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2017 (1) TMI 480 - GUJARAT HIGH COURT

2017 (1) TMI 480 - GUJARAT HIGH COURT - TMI - Prosecution proceedings against the central excise officers - allowing conditional exemption to the unit illegally - Issuance of forged document in favour of the Company though there was no commercial production by the Company - Criminal misconduct - compromise or compounding of offence - Held that: - under Section 13(1)(d), the basic requirement is to the effect that the accused himself should have obtained either for himself or for any other person .....

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gs, more particularly when offences are either in the form of breach of rules or technical offences - In the present case, though some documents are alleged to be forged practically there is no forgery of any documents. It is submitted by the petitioners that, in fact an advance appreciation of work by the Company as per project report happens as per fixed schedule was disclosed. However for one reason or another if such time schedule could not be adhered to either during installation or dur .....

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MR. S.G.SHAH, J. FOR THE APPLICANT : MR PRATIK Y JASANI AND MR.DIGANT M. POPAT, ADVOCATES FOR THE RESPONDENT : MR RC KODEKAR, ADVOCATE COMMON CAV JUDGMENT 1. Heard learned advocate Mr.Pratik Jasani and Mr.Digant M. Popat for the petitioners and learned Standing Counsel Mr. R.C. Kodekar for CBI. Perused the record. 2. These two petitions are though by different petitioners, they are arising out of the same FIR and having common and similar disputes between the parties and therefore, they are hear .....

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ioner in Criminal Revision Application No.857 of 2016 namely; James Samual is nowhere connected either with the tax benefit claimed by the Company or with the paper work carried out by another petitioner viz. Babubhai Chhotalal Makwana, an Officer of the Central Excise Department. However, the only allegation against him in the FIR so also in the Chargesheet is to the effect that he has issued forged document in favour of the Company though there was no commercial production by the Company. Wher .....

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y. So far as criminal act is concerned, the allegation is only to the effect that though actual supply was of 50 MM thickness MS plates on 4.1.2006, the invoice issued by the Company was for clearance of 06 MS plates of 35 and 40 mm thickness and, thereby, when Company was not able to start production of requisite product, the petitioner firm has tried to show that it has received a proper production as per their order. 4. In any case, this allegation does not amount to any particular offence, i .....

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ned, inasmuch as, production is dated 27.12.2005, invoice is dated 28.12.2005 and supply of goods is dated 4.1.2006. So far as measurement in terms of thickness of plates are concerned, when immediately goods is supplied practically petitioner has no chance either to accept or to reject the goods but it cannot be said that there was no production even if goods were having some discrepancy in measurement. Therefore there is no clinching evidence to confirm that petitioner has committed any offenc .....

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16.1.2006 mentioning that the Company had invested ₹ 45.46 crores and started production and, therefore, eligible for exemption of Central Excise Tax under the Notification. Whereas, according to the Investigating Agency, no commercial production was started on that day. Even if it is to be presumed that on date of such report by the petitioner, the Commercial production was not started, as recorded hereinabove, the fact remains that production was already started on 27.12.2005 which was .....

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that commercial production is commenced by the Company as per his visit dated 27.12.2005. Such report No.IV-16-162- TECH-2005 dated 2.1.2006 is at page 75 / A wherein against the name of the Company, the date of commencement of commercial production is disclosed as 27.12.2005 so also the date of visit as 27.12.2005. 6. Therefore, what is submitted by the petitioner is quite simple and is to the effect that in-fact he has relied upon the documents produced before him regarding investment by the C .....

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be ignored that ultimately Company has not received any financial benefit since it has on its own declaration to the Department stated that now they are not entitled to the tax benefit and even, thereafter, Department has penalized them by imposing penalty of ₹ 50,000/- for each of the accused who are concerned with the Company and came forward to settle the issue with the Department. 8. So far as petitioner Babubhai Chhotalal Makwana is concerned, he has been charged with Sections of Ind .....

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t is to the effect that the accused himself should have obtained either for himself or for any other person either any valuable thing or pecuniary advantage either by corrupt or illegal means or by abusing his position and without any public interest. Therefore, when there is no allegation about any such fact, it can be said that there is no prima-facie evidence regarding criminal misconduct as alleged. 10. Learned advocate for the petitioner is relying upon the decision in the case of Surinderj .....

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Chhotalal Makwana was not performing his official duty, inasmuch as, on the contrary it is the basic requirement of the Act that if somebody while holding office as a public servant or by abusing his position as public servant obtains any benefit either for himself or for any other person in terms of valuable thing or pecuniary advantage. Therefore, it is obvious that allegation against the petitioner is with respect to performance of his official duty and hence in absence of sanction so also e .....

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ompanies Act, 1956 namely M/s.Welspun Gujarat Sthal Public Limited which name was changed to M/s.Welspun Corporation Limited (hereinafter referred to as the Company ) has filed an application for exemption of Excise duty, pursuant to the notification dated 31st July, 2001 by the Central Government offering exemption from the excise duty to certain units under specific terms and conditions. It is undisputed fact that said factory has its units at Anjar in Kutch and for the benefit of the Company, .....

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any they found that the plant and machinery were not fully installed and the unit was operated only for limited production and that it was the only possible production at the time of inspection i.e. 2nd January, 2006 and thereby there is no possibility of any more production and therefore the disclosure by the Company through its officers was not only false but fraudulent in as much as they wanted to declare themselves eligible under the terms and conditions of the notification dated 31st July, .....

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hinery. Therefore, as submitted, it is found that several documents are manipulated to get the exemption from excise duty and hence investigation was conducted, wherein it has been revealed that several documents are forged and fabricated and therefore the complaint was lodged against the Company on 31st July, 2006. After investigation, CBI has submitted its report and filed a complaint against several accused under sections 420, 467, 468, 471, 511, 120(b) of I.P.C. and Section 13(2) read with S .....

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Accountants disclosing the compliance of certain terms and conditions of the notification under reference. But, mainly it was found that the contents of such communication are not correct. 15. Amongst the accused, the Managing Director of the Company namely B.K. Goenka had come forward and discussed the dispute with the department of Customs and Excise conveying that it was a bonafide error or mistake on their part and therefore he would like to settle the dispute with the department. It cannot .....

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any and not to any individual and that the benefit to the Company would be ultimately to its shareholders and not to any particular individual in terms of any fix amount. 16. Pursuant to such attempt and exercise by B.K. Goenka, the Managing Director of the Company, the Customs and Excise Department had; considering the bonafides of the Company and its office bearers, so also officers; agreed to settle the dispute and therefore now it would not be necessary to recollect all the minute details of .....

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ts of the case and verification by the reporting authority while recording the findings makes it clear that the applicant before it i.e. M/s Welspun Corporation Ltd., Shri B K Goenka Managing Director of M/s Welspun Corporation Ltd. and Shri Mahesh Khemka Vice President of M/s Welspun Corporation Ltd. have disclosed true facts relating to the case and therefore the Chief Commissioner granted them immunity from prosecution under Section 9 of the Central Excise Act, 1944. While granting such immun .....

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pany. Therefore, it is certainly a clear position that when department by which the proceeding has been initiated has compounded the offence and that too by imposing condition to pay the amount for such compounding and thereby when the Chief Commissioner of Central Excise compounded the offence subject to the payment of ₹ 50,000/- by each of the applicant before it and that such amount is deposited by the concerned persons / accused; there is no reason to proceed further in criminal trial .....

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, such petition was resisted by the State and CBI. The perusal of the judgment dated 10th April,2015, is on record at Annexure P-20 in such petition makes it clear that the Co-ordinate Bench has not only quashed and set aside the FIR qua the petitioner before it namely B.K. Goenka but has categorically observed that the purpose of compounding of offence against the payment of compounding amount is to prevent litigation and encourage early settlement of dispute as held by Hon ble Supreme Court of .....

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e documents produced on record. In the present case, the FIR came to be registered against one of the petitioners namely; B. C. Macwana, the then Assistant Commissioner, Central Excise, Rajkot, M/s. Welspun Gujarat Sthal Rohren Limited and also against present petitioner namely; James Samual for the offences punishable under Sections 120B, 420, 467, 468, 471 and 511 of Indian Penal Code and under Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988. After the investigation, a ch .....

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bmitted by the Company and, therefore, the Company has not received any wrongful gain on the basis of its earlier application dated 24.12.2005 and therefore, no pecuniary loss is caused to the Department. Thus, the ingredients of the alleged offence punishable u/s. 420 of IPC are not attracted. 19. It is also clear from the record and more particularly from the order dated 19.09.2008 passed by the Chief Commissioner, Central Excise that when the Central Excise Department had initiated the procee .....

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be permitted. 20. In the case of Rajesh Kumar Sharma v. Union of India & Ors., reported in (2007) 9 SCC 158, The Hon ble Supreme Court, in para 6, observed as under: 6. The guidelines for compounding are contained in the Circular No. 54/2005-Cus dated 30th December, 2005.Central Government had brought in to force the Customs ( Compounding of Offences) Rules 2005 (in- short the Custom Rules ) and Central Excise (Compounding of Offences ) Rules 2005) (in short the Central Excise Rules ) with e .....

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compounded on a settlement with respect to the civil issues and, therefore, the First Information Report was erroneously issued and was totally unwarranted. From the aforesaid judgment, the proposition that follows in the instant case is that the Kar Vivad Samadhan Scheme, 1998 issued by the Government of India was a voluntary scheme whereby if the disputed demand is settled by the Authority and pending proceedings are withdrawn by an importer shall be dropped and the importer shall be immuned .....

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iving the present appellants to double jeopardy when they had been honorably exonerated by the Collector of Customs by their adjudication and further the GCS of which one of the appellants is the General Secretary in which capacity he is accused in the present case was granted amnesty under the Kar Vivad Samadhan Scheme, 1998. In our opinion, the present case does not warrant subjecting a citizen especially senior citizens of the age of 92 & 70 years to fresh investigation and prosecution on .....

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respect of MRI and Lithotripsy machines and by violating the provisions of actual user condition as per Import Export Policy and Customs Notification No. 279/83 dated 30.9.1983 and Customs Notification No. 64/88 dated 1.3.1988 during the year 1987-90, despite acknowledging the fact that Customs Duty has been paid by the appellants to the Customs Department and settled and that commission of offences under Section 120B read with section 420 of the Indian Penal Code are made out. 30.In our view, u .....

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ould have been described as culpable. The true fact and import of the Kar Vivad Samadhan Scheme, 1998, in our view, is that once the said Scheme is availed of and all the formalities complied with including the payment of the duty, the immunity granted under the provisions of the Customs Act,1962 also extends to such offences that may prima facie be made out on identical allegations i.e. of evasion of Customs Duty and violation of any Notification issued under the said Act. 22. In view of the af .....

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. It is nobody s case that G.N. Verma was appointed as an agent of any mine. Also, the complaint does not allege or state anywhere that G.N. Verma acted or purported to act on behalf of the owner of the mine or that he took part in the management, control, supervision or direction of any mine. In fact his duties and responsibilities have not been described in the complaint. In the absence of G.N.Verma s duties having been spelt out in the complaint, it is not possible to say whether he was merel .....

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ations were conducted in accordance with the Act, the Rules, Regulations, Orders made thereunder. 19. It has been laid down, in the context of Sections 138 and 141 of the Negotiable Instruments Act, 1881 in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal reported in (2010) 2 GLH 766 that Section 141 is a penal provision creating a vicarious liability. It was held as follows: (SCC p. 336, para 13) 13. … It is therefore, not sufficient to make a bald cursory statement in a co .....

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asis in original) It was then concluded: (SCC p. 345, para 39) 39. (I) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. 20. Insofar as the criminal complaint is concerned, it does not contain any allegation against G.N. Verma. The only statement concerning him is that .....

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ns to G.N. Verma. The law laid down by this Court in Harmeet Singh Paintal (though in another context) would be squarely applicable. Under the circumstances, we are of the opinion that on the facts of this case and given the absence of any allegation in the complaint filed against him no case for proceeding against G.N. Verma has been made out. 25. On the facts of this case, we would need to unreasonably stretch the law to include G.N. Verma as a person vicariously responsible for the lapse that .....

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have been implicated in the offence, but the petitioners cannot be made vicariously liable for the act and/or omission on the part of the Company for the offence punishable under the provisions of the IPC or Prevention of Corruption Act when there is no evidence against them to prove such offences. Whereas Department has already compounded the offence if any committed by the Company. 25. The contention of the learned advocate Shri Kodekar appearing for respondent No.2 - CBI is that petitioners w .....

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aid that petitioners were having any intention to commit the alleged offence. 26. In fact no specific role is attributed to each of the petitioner with regard to the alleged offence. Further, the Company has also decided to withdraw the application given for getting the benefit as per the Notification dated 31.07.2001 and therefore the Company has given an application for withdrawal on 17.07.2006 i.e. before the registration of the FIR. Therefore, it cannot be said that the petitioners have comm .....

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the said coaccused against the petitioner. 27. In view of the aforesaid discussion, when it is prima facie proved that the petitioner has not wrongfully gained anything and/or any wrongful loss is caused to the Department and the Company and its officers including the petitioners have been granted immunity, in the opinion of this Court, there is no need to continue with the criminal prosecution against the present petitioners. Moreover, neither in the FIR nor in the charge-sheet any specific all .....

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d and set aside. Accordingly, FIR being RC20(A)/2008 - GNR and the charge-sheet filed pursuant thereto are hereby quashed and set aside qua the petitioners. Rule is made absolute. 29. The petitioners are also relying on the following cases which are confirming same principles that prosecution and proceedings after compounding dispute cannot be sustained therefore, further discussion of such judgment has been avoided. (1) 1998 (108) E.L.T. 16 (S.C) G.L. DIDWANIA V. INCOME TAX OFFICER; (2) (2011) .....

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learned Advocate Mr. Kodekar for the CBI is relying on the decision reported in (2013)10 SCC 686 Central Bureau of Investigation v. Jagjit Singh wherein Hon ble the Supreme Court has held that settling the dispute with the bank is no ground to quash criminal proceedings against defaulter/loanee because such offences are not related to banking activities and it has harmful effect on public and it threatens the whole society and therefore though bank seems to be the victim society in general is vi .....

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y practically there was benefit to the department and there was no benefit to the accused. 31. Mr. Kodekar is also relying upon the decision in (2013) 7 SUPREME COURT CASES 789 between MOHIT alias SONU AND ANOTHER v. STATE OF UTTAR PRADESH AND ANOTHER wherein Hon ble Supreme Court has considered the revisional powers of the Court under Section 397(2) with reference to interlocutory order and held that when there is specific remedy provided by way of appeal or revision, inherent powers under sect .....

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the existence of the factual ingredients constituting the offence alleged ; therefore it cannot be said that even if in absence of suspicion, presumptive opinion of the commission of offence as alleged, charge must be framed. Suffice to say that when enactment /statute provides for discharging accused, basically accused has a right to get discharge, which may be subject to fulfillment of certain criteria, that may be laid down either in the statute as well as its interpretation by the Apex Court .....

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link such suspicion with the accused, there cannot be a presumption against the accused that he had committed the offence and he may be entitled to get discharged from the charges levied against him under the charge sheet. Needless to say that the charges levied against the person is to be considered and not the story or history of incident which results into the commission of offence. For more clarity, commission of offence alone is not sufficient to frame charge against any person, there must .....

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o continue only upon opinion of the investigating agency that accused had committed the offence as alleged in charge sheet. The Court has to arrive at independent opinion, after considering the available prima facie evidenced on record - which is in the form of papers with the charge sheet, not only tabular charge sheet but list of witnesses and their statement before the investigating agency (police papers). It is the Court's duty to frame independent opinion regarding not only commission o .....

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only on suspicion but without sufficient evidence against him would be a futile exercise and it will not only increase unnecessary workload but crime in the society also, since real culprits are able to get secluded them from the trial. 33. It becomes clear that the special judge mainly relied upon the facts discussed in the FIR and charge-sheet, but failed to realize the legal position in the case of compromise or compounding of offence by the parties. There is no need to proceed further in cr .....

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hen the complainant is already quashed against the Managing Director of the Company and when the Company and its Vice President has also compounded the offence with department on payment of compounding charges, it cannot be said that there is sufficient material and ground to continue with the proceeding against remaining accused including the present petitioners who are practically not concerned with the final benefit if any received by the Company. When factually Company has never received any .....

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. 34. It is undisputed fact that Central Excise Act and Rules provides for compounding the offences so also section 320 of Cr.PC. It is also undisputed fact that once main offence is compounded then there is catana of judgments by Supreme Court that when the department has compounded the offences then there is no reason to continue the criminal proceedings, more particularly when offences are either in the form of breach of rules or technical offences. In the present case, though some documents .....

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n favour of the petitioners. 35. In support of such conclusion, reference to certain judgments of the Apex Court are necessary, which are as under. (1) AIR 1997 S.C. 2041: State of Maharashtra vs. Priya Sharan Maharaj - It is held that at the stage of framing the charge, the Court has to consider the material with a view to find out if there is ground for presuming that accused has committed an offence or that there is no sufficient ground for proceeding against him and not for the charges by ar .....

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even if fully accepted, it cannot show that accused committed that particular offence. Thus it is settled law that at the stage of framing the charge, the Court has to prima facie consider whether there is sufficient ground for proceeding against the accused. The Court is not required to appreciate the evidence and arrive at the conclusion that the materials produced are sufficient or not for convicting the accused. If the Court is satisfied that a prima facie case is made out for proceeding fur .....

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n from S.227 of the Code that in a case triable before the Court of Session, if the Court on consideration of the record of the case and the documents submitted therewith and after hearing the submission of the prosecution and the accused if the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused after recording reasons for doing so. (4) (1997) 4 SCC 393 = 1997 AIR SCW 1833: State of Maharashtra vs. Priya Sharan Maharaj - Referrin .....

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spel truth and even if it is opposed to common sense or the broad probabilities of the case. Therefore, at the stage of framing of the charge, the Court has to consider the material with a view to find out that whether there is any ground for presuming that the accused has committed the offence or that there is not sufficient ground for proceeding against him and not for the purpose of arriving at the conclusion that it is not likely to lead to a conviction. (5) AIR 2007 SC 2149 = 2007 AIR SCW 3 .....

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raming charge and Court can convict the accused only if such charges i.e. evidence is proved on record without reasonable doubt. Therefore, if there is no chance to prove a commission of offence by the accused, charge cannot be framed. (7) AIR 2009 SC Supplimentary 1744 - State of M.P. Vs.Sheetla Sahai It is held as under: if the Court arrives at only opinion, there is no evidence against the accused, the Court shall not put accused to harassment by asking him to face a trial. 1. Thus, the law o .....

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