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2016 (7) TMI 435 - HC - Central ExciseBail application - Prosecution proceedings - offence punishable under Section 9 and 9AA of Central Excise Act, 1944 - Petitioner was arrested u/s 13 - evasion of customs duty / CVD on import - violation of provisions of conditional exemption notifications. Held that - the petitioner was arrested by the Inspector and he was produced before the Learned CJM by an Inspector, namely, Mr. Dhiraj Surangi. The Central Excise Officers have power to arrest under Section 13 of the 1944 Act and after arrest, Department is bound to follow procedure prescribed under the said Act. Power to arrest is independent from disposal of person arrested. As per the relevant Notification No. 9/99-CE (N.T) dated 10.02.1999/11.05.1999 issued under the 1944 Act concededly governing the issue, only Superintendent can forward arrested person to custody of Magistrate. - Therefore the petitioner not being presented before the learned Magistrate by an authorized officer, at least a strong case for grant of bail would be made out. Learned counsel for the respondent-Department has argued that it is an economic offence and no leniency should be shown. The counsel has ignored the fact that matter is pending for last more 5 years and nothing new had occurred in Jan 2016 which prompted the department to take harsh action of arrest. Further, it is an economic offence where separate Assessment/Adjudication proceedings are going on. It is not a case of mass level cheating, as involved in the cited and relied case, where except criminal trial no effective remedy was available. In the present case, if the department succeeds in adjudication, the department shall have all rights to recover the dues. So, the contention of Department is repelled. Bail granted on furnishing of bail bond of ₹ 5 lacs with two sureties of equal amount.
Issues Involved:
1. Application for placing on record orders. 2. Grant of regular bail under Section 439 Cr.P.C. 3. Arrest under Section 13 of the Central Excise Act, 1944. 4. Alleged evasion of duty and issuance of Show Cause Notice. 5. Petitioner’s contentions against the arrest and duty demand. 6. Respondent’s opposition to bail. 7. Consideration of remand procedures. 8. Question of levy or exemption of duty. 9. Statutory provisions and their interpretation. 10. Authorization and procedure followed in arrest and remand. 11. Economic offence and its implications. 12. Compoundable nature of the offence and conditions for bail. Detailed Analysis: 1. Application for Placing on Record Orders: The petitioner filed CRM No. 15390 of 2016 to place on record orders dated 02.12.2013 and 20.10.2014 passed by the Customs Excise & Service Tax Appellate Tribunal, and an order dated 15.07.2014 passed by a Division Bench of the High Court. The application was allowed, and the orders were taken on record. 2. Grant of Regular Bail under Section 439 Cr.P.C.: The petitioner sought regular bail in a criminal complaint under Sections 9 & 9AA of the Central Excise Act, 1944. The petitioner was arrested on 05.01.2016 and produced before the CJM, Amritsar, who sent him to judicial custody. The petitioner argued that he was not a director, shareholder, or employee of the company and had no concern with the duty demand. 3. Arrest under Section 13 of the Central Excise Act, 1944: The petitioner was arrested by an Inspector of Central Excise for alleged evasion of duty amounting to ?29.59 crores. The arrest was claimed to be in violation of Section 41A of Cr.P.C., as the petitioner complied with summons and there was no necessity for arrest. 4. Alleged Evasion of Duty and Issuance of Show Cause Notice: The Show Cause Notice dated 06.01.2016 demanded duty from M/s Dunar Foods Ltd. for clearing goods without payment of duty. The petitioner contended that the process of milling rice does not amount to manufacture, and thus Section 3 of the Act is not invokable. 5. Petitioner’s Contentions Against the Arrest and Duty Demand: The petitioner raised multiple contentions, including: - He was not involved in the company’s affairs. - The company is an Export Oriented Unit (EOU) and liable to pay excise duty, not customs duty. - The goods sold by EOU are exempt from duty under Notification No. 23/2003. - The judicial remand was extended without his presence. 6. Respondent’s Opposition to Bail: The respondent argued that the petitioner was supervising the company’s affairs and the amount of duty involved was more than ?170 crores. The arrest was justified as per the Central Board of Excise and Customs’ directions, and economic offences should not be treated leniently. 7. Consideration of Remand Procedures: The court examined the remand procedures and found that the petitioner was produced through video conferencing and admitted to a hospital due to chest pain. The judicial remand was extended in his presence, and the court did not consider it a plausible ground for bail. 8. Question of Levy or Exemption of Duty: The court noted that it was not appropriate to consider the question of levy or exemption of duty at this stage, as the Tribunal was already seized of the matter. However, it prima facie considered the statutory provisions and noted that the duty would be attracted irrespective of permission accorded to sell goods in the Domestic Tariff Area. 9. Statutory Provisions and Their Interpretation: The court referred to the relevant statutory provisions, including the proviso to Section 3(1) of the Central Excise Act, 1944, Section 12 of the Customs Act, 1962, and Sections 2, 3(1), and 3(5) of the Customs Tariff Act, 1975. It noted that the Department demanded customs duty, not CVD, and the question of levy of customs duty was a matter for the Tribunal to decide. 10. Authorization and Procedure Followed in Arrest and Remand: The court found that the petitioner was forwarded to custody by an Inspector, which was not in accordance with the relevant notification requiring a Superintendent to forward the arrested person to custody. This procedural lapse made a strong case for granting bail. 11. Economic Offence and Its Implications: The court acknowledged the respondent’s argument that economic offences should not be treated leniently but noted that the matter had been pending for over five years, and separate adjudication proceedings were ongoing. The court found no new occurrence justifying the harsh action of arrest. 12. Compoundable Nature of the Offence and Conditions for Bail: Considering the compoundable nature of the offence, the petitioner’s custody since 05.01.2016, completion of investigation, and pending adjudication before the Tribunal, the court found it appropriate to grant bail. The petitioner was ordered to be released on bail subject to furnishing a bond of ?5 lacs with two sureties of equal amount. Conclusion: The court allowed the bail application, emphasizing the procedural lapses in the arrest and remand, the compoundable nature of the offence, and the ongoing adjudication proceedings. The petitioner was granted bail with specific conditions to ensure compliance.
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