2019 (4) TMI 113 - DSC - Indian Laws

Dishonor of Cheque - section 138 of NI Act - no debt or liability payable by the accused on the date of issuance of Cheque - section 14 of CEA - Held that - Admittedly, in the present case, the complainant / respondent had instituted the prosecution u/s 138 of NI Act against the accused/ petitioner before the Ld. MM on the basis of the accused having tendered certain cheques to the Excise Officials when they had carried out a raid / search of his premises. It is when his statement u/s 14 of the Central Excise Act, 1944 was recorded, that the complainant alleges in the complaint that the accused had admitted his liability to pay the Central Excise Duty evaded by him on the pretext of his entitled to exemption under some notification. As such, reference to Section 14 of the Central Excise Act, 1944 becomes necessary. The record of the complaint before the Ld. MM was absolutely insufficient to form the opinion that the cheques were issued by the accused/ petitioner towards the discharge, in whole or in part, of the legally enforceable debt or liability. As per the record available before the Ld. MM, the show cause proceedings of the demand and recovery of the Central Excise duty alleged to have been evaded by the accused had been initiated and there was nothing in the complaint that any order in consequence thereof, of the determination of the evaded central excise duty had been passed by the proper officer / competent authority under the Central Excise Act. Instead, the accused petitioner had shown that the order was passed subsequently which was stayed by the Appellate Authority on the appeal preferred there against by the accused / petitioner - the impugned order dated 04.05.2018 vide which the petitioner had been summoned to face trial for the offence u/s 138 of NI Act suffers from a grave illegality and cannot be sustained. Revision allowed.

Summary

Issues involved:
- Impugned order summoning the petitioner to face trial for an offence under section 138 of the Negotiable Instruments Act.
- Legal enforceability of debt or liability for the offence under section 138 of the NI Act.
- Compliance with Central Excise Act procedures in determining liability for Central Excise Duty.
- Validity of the impugned order dated 04.05.2018.

Analysis:

Issue 1: Impugned order summoning the petitioner
The revision petitioner challenged the order summoning him to face trial for an offence under section 138 of the Negotiable Instruments Act. The complaint alleged that the accused admitted his liability to pay Central Excise Duty evaded by him. However, the accused's statement did not categorically admit to evading duty, and the subsequent proceedings bypassed the proper procedures under the Central Excise Act for determining liability. The High Court judgment in a similar case highlighted the need for proper procedures and quantification of duty before collecting cheques on the spot.

Issue 2: Legal enforceability of debt or liability
The complainant failed to establish that the cheques were issued by the accused to discharge a legally enforceable debt or liability. The record showed that show cause proceedings were initiated for the alleged evasion of Central Excise Duty, but no final determination or order was passed by the competent authority under the Central Excise Act. The impugned order lacked sufficient evidence to support the claim that the cheques were issued towards a legally enforceable debt or liability, rendering it legally unsustainable.

Issue 3: Compliance with Central Excise Act procedures
The complaint relied on the accused's statement under section 14 of the Central Excise Act as the basis for determining his liability. However, this bypassed the proper procedures outlined in the Central Excise Act for determining and recovering evaded duty. The accused's subsequent appeal and stay of recovery indicated that the liability determination process was incomplete and legally insufficient. The impugned order failed to consider these procedural irregularities, leading to its invalidation.

Issue 4: Validity of the impugned order
Considering the lack of evidence establishing a legally enforceable debt or liability, the impugned order summoning the petitioner to trial for the offence under section 138 of the NI Act was deemed legally flawed. The order was set aside due to the grave illegality in its issuance and the insufficiency of evidence supporting the allegations. The revision petition was allowed, and the impugned order dated 04.05.2018 was consequently overturned.

In conclusion, the judgment highlighted the importance of following proper legal procedures and establishing clear evidence of debt or liability in cases involving financial offences. The impugned order was set aside due to procedural irregularities and insufficient evidence, emphasizing the necessity for legal compliance and evidentiary support in criminal proceedings.