Disposed

3M India Limited v. the Assistant Commissioner of Central Taxes (Legal)

Karnataka HC2 Mar 2021WP/588/2021

Case brief

AI extract

What is this about?

Criminal prosecution for alleged excise-duty evasion was kept in abeyance pending adjudicatory proceedings for one year. The court directed the petitioners to take immediate steps to secure disposal of their appeal within that period, with liberty to the respondent to proceed with prosecution if it remained undecided.

What did the court decide?

Criminal proceedings against the petitioners kept in abeyance pending adjudicatory proceedings for one year; prosecution could proceed if the appeal remained undecided thereafter.

3M India Limited Vs the Assistant Commissioner of… — Customs and Excise | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 2^ND DAY OF MARCH, 2021

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BEFORE

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THE HON'BLE MR. JUSTICE H.P. SANDESH

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WRIT PETITION No.588/2021(GM-RES)

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BETWEEN:

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1 . 3M INDIA LIMITED

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A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT PLOT NO.48-51, ELECTRONIC CITY HOSUR ROAD BENGALURU-560100 REPRESENTED BY MS.PRIYA MENON AGED ABOUT 57 YEARS.

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2 . AMIT LAROYA AGED ABOUT 56 YEARS FORMER MANAGING DIRECTOR 3M INDIA LIMITED PLOT NO.48-51, ELECTRONIC CITY HOSUR ROAD, BENGALURU-560100

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3 . SUNIL BANTHIYA AGED ABOUT 55 YEARS FORMER VP/EXECUTIVE DIRECTOR SUPPLY CHAIN (MFG. ENGG AND SOURCING) 3M INDIA LIMITED PLOT NO.48-51, ELECTRONIC CITY HOSUR ROAD, BENGALURU-560100

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4 . SAMEER AGRAWAL

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AGED ABOUT 46 YEARS FORMER CHIEF FINANCIAL OFFICER 3M INDIA LIMITED PLOT NO.48-51, ELECTRONIC CITY

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HOSUR ROAD BENGALURU-560100

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5 . MILIND JOGLEKAR AGED ABOUT 49 YEARS SENIOR GENERAL MANAGER 3M INDIA LIMITED PLOT NO.48-51, ELECTRONIC CITY HOSUR ROAD, BENGALURU-560100

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6 . B. SRIKANTH AGED ABOUT 45 YEARS FORMER GENERAL MANAGER-SOURCING 3M INDIA LIMITED PLOT NO.48-51 ELECTRONIC CITY HOSUR ROAD, BENGALURU-560100

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7 . D.K. SURESH AGED ABOUT 52 YEARS MANAGER-INDIRECT TAXES 3M INDIA LIMITED PLOT NO.48-51, ELECTRONIC CITY HOSUR ROAD, BENGALURU-560100

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… PETITIONERS (BY SRI HASMATH PASHA, SENIOR COUNSEL FOR SRI RAVI RAGHAVAN, ADVOCATE)

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AND:

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THE ASSISTANT COMMISSIONER OF CENTRAL TAXES (LEGAL), OFFICE OF THE PRINCIPAL COMMISSIONER OF CENTRAL TAX, BENGALURU-WEST COMMISSIONERATE TTMC/BMTC BUS STAND COMPLEX BANASHANKARI, BENGALURU-560070

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… RESPONDENT (BY SRI JEEVN NEERALGI, ADVOCATE, ADVOCATE)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C PRAYING TO QUASH THE CRIMINAL COMPLAINT AND ALL PROCEEDINGS IN C.C.NO.70/2020 VIDE ANNEXURE-B AND C ON THE FILE OF THE LEARNED SPECIAL COURT OF ECONOMIC OFFENCES, BENGALURU.

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THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 09.02.2021, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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O R D E R

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This petition is filed under Articles 226 and 227 of Constitution of India read with Section 482 of Cr.P.C. praying this Court to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order or direction quashing the criminal complaint and all the proceedings in C.C.No.70/2020; issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order or direction quashing the order dated 07.11.2020 taking cognizance in C.C.No.70/2020 and pass such other order as this Court deem fit and proper in the facts and circumstances of the case.

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The factual matrix of the case is that the respondent has filed the complainant against these petitioners and also accused Nos.1 and 2 and the said complaint is numbered as PCR No.45/2020 and after registering the complaint, the learned

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Magistrate, dispensed the recording of sworn statement since the complainant is a Government servant and proceeded to take the cognizance vide order dated 07.11.2020.

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The allegation in the complaint is that accused No.1 is engaged in the manufacture of three I.E. products viz., diesel engine conditioner, fuel system cleaner and intake system cleaner for accused No.3 classifiable under CHS 34031900, 34039900 and 34039900 respectively. The accused No.1 has evaded the payment of Central Excise Duty amounting to Rs.3,02,87,970/- and removed excisable goods in contravention of Rules 6, 8, 11 and 12 of the Central Excise Rules, 2002. The accused No.1 acquired the possession of the excisable goods or concerned himself in depositing, keeping, concealing, selling, purchasing or clandestine removal of the excisable goods without payment of duty knowing fully well and suppressed the facts from the department and accused Nos.1 and 3 have committed offence punishable under Sections 9(1)(b), 9(1)(bbb), 9(1)(c) of the Central Excise Act, 1944 read with Section 174 of the CGST Act, 2017.

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Accused No.3, who is the petitioner No.1 is a multinational company engaged in manufacturing and trading of various products with a total turnover of more than Rs.1900 Crores in the year 2014-2015. Accused No.3 has supplied all the raw materials to accused No.1 represented by accused No.2 and the manufacturing activities were undertaken by accused No.1. Hence, vicariously held liable for the offence committed by accused No.1 by virtue of Section 9AA(1) of the erstwhile Central Excise Act, 1944 read with Section 174 of the CGST Act, 2017.

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Accused No.4 is the Managing Director of accused No.3; accused No.5 is the Vice President/Executive DirectorSupply Chain (manufacturing engineering and sourcing) of accused No.3; accused No.6 is the CFO of accused No.3; accused No.7 is the Senior General Manager-Finance of accused No.3; accused No.8 is the General Manager-Sourcing of accused No.3 and all of them were responsible in connection with procurement of raw materials and finished goods which involves the process of identification of vendors qualification of products, finalizing contracts and ensuring supply of raw materials of the vendors and have committed the offence punishable under Sections 9

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and 9AA(2) of the erstwhile Central Excise Act, 1944 read with Section 174 of CGST Act, 2017. Petitioner No.7 is accused No.9, who is the Manager-Indirect Taxes of accused No.3.

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Learned Magistrate, while considering the material available on record i.e., complaint averments coupled with documents, comes to the conclusion that it prima facie discloses the accused No.1 has committed the offences and the other accused persons who were in charge of the affairs of accused No.3 have also committed the offences as alleged and proceeded to issue the summons against the accused persons. Hence, the present petition is filed by accused Nos.3 to 9.

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Learned counsel appearing for the petitioners would vehemently contend that accused No.3 entrusted the work to accused No.1 and supplied the raw materials. The work entrusted to accused No.1 was to pack the products in resalable form and to pay the service tax, which amounts to manufacturing of goods. The case of the prosecution is that excise duty is not paid and the demand notice was issued for a period of 5 years claiming the excise duty to the tune of Rs.3,02,87,970/-.

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The main contention of the learned counsel for the petitioners is that the Commissioner has confirmed the notice and imposed the penalty, but there is no recommendation for criminal prosecution. The said order has been challenged by filing an Appeal, which is pending for adjudication before the Appellate Authority. When such being the case, there cannot be any criminal proceedings against the petitioners herein. The other contention of the learned counsel for the petitioners is that the computation of the excise duty payable is also disputed since the same has been calculated on the transactional value and the MRP is not permissible. If the excise duty is properly calculated, it would be less than the minimum limit. Hence, there cannot be any initiation of the criminal prosecution, if the excise duty to be paid is less than the minimum limit. Hence, the very complaint filed by the complainant is a premature one as the complaint does not disclose the monitory value. When such being the case, there cannot be any criminal prosecution against the petitioners.

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Learned counsel for the petitioners would submit on

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when the matter is pending for adjudication, the criminal proceedings has to be kept in abeyance. It is further contended

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that the factual aspects would clearly discloses that the primary liability is on accused No.1 and not on accused No.3. The only course open is to recover from accused No.1. The question of abatement does not arise. The learned Magistrate while taking the cognizance has not adverted to the factual aspects of the case.

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The contention of the learned counsel for the petitioners is that the petitioners are not liable to pay the excise duty which ought to have been paid by accused No.1 and not by accused No.3. The petitioners was under the bona fide belief that the amount to be paid is the service tax and not as excise duty and accordingly, paid the service tax. When the act of the accused/petitioners is bona fide one, there cannot be any criminal proceedings against the petitioners. Learned counsel also brought to the notice of this Court the circular and contend that the initiation of the criminal proceedings against these petitioners is an abuse of process. If the proceedings initiated against the petitioners are dripped by the Adjudicatory Authority i.e., by the Appellate Court, the petitioners would be subjected to mental agony and harassment. The initiation of the criminal

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case is a serious matter. Hence, first of all the petitioners are not liable for any criminal prosecution and even if this Court comes to the conclusion that the criminal proceedings to be proceeded against them, the same has to be kept in abeyance till the disposal of the adjudicatory proceedings. The petitioners are the Managing Directors, Vice President and other office bearers of accused No.3 and there cannot be any proceedings against them since it has not been cited in the complaint about the role of accused Nos.4 to 9. The question of vicarious liability of accused Nos.4 to 9 does not arise and the learned Trial Judge has failed to take note of all these aspects while taking the cognizance.

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Learned counsel in support of his arguments relied upon the provisions enumerated under Sections 4, 4A, 9, 9AA, 11A, 11AC, 35B, 37B of the Central Excise Act, 1944 and also brought to the notice of this Court the Rules 25, 26 and 31 of the Central Excise Rules, 2002 and so also Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Learned counsel also brought to the notice of this Court circulars bearing No.1009/16/2015-C.X. dated 23.10.2015 and No.201/11/2016-S.T. dated 30.09.2016.

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The main argument of the learned counsel for the petitioners is that the prosecution cannot be continued, when the same is pending for adjudication. Learned counsel referring to the judgment in the case of KAVVERI TELECOM PRODUCTS LIMITED V. ADDITIONAL COMMR OF C.EX.(LEGAL), BENGALURU reported in 2020 (371) E.L.T. 834 (Kar.) wherein this Court held that the proceedings are quashed for the present reserving liberty to the respondent to initiate appropriate action depending upon the result of the proceedings pending before the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru.

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Learned counsel also brought to the notice of this Court the judgment of the Apex Court in the petition for Special Leave to Appeal (Crl.) No.6486/2019 between ADDITIONAL COMMISSIONER OF CENTRAL EXCISE (LEGAL), BENGALURU V. M/S. KAVVERI TELECOM PRODUCTS LIMITED AND ANR., wherein it has been held that at the most, the criminal proceedings could have been kept in abeyance till the disposal of the matter before the Appellate Authority/Tribunal (CESTAT).

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Learned counsel also relied upon the judgment of the Rajasthan High Court in the case of LAXMI NARAYAN SHARMA V. SUPERINTENDENT, C.EX. AND CUS., JAIPUR reported in 1996 (87) E.L.T. 345 (Raj.) and brought to the notice of this Court para No.12, wherein it has been held that in the matters relating to levy of tax, cess or duty on the subject, the orders, instructions or circulars are, no doubt, not binding upon the Courts but since, they are issued by a superior authority to its subordinate authorities employed in the execution of the statute they carry a binding force in so far as the subordinate authorities are concerned. Moreover, the intention behind issuing such circulars was not to launch fruitless criminal litigation and waste public money and energy in prosecution involving petty amounts. Since the order passed by the learned Assistant Collector in the present case clearly stated that the petitioner had evaded the payment of excise duty amounting to Rs.8,919.26/- only which was a figure below Rs.10,000/-, no prosecution should have been launched in view of the clear and specific circulars issued by the Board.

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Learned counsel relied upon the judgment of the Madras High Court in the case of V.G.HIRUSHA V. ASSISTANT COMMISSIONER OF C. EX., CHENNAI reported in 2009 (238) E.L.T. 60 (Mad.) . The learned counsel brought to the notice of this Court para No.6 wherein it is observed that the extent of evasion of excise duty is fixed at an amount which is more than the minimum limit for launching the prosecution and a clear case has been made out for quashing the criminal proceedings pending on the ground that it has become infructuous.

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Learned counsel further relied upon the judgment of the Gujarat High Court in the case of LAKME LIMITED V.

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STATE OF GUJARAT reported in 2001 (132) E.L.T. 20 (Guj.) , wherein it has been held that order of Collector of Central Excise is having a direct bearing on criminal prosecution. Continuation of criminal prosecution would only cause misery and harassment to the petitioner and the proceedings of criminal case to be stayed till the final adjudication by Collector, Central Excise.

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Learned counsel also relied upon the judgment of the Constitutional Bench of the Apex Court in the case of

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COMMISSIONER OF C.EX., BOLPUR V. RATAN MELTING

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AND WIRE INDUSTRIES reported in 2008 (231) E.L.T. 22 (S.C.). Learned counsel brought to the notice of this Court para No.6 of the said judgment, wherein the Apex Court has held that the circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court.

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Learned counsel relied upon the judgment of the Constitutional Bench of the Apex Court in the case of COLLECTOR OF C.EX., VADODARA V. DHIREN CHEMICAL INDUSTRIES reported in 2002 (139) E.L.T. 3 (S.C.) , wherein

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the Apex Court at para No.9 has held that regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon

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the said phrase, that interpretation will be binding upon the revenue.

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Learned counsel further relied upon the judgment of the Punjab and Haryana High Court at Chandigarh in the case of COMMISSIONER OF CENTRAL EXCISE, DELHI-III V. VEE GEE FAUCETS PVT. LTD. . reported in 2015 (329) E.L.T. 76 (P&H) wherein it is held that mens rea is a necessary ingredient for imposition penalty under Rules 25 and 26 of Central Excise Rules, 2002.

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Learned counsel also relied upon the judgment of the Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, JALANDHAR V. ROYAL ENTERPRISES reported in 2016 (337) E.L.T. 482 (S.C.) , wherein the Apex Court has held that mere omission to disclose would not amount to suppression of facts, unless there was deliberate attempt to evade duty.

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Learned counsel for the petitioners further relied upon the judgment of the Apex Court in the case of GANGADHAR ALIAS GANGARAM V. STATE OF MADHYA

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PRADESH reported in (2020) 9 SCC 202 wherein it is held that with regard to the liberty of individual is concerned, if the Court is satisfied, that prosecution had failed to establish prima facie case, evidence led was wholly insufficient and there was gross misappropriation of evidence by Courts below, bordering on perversity, Supreme Court shall not be inhibited in protecting the liberty of individual.

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Learned counsel also relied upon the order of the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru, wherein the miscellaneous application for early hearing was entertained and ordered to list the appeals for final hearing.

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Learned counsel further relied upon the judgment of the Apex Court in the case of COMMISSIONER OF INCOME TAX, MUMBAI V. BHUPEN CHAMPAK LAL DALAL AND ORS.

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reported in AIR 2001 SC 1096 and brought to the notice of this Court para Nos.3 and 5, wherein it has been held that when ultimately the result to come out of the proceedings before the Appellate Authorities have a definite bearing on the case alleged against the respondents and affirmed the order of the High Court granting the Interim order.

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Learned counsel also relied upon the judgment of the

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Kerala High Court in the case of BEAVER ESTATES PVT. LTD.

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AND ORS. V. THE ASSISTANT COMMISSIONER OF INCOME

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TAX CORPORATE, CIRCLE 1(1) AND OTHERS decided on 23.10.2019 and brought to the notice of this Court para No.13, wherein it is directed to keep in abeyance all further proceedings against the petitioners.

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Learned counsel relied upon the judgment of the Patna High Court in the case of CHOUBEY SUGANDITH TAMBAKU CO., V. UNION OF INDIA reported in 2013 (288) E.L.T. 342 (Pat.), wherein it is held that the High Court had ample power to pass any order by exercising its power under Section 482 ibid to do complete justice between the parties.

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Learned counsel further relied upon the judgment of the Kerala High Court in the case of NANDAKUMAR V. INCOME TAX OFFICER r eported in 2009 SCC Online Ker 1399 , wherein it is held that the since the decision of the Appellate Authority has a direct impact on the criminal prosecution, it is just and desirable that the criminal proceedings are kept pending

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till a final decision is taken on the matters pending before the appropriate forum.

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Learned counsel further relied upon the judgment of

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the Patna High Court in the case of GAURI SHANKAR PRASAD AND OTHERS V. UNION OF INDIA AND OTHERS reported in 2003 SCC Online Pat 102 , wherein it is held in para Nos.14 and 15 that petitioner has been able to make out a case for the grant of interim stay of the criminal cases by considering a decision of the Apex Court in the case of COMMISSIONER OF

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INCOME TAX, MUMBAI V. BHUPAN CHAMPAK LAI DALAI

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reported in (2001) 3 SCC 459 .

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Learned counsel relied upon the judgment of the Apex Court in the case of UNIWORTH TEXTILES LTD., V. COMMISSIONER OF CENTRAL EXCISE, RAIPUR reported in 2013 (288) ELT 161 (S.C.), wherein the Apex Court has held that mere non-payment of duties is not equivalent to collusion or willful misstatement or suppression of facts and positive action betraying negative intention of willful/deliberate default is mandatory prerequisite.

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Learned counsel further relied upon the judgment of the Apex Court in the case of PEPSI FOODS LTD., AND ANOTHER V. SPECIAL JUDICIAL MAGISTRATE AND

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OTHERS reported in (1998)5 SCC 749 , wherein the Apex Court has held that while invoking Section 204 for summoning the accused, the order must show that the Magistrate has applied his mind to the facts of the case and law applicable thereto. He should carefully scrutinize the evidence brought on record and may himself put questions to the complainant and his witnesses to find out the allegations.

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Learned counsel also relied upon the judgment of the Apex Court in the case of NATIONAL SMALL INDUSTRIES CORP. LTD., V. HARMEET SINGH PAINTAL AND OTHERS reported in (2010)3 SCC 330 , wherein the Apex Court discussed with regard to Section 141 of the NI Act and held that to put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what

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manner the accused was guilty of consent and connivance or negligence.

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Learned counsel further relied upon the judgment of

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the Apex Court in the case of IMTIAZ AHMED V. UNION OF INDIA AND OTHERS reported in MANU/KA/3199/2019 and brought to the notice of this Court para Nos.7 and 14, wherein this Court held that in criminal trial, no doubt, the Court was entitled to take into consideration confession of co-accused, but unlike in confiscation proceedings, in criminal trial, Court could not start with confession of co-accused as foundational fact to record conviction of accused. The proper approach was to consider other evidence against such other accused person, and if evidence appears to be satisfactory and Court was inclined to hold that said evidence may sustain charge framed against the accused persons, the Court may rely on confession with view to assure itself that conclusion drawn on it from other evidence was just and proper and also exercising the powers under Section 482 of Cr.P.C. Though it was not proper to deny relief to the petitioner solely on the ground that he had failed to surrender himself before criminal Court and only the Court has to look into

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the material collected by investigating agency prima facie were not sufficient to make out ground for prosecution of the petitioner for the offences charged against him.

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Learned counsel also relied upon the judgment of the Apex Court in the case of V.Y.JOSE AND OTHERS V. STATE OF GUJARAT AND OTHERS reported in (2009)3 SCC 78 and brought to the notice of this Court para Nos.13 and 15, wherein the Apex Court held that the facts disclosing the ingredients of the offence must be averred and the Court should not hesitate to exercise its jurisdiction under Section 482 of Cr.P.C.

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Learned counsel for the respondent referred to the communication/report of the office of the Commissioner of Central Excise dated 19.07.2016 forwarding of proposal and statement of facts for obtaining permission for launching of prosecution against M/s. Indi Cans, wherein it is observed that all the notices as mentioned had carefully devised the scheme with deliberate intention to evade payment of duty thus defrauding Government exchequer. This clearly brings out their culpable state of mind and their complicity in the commission of

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the offence. Therefore, it is felt that this case is a fit case for launching prosecution against all the above mentioned notices.

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Learned counsel in support of his contention relied upon the judgment of the Apex Court in the case of AIR CUSTOMS OFFICER, IGI NEW DELHI, reported in (2016) 66 TAXMANN.COM 293 (SC) . Referring to this judgment, learned counsel brought to the notice of this Court para Nos.5, 6, 7 and 9, wherein the Apex Court discussed with regard to its earlier judgment in the case of PRITAM SINGH V. STATE OF PUNJAB and in the case of N.R. GHOSE V. STATE OF WEST BENGAL so also in the case of K.G.PREMSHANKAR V. INSPECTOR OF POLICE reported in (2002) 8 SCC 87 . In para No.6 of the said judgment, the Apex Court has made an observation that in a criminal case, Section 300 of Cr.P.C. makes provision that once a person is convicted or acquitted, he may not be tried again for the same offence if the conditions mentioned therein are satisfied. If the criminal case and civil proceedings are for the same cause, judgment of the civil court would be relevant if conditions of any of Sections 40 to 43 are satisfied, but it cannot be said that the same would be conclusive except as provided in

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Section 41. Section 41 provides which judgment would be conclusive proof of what is stated therein.

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The Apex Court in the said judgment also discussed the principles laid down in three-Judge Bench decision in the case of RADHESHYAM KEJRIWAL V. STATE OF WEST BENGAL reported in (2011) 3 SCC 581 and extracted para No.38 of the said judgment and forms an opinion that the High Court was not right and justified in accepting the prayer for quashing of the proceedings in coming to the conclusion that adjudication proceedings and criminal prosecution can be launched simultaneously since both are independent in nature to each other.

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Learned counsel also relied upon the judgment in the case of P.JAYAPPAN V. S.K.PERUMAL, FIRST INCOME OFFICER, TUTICORIN reported in (1984) 1984 TAXMANN.COM 661 (SC) . Learned counsel referring to this judgment would brought to the notice of this Court para Nos.6 and 7 of the judgment, wherein the Apex Court has held that the institution of the criminal prosecution for offences punishable under Section 276C, 277 of the Act does not amounts to an

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abuse of process of the Court and the pendency of the reassessment proceedings cannot act as bar. The Apex Court also observed that the prosecution in those circumstances cannot be quashed on the ground that it is a premature one.

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Learned counsel relied upon the judgment of the Apex Court in the case of RADHESHYAM KEJRIWAL V. STATE OF WEST BENGAL AND ANOTHER reported in (2011)3 SCC 581 and brought to the notice of this Court para No.38, wherein the Apex Court has stated 7 ratios which can be culled out from the decisions broadly in continuing the criminal proceedings.

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Learned counsel also relied upon the judgment of the Apex Court in the case of STANDARD CHARTERED BANK V. DIRECTORATE OF ENFORCEMENT reported in (2006) 67 SCL 2 (SC) wherein the Apex Court discussed with regard to the offences and prosecution - whether a complaint under Section 56 can never be said to be premature, if it is instituted before awarding of penalty under Section 50 and such criminal proceeding being an independent proceeding, can be initiated during the pendency of the adjudication proceeding under Section 51.

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Learned counsel also relied upon the judgment of the Apex Court in the case of ANANDA FABRICS V. ASSISTANT COMMISSIONER OF INCOME TAX, reported in (1990) 185 ITR 412 (Madras) , wherein the Madras High Court has held that willful attempt to evade tax. When an order has been sought for quashing on the ground that departmental appeals were pending, the same cannot be quashed. However, the petitioner was free to request the Magistrate not to pronounce judgment till departmental proceedings were over.

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Learned counsel also relied upon the judgment of the High Court of Madras in the case of N. ATHIMOOLAM V. INCOME-TAX OFFICER, reported in (2010) 327 ITR 603 (MADRAS) , wherein it has been held that the proper course to be adopted by the High Court would be to allow proceedings to go on de hors orders setting aside penalty proceedings by Tribunal. Once the trial of the case has commenced with regard to willful attempt to evade the tax.

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Learned counsel also relied upon the judgment of the Madras Court in the case of ASSISTANT COMMISSIONER OF

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INCOME-TAX V. N.K.MOHAMED ALI reported in (2010) 325 ITR 661 (MADRAS) with regard to willful attempt to evade tax.

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Learned counsel also relied upon the judgment of the Delhi High Court in the case of COMMERCIAL AVIATION AND TRAVEL CO., INC. V. N.KUMAR, INCOME-TAX OFFICER reported in (1991) 54 TAXMAN 26 (DELHI) , wherein the Delhi High Court has held that willful attempt to evade taxes etc., - whether in a case of setting aside of assessment order made by ITO which was basis for filing criminal complaint, it would be a fit case where option be left to petitioners to approach criminal Court for stay of proceedings till reassessment was finalized.

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Learned counsel also relied upon the judgment of the Andhra Pradesh High Court in the case of ASHOK BISCUIT WORKS V. INCOME-TAX OFFICER reported in (1988) 39 TAXMANN.COM 243 (AP) , wherein the High Court has held that the result of a proceeding under Income-Tax Act is not binding on Criminal Court.

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Learned counsel relied upon the judgment of the Madras High Court in the case of PANCHU ARUNACHALAM V. INCOME-TAX OFFICER reported in (1995) 214 ITR 733 (MADRAS) , wherein it is held that the pendency of the appeal before the income tax authorities will not be a bar to proceedings with complaint for the offences under Sections 276C/277.

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Learned counsel relied upon the judgment of the Punjab and Haryana High Court in the case of KAMRA TRADING CO., V. INCOME-TAX OFFICER reported in (1995) 81 TAXMAN 463 (PUNJAB AND HARYANA) wherein the Punjab and Haryana High Court held that merely because second appeal again was accepted prosecution proceedings could not be quashed inasmuch as result of proceedings under the Act would not be binding on criminal court.

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Learned counsel also relied upon the judgment in the case of SUPERINTENDENT (PROSECUTION) CENTRAL EXCISE AND CUSTOMS DEPARTMENT V. ASHOK LEYLAND LTD., reported in (2015) 56 TAXMANN.COM 309 (RAJASTHAN) wherein the Rajasthan High Court held that

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exoneration in adjudication proceedings was not on merits, assesee-accused cannot take a shelter thereof to avoid the prosecution proceedings.

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Learned counsel relied upon the judgment of the Calcutta High Court in the case of BAIDYANATH BASAK V. UNION OF INDIA reported in (1983) 1983 TAXMANN.COM 638 (CALCUTTA) wherein it is held that departmental proceedings pending criminal case in Court are not double jeopardy. Right of silence pending criminal case hearing is nonapplicable as departmental and court proceedings are different.

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Learned counsel also relied upon the judgment of the Supreme Court in the case of BENGAL IRON CORPORATON V. COMMERCIAL TAX OFFICER reported in (1993) 1993 TAXMANN.COM 52 (SC), wherein the Apex Court has held that binding effect-Government instructions or circulars express Government view only and these are not binding on quasijudicial officers. Courts alone can interpret law.

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Learned counsel also relied upon the judgment of the Apex Court in the case of COMMISSIONER OF CENTRAL

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EXCISE, JAIPUR-II V. SUPER SYNOTEX (INDIA) LTD., reported in (2014) 43 TAXMANN.COM 140 (SC) , wherein the Apex Court has held that if there are circulars issued BY CBEC which placed different interpretation upon a phrase in statute, interpretation suggested in circular would be binding on revenue regardless of interpretation placed by Supreme Court. It is further observed that it would not be appropriate for the Court to direct that circular should be given effect to and not view expressed in a decision of supreme Court or High Court.

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Learned counsel also relied upon the judgment of the Madras High Court in the case of PRECOT MERIDIAN LTD., V. COMMISSIONER OF CUSTOMS, TUTICORIN reported in (2020) 118 TAXMANN.COM 228 (MADRAS) with regard to relying on circular issued by Government vide Circular cannot prevail over statute. Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over statutory provision.

¶131

Learned counsel also relied upon the judgment of the Kerala High Court in the case of KUTHANNUR SERVICE COOPERATIVE BANK LTD., V. INCOME-TAX OFFICER, WARD

¶132

¶133

5, PALLAKAD reported in (2020) 116 TAXMANN.COM 33

¶134

(KERALA) with regard to clarificatory circulars issued for guidance of officers bind department but not Court in interpretation of statutory provisions. The same is also reiterated in the judgment of the Kerala High Court in the case of CHOICE PLYWOOD INDUSTRIES V. STATE OF KERALA reported in (2006) TAXMAN.COM 1846 (KERALA). It has been held that by issuing the clarificatory letters issued by C.C.T. has no legal sanctity and would not fall within the scope of Section 3 and such letters represent merely their understanding of statutory provisions and not binding upon Courts and Tribunals.

¶135

Learned counsel relied upon the judgment of the Bombay High Court in the case of TEJAS PRAVIN DUGAD V. UNION OF INDIA, THROUGH THE MINISTRY OF FINANCE reported in 2021 SCC ONLINE BOM 45 and brought to the notice of this Court para No.15 with regard to culpable state of mind. Learned counsel referred to para No.27 of the judgment, wherein it is observed that respondent department was virtually prevented from exercising its powers even like issuing summons. By such order, the petitioners indirectly got relief of anticipatory

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bail, which is also not ordinarily permissible in proceeding of present nature. The circumstance needs to be kept in mind by Court as the granting of relief or anticipatory bail hampers investigation and such approach causes damage to the image of judiciary.

¶138

Learned counsel also relied upon the judgment of the Madras High Court in the case of ASSISTANT COLLECTOR OF CUSTOMS, MADRAS V. GOVINDASAMY RAGUPATHY reported in 1997(2) MWN (CR.)205 with regard to the culpable mental state of mind. In respect of Section 138A of the Customs Act, the burden to prove the non-existence of the presumed culpable mental state is paramount and heavily cast on the accused. Learned counsel also brought to the notice of this Court para Nos.14, 15 and 16, wherein the Madras High Court has discussed with regard to escape of the accused from the clutches of the law, especially, in the light of the fact that the subject matter is an economic offence affecting the economic policy of the State creating imbalance in the financial status of the country.

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Learned counsel for the respondent referring to the above judgments in reply to the contention of the learned counsel for the petitioners submits that there was no any recommendation for initiating the criminal action and that the communication is only an internal communication within the department. The recommendation is also not required and the petitioners also not having any vested right. If the stay is granted, the purpose of initiating the proceedings would be defeated. The prosecution is initiated against the persons who are responsible for the Company who were in the affairs of the Company matters and a specific allegation is made against these petitioners in the complaint. Hence, there cannot be any order of quashing or keeping in abeyance the criminal prosecution initiated against these petitioners.

¶141

The material clearly discloses that the excise duty

¶142

has not been paid and it is also not the bona fide mistake as contended by the learned counsel for the petitioners and with an intention to avoid the payment of excise duty, the service charges has been paid and thus, committed the offence invoked

¶143

¶144

against them. Hence, it is not a fit case to exercise the powers under Section 482 of Cr.P.C.

¶145

In reply to the arguments of the learned counsel for the respondent, learned counsel for the petitioners would submit that the Hon'ble Apex Court, subsequent to the judgment referred to by the learned counsel for the respondent, has passed the judgment in Videocon’s case (referred supra), wherein the Apex Court clarifying the position held that the majority proceeded to analyse the factual matrix and analysed the finding recorded by the adjudicatory authority and opined when there is a finding by the Enforcement Directorate in the adjudication proceeding that there is no contravention of any of the provisions of the Act, it would be unjust and an abuse of process of the Court to permit the Enforcement Directorate to continue with the criminal prosecution.

¶146

Having heard the learned counsel for the petitioners and learned counsel for the respondent and also the principles laid down in the judgments referred supra, this Court has to analyse the material available on record keeping in view of the prayer sought in the petition, i.e., to issue a writ of certiorari or

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¶148

a direction for quashing the criminal proceedings. The main allegation in the complaint is that all these petitioners have committed the offence punishable under Sections 9(1)(b), 9(1)(bbbb), 9(1)(d), 9AA(1) and 9AA(2) of the Central Excise Act, 1944. The specific allegation against all the accused is that they evaded the payment of the Central Excise Duty amounting to Rs.3,02,87,970/and removed excisable goods in contravention of the Rules enumerated in the Central Excise Rules, 2002 apart from the penal provisions.

¶149

It is not in dispute that accused No.3 is a multinational company engaged in the manufacturing and trading of the various products. It is also not in dispute that accused No.3 had supplied all the raw materials to accused No.1 and manufacturing activities were undertaken by accused No.1. It is the contention of the learned counsel for the petitioners that service charges are paid. But the question before this Court is that the excise duty has not been paid. Hence, the prosecution is initiated against all the accused, but in this case, accused No.3Company as well as its office bearers have filed the present petition.

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The main contention of the learned counsel for the petitioners is also that when the adjudicatory proceedings are pending, there cannot be any criminal proceedings. In support of his contention, he has relied upon several judgments before this Court as referred supra. Learned counsel appearing for the respondent also relied upon the several judgments. This Court also in Kavveri Telecom ’s case (referred supra) has held that the proceedings initiated are quashed for the present reserving liberty to the respondent to initiate the appropriate action depending upon the result of the proceedings pending before the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru. The Apex Court also in Additional Commissioner of Central Excise ’s case (referred supra) has held that the criminal proceedings could have been kept in abeyance till the disposal of the matter before the Appellate Authority/Tribunal.

¶152

The order impugned was passed on 29.07.2019 and the matter pending before the adjudicatory Appellate Authority is not in dispute. The question involved in the matter is whether the petitioners and accused Nos.1 and 2 are liable to pay the excise duty and whether it requires adjudication. No doubt, the

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Commissioner passed an order fastening the liability to the tune of Rs.3,02,87,970/- and the said notice is also confirmed by the Commissioner. The order of the Commissioner is challenged before the Appellate Authority.

¶155

Learned counsel appearing for the respondent referred to the decision of the Apex Court in Air Customs Officer IGI New Delhi’s case (referred supra) to para Nos.5, 6, 7 and 9, wherein it is held that adjudication proceedings and criminal prosecution can be launched simultaneously. Decisions in adjudicatory proceedings is not necessary before initiating the criminal prosecution. It is observed that findings in adjudication proceedings are not binding for criminal prosecution. However, if assessee is exonerated in adjudication proceedings on merits and it is found that allegation is not sustainable at all assessee is held innocent, then the criminal prosecution cannot be continued.

¶156

When such being the facts and circumstances of the case, the Apex Court also discussed the judgment of Radheshyam Kejriwal ’s case (referred supra) , which has been relied upon by the learned counsel for the respondent. In para

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¶158

No.38 of the said judgment, it has been held that the adjudication proceedings and criminal prosecution can be launched simultaneously. It is also observed that in case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases.

¶159

The decision which has been referred by the petitioners herein in Videocon’s Case is decided on 19.04.2016 that is subsequent to the judgment of the Air Customs Officer ’s case, wherein the Apex Court discussed in para No.18 the principles laid down in Radheshyam’s case and clarifying the position has come to the conclusion that if adjudicating authority opined that there is no contravention of any of the provisions of the Act, it would be unjust and an abuse of process of the Court to permit the Enforcement Directorate to continue with the criminal prosecution. The Apex Court concurring with the said view in Radheshyam’s case has come to the conclusion that it would be unjust and an abuse of process of

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Court to permit the Enforcement Directorate to continue with the criminal prosecution.

¶162

Having perused the material available on record and

¶163

also the principles laid down in the judgments, no doubt, the Apex Court has held that simultaneously both the civil as well as the criminal proceedings can be launched even if the matter is pending for adjudication. But in the recent decision of the Apex Court, it has been held that the criminal proceedings can be kept in abeyance. The Apex Court in Additional Commissioner’ s case has held that at the most according to him, the criminal proceedings could have been kept in abeyance till the disposal of the matter before the Appellate Authority/Tribunal. This Court also in Kavveri Telecom ’s case quashed the proceedings for the present reserving liberty to the respondent to initiate appropriate action depending upon the result of the proceedings pending before the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru. No doubt, the Apex Court in Videocon’s case subsequent to the decision relied upon by the learned counsel for the respondent, it is held that if there is no contravention of any of the provisions of Act, it would be unjust and an abuse of

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process of the Court to permit the Enforcement Directorate to continue with the criminal prosecution.

¶166

In the present case on hand also, it is clear that

¶167

service tax is paid but the excise duty has not been paid and the same has been disputed, for which, the matter has also been before the Tribunal for adjudication. The main contention of the learned counsel for the petitioners is that if the excise duty payable is less than the minimum limit, there cannot be any criminal proceedings but actually the claim by the respondent is for Rs.3,02,87,970/- and whether the same is reduced to less than the minimum limit or more than the minimum limit has to be adjudicated by the Tribunal. If the criminal prosecution is continued and the accused persons are convicted and if, subsequently, the adjudicatory proceeding has been concluded exonerating the petitioner or comes to the conclusion of minimum limit, then it amounts to an abuse of process and the same would be unjust permitting the Enforcement Directorate to continue with the criminal prosecution. Hence, it is appropriate for the present the proceedings can be kept in abeyance till the disposal of the matter which is pending before the adjudicatory

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authority. If the same favours the petitioners herein, the question of revival does not arise and if it is against the respondent, the same can be revived or continued. However, this Court direct the petitioners herein to move an application before the adjudicatory authority to get the matter disposed of as early as possible within one year since the matter involved is with regard to payment of excise duty due for a period of more than 3 years and odd, which affects the economy of the country as held by the Apex Court as well as other High Courts.

¶170

In view of the discussion made above, I pass the

¶171

following:-

¶172

ORDER

¶173

(i) The proceedings initiated against these petitioners are kept in abeyance till the disposal of the adjudicatory proceedings for a period of one year.

¶174

(ii) The petitioners are directed to get it disposed off the appeal, which is pending before the adjudicatory authority, within a period of one year from the date of this order by taking steps immediately. If the same is not disposed of within the stipulated time of one year, the respondent is

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given liberty to proceed with the matter for criminal prosecution.

¶177

In view of the disposal of the main petition, I.A., if any does not survive for consideration and the same stands disposed of.

¶178

Sd/JUDGE

¶179

PYR

3M India Limited v. the Assistant Commissioner of Central Taxes (Legal)

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3M India Limited v. the Assistant Commissioner of Central Taxes (Legal)

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