2018 (3) TMI 411 - HC - Central Excise

Evasion of tax - prosecution case is that A4 and A5 having obtained permission from the Deputy Commissioner, Central Excise, Guntur for destruction of two autoconers, indeed, did not do so, but they, with the conspiracy of A1 to A3, fabricated record of destruction in their premises and sold the two autoconers to M/s.SJSML for ₹ 50 lakhs - Whether there are merits in this Criminal Petition to quash the proceedings in C.C.No.29 of 2006? Held that - civil and criminal proceedings can be initiated simultaneously and judgment in one proceeding will not have impact on the other - In the case on hand also, merely because CESTAT held that A4 and A5 need not pay the tax as claimed before the Commissioner, Customs and Central Excise, Guntur and approved by him, the criminal proceedings cannot be quashed. The CESTAT observed as if it was not in dispute that machinery was dismantled under the supervision of the Central Excise Range Officers and cleared from the factory as scrap. When the foundation for case of the Department was that two autoconers were not destructed despite obtaining permission, it is quite astounding as to how the CESTAT observed that the destruction of two autoconers was not in dispute. Therefore, though the order of the CESTAT attained finality on civil side, still criminal proceedings against fraud and cheating can be independently established by the prosecution. Petition dismissed - decided against petitioner.

Issues Involved:
1. Quashing of proceedings under Section 482 Cr.P.C.
2. Allegations of criminal conspiracy, cheating, and falsification of records.
3. Relevance of CESTAT's order in criminal proceedings.
4. Simultaneous civil and criminal proceedings.
5. Application of precedents regarding civil and criminal proceedings.

Issue-wise Detailed Analysis:

1. Quashing of Proceedings under Section 482 Cr.P.C.:
The petitioner sought to quash the proceedings in C.C.No.29 of 2006 on the grounds that the Customs Excise and Service Tax Appellate Tribunal (CESTAT) had ruled in their favor regarding the dismantling and clearance of machinery. The court examined whether the allegations made in the FIR and accompanying materials prima facie constituted any offense or justified an investigation. The court referenced the guidelines from the case of State of Haryana vs. Ch. Bhajan Lal, which outline circumstances under which proceedings can be quashed to prevent abuse of process.

2. Allegations of Criminal Conspiracy, Cheating, and Falsification of Records:
The prosecution alleged that A1 to A3, officials of the Central Excise Department, conspired with A4 and A5 to fabricate records indicating the destruction of two autoconers, which were actually sold to another company. The investigation revealed that the autoconers were found in working condition, contradicting the destruction report. The court noted that if these allegations were proven, they would constitute offenses under Sections 120B, 420, 468, and 471 IPC, and under Section 13(2) r/w 13(1)(d)(ii) of the Prevention of Corruption Act, 1988.

3. Relevance of CESTAT's Order in Criminal Proceedings:
The petitioner argued that the CESTAT's order, which found no fault in the clearance of the machinery as scrap, should preclude criminal prosecution. The court, however, emphasized that civil and criminal proceedings operate in different spheres, with civil proceedings based on the preponderance of probabilities and criminal proceedings requiring proof beyond a reasonable doubt. The court cited several precedents, including Kishan Singh vs. Gurpal Singh and K.G. Premshanker vs. Inspector of Police, to support the principle that findings in civil proceedings do not bind criminal proceedings.

4. Simultaneous Civil and Criminal Proceedings:
The court reiterated the well-established principle that civil and criminal proceedings can proceed simultaneously. The outcome in one does not necessarily affect the other. The court referenced cases such as Smt. Rumi Dhar vs. State of West Bengal and Sh. Vishnu Dutt Sharma vs. Smt. Daya Sapra to illustrate that civil judgments do not preclude criminal liability, especially when the allegations involve fraud and criminal conspiracy.

5. Application of Precedents Regarding Civil and Criminal Proceedings:
The court analyzed various precedents to conclude that the findings of the CESTAT, which pertained to civil liability and tax recovery, did not preclude the criminal prosecution for alleged fraudulent acts. The court highlighted that the CESTAT's observation that the machinery was dismantled was not in dispute, which contradicted the prosecution's case. Despite this, the court maintained that the criminal proceedings could independently establish fraud and cheating.

Conclusion:
The court found no merit in the petitioner's arguments and dismissed the criminal petition, allowing the criminal proceedings to continue. The court emphasized the independence of civil and criminal proceedings and the necessity to prove criminal allegations beyond a reasonable doubt. The judgment underscored the principle that civil adjudications do not necessarily absolve criminal liability, especially in cases involving allegations of fraud and conspiracy.

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