WHETHER, AFTER THE CRIMINAL PROCEEDINGS WERE SIMULTANEOUSLY, THE EXONERATION IN THE ADJUDICATION PROCEEDINGS WOULD IMPACT THE PENDING CRIMINAL PROCEEDINGS?

[Mr. M. GOVINDARAJAN]

The provisions of direct taxes and indirect taxes empowered to recover the tax not remitted through adjudication process. Some provisions empowered the Adjudicating Authorities to impose interest in addition to the tax confirmed and also penalties under the relevant sections and also empowered by virtue of certain sections to initiate criminal proceedings.

Question may also arise whether double jeopardy is allowable for same cause of action. For this question the Delhi High Court in 'Surkhi Lal V. Union of India' - 131 (2006) DLT 12 held that the departmental proceedings and the criminal proceedings can proceed side by side. Departmental proceedings are different from trial.

The issue taken up for discussion in this article is whether, after the criminal proceedings were simultaneously, the exoneration in the adjudication proceedings would impact the pending criminal proceedings.

The Delhi High Court in 'Surkhi Lal' case (supra) held that if the departmental proceedings end in favour of the accused the criminal trial is not hit by the principle of autre fois acquit. But at the same time if the departmental proceedings end in a finding in favour of the accused in respect of the allegations which also form the basis for the criminal proceedings then the departmental adjudication will remove the very basis of the criminal proceedings and in such situation the continuance of the criminal proceedings will be a futile exercise and an abuse of the process of the court.

In 'Sunil Gulati V. R.K. Vohra' - 2007 (1) CC 22 the Delhi High Court held as follows:

* On the same violation alleged against a person, if adjudication proceedings as well as criminal proceedings are permissible, both can be initiated simultaneously. For initiating criminal proceedings one does not have to wait for the outcome of the adjudication proceedings as two proceedings are independent in nature;

* The findings in the departmental proceedings would not amount to res judicata and initiation of criminal proceedings in these circumstances can be treated as double jeopardy as they are not in the nature of 'prosecution';

* In case adjudication proceedings are decided against a person who is facing prosecution as well and the Tribunal has also upheld the findings of the adjudicators/assessing authority, that would have no bearing on the criminal proceedings and that criminal proceedings are to be determined on its own merits in accordance with the law, uninhibited by the findings of the Tribunal. It is because of the reason that in so far as criminal action is concerned, it has to be proved as per the strict standards fixed for criminal cases before the criminal court by producing necessary evidence;

* In case of converse situation namely where the accused persons are exonerated by the competent authorities/Tribunal in adjudication proceedings one will have to see the reasons for such exoneration, to determine whether these criminal proceedings could still continue. If the exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on merits of the adjudication proceedings were on different facts, it would have no bearing on criminal proceedings;

* If, on the other hand, the exoneration in the adjudication proceedings is on merits and it is found that allegations are not substantiated at all and the concerned person(s) is/are innocent, and the criminal prosecution is also on the same set of facts and circumstances, the criminal prosecution cannot be allowed to continue. The reason is obvious criminal complaint is filed by the departmental authorities alleging violation/contravention of the provisions of the Act on the part of the accused persons. However, if the departmental authorities themselves, in adjudication proceedings, record a categorical and unambiguous finding that there is no such contravention of the provisions of the Act, it would be unjust for such departmental authorities to continue with the criminal complaint and say that there is sufficient evidence to foist the accused persons with criminal liability when it is stated in the department proceedings that ex-facie there is no such violation;

* The yardstick would, therefore, be to see as to whether charges in the departmental proceedings as well as criminal complaint are identical and the exoneration of the concerned person in the departmental proceedings is on merits holding that there is no contravention of the provisions of any Act.

In 'Medisphere Marketing Limited V. Inspector of Customs Preventive' - 2010 (256) ELT 27 (Del) the petitioners are engaged in the business of distribution of medicines. They imported medicine at nil rate of customs duty against proper Bills of Entry taking benefit of the Exemption Notification No.23/98-Cus. The Customs raided the godowns and alleged that there was a misdeclaration of the goods and therefore a fraudulent evasion of customs duty, the Customs initiated proceedings both departmentally as well as in the criminal court. A show cause notice was issued under Sec. 124 of the Customs Act, 1962 to which the petitioners replied. Meanwhile a complaint was filed in the Court of Additional Chief Metropolitan Magistrate (ACMM), New Delhi for the offences under Sections 132 and 135(1)(a) of the Customs Act, 1962.

The Commissioner disposed of the show cause notice by holding that the petitioners were not entitled to the benefit of the exemption. Accordingly an order was passed by him inter alia imposing penalty on the petitioners. The appeal filed by the petitioners before CESTAT was allowed reversing the order of the Commissioner of Customs and holding that the petitioners were entitled to avail of the exemption. Aggrieved against this order the Department filed a special leave petition before the Supreme Court which was dismissed. A refund order was passed by the Department.

On the basis of the orders passed by the CEGAT and the Supreme Court the petitioners applied to the ACMM for dropping the proceedings. The ACMM dismissed the petition on the ground that the order passed by CEGAT was not binding on the criminal court. Therefore the petitioners filed this present petition before the High Court.

The petitioners put forth the following submissions:

* The High Court should quash the criminal proceedings since the departmental proceedings on a lesser degree of proof on the same set of facts have already been decided in favor of the petitioners;

* The entire basis of the criminal prosecution that the petitioners were not entitled to the exemption has been negativated by the CEGAT and its order has been upheld by the Supreme Court;

* Therefore there is no question of the petitioners being prosecuted for the offences of misdeclaration of goods or evasion of customs duty in terms of Sections 132 or 135 (1)(b) of the Act;

The Department put forth the following arguments:

* The departmental adjudication proceedings were not conclusive and binding on the criminal court;

* In 'State V. M. Krishna Mohan' - 2007 (4) CC Cases (SC) 140 where it was held that the exoneration in departmental proceedings cannot automatically led to closure of the criminal case in a situation where the departmental enquiry was completed even before the investigation in the criminal case concerned.

The Court held that the observations in the case laws cited by the Department that the finding in the adjudication proceedings are not to be viewed as binding and conclusive on the criminal proceedings, while not overruling, the earlier judgments 'Uttham Chand and P.S. Rajya V. State of Bihar' - (1996) 9 SCC 1, - if the department is able to show the court that irrespective of the departmental/adjudication proceedings which have resulted in total exoneration, there is some other independent evidence, not considered in the adjudication proceedings, on the basis of which the conviction could be obtained in the criminal court, then and only they can it be said that the findings of the departmental/adjudication proceedings will not bind the criminal court. If there is no other independent evidence and on the very same material which forms the basis of the prosecution there has been exoneration in the departmental proceedings, which has attained finality, then it will be futile to keep the criminal proceedings on the same material pending in the criminal court. The Court held that the criminal complaint and all proceedings consequent thereto is unsustainable in law and quashes the same.