9911796707
TMI Blog1994 (11) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ired under Section 6 of the Act, that the accused had removed/cleared T.V. cabinets liable to payment of excise duty without making such payment and without issue of gate pass and that the accused had also not maintained daily stock account and current account with the Collector of Central Excise. 3.The Magistrate has taken cognizance of the offences and has issued process to the accused persons including the present petitioners. 4.The learned Counsel for the petitioners has sought for quashing of the proceedings on various grounds. The first ground urged by him is that under Section 9 of the Act it is only the person who commits the offence, who is liable to be punished, as Section 9(1) begins with the words "whoever commits any of the following offences", that under Section 9(1) there cannot be vicarious liability for the offence committed by another and that in the present case admittedly the offence is committed by the company and that unless the complaint discloses that the other accused persons are vicariously liable under Section 9AA, they cannot be prosecuted for the offence committed by the company. He pointed out that there is no reference to Section 9AA in the compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act indicates that the person is made liable personally for the offence, that the liability cannot be extended to another person merely by virtue of an office or position he holds in a company or firm unless it is specifically averred in the complaint that he is guilty of an act of commission or omission which amounts to offence punishable under the Act. In that case though it had been averred in the complaint that the accused had committed the offence inasmuch as they were responsible to the company for the conduct of the business of the company at the relevant time when the offence was committed, the proceedings were quashed on the ground that there was no averment that the petitioners were guilty of any specific act of commission or omission. The learned Counsel for the petitioners strongly relied on this decision and contended that in the present case there was not even an averment that the other accused persons were in charge of and responsible for the conduct of the business to the firm. He also relied on the decision of Kishore Lal v. State of Karnataka (ILR 1990 Kar. 3876) wherein this Court, while dealing with a case under Section 10 of Essential Commodities Act, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the face of the complaint or the papers accompanying the same, no offence is constituted, held that there was no clear averment in the complaint that the directions were really in charge of the manufacture and responsible for the conduct of the business and that the complainant had merely presumed that the directors of the company must be guilty because they are holding particular office. As such the Supreme Court upheld the judgment of the High Court quashing the proceedings against the directors. But so far as the manager was concerned the Supreme Court held that from the very nature of his duties it can be safely inferred that he would be vicariously liable for the offence and as such the proceedings could not be quashed against him. 9.In another connected case in Municipal Corpn. of Delhi v. Purushothamdass Jhunjunwala Ors. [1983 (1) S.C.C. 9] which was heard by the Supreme Court along with the above case, the Supreme Court held that the averment that the accused were managing director and directors of the mill and were in charge of and responsible to it for the conduct of its business at the time of commission of the offence was sufficient and that the proceedings could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that the company cannot act by itself and it has to act through someone, that the managing director of the company prima facie would be in charge of and responsible for the conduct of the business. This shows that even if there is some material in the complaint from which prima facie it could be inferred that the accused must have been in charge of and responsible for the conduct of the business, that would be sufficient at this stage and the proceedings cannot be quashed merely on the ground that there is no specific allegation. 11.We have to see whether in the present case the material on record, at this stage, prima facie indicates that the other accused persons are vicariously liable for the offence committed by the first petitioner-company. It is no doubt true that there is no specific averment in the complaint that A-2 to A-4 were in charge of and responsible to the company for the conduct of the business at the time of the commission of the offence. But in the complaint the first accused firm is shown as being represented by Kanthilal K. Pankhania, Managing Partner. Kanthilal K. Pankhania is also impleaded as second accused showing him as the managing partner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and sought to explain why they did not take licence and that he also admitted that he had supplied the products to M/s. Relectronics Pvt. Ltd. The averments also show that the second accused expressed his readiness to pay central excise duties if found necessary. The averments, prima facie, show that the second petitioner was actually in charge of the entire business and that it was he who was managing the affairs of the firm. 13.The complaint shows that two statements made by the second petitioner in his own handwriting are produced along with the complaint as annexures. The lower court records show that those two statements are annexed to the complaint as Annexures C and D. In Annexure-C, which purports to be the statement of the second petitioner he has clearly stated as hereunder : "My name and address is as stated above, Tonesta Electronics is a partnership concern with 3 partners (1) Myself, (2) K.H. Pankhania (3) N.K. Pankhania, Nos. 2 and 3 are my father and my younger brother. These two partners are staying in London and are employed there. I am managing the entire factory." In view of this specific statement which is alleged to have been made by the second petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and as the criminal proceedings instituted against a company under Section 277 of the Income Tax Act would be futile, the proceedings against the company should be quashed. 16.The learned Counsel for the respondent contended that in a later decision of this Court in M/s. Shankar and Company v. Income Tax Officer, Bangalore [1991 (2) Kar. L.J. 576] has held that the proceedings against a company cannot be quashed only on the ground that the company cannot be sentenced to imprisonment. In this case though the decision in Vijaya Commercial Credit Ltd.'s case was noticed, it was held that in view of the decisions of the Supreme Court in Sheorathan Agarwal and Another v. State of M.P. (AIR 1984 S.C. 1824) and T.J. Stephen and Ors. v. M/s. Parle Bottling Co. (P) Ltd. and Ors. (64 Company Cases 151), the prosecution of the company cannot be quashed on the ground that the company cannot be sentenced to imprisonment. 17.However in P.V. Pai v. R.L. Rinawngma (ILR 1993 Kar. 709) a Division Bench of this Court has held that, when the court finds the company guilty and imposition of sentence of imprisonment is compulsory, the prosecution of the company becomes unpurposeful as the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the Collector has passed an order of sanction authorising the Assistant Collector to file the complaint only in pursuance of departmental guidelines to prevent abuse of power and that as such the validity or otherwise of that sanction has no relevance. 21.Sri Chanderkumar conceded that there is no provision in the Act requiring any sanction for prosecution in respect of offences under the Act. However, he contended that it is by virtue of that sanction order the complaint is filed by the Assistant Collector, that if that sanction order is to be ignored then the Assistant Collector would have no competence to file the complaint and that the Collector being the aggrieved party he alone should have filed the complaint. I do not find much substance in this submission. 22.As there is no statutory requirement of a sanction of any prescribed authority for prosecuting a person for an offence under the Act, the validity or otherwise of the sanction order which is passed in pursuance of administrative instructions would not arise for consideration. Even if that order can be said to be bad, the proceedings cannot be quashed on that ground. The Act does not stipulate that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub-section (1A) provides that in certain contingencies a person shall not be proceeded against for an offence under Section 276C or 277. Sub-section (2) of that section lays down that any offence under that chapter may either before or after the institution of the proceedings be compounded by the authorities mentioned therein. This Court while dealing with the above provision has held that if the provisions of Section 269 of the Act are read in totality together with the provisions of Section 278 regarding abetment of assessee or person abetting the commission of offence under Section 276C, the intention of the legislature becomes clear namely, to give an opportunity to the assessee or the person charged with abetment to satisfy the sanctioning authority about his bona fides or about the circumstances under which certain statements were made. It was also held that an assessee may be anxious to offer composition even before prosecution to save himself from the disgrace and ignominy of the prosecution and that as such the stage at which such offer may be considered could be at the time sanctioning authority considers according a sanction to prosecute. On this .... [sic], it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the amount which could be accepted in lieu of confiscation of goods or for punishment and this amount may have no comparison to the punishment actually prescribed for an offence under Section 9, under which if there are no sufficient and adequate reasons imprisonment of 6 months is compulsory. But the wording of Rule 210A shows that it applies even in respect of an offence under the Act and not only under the rules. Further the amount to be collected could be in lieu of punishment. As such it is difficult to accept the contention that Rule 210A is restricted in its operation only for confiscation of the property or for the penalty to be imposed in the adjudication proceedings. But the main point is, assuming that Rule 210A is applicable even in respect of an offence punishable under Section 9 of the Act, whether the prosecution could be quashed on the ground that no notice had been issued to the accused persons before launching the prosecution. 27.In P.V. Pai's case the provision for compounding the offence is made in the very provision stipulating sanction for prosecution. Under that Act before a person could be prosecuted for certain offences, sanction of the prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments or the Code of Criminal Procedure. In our considered opinion the view taken by the learned single Judge of the Rajasthan High Court in the case of Shri Singhvi in the matter of applicability of principles of natural justice while according sanction under Section 279 of the Act appears to be the correct view. We have extracted the observations of the learned Judge at the commencement of our discussion on this point and we are of the view that these observations made a correct approach towards the course to be followed while according sanction under Section 279 (1) of the Act. In Gangasagar v. Emperor (4 ITC 97) it was pointed out that the provision for compounding is not meant to enable the Department to obtain as much money as possible by holding out a threat of prosecution. However when it is for the benefit of the assessee he may avail of the benefit by making an offer even before the prosecution is launched and the discretion vests in the sanctioning authority whether to accept or not. In the instant case the Department is at liberty to consider the question of sanction afresh after giving opportunity to the petitioners (A-2 A-5) of being heard." The observations cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no scope to contend that a notice should be issued to the accused before deciding to prosecute him, or failure to issue such notice would amount to violation of principles of natural justice. Merely because there is a provision under which the Collector can collect not exceeding Rs.2,000/- in lieu of punishment for breach of any provision of the Act or the rules, it cannot be said that the accused are entitled to issue of a notice before the complaint is lodged. The accused, when arrested under the provisions of the Act, would have notice of the fact that the proceedings have been initiated against him in respect of an offence under the Act. He would therefore have the opportunity to make an offer for compounding if he so desires and it would be entirely for the officer concerned to accept the offer or not. 29.After careful consideration of the provisions of the Act and the provisions of the Income Tax Act on the basis of which the decision in P.V. Pai's case is rendered I am convinced that the principle laid down in P.V. Pai's case is not applicable to this case. The proceedings in this case cannot be quashed on the ground that notice have not been issued to the accused ..... X X X X Extracts X X X X X X X X Extracts X X X X
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