Allowed

Itc Limited v. State of U.P. and Another

Allahabad HC14 Dec 2018A482/11882/2008

Case brief

AI extract

What is this about?

The High Court quashed criminal proceedings under Sections 9 and 9AA of the Central Excise Act against ITC Limited and its directors. This decision follows the Supreme Court's judgment setting aside the underlying excise demand, deeming further prosecution unjust and an abuse of process.

What did the court decide?

The proceedings of Criminal Case No. 875 of 1998 pending before the Special Chief Judicial Magistrate, Meerut were quashed.

Itc Limited Vs State of U.P. and… — Constitutional and Fundamental Rights | Allahabad HC (2018)

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Court No. - 36 Case :- APPLICATION U/S 482 No. - 11882 of 2008 Applicant :- Itc Limited Opposite Party :- State Of U.P. & Another Counsel for Applicant :- Yashwant Varma,Prashant Mishra,Rohan Gupta

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Counsel for Opposite Party :- Govt. Advocate,A.S.G.I.,B.K. Singh Raghuvanshi,Praveen Kumar,S.K. Misra

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Connected with

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Case :- APPLICATION U/S 482 No. - 3251 of 1999 Applicant :- J.N. Sapru And Others Opposite Party :- State Of U.P. & Another Counsel for Applicant :- Yashwant Varma,Raghav Nayar,Rohan Gupta Counsel for Opposite Party :- Govt. Advocate,B.K. Singh Raghuvanshi,Praveen Kumar,R.B.Singh,S.N. Srivastava,Satish Agrawala

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Hon'ble Mrs. Sunita Agarwal,J.

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Heard Sri Navin Sinha, learned Senior Advocate assisted by Sri Raghav Nayar, learned counsel appearing for the applicants and Sri B.K. Singh Raghuvanshi, learned counsel for the respondent no. 2/department and learned AGA appearing for the respondent no. 1.

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These are two connected criminal applications under Section 482 of the Criminal Procedure Code. The Criminal Application No. 11882 of 2008 has been filed on behalf of the company namely ITC Limited whereas the Criminal Application No. 3251 of 1999 has been filed on behalf of the Directors of the said company.

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The prayer in both the criminal applications is to quash the proceedings of Criminal Case No. 875 of 1998 (Shailendra Sharma vs. ITC and others) pending before the Court of Special Chief Judicial Magistrate, Meerut, which had commenced on a complaint dated 31.8.1998 of an offence punishable under Sections 9 and 9AA of the Central Excise Act, 1944.

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The basis of the said criminal complaint was the adjudication made by the Commissioner of Central Excise, Delhi on a show cause notice dated 27.3.1987, which was issued proposing recovery of Central Excise Duty short paid and imposition of penalty thereon. The Commissioner of Central Excise, Delhi while holding the petitioners (company & Directors) responsible for evasion of Central Excise Duty had imposed penalty amounting to Rs. 14.5 crores against the company and Rs. 3.15 crores against the Directors. At the time of lodging of the said complaint, the matter was pending before the Customs, Excise and Gold (control) Appellate Tribunal (CEGAT) [(now known as the Customs Excise and Service Tax Appellate Tribunal (CESTAT)] in an appeal filed against the order of Commissioner of Central Excise, Delhi.

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The allegations against the company in the complaint was that it

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had contravened the provisions of Rules 9(1), 52, 52A of the Central Excise Rules, 1944, inasmuch as, the company had falsely and fraudulently declared to the proper officer and on the cigarette packets, lower sale price with clear intent to evade payment of appropriate excise duty and availed exempted rates as applicable to cigarettes with lower sale price by concealment of correct price. The company had wilfully suppressed the fact that the prices printed on the cigarette packets were false and had deliberately printed lower price to facilitate payment of duty at lower rates as per the exemption granted under Notification Nos. 36/83 dated 1.3.1983, 211/83 dated 4.8.1983, 100/85 dated 25.3.1985, 134/85 dated 24.5.1985, 201/85 dated 2.9.1985, as amended by No. 210/85 dated 20.9.1985 and No. 78/86-CE dated 10.2.1986. The company had also made wilful misstatement regarding the adjusted 'sale price per thousand cigarettes' and 'sale price' of the cigarettes as aforementioned.

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Vide order dated 4.9.1998, the Customs, Excise and Gold(control) Appellate Tribunal (CEGAT) had allowed the appeal in part. As far as the order of confirmation of demand on the appellants, the same was set aside remanding the matter back to the adjudication authority for fresh quantification of duty demand on the company in accordance with the findings given therein and direction was issued for fresh computation after giving an opportunity of personal hearing to the company. The penalties, however, imposed on the company and the directors had been set aside.

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The order of the Appellate Tribunal was challenged before the Apex Court in two Special Leave Petitions filed by the company as also the department.

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Both the Special Leave Petitions were converted into Civil Appeal No. 70 of 1999 (ITC Ltd. vs. CCE) and Civil Appeal No. 6101 of 1998 (CCE vs. ITC Ltd.) and were decided together vide judgment and order dated 10^th September, 2004 reported in (2004) 7 Supreme Court Cases 591 (ITC Ltd. vs. Commissioner Central Excise New Delhi and another) . The Apex Court has allowed the Civil Appeal No. 70 of 1999 filed by the company whereas the appeal filed by the department has been dismissed. The demand raised against the appellant company, had thus been set aside. While setting aside the demand, the Apex Court has observed in paragraph '55', '56' and '57' as under:-

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" 55. The Tribunal itself noted that the intention underlying the Notification was to get over "hassles arising on the question of determination of assessable value under Section 4(l)(a) of the Act and the admissible deductions". But then it held that the switch over was made from "assessable value to 'quasi-specific duty'. Duty is either specific or not. Since it is not specific according to the Tribunal, it would be open to the Department to go behind the printed prices and find out the "effective prices" at which the retailers may sell the packages to consumers and treat such prices as the printed prices for the purpose of determining the rate of duty applicable. The consequences of this interpretation by the Tribunal would be starting. There is no dispute that the Notification envisages a single retail price in respect of certain brands of cigarettes. It is this single retail price which has to be printed on the package. If one were to accept the High Court's prima facie view, the printed MRP should reflect the actual price at which the particular kind of cigarette is sold throughout the country. The patent impossibility of this was acknowledged by the Tribunal which held that the actual price at which the cigarettes were sold could not "lawfully or logically" be the printed MRP because

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"the manufacturer has limited or little control over the actions of the retailers" who are, in the case of the appellant, "about a million in number"; that the appellant could not be held responsible for "the tendency of the retailers to charge higher than the printed price so as to secure larger margin" and that different prices may be actually charged for the same brand all over the country. Therefore, the Tribunal held that the printed MRP should have been the "reasonable price" at which the cigarettes could be sold. This led the Tribunal and the adjudicating authority to go into an elaborate exercise to determine what should be that single reasonable price for the entire country which should have been declared and printed by the appellant on the packages.

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56. In our opinion the outcome of this would be equally illogical. It envisages an excise officer in one part of the country determining what would be the reasonable market price throughout the country for that particular brand, an exercise which the Tribunal itself concede would require the examination of the cost data and market considerations and would be a "very complicated and time consuming impractical exercise which was rightly not provided for". And yet according to the Tribunal's and the Revenue's interpretation of the notification, the Excise Officer would have had to do just that. Apart from the patent impracticability of the matter, the question whether the price so fixed by the Excise authority is 'reasonable' or not would itself be justiciable with the consequent blockage of revenue in the quagmire of litigation. That is precisely what the Notification had sought to avoid.

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57. The certainty of specific rates which was sought to be achieved by the notification has been undone by the adjudicating authority and the Tribunal. The notification had introduced a system for levy of excise duty on an experimental basis. If the experiment was a failure for whatever reason, it was open to the respondents to do away with it and replace the system by some other as it did in 1987. But as long as the notification stood, it had to be given effect to. In the view we have taken, there is no need to go into other questions debated before us. We, therefore, allow Civil Appeal No. 70 of 1999 (M/s. ITC Ltd. v. Commissioner of Central Excise & Anr.) and dismiss Civil Appeal No. 6101 of 1998, (Commissioner of Central Excise, New Delhi v. M/s. ITC Ltd.). The impugned demands raised against the appellant are set aside without any order as to costs."

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In the face of the aforesaid findings returned by the Apex Court, it is evident that the demands raised by the department with the allegation of evasion of excise duty on the part of the company and the directors had been set aside in toto. The result is that the show cause notice dated 27.3.1987 stood quashed. No proceeding, therefore, could have been continued against the company on the allegations of evasion of excise duty.

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The criminal complaint dated 31.8.1998 is based on the findings of the Commissioner of Central Excise, Delhi about the liability of the company to pay the excise duty which it had allegedly evaded. The basis of the said complaint itself goes with the judgment and order dated 10th September, 2004 passed by the Apex Court and, therefore, this Court is of the considered view that the proceedings of Criminal Case No. 875 of 1998 (Shailendra Sharma vs. ITC and others) cannot continue to prosecute the company and its directors.

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This view taken by this Court is supported by the decision of the Apex Court in Radheshyam Kejriwal vs. State of West Bengal and another reported in (2011) 3 Supreme Court Cases 581 .

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Relevant paragraph '47' is quoted as under:-

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"47. Bearing in mind the principles aforesaid we proceed to consider the case of the appellant. In the adjudication proceeding on merit the adjudicating authority

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has categorically held that "the charges against Shri Radheshyam Kejriwal for contravening the provisions of Section 9(1)(f)(i) and Section 8(2) read with Section 64(2) of the Foreign Exchange Regulation Act, 1973 cannot be sustained". In the face of the aforesaid finding by the Enforcement Directorate in adjudication proceeding that there is no contravention of any of the provisions of the Act, it would be unjust and an abuse of the process of the court to permit the Enforcement Directorate to continue with the criminal prosecution."

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Consequently, both the applications under Section 482 of the Criminal Procedure Code are allowed .

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The proceedings of the Criminal Case No. 875 of 1998 (Shailendra Sharma vs. ITC and others) pending before the Court of Special Chief Judicial Magistrate, Meerut are hereby quashed.

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Order Date :- 14.12.2018 Brijesh

Itc Limited v. State of U.P. and Another

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Itc Limited v. State of U.P. and Another

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