2018 (2) TMI 2067 - HC - Central Excise

Scope of Jurisdiction - Whether the pendency of appeals before CESTAT debars the respondent from prosecuting the petitioners for the offence punishable under Section 9 of the Central Excise Act 1944 if so whether the proceedings on the file of Special Judge for Economic offences Hyderabad are liable to be quashed? - Section 9 of the Central Excise Act - HELD THAT - The scope of jurisdiction of this Court under Section 482 of Cr.P.C. is limited and this Court at this stage cannot appreciate the facts on record but verify and conclude that if the allegations made in the complaint prima facie constitutes any cognizable offence the Court shall not quash the proceedings since the powers of this Court are limited to give effect to the orders passed under the Code to prevent abuse of process of Court or to meet the ends of justice. Section 482 of the Code of Criminal Procedure empowers the High Court to exercise its inherent power to prevent abuse of the process of Court. In proceedings instituted on complaint exercise of the inherent power to quash the proceedings is called for only in cases where the complaint does not disclose any offence or is frivolous vexatious or oppressive. If the allegations set out in the complaint do not constitute the offence of which cognizance is taken by the Magistrate it is open to the High Court to quash the same in exercise of the inherent powers under Section 482 - If it appears on a consideration of the allegations in the light of the statement on oath of the complainant that ingredients of the offence/offences are disclosed and there is no material to show that the complaint is mala fide frivolous or vexatious. The main endeavour of the learned counsel for the petitioners is that when appeals are pending against the orders passed by the Commissioner the Criminal Proceedings cannot be continued and liable to be quashed since the finding of the CESTAT will have its own bearing on the criminal prosecution if for any reason CESTAT concluded that these petitioners did not avail Cenvat Credit on the alleged fake bills then the prosecution is liable to be ended in favour of the petitioners. Therefore the criminal prosecution during pendency of appeals against the petitioners is nothing but abuse of process of Court as an arm twisting method to collect penalty and duty levied as per the order passed by the Commissioner - When a criminal prosecution is launched during pendency of appeals in the criminal case all the ingredients of the offence in question have to be established in order to secure the conviction of the accused. The criminal court no doubt has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act. It does not however mean that the result of a proceeding under the Act would be binding on the criminal court. The criminal court has to judge the case independently on the evidence placed before it. It is a fit case to stay pronouncement of judgment in C.C.No.132 of 2017 while permitting the Special Judge for Economic Offences at Hyderabad to try the accused for the offence punishable under Section 9 of the Central Excise Act - there are no ground to quash the proceedings in C.C.No.132 of 2017 on the file of Special Judge for Economic Offences at Hyderabad since I find prima facie material against these petitioners to constitute offence punishable under Section 9 of Central Excise Act and that initiating criminal prosecution against these petitioners during pendency of appeals before CESTAT does not amount to abuse of process of Court - petition dismissed.

Summary

Issues Involved:
1. Whether the pendency of appeals before CESTAT debars the respondent from prosecuting the petitioners for the offence punishable under Section 9 of the Central Excise Act, 1944.
2. Whether the proceedings in C.C.No.132 of 2017 on the file of Special Judge for Economic Offences, Hyderabad are liable to be quashed.

Detailed Analysis:
Issue 1: Pendency of Appeals Before CESTAT
The petitioners argued that the criminal proceedings should be quashed as the appeals against the Commissioner’s order, which imposed duty and penalties for fraudulent availing of “Cenvat Credit,” are pending before the CESTAT. They contended that if the CESTAT reverses the Commissioner’s findings, it would impact the criminal prosecution. The petitioners relied on judgments such as "Commissioner of Income Tax, Mumbai v. Bhupen Champak Lal Dalal" and "Prabhava Organics P. Ltd. v. Deputy Commissioner of Income Tax."

The respondent countered that the prosecution was based on the fraudulent availing of “Cenvat Credit” and not merely on the assessment, citing judgments like "P. Jayappan v. S.K. Perumal" and "Rockwool (India) Limited Company, Medak District v. Deputy Commissioner (Legal) Central Excise Hyderabad-1 and another."

The court held that the pendency of appeals does not debar the authorities from prosecuting the petitioners for the offence under Section 9 of the Central Excise Act. The criminal court must judge the case independently, and the result of the CESTAT proceedings is not binding on the criminal court. The court referenced the consistent view of the Apex Court that criminal prosecution can proceed independently of the appeals process.

Issue 2: Quashing of Proceedings in C.C.No.132 of 2017
The court examined whether the allegations in the complaint prima facie constituted a cognizable offence. The complaint alleged that the petitioners fraudulently availed “Cenvat Credit” using fictitious documents without actual receipt of inputs. The Commissioner’s order, which is under appeal, had confirmed these allegations and imposed penalties.

The court noted the limited scope of its jurisdiction under Section 482 of Cr.P.C., which is to prevent abuse of the process of the court or to meet the ends of justice. The court cited several precedents, including "R.P. Kapur v. State of Punjab" and "State of Haryana v. Bhajan Lal," which outline the circumstances under which criminal proceedings can be quashed.

The court found that the material produced along with the complaint disclosed prima facie that the petitioners committed an offence punishable under Section 9 of the Central Excise Act. The allegations, if accepted at face value, constituted an offence under the Act.

The court concluded that initiating criminal prosecution during the pendency of appeals does not amount to abuse of the process of the court. However, to avoid contradictory decisions, the court stayed the pronouncement of judgment in C.C.No.132 of 2017 until the disposal of the appeals pending before the CESTAT.

Conclusion:
The petition to quash the proceedings in C.C.No.132 of 2017 was dismissed. The court permitted the Special Judge for Economic Offences at Hyderabad to try the accused but stayed the pronouncement of judgment until the disposal of the appeals before the CESTAT. The court found prima facie material against the petitioners to constitute an offence under Section 9 of the Central Excise Act.