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TMI Blog2017 (4) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Negotiable Instruments Act for the dishonour of the cheques. The complaint filed by the respondent no.2 reads as under : "1. That, as per the Central Excise Act, 1944, the Government of India has constituted various Commissionerate of Central Excise Department for the recovery of Central Excise Duty from various manufacturers who are covered under the said Act and rules, Directorate General of Central Excise Intelligence is a Special Wing of the Central Excise Department constituted by the Central Government to detect the evasion of Central Excise duty by the manufacturer and proceed against them. 2. That, the accused No.1 M/s. Nandeshwari Steel Ltd. is a Public Limited Company and registered under the Indian Companies Act and engaged in manufacture of SS ingotes, SS Round Bars falling under chapter - 72 of The Central Excise Tariff Act, 1985. The accused No.2 Shri Mitesh Patel is the director of the said Company and looking after day to day affairs of the said company and is responsible for the said company M/s. Nandeshwari Steel Ltd. falls within the Jurisdiction of the Commissioner of Central Excise Ahmedabad III and are registered with Central Excise Division Office, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 willingly and voluntarily tendered following seven post dated cheques signed by him towards the duty evasion and wrong availment of Cenvat Credit. The cheques drawn on Bank of Baroda, Naroda Road Branch, Ahmedabad in the name of Commissioner of Central Excise, Ahmedabad-III A/c. M/s.Nandeshwari Steel Ltd. as their account for Central Excise duty is being maintained with Commissioner Central Excise, Ahmedabad-III. Sr. No. Cheque No. Date Amount 1. 000851 01.12.12 Rs.50,00,000/- 2. 000852 15.12.12 Rs.50,00,000/- 3. 000853 31.12.12 Rs.50,00,000/- 4. 000854 15.01.13 Rs.50,00,000/- 5. 000855 31.01.13 Rs.50,00,000/- 6. 000856 15.02.13 Rs.50,00,000/- 7. 000857 28.02.13 Rs.50,00,000/- Total Rs.3,50,00,000/- 7. That, out of the cheques mentioned in the table above three cheques mentioned at serial No.04 and 05 above the cheque No.000854, 000855 were deposited in the State Bank of India, Ashram Road Branch, Ahmedabad on 05.02.2013 for crediting the same in Government of India Account and the same were returned unpaid by their Bank of Baroda on 07.02.2013 with a remark of 'Payment Stopped by Drawer'. Therefore, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the cheques in question were not issued by his clients in discharge of any legally enforceable debt or liability. It is submitted that the cheques were obtained by the officers of the Central Excise department under threat, pressure and duress. The applicant no.2 was pressurised by the officers to give a statement in writing on a letterhead of the company that the cheques were being drawn voluntarily and without any threat or duress. Mr.Trivedi submits that the adjudication proceedings under the Central Excise Act have not been initiated till this date. A show-cause notice proposing to recover a particular amount towards the duty has to be issued in accordance with law. The adjudicating authority, thereafter, will have to consider the claim put forward by the department by giving the applicants opportunity of leading appropriate evidence. Mr.Trivedi submits that the exact amount of the alleged evasion of duty is yet to be determined in accordance with law, and on the date when the cheques were obtained by the officers under threat, pressure and duress, there was no legally enforceable debt payable by the applicants to the complainant. Mr.Trivedi submits that the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,- (a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,- (i) his own ascertainment of such duty; or (ii)the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA. (2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder. (3) Where the Central Excise Officer is of the opinion that the amount paid under clause (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty has not been established against the person to whom the notice was issued, the Central Excise Officer shall determine the duty of excise payable by such person for the period of one year, deeming as if the notice were issued under clause (a) of sub-section (1). (10) The Central Excise Officer shall, after allowing the concerned person an opportunity of being heard, and after considering the representation, if any, made by such person, determine the amount of duty of excise due from such person not being in excess of the amount specified in the notice. (11) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10)- (a) within six months from the date of notice in respect of cases falling under subsection (1); (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4) (12) Where the appellate authority or tribunal or court modifies the amount of duty of excise determined by the Central Excise Officer under sub-section (10), then the amount of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty after the final assessment thereof; (v) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund; (vi) in the case where only interest is to be recovered, the date of payment of duty to which such interest relates. (c) Omitted. Explanation 2:- For the removal of doubts, it is hereby declared that any non-levy, short levy, non-payment, short-payment or erroneous refund where no show cause notice has been issued before the date on which the Finance Bill, 2015 receives the assent of the President, shall be governed by the provisions of section 11A as amended by the Finance Act, 2015." Thereafter, to Section 35 of the Act, which provides for appeals. It reads as under : "Section 35. Appeals to Commissioner (Appeals). - (1) Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Commissioner of Central Excise , may appeal to the Commissioner of Central Excise (Appeals) hereafter in this Chapter referred to as the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order : Provided that the Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndbhai Metalia to support its case, is thoroughly misconceived inasmuch as the said Criminal Misc. Application No.17170 of 2014 is admitted by this Hon'ble Court for consideration of contention raised by the said applicant that the post-dated cheque bearing Nos.000260 dated 11.10.2011 was drawn in favour of ACAO, Central Excise, Bhavnagar, Whereas, the said cheque was submitted for realization at Junagadh by the office of ACAO, Central Excise, Junagadh in the State Bank of India, Junagadh. The said applicant has also produced photocopy of cheque in support of his plea, by way of draft amendment on 17.04.2015 and in these circumstances, this Hon'ble Court by order dated 17.04.2015 has allowed the draft amendment and issued rule on the petition. The applicant herein has relied upon the said order dated 17.04.2015, which is produced by him at PP-134. It is respectfully submitted that no such plea is available to the applicant in support of prayer for quashing the complaint filed against him by the answering respondent. A copy of draft amendment submitted in Criminal Misc. Application No.17170 of 2014 is annexed hereto and marked as ANNEXURE R-1 to this affidavit. Therefore, the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clandestine removals of finished goods without issuance of Central excise invoices & without payment of Central excise duty. During the course of investigation, the applicant has by making statements dated 07.11.2012 & 08.11.2012 under Section 14 of the Central Excise Act, 1944, confessed that he was indulging into fraudulent availment of Cenvat Credit of Rs. 3.27 Crores on the basis of phony cenvatable invoices issued by the various shipbreaking units of Bhavnagar showing sale of old & used MS Plates, without receipt of goods mentioned therein; that they were not having facility/shredding machine for cutting, shredding & using said old & used MS Plates in manufacture of finished excisable goods at their factory premises; that they shared duty of such phony invoices in 50:50 ratio; that he was also indulging into clandestine removal of excisable goods i.e. SS Rounds on cash basis without issuance of invoices & without payment of Central Excise duty leviable thereon. He has also admitted the modus operandi adopted by him for evading Central Excise duty by aforesaid manners. Duty evasion on aforesaid counts approx. comes to Rs. 4.00 Crores. Admitting the above offence, M /s. NSL ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s replied by M/s. NSL vide letter dated 21.03.2013, inter alia, disputing and denying the contents of the notice and it 'was further contended that no Show Cause Notice was issued by the Excise Department to demand the excise duty due and payable by the applicant and that the liability to make payment of excise duty would arise only when the tax liability is ascertained and that there is no provision in law to pay advance tax compulsorily. It was further stated that the cheques were not issued voluntarily but it was rather issued under threat and coercion. Therefore, the answering respondent has filed Criminal Case No.746 of 2013 on 01.04.2013 for the offence punishable under Section 138 of the Negotiable Instrument Act, 1881 by the applicant, which is sought to be quashed by the applicant under the captioned application. The learned Metropolitan Magistrate (NIA), Court No.36, Ahmedabad is hearing the above criminal case and evidence of the complainant is recorded. 5. With reference to the grounds set out by the applicant in the memo of application, seeking quashment of the complaint filed by the answering respondent against him for the offence punishable under section 138 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s obliged to make payment of duty in the manner and at the time as prescribed under Rule 4 and Rule 8 of the Central Excise Rules, 2002. It is submitted that act of omission on the part of the manufacturer to make payment of duty according to the said provisions would result into "Legally Enforceable Debt" against such manufacturer. The applicant has admittedly fraudulently availed Cenvat Credit on the basis of phony invoices without receipt of corresponding goods in their factory premises and removed the excisable goods manufactured by him clandestinely and without making payment of excise duty during the period from FY. 2010-11 to F.Y. 2012-13 and, therefore, in the present case as on the date of issue of the cheque by the applicant there existed legally enforceable debt within the meaning of section 138 of the Negotiable Instruments Act, 1881. In the premises, it is also not correct to contend by the applicant that, there was no legally enforceable debt during the deposition of the said cheques, as prescribed under the provisions of the Negotiable Instruments Act, 1881, is not capable of being accepted by this Hon'ble High Court. 5.3 The answering respondent do not admit the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my consideration is, whether the officials could have acted in such a manner and asked the applicants to make good the payment without there being any adjudication in accordance with the provisions of the Excise Act and the Rules framed therein. In order to attract the penal provisions for the bouncing of a cheque, it is essential that the dishonoured cheque should have been issued in discharge, wholly or in part, or any debt or other liability of the drawer to the payee. The explanation to Section 138 of the Negotiable Instruments Act defines the expression "debt or other liability" as a legally enforceable debt or other liability. Unless the two conditions set out in Section 138 of the Act are satisfied, no criminal liability can be fastened. This is also in accordance with the general scheme as laid down in Section 118(a) of the Negotiable Instruments Act. It also enforces the doctrine of consideration as laid down in Section 2(d) of the Indian Contract Act, 1872. Too many definitions of the word debt have been given though the word debt is not defined in the Act. 'Debt' is defined in the Stroud's Judicial Dictionary, (4th edition, volume 2) as a sum payable in respect of a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a case arising from the proceedings under the Value Added Tax Act, 2003. The facts were almost identical to the one on hand. In that case also, the authorities somehow obtained cheques towards the VAT. A writ-application was filed by one Atul Motors Private Limited, questioning such action on the part of the authorities. The Division Bench observed as under : "On 22nd January 2014, the Court had passed the following order :- 1. The petitioners are the authorised distributors of Maruti cars. They have been filing returns under the Value Added Tax Act, 2003 (hereinafter referred to as 'the Act') regularly. It is the contention of the petitioners that they recover certain handling charges from the customers, which are in the nature of post sales services. On such handling charges, according to them, they are not required to pay the Value Added Tax (hereinafter referred to as VAT), since such handling charges cannot form a part of sale value of the car. The respondents carried out search operations in the premises of the petitioners on December 25, 2013 and raised the issue of non-payment of VAT on handling charges. 2. The learned counsel for the petitioner submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication at the end of the competent authority under the Act is yet to take place. I find it extremely difficult to accept the argument of the learned counsel appearing for the department that the liability was fixed on the basis of the statements made by the applicant no.2 herein dated 7th November 2012 and 8th November 2012 respectively under Section 14 of the Central Excise Act, 1944. It appears that the department construed the two statements recorded under Section 14 of the Act, 1944 as a confession on the part of the applicants of indulging into fraudulent availment of the Cenvat Credit of Rs. 3.27 crore on the basis of phony cenventible invoices issued by the various ship breaking units of Bhavnagar. Let me assume for the moment that at the end of the search operation the officials were able to collect something incriminating against the applicants as regards the evasion of the excise duty. However, it cannot be said that the cheques which were obtained by the department were towards the discharge of the existing enforceable debt or liability. The liability was yet to be determined by the competent authority under the provisions of the Act. In such circumstances, the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a post-dated cheque is for "discharge of debt or liability" depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise. 10. Reference to the facts of the present case clearly shows that though the word "security" is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability. 11. The judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on account of dishonour of cheque issued was not by itself at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cused. Negativing the contention, this Court held :- "10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are given opportunity to lead evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners of the firm." 15. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P-7) shows that as per the case of the complainant, the cheques which were subject matter of the said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint). 16. As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for quashing does not adjudicate upon a disputed question of fact." Thus, the dictum of law explained by the Supreme Court is, whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being any subsisting debt or liability. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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