supra).

                        The Department strenuously opposed the petition that there was no ground for quashing the order of framing charges.  The only reason for the adjudication process going against the Department was the inability to produce relevant evidence and thus, it is a technical nature of decision.

                        The Court finds that the present case would fall in the fourth category of Sunil Gulati's case (Supra).  The Court rejected the plea raised by the Department.  If on the basis of the evidence and material produced a finding is reached by the adjudicatory authority on merits, it cannot be said to be a technical finding. To accept the plea of the Department it would imply that the Department would have the right not to produce material before the adjudicating authority, invite an unfavorable decision and yet prosecute the complaint on the basis that it would produce further evidence in support of the case.

                        The Court held that the present case is not one where it could be said that the adjudication proceedings are based on technical ground or by giving benefit of doubt or that the merits have not been examined. It further held that the charges cannot be framed and the criminal prosecution cannot be permitted to continue against the petitioners once the adjudication proceedings on merits have been found in favor of the petitioners.

                        The Court passed strictures against the Department.  In view of the findings of the adjudicatory process, it was a fit case where the Department ought to have conceded the matter on the basis of the settled legal position. The Department had failed in the adjudicatory process against the petitioners and yet continued to contend that the criminal proceedings must go on. The legal system by which we are governed is adversarial in nature, but there is a special responsibility on the Government and public authorities to act reasonably and in a fair manner. The over burdened legal system cannot be further burdened by unnecessary cases or contest in the form of luxury litigation on the part of the Government authorities. The Counsel for the Department pleaded that no one had even come to instruct him after the brief had been handed over to him, which itself shows the lack of seriousness on the part of the Department in defending the present cases. It appears that only the formality of a seal of approval from the court is sought to be obtained without the Department acting in a just and fair manner resulting in unnecessary wastage of time of the court. The Court awarded cost Rs.20,000/- payable to the petitioners that may be recovered from any Officer negligent in performing duties.