Central Excise - Guidelines for launching prosecution under the Central Excise & Salt Act, 1944 - Central Excise - 15/90-CX.6

Central Excise - Guidelines for launching prosecution under the Central Excise Salt Act, 1944 Circular No. 15/90-CX.6 Dated 9-8-1990 [From F.No. 218/7/89-CX.6] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Guidelines for launching prosecution under the Central Excise Salt Act, 1944. I am directed to refer to undermentioned letters on the subject. It has been decided to modity the guidelines for prosecution in the light of recent experience : (i) No. 208/6-M/77-CX.6 dated 26th July, 1980 (ii) No. 208/10/85/CX.6 dated 19-6-1985 (iii) No. 208/20/85 CX.6 dated 15-10-85 (iv) No. 208/19/86 CX.6 dated 30-9-1986 2. The guidelines so far issued are not being revised and incorporated in this letter. These are as unders- (i) Prosecution should be launched with the final approval of the Principal Collector after the case has been carefully examined by the Collector in the light of the guidelines. (ii) Prosecution should not be launched in cases of technical nature, or where the additional claim of duty is based totally on a difference of interpretation of law. Before launching any prosecution, it is necessary that the department should have evidence to prove that the person, company or individual had guilty knowledge of the offence, or had fraudulent intention to commit the offence, or in any manner possessed mens rea (mental element) which would indicate his guilt. It follows, therefore, that in the case of public limited companies, prosecution should not be launched indiscriminately against all the Directors of the company but it should be resticted to only against such of the Director like the Managing Director, Director in charge of Marketing and Sales, Director (Finance) and other executives who are in charge of day-to-day operations of the factory. The intention should be to restrict the prosecution only to those who have taken active part in committing the duty evasion or connived at it. For this purpose, the Collectors should go through the case file and satisfy themselves that only those Chairman/Managing Directors/Directors/Partners/Executives/Officials against whom reasonable evidence exists of their involvement in duty evasion, should be proceeded against while launching the prosecution. For example , Nominee Directors of financial institutions, who are not concerned with day-to-day matters, should not be prosecuted unless there is very definite evidence to the contrary. Prosecution should be launched only against those Directors/Partners/Officials etc. who are found to have guilty knowledge, fraudulent intention or mens rea necessary to bind them to criminal liability. (iii) In order to avoid prosecution in minor cases, a monetary limit of Rs. 10,000/- was prescribed in the instructions contained in Board's letter F.No. 208/6/M-77- CX.6 dated 26-7-1980. Based on experience, and in order not to fritter the limited man-power and time of the Department on too many petty cases, it has now been decided to enhance this limit to Rs. 1 lakh. But in the case of habitual offenders, the total amount of duty involved in various offences may be taken into account while deciding whether prosecution is called for. Moreover, if there is evidence to show that the person or the company has been systematically engaged in evasion over a period of time and evidence to prove malafides is available, prosecution should be considered irrespective of the monetary limit. (iv) One of the important considerations for deciding whether prosecution should be launched is the availablity of adequate evidence. Prosecution should be launched against top management when there is adequate evidence/material to show their involvement in the offence. (v) Persons liable to prosecution should not normally be arrested unless their immediate arrest is necessary. Arrest should be made with the approval of the Assistant Collector or the senior most officer available. Cases of arrest should be reported at the earliest opportunity to the Collector, who will consider whether the case is a fit one for prosecution. (vi) Decision on prosecution should be taken immediately on completion of the adjudication proceedings. (vii) Prosecution should normally be launched immediately after adjudication has been completed. However, if the party deliberately delays completion of adjudication proceedings prosecution may be launched even during the pendency of the adjudication proceedings if it is apprehended that undue delay would weaken the department's case. (viii) Prosecution should not be kept in abeyance on the ground that the party has gone in appeal/revision. However, in order to ensure that the proceedings in appeal/revision are not unduly delayed because the case records are required for purpose of prosecution, a parallel file containing copies of the essential documents relating to adjudication should be maintained. It is necessary to reiterate that in order to avoid delays, Collector should indicate at the time of passing the adjudication order itself whether he considers the case to be fit for prosecution so that it should be further processed for being sent to Principal Collector for sanction. 3. Procedure for prosecution: (i) Consequent upon the creation of the post of Principal Collector, the procedure for sanctioning of the prosecution is being modified. In all such cases where the Collector of Central Excise incharge of judicial work is satisfied that prosecution should be launched, an investigation report for the purpose should be launched, an investigation report for the purpose of launching prosecution should be carefully prepared and signed by an Asstt. Collector, endorsed by the Collector and forwarded to the Principal Collector for decision within one month of the adjudication of the case. The format of this report is annexed to this letter. A criminal complaint in a Court of Law should be, filed only after the sanction of the jurisdictional Principal Collector has been obtained. (ii) It is hardly necessary to emphasize that prosecution, once launched, should be vigorously followed. The Collector of Central Excise incharge of judicial work should monitor cases of prosecution at monthly intervals and take the corrective action wherever necessary to ensure that the progress of prosecution is satisfactory. In large cities, where a number of Central Excise division are located at the same place, all the prosecution cases could be centralised in one office so that it will be easier for the officers to deal with the cases. (iii) In order that the prosecution may have a deterrant effect, it is necessary that conviction should be secured with utmost speed. This can only be done if regular monitoring of the progress of the prosecution is undertaken. (iv) It has been reported that delays in the Court proceedings are often due to non-availability of the records required to be produced before the Magistrate. As a matter of practice, whenever a case is taken up for seeking the approval of the Principal Collector for launching prosecution, the concerned officers should immediately take charge of all documents, statements and other exhibits that would be required to be produced before a Court. The list of exhibits etc. should be finalised in consultation with the Public Prosecutor at the time of drafting of the complaint. No time should be lost in ensuring that all exhibits are kept in safe custody. (v) Section 9 of the Central Excises and Salt Act provides that imprisonment for a terms which may extend to 3 years or a fine or both may be imposeds on a person convicted for offences under this Section. It has been found, however, that most Courts do not impose prison sentences inspite of the statutory provision of the Act. In relation to offences where the duty leviable on the excisable goods exceeds one lakh of rupees, Section 9 provides that the convicted person shall be punishable with imprisonment for a term not less than 6 months, which could extend to 7 years. In addition, the person would also be liable to a fine. In such cases a Court can order imprisonment of a term less than 6 months only where there are special and adequate reasons to impose a lighter sentence and such reasons have to be duly recorded by the Court in the judgement. It has been found that in one case where the amount of duty involved was more than Rs. 1 lakh and the accused had even pleaded guilty, simple imprisonment till the rising of the Court was awarded. It is apparent that generally in cases of sizable evasion persons convicted under the Central Excises and Salt Act suffer very light penalties which is contrary to the spirit of the Central Excise Salt Act, as well as the purpose of launching prosecution. (vi) The Board, therefore, desires that the Collectors of Central Excise responsible for the conduct of prosecution, should study the judgements of the Courts and, where it is found that the accused persons have been let off with light punishment than what is envisaged in the Act, the question of filing appeal under the law should invariably by examined with reference to the evidence on record within the stipulated time. This is equally applicable to cases in which a Court orders acquittal without recording sufficient reasons in the judgment even though adequate evidence was available and was provided in the Court. (vii) Section 9B of the Central Excise Act grants power to publish name, place of business etc. of person convicted under the Act by a Court of Law. The power is being exercised very sparingly by the Courts. The Board desires that in ail cases, the department should make a prayer to the Court to invoke this section in respect of all persons who are convicted under the Act. (viii) A Prosecution Register in a form enclosed as Annexure II to this letter may be maintained in the prosecution Cell of the Collectorate Headquarters. Director General (Inspection) and Principal Collector, who would be inspecting the offices of Collectors should specially check on these points at the time of inspection. 4. Whether or not a case is suitable for prosecution and adequate evidence is forthcoming for securing conviction also depends on the quality of investigation. It is, therefore, necessary for senior officers to take interest in big and important cases of evasion and to provide guidance and support to the officers at the stage of investigation itself. With the appointment of a second Collector in 18 Collectorates, the work load of the existing Collectors has been lightened considerably and it should, therefore, be possible for then to monitor the investigation at frequent intervals so that all possible evidence is brought on record and can be used in securing conviction. 5. It has also been noticed that officers posted in the Prosecution units of the Collectorates do not have proper training in this area of work. Director General of Training is being asked to organise training courses on prosecution and to incorporate services of lectures in the cources organised for preventive and anti-evasion officers. Collectors should judiciously sponsor officers for these courses. 6. It has also been decided that the progress of prosecution should be discussed in Tariff-cum-General Conference to ensure that the guidelines are strictly followed.