THE HONBLE SRI JUSTICE U. DURGA PRASAD RAO
Criminal Petition No.2265 of 2015
02.03.2018
Anil Kumar Aggarwal.... Petitioner/Accused No.4
The State of Andhra Pradesh, Inspector of Police, Central Bureau of Investigation,Visakhapatnam,Rep. By its Public Prosecuto
Counsel for Petitioner : Pillix Law Firm
Counsel for Respondent : Sri K. Surender,
Special Public Prosecutor for CBI
<Gist:
>Head Note:
? Cases referred:
1)AIR 1992 SC 604
2)AIR 2010 SC 3624
3)AIR 2002 SC 3372 = 2002 Crl.L.J. 43l43
4)AIR 2009 SC 2195
5)(2008) 9 SCC 677
6)(2009) 13 SCC 729
HONBLE SRI JUSTICE U.DURGA PRASAD RAO
CRIMINAL PETITION No.2265 of 2015
ORDER:
This petition is filed under Section 482 Cr.P.C by the petitioner/A4
seeking to quash the proceedings against him in C.C.No.29 of 2006 on the
file of Special Judge for CBI cases, Visakhapatnam.
2) The Inspector of Police, CBI, SPE, Visakhapatnam filed charge
sheet against A1 to A5 for the offences under Sections 120B, 420, 468,
471 IPC and under Section 13(2) r/w 13(1)(d)(ii) of Prevention of
Corruption Act, 1988.
a) A1 to A3 are the officials of Customs Department. A4Anil Kumar
Aggarwal is the Managing Director and A5 is the Director of M/s.Kumars
Cotex Limited (M/s.KCL). A4 and A5 were engaged in manufacture and
clearance of cotton yarn and cotton waste having their factory at Dokiparu
in Guntur District.
b) A4Company imported six numbers of autoconers (capital goods)
during the year 1996 valuing Rs.5,91,84,990/- availing 100% Customs
Duty Waiver facility as per Notification No.13/81-Customs. While so,
on 05.02.2002 it made an application to the Development Commissioner,
Visakhapatnam Export Processing Zone, Visakhapatnam seeking
permission to destroy two autoconers out of six, stating that the said two
autoconers were burnt due to short circuit and not serviceable.
Accordingly, on 27.02.2002 the Development Commissioner accorded
permission for disposal of two autoconers subject to observance of
customs formalities. Then, A4 requested the Deputy Commissioner,
Central Excise, Guntur to pass orders for destruction, who in turn passed
orders on 24.07.2002 permitting the petitioner/A4 to destruct two
autoconers in the presence of Central Excise Officials.
c) When the matter stood thus, A1 to A3Excise Officials entered
into criminal conspiracy with A4 and in pursuance of the same they went
to the premises of A4Company on 25.07.2002 to supervise the
destruction of two autoconers, but did not ensure destruction. A1 by
abusing his position as a public servant sent compliance report to Deputy
Commissioner as if two autoconers were destroyed by breaking into pieces
in their presence; the scrap was transported through lorry bearing No.AP
7T 1436 and sold the same to M.Venkateswar Raoscrap dealer for
Rs.1,90,000/- and a sum of Rs.30,400/- was deposited in the bank towards
Central Excise Duty. However, the investigation revealed, on 09.10.2003,
A4 sold the said two autoconers to M/s.Sri Jayalakshimi spinning Mills
limited, Chebrolu (M/s.SJSML) for of Rs.50 lakhs. In fact, the said two
autoconers were found in working condition at M/s.SJSML by
Superintendent, Preventive, Central Excise, Gu`ntur by evading tax hence
they were seized. Therefore, the Central Excise Department issued show
cause notice to petitioner/A4 demanding customs duty of Rs.52.61 lakhs.
Accordingly charge sheet was filed.
Hence, the instant Criminal Petition for quashment.
3) Heard learned counsel for petitioner and learned Special Public
Prosecutor for CBI.
4) Learned counsel for petitioner would challenge the proceedings in
C.C.No.29 of 2006 on the main plank of argument that against the order
passed by the Commissioner of Customs and Central Excise, Guntur
petitioners Company preferred an appealC/270-272/2007 before the
Customs Excise and Service Tax Appellate Tribunal (CESTAT),
Bangalore and final order was passed in order Nos. 445-447/2012 allowing
the appeal in favour of petitioner on 13.06.2012 holding that machinery
was dismantled under the supervision of the Central Excise Officers and
cleared from the factory as scrap. As such, it should be considered as
Domestic Tariff Area (DTA) clearance by the Export Oriented Unit (EOU)
attracting Central Excise duty. It was not a clearance of the capital goods
from the factory. Therefore, payment of Central Excise duty by the
assessee at the time of clearance of the scrap to M/s.SJSML cannot be
faulted. Added to it, there is no valid case to hold that there was
suppression or wilful misstatement of facts, let alone fraud, with intent to
evade payment of duty has been made out against the petitioner. Learned
counsel argued that the said order of CESTAT remained unchallenged.
In that view of the matter, the prosecution launched by CBI on the same
facts and continuation of the criminal proceedings is nothing but abuse of
process of law. Hence, the proceedings in C.C.No.29 of 2006 may be
quashed.
5a) Opposing the petition, learned Special Public prosecutor for CBI
would argue that A1 to A3 who are the officials of Central Excise
Department, in collusion with A4 and A5 have created documents as if two
autoconers have been destructed without there being any factual
destruction. On the other hand, A4 and A5 have sold the said two
autoconers to M/s.SJSML for Rs.50 lakhs on 09.10.2003 and those two
autoconers were very much found in working condition with M/s.SJSML
by Superintendent, Preventive, Central Excise, Guntur, hence they were
seized. Since two autoconers were disposed of by A4 and A5 evading
customs duty with the conveyance of A1 to A3, who are deputed to
witness the physical destruction, which in fact was not done, the
prosecution is very much maintainable in view of fraudulent acts
committed by the accused.
b) Learned Special Public Prosecutor would staunchly further argue
that the order of CESTAT dated 13.06.2012 being the order in civil
proceedings is not binding in the criminal proceedings. He submitted that
for another reason also the order passed by the CESTAT is not binding in
the criminal proceedings. Before CESTAT the department argued that in
September, 2004 the department conducted investigation and after seizing
the goods in question from the premises of M/s.SJSML, they have issued a
show cause notice to appellant and M/s.SJSML clearly stating that A4 and
A5 committed fraud, wilful misstatement, suppression of facts and
M/s.SJSML have purchased the two autoconers without payment of
appropriate duty of customs. In spite of said contention, CESTAT held
as if the department has not disputed the machinery was dismantled under
the supervision of Central Excise Range Officers and cleared from the
factory as scrap. The allegation of the department that two autoconers were
sold by A4 and A5 to M/s.SJSML was not clearly discussed. Therefore,
the order of CESTAT is not binding in the criminal proceedings. He thus
prayed to dismiss the petition.
6) The point for consideration is:
Whether there are merits in this Criminal Petition to quash the
proceedings in C.C.No.29 of 2006.
7) POINT: The fulcrum of prosecution case is that A4 and A5 having
obtained permission from the Deputy Commissioner, Central Excise,
Guntur for destruction of two autoconers, indeed, did not do so, but they,
with the conspiracy of A1 to A3, fabricated record of destruction in their
premises and sold the two autoconers to M/s.SJSML for Rs.50 lakhs and
this fact was exhumed when the two autoconers were found in working
condition at M/s.SJSML by Superintendent, Preventive, Central Excise,
Guntur and thus A4 and A5 evaded tax hence, the charges against all the
accused.
8) The Honourable Apex Court in State of Haryana and others
vs. Ch. Bhajan Lal and others have laid down the following guidelines
relating to exercise of inherent power under Section 482 Cr.P.C. to quash
the proceedings to prevent abuse of process of Court. They are:
1. Where the allegations made in the First Information Report or
the complaint, even if they are taken at their face value and
accepted in their entirety do not prima-facie constitute any offence
or make out a case against the accused.
2. Where the allegations in the First Information Report and other
materials, if any, accompanying the F.I.R. do not disclose a
cognizable offence, justifying an investigation by police officers
Under Section 156(1) of the Code except under an order of a
Magistrate within the purview of Section 155(2) of the Code.
3. Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the same do not
disclose the commission of any offence and make out a case against
the accused.
4. Where, the allegations in the F.I.R. do not constitute a
cognizable offence but constitute only a non-cognizable offence, no
investigation is permitted by a police officer without an order of a
Magistrate as contemplated Under Section 155(2) of the Code.
5. Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no prudent
person can ever reach a just conclusion that there is sufficient
ground for proceeding against the accused.
6. Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a
criminal proceeding is instituted) to the institution and continuance
of the proceedings and/or where there is a specific provision in the
Code or the concerned Act, providing efficacious redress for the
grievance of the aggrieved party.
7. Where a criminal proceeding is manifestly attended with mala
fide and/or where the proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the accused and with a
view to spite him due to private and personal grudge.
9) When the material placed by the prosecution is tested on the anvil of
the above guidelines, the said material if uncontroverted would certainly
shed prima facie case against the accused for the offences charged against
them. It is pertinent to note here that prosecution claims seizure of two
autoconers in working condition in the premises of M/s.SJSML against the
contention of the accused that those two autoconers were destructed in the
premises of A4Company on 25.07.2002. If this fact is convincingly
established by the prosecution in the trial, the accused will be liable for the
offences charged against them. Therefore, as the matter stands, none of the
guidelines extracted above in Bhajanlal (1 supra) would attract in this case
to quash the proceedings.
10) Now, coming to the argument of learned counsel for petitioner
regarding the order passed by CESTAT, I have gone through the said order
dated 13.06.2012 in appeal Nos.C/270-272/2007. Those appeals are filed
by A4 against the order passed by Commissioner of Customs and Central
Excise, Guntur in his proceedings No.CEX-15/2006 (Commissioner) dated
14.12.2006.
a) A perusal of said order would show that in Para-29 he gave a clear
finding thus:
Para-29: xx xx xx.. From the above facts, it is evident that the
entire operation of applying for destruction of autoconers and
transferring the same to M/s.Sri Jayalakshimi Spinning Mills
Limited M/s.Sri Jayalakshimi Spinning Mills Limited are able to
make use of them with the technical adjustments of their own staff is
a planned one. xx xx xx. Though the permission for destruction
accorded to them vide Deputy Commissioner, Central Excise,
Gunturs letter C.No.2/2002/DC/Steno dated 24.07.2002, if the
destruction was completed, how the obsolete machinery still
available to them for clearance on 09.10.2003 i.e. for one year after
permission is accorded. Thus the machinery was not destructed and
the same were cleared on 09.10.2003.
b) With the above and other findings, the learned Commissioner passed
an order demanding Customs Duty of Rs.26,83,590/- from M/s.Kumar
Cotex Limited, Dokiparru (A4) along with interest and penalty of
Rs.26,83,590/-. In the said order the Commissioner also directed
confiscation of two numbers of autoconers which were already under
seizure from M/s. Sri Jayalakshimi Spinning Mills Limited. Further, he
imposed penalty of Rs.25 lakhs on A4 and Rs.20 lakhs on M/s.Sri
Jayalakshimi Spinning Mills Limited and Rs.20 lakhs on Sri Anil Kumar
Agarwal and Abhishek Aggarwal. Against the aforesaid order appeals
were preferred by A4 and others before CESTAT, Bangalore. The
CESTAT in its order dated 13.06.2017 has set aside the order of the
Commissioner as per its findings mentioned in Paras-6 and 7 which, in my
view, are germane in this petition and hence extracted thus:
Para-6 As it is not in dispute that the machinery was
dismantled under the supervision of the Central Excise
Range Officers and cleared from the factory as scrap, in our
view, it should be considered to be a DTA clearance by the
EOU attracting Central Excise duty. It was not the
clearance of the capital goods as such from the factory.
Therefore the payment of Central Excise Duty by the
assessee at the time of clearance of the scrap to M/s.SJSML
cannot be faulted. The Department has no case that there
can be no penalty on the assessee or co-appellants under the
Customs Act in relation to clearance of goods on payment of
excise duty under the provisions of the Central Excise Act.
Para-7 Apart from the above, we have also found force in
the plea of limitation raised by the assessee. The entire
demand is beyond the normal period of limitation. No valid
case of suppression or wilful misstatement of facts, let alone
fraud, with intend to evade payment of duty has been made
out against the assessee by the Revenue. As a matter of fact,
no such finding has been recorded in the impugned order.
Therefore, the entire demand is also barred by limitation.
11) The petitioners contention is that since CESTAT has held that
machinery was dismantled and payment of Central Excise Duty by the
assessee as scrap and not as a capital good cannot be faulted, the criminal
prosecution on the same accusation that the machinery was not destructed
and the accused have fabricated documents in that regard, is unsustainable.
12) I am afraid this argument cannot be countenanced for the following
reasons.
a) Firstly, in this case the department has initiated simultaneous civil
and criminal proceedingscivil proceedings for recovery of tax evaded
with interest and penalty before the Commissioner and criminal
proceedings for punishing the accused for their conspiratorial acts of
cheating and falsification of records etc.
b) It is a well known principle that when the same cause of action give
rise to civil and criminal proceedings, both can be initiated simultaneously.
The emancipation of the accused in the corresponding civil proceedings
will have no binding effect on the criminal proceedings and vice-versa
because the civil and criminal proceedings operate on different spheres.
The civil proceedings proceed on the principle of preponderance of
probabilities whereas the criminal proceedings take the course of proof to
the hilt.
13) In Kishan Singh (D) through LRs. vs. Gurpal Singh and others ,
the question that came up for consideration before the Apex Court was
whether criminal proceedings can be quashed by the High Court relying
upon the finding of civil court on an issue involved in criminal proceedings
in respect of same subject matter. The respondents/accused sought for
quashment of FIR on the ground that the appellant after losing the suit for
specific performance, lodged a false FIR stating that the signature of
Kishori Lal was forged on agreement to sell. The High Court quashed the
FIR on the ground that the finding in the civil suit to the effect that
agreement to sell was not forged or fabricated is binding in the criminal
proceedings. The Apex Court after verifying the previous judgments on
the issue, held:
Para-19: Thus, in view of the above, the law on the issue
stands crystallized to the effect that the findings of fact
recorded by the Civil Court do not have any bearing so far
as the criminal case is concerned and vice-versa. Standard
of proof is different in civil and criminal cases. In civil cases
it is preponderance of probabilities while in criminal cases
it is proof beyond reasonable doubt. There is neither any
statutory nor any legal principle that findings recorded by
the court either in civil or criminal proceedings shall be
binding between the same parties while dealing with the
same subject matter and both the cases have to be decided
on the basis of the evidence adduced therein. However, there
may be cases where the provisions of Sections 41 to 43 of
the Indian Evidence Act, 1872 dealing with the relevance of
previous Judgments in subsequent cases may be taken into
consideration.
However, in view of the facts peculiar to that case, the Apex Court
approved the decision of the High Court.
14) The Apex Court in K.G.Premshanker vs. Inspector of Police and
another happened to consider the effect of a previous judgment on the
subsequent proceedings with reference to Sections 40 to 43 of Evidence
Act. The Apex Court observed thus:
Para-30: What emerges from the aforesaid discussion is --
(1) the previous judgment which is final can be relied upon
as provided under Section 40 to 43 of the Evidence Act; (2)
in civil suits between the same parties, principle of res-
judicata may apply; (3) in a criminal case, Section 300
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; (4) if the
criminal case and the civil proceedings are for the same
cause, judgment of the civil Court would be relevant if
conditions of any of the Sections 40 to 43 are satisfied, but it
cannot be said that the same would be conclusive except as
provided in Section 41. Section 41 provides which judgment
would be conclusive proof of what is stated therein.
Para-31: Further, the judgment, order or decree passed in a
previous civil proceedings, if relevant, as provided under
Sections 40 and 42 or other provisions of the Evidence Act
then in each case, Court has to decide to what extent it is
binding or conclusive with regard to the matter(s) decided
therein.
Take for illustration, in a case of alleged trespass by 'A' on
'B's property, 'B' filed a suit for declaration of its title and to
recover possession form 'A' and suit is decreed. Thereafter,
in a criminal prosecution by 'B' against 'A' for trespass,
judgment passed between the parties in civil proceedings
would be relevant and Court may hold that it conclusively
establishes the title as well as possession of 'B' over the
property. In such case, 'A' may be convicted for trespass.
The illustration to Section 42 which is quoted above makes
the position clear. Hence, in each and every case, first
question which would require consideration is--whether
judgment, order or decree is relevant?, if relevant -- its
effect. It may be relevant for a limited purpose. Such as,
motive or as a fact in issue. This would depend upon facts of
each case.
15) In Smt. Rumi Dhar vs. State of West Bengal and another , the
Apex Court was considering the application of provision of Section 320
Cr.P.C. The factual background was that the appellant and her husband
(A4) along with others including the officers of Oriental Bank of
Commerce was facing prosecution for the offences under Sections 120B,
420, 468, 461 IPC and also Section 13(2) r/w 13(1)(d) of Prevention of
Corruption Act, 1988. The bank for realization of the amount, initiated
parallel civil proceedings before the Debt Recovery Tribunal wherein the
appellant and bank entered into settlement, pursuant to which, a sum of
Rs.25.51 lakhs was paid. Thereafter, the appellant filed a petition under
Section 320 Cr.P.C. for discharge submitting that in view of the settlement
arrived at by the parties and payment of the amount, no criminal
proceedings can be continued. The CBI opposed the petition contending
that mere payment of the loan to the bank would not exonerate the
appellant from criminal proceedings. The Special Court dismissed the
application of the appellant. The matter was carried in revision to the High
court and it was dismissed. Then, the appellant went to the Apex Court,
which observed thus:
Para-18: It is now a well settled principle of law that in a
given case, a civil proceeding and a criminal proceeding can
proceed simultaneously. Bank is entitled to recover the
amount of loan given to the debtor. If in connection with
obtaining the said loan, criminal offences have been
committed by the persons accused thereof including the
officers of the bank, criminal proceedings would also
indisputably be maintainable. When a settlement is arrived at
by and between the creditor and the debtor, the offence
committed as such does not come to an end. The judgment of
a tribunal in a civil proceeding and that too when it is
rendered on the basis of settlement entered into by and
between the parties, would not be of much relevance in a
criminal proceeding having regard to the provisions
contained in Section 43 of the Indian Evidence Act.
Para-19: The judgment in the civil proceedings will be
admissible in evidence only for a limited purpose. It is not a
case where the parties have entered into a compromise in
relation to the criminal charges. In fact, the offence alleged
against the accused being an offence against the society and
the allegations contained in the first information report
having been investigated by the Central Bureau of
Investigation, the bank could not have entered into any
settlement at all. The CBI has not filed any application for
withdrawal of the case. Not only a charge sheet has been
filed, charges have also been framed. At the stage of framing
charge, the appellant filed an application for discharge. One
of the main accused is the husband of the appellant. The
complicity of the accused persons was, thus, required to be
taken into consideration for the purpose of determining the
application for discharge upon taking a realistic view of the
matter. While considering an application for discharge filed
in terms of Section 239 of the Code, it was for the learned
Judge to go into the details of the allegations made against
each of the accused persons so as to form an opinion as to
whether any case at all has been made out or not as a strong
suspicion in regard thereto shall subserve the requirements of
law.
It should be noted, attention of the Apex Court was drawn to the decision in
Nikhil Merchant vs. Central Bureau of Investigation and another
wherein the Apex Court, in similar case considering that the dispute
between the parties had overtones of a civil dispute with certain criminal
facets and also considering the compromise arrived at between the
Company and the Bank and observing that continuation of the criminal
proceedings in view of compromise arrived at by the parties would be a
futile exercise, allowed to quash the proceedings. However, in Rumi
Dhars case (4 supra) the Apex Court did not incline to follow the said
decision and observed thus:
Para-23: The jurisdiction of the Court under Article 142 of
the Constitution of India is not in dispute. Exercise of such
power would, however, depend on the facts and circumstance
of each case. The High Court, in exercise of its jurisdiction
under Section 482 of the Code of Criminal procedure, and
this Court, in terms of Article 142 of the Constitution of India,
would not direct quashing of a case involving crime against
the society particularly when both the learned Special Judge
as also the High Court have found that a prima facie case has
been made out against the appellant herein for framing
charge.
16) In Sh.Vishnu Dutt Sharma vs. Smt. Daya Sapra observing that
acquittal of the accused in a criminal prosecution under Section 138 of
Negotiable Instruments Act would not operate as res judicata in the civil
suit filed by the plaintiff for recovery of money, the Apex Court held thus:
Para-11: There cannot be any doubt or dispute that a
creditor can maintain a civil and criminal proceeding at the
same time. Both the proceeding, thus, can run parallely. The
fact required to be proved for obtaining a decree in the civil
suit and a judgment of conviction in the criminal
proceedings may be overlapping but the standard of proof in
a criminal case vis-a-vis a civil suit, indisputably is different.
Whereas in a criminal case the prosecution is bound to
prove the commission of the offence on the part of the
accused beyond any reasonable doubt; in a civil suit
`preponderance of probability' would serve the purpose for
obtaining a decree.
17) So, the above precedential jurisprudence would give a clear
understanding that civil and criminal proceedings can be initiated
simultaneously and judgment in one proceeding will not have impact on the
other. In the case on hand also, merely because CESTAT held that A4 and
A5 need not pay the tax as claimed before the Commissioner, Customs and
Central Excise, Guntur and approved by him, the criminal proceedings
cannot be quashed. The judgment in civil case will not be relevant under
Sections 40, 41, 42 or 43 of the Evidence Act. At best, the said judgment
will be relevant to consider the quantum of punishment to be imposed to
the accused in case the criminal proceedings culminate in conviction.
18) Secondly, as extracted supra, in para-6 of its order, the CESTAT
observed as if it was not in dispute that machinery was dismantled under
the supervision of the Central Excise Range Officers and cleared from the
factory as scrap. When the foundation for case of the Department was that
two autoconers were not destructed despite obtaining permission, it is quite
astounding as to how the CESTAT observed that the destruction of two
autoconers was not in dispute. Therefore, though the order of the CESTAT
attained finality on civil side, still criminal proceedings against fraud and
cheating can be independently established by the prosecution.
19) Thus, on a conspectus, I find no merits in the case of petitioners.
Accordingly, the Criminal Petition is dismissed.
As a sequel, miscellaneous petitions pending, if any, shall stand
closed.
_________________________
U. DURGA PRASAD RAO, J
Date: 02.03.2018
Criminal Petition No.2265 of 2015
02.03.2018
Anil Kumar Aggarwal.... Petitioner/Accused No.4
The State of Andhra Pradesh, Inspector of Police, Central Bureau of Investigation,Visakhapatnam,Rep. By its Public Prosecuto
Counsel for Petitioner : Pillix Law Firm
Counsel for Respondent : Sri K. Surender,
Special Public Prosecutor for CBI
<Gist:
>Head Note:
? Cases referred:
1)AIR 1992 SC 604
2)AIR 2010 SC 3624
3)AIR 2002 SC 3372 = 2002 Crl.L.J. 43l43
4)AIR 2009 SC 2195
5)(2008) 9 SCC 677
6)(2009) 13 SCC 729
HONBLE SRI JUSTICE U.DURGA PRASAD RAO
CRIMINAL PETITION No.2265 of 2015
ORDER:
This petition is filed under Section 482 Cr.P.C by the petitioner/A4
seeking to quash the proceedings against him in C.C.No.29 of 2006 on the
file of Special Judge for CBI cases, Visakhapatnam.
2) The Inspector of Police, CBI, SPE, Visakhapatnam filed charge
sheet against A1 to A5 for the offences under Sections 120B, 420, 468,
471 IPC and under Section 13(2) r/w 13(1)(d)(ii) of Prevention of
Corruption Act, 1988.
a) A1 to A3 are the officials of Customs Department. A4Anil Kumar
Aggarwal is the Managing Director and A5 is the Director of M/s.Kumars
Cotex Limited (M/s.KCL). A4 and A5 were engaged in manufacture and
clearance of cotton yarn and cotton waste having their factory at Dokiparu
in Guntur District.
b) A4Company imported six numbers of autoconers (capital goods)
during the year 1996 valuing Rs.5,91,84,990/- availing 100% Customs
Duty Waiver facility as per Notification No.13/81-Customs. While so,
on 05.02.2002 it made an application to the Development Commissioner,
Visakhapatnam Export Processing Zone, Visakhapatnam seeking
permission to destroy two autoconers out of six, stating that the said two
autoconers were burnt due to short circuit and not serviceable.
Accordingly, on 27.02.2002 the Development Commissioner accorded
permission for disposal of two autoconers subject to observance of
customs formalities. Then, A4 requested the Deputy Commissioner,
Central Excise, Guntur to pass orders for destruction, who in turn passed
orders on 24.07.2002 permitting the petitioner/A4 to destruct two
autoconers in the presence of Central Excise Officials.
c) When the matter stood thus, A1 to A3Excise Officials entered
into criminal conspiracy with A4 and in pursuance of the same they went
to the premises of A4Company on 25.07.2002 to supervise the
destruction of two autoconers, but did not ensure destruction. A1 by
abusing his position as a public servant sent compliance report to Deputy
Commissioner as if two autoconers were destroyed by breaking into pieces
in their presence; the scrap was transported through lorry bearing No.AP
7T 1436 and sold the same to M.Venkateswar Raoscrap dealer for
Rs.1,90,000/- and a sum of Rs.30,400/- was deposited in the bank towards
Central Excise Duty. However, the investigation revealed, on 09.10.2003,
A4 sold the said two autoconers to M/s.Sri Jayalakshimi spinning Mills
limited, Chebrolu (M/s.SJSML) for of Rs.50 lakhs. In fact, the said two
autoconers were found in working condition at M/s.SJSML by
Superintendent, Preventive, Central Excise, Gu`ntur by evading tax hence
they were seized. Therefore, the Central Excise Department issued show
cause notice to petitioner/A4 demanding customs duty of Rs.52.61 lakhs.
Accordingly charge sheet was filed.
Hence, the instant Criminal Petition for quashment.
3) Heard learned counsel for petitioner and learned Special Public
Prosecutor for CBI.
4) Learned counsel for petitioner would challenge the proceedings in
C.C.No.29 of 2006 on the main plank of argument that against the order
passed by the Commissioner of Customs and Central Excise, Guntur
petitioners Company preferred an appealC/270-272/2007 before the
Customs Excise and Service Tax Appellate Tribunal (CESTAT),
Bangalore and final order was passed in order Nos. 445-447/2012 allowing
the appeal in favour of petitioner on 13.06.2012 holding that machinery
was dismantled under the supervision of the Central Excise Officers and
cleared from the factory as scrap. As such, it should be considered as
Domestic Tariff Area (DTA) clearance by the Export Oriented Unit (EOU)
attracting Central Excise duty. It was not a clearance of the capital goods
from the factory. Therefore, payment of Central Excise duty by the
assessee at the time of clearance of the scrap to M/s.SJSML cannot be
faulted. Added to it, there is no valid case to hold that there was
suppression or wilful misstatement of facts, let alone fraud, with intent to
evade payment of duty has been made out against the petitioner. Learned
counsel argued that the said order of CESTAT remained unchallenged.
In that view of the matter, the prosecution launched by CBI on the same
facts and continuation of the criminal proceedings is nothing but abuse of
process of law. Hence, the proceedings in C.C.No.29 of 2006 may be
quashed.
5a) Opposing the petition, learned Special Public prosecutor for CBI
would argue that A1 to A3 who are the officials of Central Excise
Department, in collusion with A4 and A5 have created documents as if two
autoconers have been destructed without there being any factual
destruction. On the other hand, A4 and A5 have sold the said two
autoconers to M/s.SJSML for Rs.50 lakhs on 09.10.2003 and those two
autoconers were very much found in working condition with M/s.SJSML
by Superintendent, Preventive, Central Excise, Guntur, hence they were
seized. Since two autoconers were disposed of by A4 and A5 evading
customs duty with the conveyance of A1 to A3, who are deputed to
witness the physical destruction, which in fact was not done, the
prosecution is very much maintainable in view of fraudulent acts
committed by the accused.
b) Learned Special Public Prosecutor would staunchly further argue
that the order of CESTAT dated 13.06.2012 being the order in civil
proceedings is not binding in the criminal proceedings. He submitted that
for another reason also the order passed by the CESTAT is not binding in
the criminal proceedings. Before CESTAT the department argued that in
September, 2004 the department conducted investigation and after seizing
the goods in question from the premises of M/s.SJSML, they have issued a
show cause notice to appellant and M/s.SJSML clearly stating that A4 and
A5 committed fraud, wilful misstatement, suppression of facts and
M/s.SJSML have purchased the two autoconers without payment of
appropriate duty of customs. In spite of said contention, CESTAT held
as if the department has not disputed the machinery was dismantled under
the supervision of Central Excise Range Officers and cleared from the
factory as scrap. The allegation of the department that two autoconers were
sold by A4 and A5 to M/s.SJSML was not clearly discussed. Therefore,
the order of CESTAT is not binding in the criminal proceedings. He thus
prayed to dismiss the petition.
6) The point for consideration is:
Whether there are merits in this Criminal Petition to quash the
proceedings in C.C.No.29 of 2006.
7) POINT: The fulcrum of prosecution case is that A4 and A5 having
obtained permission from the Deputy Commissioner, Central Excise,
Guntur for destruction of two autoconers, indeed, did not do so, but they,
with the conspiracy of A1 to A3, fabricated record of destruction in their
premises and sold the two autoconers to M/s.SJSML for Rs.50 lakhs and
this fact was exhumed when the two autoconers were found in working
condition at M/s.SJSML by Superintendent, Preventive, Central Excise,
Guntur and thus A4 and A5 evaded tax hence, the charges against all the
accused.
8) The Honourable Apex Court in State of Haryana and others
vs. Ch. Bhajan Lal and others have laid down the following guidelines
relating to exercise of inherent power under Section 482 Cr.P.C. to quash
the proceedings to prevent abuse of process of Court. They are:
1. Where the allegations made in the First Information Report or
the complaint, even if they are taken at their face value and
accepted in their entirety do not prima-facie constitute any offence
or make out a case against the accused.
2. Where the allegations in the First Information Report and other
materials, if any, accompanying the F.I.R. do not disclose a
cognizable offence, justifying an investigation by police officers
Under Section 156(1) of the Code except under an order of a
Magistrate within the purview of Section 155(2) of the Code.
3. Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the same do not
disclose the commission of any offence and make out a case against
the accused.
4. Where, the allegations in the F.I.R. do not constitute a
cognizable offence but constitute only a non-cognizable offence, no
investigation is permitted by a police officer without an order of a
Magistrate as contemplated Under Section 155(2) of the Code.
5. Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no prudent
person can ever reach a just conclusion that there is sufficient
ground for proceeding against the accused.
6. Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a
criminal proceeding is instituted) to the institution and continuance
of the proceedings and/or where there is a specific provision in the
Code or the concerned Act, providing efficacious redress for the
grievance of the aggrieved party.
7. Where a criminal proceeding is manifestly attended with mala
fide and/or where the proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the accused and with a
view to spite him due to private and personal grudge.
9) When the material placed by the prosecution is tested on the anvil of
the above guidelines, the said material if uncontroverted would certainly
shed prima facie case against the accused for the offences charged against
them. It is pertinent to note here that prosecution claims seizure of two
autoconers in working condition in the premises of M/s.SJSML against the
contention of the accused that those two autoconers were destructed in the
premises of A4Company on 25.07.2002. If this fact is convincingly
established by the prosecution in the trial, the accused will be liable for the
offences charged against them. Therefore, as the matter stands, none of the
guidelines extracted above in Bhajanlal (1 supra) would attract in this case
to quash the proceedings.
10) Now, coming to the argument of learned counsel for petitioner
regarding the order passed by CESTAT, I have gone through the said order
dated 13.06.2012 in appeal Nos.C/270-272/2007. Those appeals are filed
by A4 against the order passed by Commissioner of Customs and Central
Excise, Guntur in his proceedings No.CEX-15/2006 (Commissioner) dated
14.12.2006.
a) A perusal of said order would show that in Para-29 he gave a clear
finding thus:
Para-29: xx xx xx.. From the above facts, it is evident that the
entire operation of applying for destruction of autoconers and
transferring the same to M/s.Sri Jayalakshimi Spinning Mills
Limited M/s.Sri Jayalakshimi Spinning Mills Limited are able to
make use of them with the technical adjustments of their own staff is
a planned one. xx xx xx. Though the permission for destruction
accorded to them vide Deputy Commissioner, Central Excise,
Gunturs letter C.No.2/2002/DC/Steno dated 24.07.2002, if the
destruction was completed, how the obsolete machinery still
available to them for clearance on 09.10.2003 i.e. for one year after
permission is accorded. Thus the machinery was not destructed and
the same were cleared on 09.10.2003.
b) With the above and other findings, the learned Commissioner passed
an order demanding Customs Duty of Rs.26,83,590/- from M/s.Kumar
Cotex Limited, Dokiparru (A4) along with interest and penalty of
Rs.26,83,590/-. In the said order the Commissioner also directed
confiscation of two numbers of autoconers which were already under
seizure from M/s. Sri Jayalakshimi Spinning Mills Limited. Further, he
imposed penalty of Rs.25 lakhs on A4 and Rs.20 lakhs on M/s.Sri
Jayalakshimi Spinning Mills Limited and Rs.20 lakhs on Sri Anil Kumar
Agarwal and Abhishek Aggarwal. Against the aforesaid order appeals
were preferred by A4 and others before CESTAT, Bangalore. The
CESTAT in its order dated 13.06.2017 has set aside the order of the
Commissioner as per its findings mentioned in Paras-6 and 7 which, in my
view, are germane in this petition and hence extracted thus:
Para-6 As it is not in dispute that the machinery was
dismantled under the supervision of the Central Excise
Range Officers and cleared from the factory as scrap, in our
view, it should be considered to be a DTA clearance by the
EOU attracting Central Excise duty. It was not the
clearance of the capital goods as such from the factory.
Therefore the payment of Central Excise Duty by the
assessee at the time of clearance of the scrap to M/s.SJSML
cannot be faulted. The Department has no case that there
can be no penalty on the assessee or co-appellants under the
Customs Act in relation to clearance of goods on payment of
excise duty under the provisions of the Central Excise Act.
Para-7 Apart from the above, we have also found force in
the plea of limitation raised by the assessee. The entire
demand is beyond the normal period of limitation. No valid
case of suppression or wilful misstatement of facts, let alone
fraud, with intend to evade payment of duty has been made
out against the assessee by the Revenue. As a matter of fact,
no such finding has been recorded in the impugned order.
Therefore, the entire demand is also barred by limitation.
11) The petitioners contention is that since CESTAT has held that
machinery was dismantled and payment of Central Excise Duty by the
assessee as scrap and not as a capital good cannot be faulted, the criminal
prosecution on the same accusation that the machinery was not destructed
and the accused have fabricated documents in that regard, is unsustainable.
12) I am afraid this argument cannot be countenanced for the following
reasons.
a) Firstly, in this case the department has initiated simultaneous civil
and criminal proceedingscivil proceedings for recovery of tax evaded
with interest and penalty before the Commissioner and criminal
proceedings for punishing the accused for their conspiratorial acts of
cheating and falsification of records etc.
b) It is a well known principle that when the same cause of action give
rise to civil and criminal proceedings, both can be initiated simultaneously.
The emancipation of the accused in the corresponding civil proceedings
will have no binding effect on the criminal proceedings and vice-versa
because the civil and criminal proceedings operate on different spheres.
The civil proceedings proceed on the principle of preponderance of
probabilities whereas the criminal proceedings take the course of proof to
the hilt.
13) In Kishan Singh (D) through LRs. vs. Gurpal Singh and others ,
the question that came up for consideration before the Apex Court was
whether criminal proceedings can be quashed by the High Court relying
upon the finding of civil court on an issue involved in criminal proceedings
in respect of same subject matter. The respondents/accused sought for
quashment of FIR on the ground that the appellant after losing the suit for
specific performance, lodged a false FIR stating that the signature of
Kishori Lal was forged on agreement to sell. The High Court quashed the
FIR on the ground that the finding in the civil suit to the effect that
agreement to sell was not forged or fabricated is binding in the criminal
proceedings. The Apex Court after verifying the previous judgments on
the issue, held:
Para-19: Thus, in view of the above, the law on the issue
stands crystallized to the effect that the findings of fact
recorded by the Civil Court do not have any bearing so far
as the criminal case is concerned and vice-versa. Standard
of proof is different in civil and criminal cases. In civil cases
it is preponderance of probabilities while in criminal cases
it is proof beyond reasonable doubt. There is neither any
statutory nor any legal principle that findings recorded by
the court either in civil or criminal proceedings shall be
binding between the same parties while dealing with the
same subject matter and both the cases have to be decided
on the basis of the evidence adduced therein. However, there
may be cases where the provisions of Sections 41 to 43 of
the Indian Evidence Act, 1872 dealing with the relevance of
previous Judgments in subsequent cases may be taken into
consideration.
However, in view of the facts peculiar to that case, the Apex Court
approved the decision of the High Court.
14) The Apex Court in K.G.Premshanker vs. Inspector of Police and
another happened to consider the effect of a previous judgment on the
subsequent proceedings with reference to Sections 40 to 43 of Evidence
Act. The Apex Court observed thus:
Para-30: What emerges from the aforesaid discussion is --
(1) the previous judgment which is final can be relied upon
as provided under Section 40 to 43 of the Evidence Act; (2)
in civil suits between the same parties, principle of res-
judicata may apply; (3) in a criminal case, Section 300
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; (4) if the
criminal case and the civil proceedings are for the same
cause, judgment of the civil Court would be relevant if
conditions of any of the Sections 40 to 43 are satisfied, but it
cannot be said that the same would be conclusive except as
provided in Section 41. Section 41 provides which judgment
would be conclusive proof of what is stated therein.
Para-31: Further, the judgment, order or decree passed in a
previous civil proceedings, if relevant, as provided under
Sections 40 and 42 or other provisions of the Evidence Act
then in each case, Court has to decide to what extent it is
binding or conclusive with regard to the matter(s) decided
therein.
Take for illustration, in a case of alleged trespass by 'A' on
'B's property, 'B' filed a suit for declaration of its title and to
recover possession form 'A' and suit is decreed. Thereafter,
in a criminal prosecution by 'B' against 'A' for trespass,
judgment passed between the parties in civil proceedings
would be relevant and Court may hold that it conclusively
establishes the title as well as possession of 'B' over the
property. In such case, 'A' may be convicted for trespass.
The illustration to Section 42 which is quoted above makes
the position clear. Hence, in each and every case, first
question which would require consideration is--whether
judgment, order or decree is relevant?, if relevant -- its
effect. It may be relevant for a limited purpose. Such as,
motive or as a fact in issue. This would depend upon facts of
each case.
15) In Smt. Rumi Dhar vs. State of West Bengal and another , the
Apex Court was considering the application of provision of Section 320
Cr.P.C. The factual background was that the appellant and her husband
(A4) along with others including the officers of Oriental Bank of
Commerce was facing prosecution for the offences under Sections 120B,
420, 468, 461 IPC and also Section 13(2) r/w 13(1)(d) of Prevention of
Corruption Act, 1988. The bank for realization of the amount, initiated
parallel civil proceedings before the Debt Recovery Tribunal wherein the
appellant and bank entered into settlement, pursuant to which, a sum of
Rs.25.51 lakhs was paid. Thereafter, the appellant filed a petition under
Section 320 Cr.P.C. for discharge submitting that in view of the settlement
arrived at by the parties and payment of the amount, no criminal
proceedings can be continued. The CBI opposed the petition contending
that mere payment of the loan to the bank would not exonerate the
appellant from criminal proceedings. The Special Court dismissed the
application of the appellant. The matter was carried in revision to the High
court and it was dismissed. Then, the appellant went to the Apex Court,
which observed thus:
Para-18: It is now a well settled principle of law that in a
given case, a civil proceeding and a criminal proceeding can
proceed simultaneously. Bank is entitled to recover the
amount of loan given to the debtor. If in connection with
obtaining the said loan, criminal offences have been
committed by the persons accused thereof including the
officers of the bank, criminal proceedings would also
indisputably be maintainable. When a settlement is arrived at
by and between the creditor and the debtor, the offence
committed as such does not come to an end. The judgment of
a tribunal in a civil proceeding and that too when it is
rendered on the basis of settlement entered into by and
between the parties, would not be of much relevance in a
criminal proceeding having regard to the provisions
contained in Section 43 of the Indian Evidence Act.
Para-19: The judgment in the civil proceedings will be
admissible in evidence only for a limited purpose. It is not a
case where the parties have entered into a compromise in
relation to the criminal charges. In fact, the offence alleged
against the accused being an offence against the society and
the allegations contained in the first information report
having been investigated by the Central Bureau of
Investigation, the bank could not have entered into any
settlement at all. The CBI has not filed any application for
withdrawal of the case. Not only a charge sheet has been
filed, charges have also been framed. At the stage of framing
charge, the appellant filed an application for discharge. One
of the main accused is the husband of the appellant. The
complicity of the accused persons was, thus, required to be
taken into consideration for the purpose of determining the
application for discharge upon taking a realistic view of the
matter. While considering an application for discharge filed
in terms of Section 239 of the Code, it was for the learned
Judge to go into the details of the allegations made against
each of the accused persons so as to form an opinion as to
whether any case at all has been made out or not as a strong
suspicion in regard thereto shall subserve the requirements of
law.
It should be noted, attention of the Apex Court was drawn to the decision in
Nikhil Merchant vs. Central Bureau of Investigation and another
wherein the Apex Court, in similar case considering that the dispute
between the parties had overtones of a civil dispute with certain criminal
facets and also considering the compromise arrived at between the
Company and the Bank and observing that continuation of the criminal
proceedings in view of compromise arrived at by the parties would be a
futile exercise, allowed to quash the proceedings. However, in Rumi
Dhars case (4 supra) the Apex Court did not incline to follow the said
decision and observed thus:
Para-23: The jurisdiction of the Court under Article 142 of
the Constitution of India is not in dispute. Exercise of such
power would, however, depend on the facts and circumstance
of each case. The High Court, in exercise of its jurisdiction
under Section 482 of the Code of Criminal procedure, and
this Court, in terms of Article 142 of the Constitution of India,
would not direct quashing of a case involving crime against
the society particularly when both the learned Special Judge
as also the High Court have found that a prima facie case has
been made out against the appellant herein for framing
charge.
16) In Sh.Vishnu Dutt Sharma vs. Smt. Daya Sapra observing that
acquittal of the accused in a criminal prosecution under Section 138 of
Negotiable Instruments Act would not operate as res judicata in the civil
suit filed by the plaintiff for recovery of money, the Apex Court held thus:
Para-11: There cannot be any doubt or dispute that a
creditor can maintain a civil and criminal proceeding at the
same time. Both the proceeding, thus, can run parallely. The
fact required to be proved for obtaining a decree in the civil
suit and a judgment of conviction in the criminal
proceedings may be overlapping but the standard of proof in
a criminal case vis-a-vis a civil suit, indisputably is different.
Whereas in a criminal case the prosecution is bound to
prove the commission of the offence on the part of the
accused beyond any reasonable doubt; in a civil suit
`preponderance of probability' would serve the purpose for
obtaining a decree.
17) So, the above precedential jurisprudence would give a clear
understanding that civil and criminal proceedings can be initiated
simultaneously and judgment in one proceeding will not have impact on the
other. In the case on hand also, merely because CESTAT held that A4 and
A5 need not pay the tax as claimed before the Commissioner, Customs and
Central Excise, Guntur and approved by him, the criminal proceedings
cannot be quashed. The judgment in civil case will not be relevant under
Sections 40, 41, 42 or 43 of the Evidence Act. At best, the said judgment
will be relevant to consider the quantum of punishment to be imposed to
the accused in case the criminal proceedings culminate in conviction.
18) Secondly, as extracted supra, in para-6 of its order, the CESTAT
observed as if it was not in dispute that machinery was dismantled under
the supervision of the Central Excise Range Officers and cleared from the
factory as scrap. When the foundation for case of the Department was that
two autoconers were not destructed despite obtaining permission, it is quite
astounding as to how the CESTAT observed that the destruction of two
autoconers was not in dispute. Therefore, though the order of the CESTAT
attained finality on civil side, still criminal proceedings against fraud and
cheating can be independently established by the prosecution.
19) Thus, on a conspectus, I find no merits in the case of petitioners.
Accordingly, the Criminal Petition is dismissed.
As a sequel, miscellaneous petitions pending, if any, shall stand
closed.
_________________________
U. DURGA PRASAD RAO, J
Date: 02.03.2018
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