TMI Blog2023 (12) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... also enforces the doctrine of consideration as laid down in Section 2(d) of the Indian Contract Act, 1872. In the facts of the cases on hand where there is no legally enforceable debt is found and considering the above judgment which is passed in identical facts and the ratio laid down on the aspect that there should be legally enforceable debt existing on the date of issuance as well as presentation of cheques and accordingly considering the ratio laid down in the judgments of M/s Indus Airway Pvt. Ltd. [ 2014 (4) TMI 464 - SUPREME COURT ], Sampelly Satyanarayana Rao [ 2016 (9) TMI 867 - SUPREME COURT ] and Dashrathbhai Trikambhai Patel [ 2022 (10) TMI 424 - SUPREME COURT ], all these applications are allowed. Application disposed off. - HONOURABLE MR. JUSTICE SANDEEP N. BHATT R/CRIMINAL MISC. APPLICATION (FOR QUASHING SET ASIDE FIR/ORDER) NO. 17170 of 2014 With R/CRIMINAL MISC. APPLICATION NO. 17171 of 2014 With CRIMINAL MISC. APPLICATION (FIXING DATE OF EARLY HEARING) NO. 1 of 2022 In R/CRIMINAL MISC. APPLICATION NO. 17171 of 2014 With R/CRIMINAL MISC. APPLICATION NO. 17172 of 2014 With CRIMINAL MISC. APPLICATION (FIXING DATE OF EARLY HEARING) NO. 1 of 2022 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.12.2011 30,00,000/- 6 Criminal Miscellaneous Application No. 17173 of 2014 000255 12.12.2011 30,00,000/- 7 Criminal Miscellaneous Application No. 17173 of 2014 000256 30.11.2011 30,00,000/- 5. Learned advocate Mr. Thackar submitted that search was carried out by the respondent no. 2-Director General of Central Excise Intelligence at premises of the applicant on 13.7.2011; that the applicant was arrested on 16.8.2011 in connection with the offence registered by the Central Excise Department for the offences punishable under Section 9 of the Central Excise Act; that the applicant had preferred bail application before the learned trial Court wherein the applicant had made following averment in the bail application: 30. The applicant has already deposited Rs. 25,00,000/and cheque of Rs. 25,00,000/- is handed over to the officials. Thus the total amount of Rs. 50,00,000/- is given by way of cheque and cash to the opponent. That the applicant submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Aviation Pvt.Ltd. Reported in 2014(12) SCC 539. (ii) Sampelly Satyanarayana Rao V/s Indian Agency Limited, reported in 2016(10) SCC 458. (iii) Dashrathbhai Trikambhai Patel V/s Hitesh Mahendrabha iPatel, reported in 2023(1) SCC 578. and submitted that there should be a legally enforceable debt or other liabilities subsisting on the date of drawal of the cheque as well as on the date of presentation of the cheques, which is not the case in the matters on hand and therefore also, he prayed to allow these applications. 11. Per contra, learned advocate Mr.Dave appearing for respondent no. 2 has mainly submitted that there is a specific admission of exact amount of evasion of duty and for that amount, the cheque is given including that the applicant has given the cheques for payment of duty, which is made in the impugned complaints and very specific and the amount is also specifically entered by the applicant who had issued the cheques; it is not the case in the impugned complaint that the cheque was given for the purpose of security and therefore the judgments relied upon the applicant wherein the duty was uncertain and the cheque was given as security would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EI, Zonal Unit, Ahmedabad, Shri M.K. Sharma is an employee of the Central Government and a public servant within the meaning of section 21 of the Indian Penal Code, in his such official capacity the complaint is filed. 4. That, acting on the intelligence, the searches were carried out at the factory/office premises of the accused No. 1, transporters etc. by the officers of DGCEI, Ahmedabad on 07.11.2012 and various incriminating documents were recovered under the panchnamas drawn at the respective premises, preliminary scrutiny of the records resumed from the various premises revealed that the accused No. 1 has cleared SS Round bars clandestinely on cash basis without payment of Central Excise Duty leviable thereon. It was also revealed that the accused No. 1 has availed fraudulently cenvat credit on the strength of invoices issued by the various Ship- breaking units of Bhavnagar, without receipt of goods maintained therein and to adjust the quantity of goods maintained in such bogus invoices, they have procured scrape from local market on cash basis. 5. That, during the inquiry the accused No. 2 Shri Mitesh Patel has admitted that they have wrongly availed the CENVAT cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ashram Road Branch, Ahmedabad on 05.02.2013 for crediting the same in Government of India Account and the same were returned unpaid by their Bank of Baroda on 07.02.2013 with a remark of Payment Stopped by Drawer . Therefore, the complainant could not recover their legal dues of Rs. 1,00,00,000/- (Rupees One Crore Only) from the accused. 8. That on 05.03.2013, the complainant through their advocate have served a legal notice U/s. 138 of the Negotiable Instrument Act to the accused to make the payment of the aforesaid returned and unpaid cheques by Regd. Post AD. The notice were served at the Registered office as well as factory premises of the accused No. 1. The notice has been received by the accused on or about 07.03.2013. However, the accused have not made payment of the returned and unpaid cheques. The accused have on 20.03.2013 replied the notice through their advocate Shri Minesh Vaghela and refused to make the payment of the returned and unpaid cheques to the complainant. The accused have contended that they have issued the cheques under pressure, threat and duress, I submit that this is contrary to the documentary evidence. I further submit that, the cheque have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et to be determined in accordance with law, and on the date when the cheques were obtained by the officers under threat, pressure and duress, there was no legally enforceable debt payable by the applicants to the complainant. Mr. Trivedi submits that the applicants have been charged with the offence under Section 9 of the Central Excise Act, 1944, i.e. for wrongly availing the Cenvat Credit of Rs. 3.27 crore. Such allegations have been levelled merely on the ground of purchase of cenvatable invoices from the various ship breaking units without physically receiving the corresponding goods along with the Central Excise invoices during the period between 2009-10 and 2012-13. Mr. Trivedi invited the attention of the court to certain provisions of law. First, he invited the attention to Rule 14 of the Rules, which reads as under : 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.- (1) (i) Where the CENVAT credit has been taken wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 (32 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, who, on receipt of such information, shall not serve any notice under clause (a) of that subsection in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder. (2) Where the Central Excise Officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that subsection in respect of such amount which falls short of the amount actually payable in the manner specified under that subsection and the period of one year shall be computed from the date of receipt of information under sub-section (2). (3) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases falling under subsection (1); (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4) (12) Where the appellate authority or tribunal or court modifies the amount of duty of excise determined by the Central Excise Officer under subsection (10), then the amount of penalties and interest under this section shall stand modified accordingly, taking into account the amount of duty of excise so modified. (13) Where the amount as modified by the appellate authority or tribunal or court is more than the amount determined under subsection (10) by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority or tribunal or court in respect of such increased amount. (14) Where an order determining the duty of excise is passed by the Central Excise Officer under this section, the person liable to pay the said duty of excise shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately. (15) The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Commissioner (Appeals). - (1) Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Commissioner of Central Excise , may appeal to the Commissioner of Central Excise (Appeals) hereafter in this Chapter referred to as the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order : Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days. (1A) The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing: Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal. (2) Every appeal under this Section shall be in the prescribed form and shall be verified in the prescribed manner. The idea in referring to the above provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and issued rule on the petition. The applicant herein has relied upon the said order dated 17.04.2015, which is produced by him at PP-134. It is respectfully submitted that no such plea is available to the applicant in support of prayer for quashing the complaint filed against him by the answering respondent. A copy of draft amendment submitted in Criminal Misc. Application No. 17170 of 2014 is annexed hereto and marked as ANNEXURE R-1 to this affidavit. Therefore, the application requires to be dismissed at the threshold and ex-parte ad-interim relief obtained by the applicant may also be vacated. 4. Without prejudice to the preliminary objection as to the maintainability and entertainability of the captioned application, the answering respondent respectfully submit that the facts stated by the applicant in paras 2 to 9 of the application does not reflect true, complete and correct facts. The relevant facts taken out from the record maintained by the office of the answering respondent are briefly stated, as under: 4.1 The Applicant is Director of M/s Nandeshwari Steel Ltd., Factory at Block No.76, Village Zak, Taluka Dehgam, District Gandhinagar, Gujarat 382325 [hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at their factory premises; that they shared duty of such phony invoices in 50:50 ratio; that he was also indulging into clandestine removal of excisable goods i.e. SS Rounds on cash basis without issuance of invoices without payment of Central Excise duty leviable thereon. He has also admitted the modus operandi adopted by him for evading Central Excise duty by aforesaid manners. Duty evasion on aforesaid counts approx. comes to Rs. 4.00 Crores. Admitting the above offence, M /s. NSL has on spot voluntarily paid an amount of Rs. 75,00,000/- in aggregate vide GAR-7 Challan No. 00181 dated 07.11.2012 for Rs. 50,00,000/- and GAR-7 Challan No. 00182 dated 07.11.2012 for Rs. 25,00,000/- by e- payment to Govt. Exchequer. Also, they, vide their letter dated 08.11.2012, have willingly tendered below mentioned 07 post dated cheques, each of Rs.50 lakhs, totally amounting to Rs. 3,50,00,000/-, all drawn on Bank of Baroda, Naroda Road Branch, Ahmedabad: Sr.No. Cheque No. Date Amount 1 000851 01.12.12 Rs. 50,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntents of the notice and it 'was further contended that no Show Cause Notice was issued by the Excise Department to demand the excise duty due and payable by the applicant and that the liability to make payment of excise duty would arise only when the tax liability is ascertained and that there is no provision in law to pay advance tax compulsorily. It was further stated that the cheques were not issued voluntarily but it was rather issued under threat and coercion. Therefore, the answering respondent has filed Criminal Case No. 746 of 2013 on 01.04.2013 for the offence punishable under Section 138 of the Negotiable Instrument Act, 1881 by the applicant, which is sought to be quashed by the applicant under the captioned application. The learned Metropolitan Magistrate (NIA), Court No. 36, Ahmedabad is hearing the above criminal case and evidence of the complainant is recorded. 5. With reference to the grounds set out by the applicant in the memo of application, seeking quashment of the complaint filed by the answering respondent against him for the offence punishable under section 138 of the Negotiable Instrument Act, 1881, are not germane to the jurisdictional facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and at the time as prescribed under Rule 4 and Rule 8 of the Central Excise Rules, 2002. It is submitted that act of omission on the part of the manufacturer to make payment of duty according to the said provisions would result into Legally Enforceable Debt against such manufacturer. The applicant has admittedly fraudulently availed Cenvat Credit on the basis of phony invoices without receipt of corresponding goods in their factory premises and removed the excisable goods manufactured by him clandestinely and without making payment of excise duty during the period from FY. 2010-11 to F.Y. 2012-13 and, therefore, in the present case as on the date of issue of the cheque by the applicant there existed legally enforceable debt within the meaning of section 138 of the Negotiable Instruments Act, 1881. In the premises, it is also not correct to contend by the applicant that, there was no legally enforceable debt during the deposition of the said cheques, as prescribed under the provisions of the Negotiable Instruments Act, 1881, is not capable of being accepted by this Hon ble High Court. 5.3 The answering respondent do not admit the contention of the applicant that in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he officials could have acted in such a manner and asked the applicants to make good the payment without there being any adjudication in accordance with the provisions of the Excise Act and the Rules framed therein. In order to attract the penal provisions for the bouncing of a cheque, it is essential that the dishonoured cheque should have been issued in discharge, wholly or in part, or any debt or other liability of the drawer to the payee. The explanation to Section 138 of the Negotiable Instruments Act defines the expression debt or other liability as a legally enforceable debt or other liability. Unless the two conditions set out in Section 138 of the Act are satisfied, no criminal liability can be fastened. This is also in accordance with the general scheme as laid down in Section 118(a) of the Negotiable Instruments Act. It also enforces the doctrine of consideration as laid down in Section 2(d) of the Indian Contract Act, 1872. Too many definitions of the word debt have been given though the word debt is not defined in the Act. Debt is defined in the Stroud s Judicial Dictionary, (4th edition, volume 2) as a sum payable in respect of a liquidated money demand reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was a case arising from the proceedings under the Value Added Tax Act, 2003. The facts were almost identical to the one on hand. In that case also, the authorities somehow obtained cheques towards the VAT. A writ-application was filed by one Atul Motors Private Limited, questioning such action on the part of the authorities. The Division Bench observed as under : On 22nd January 2014, the Court had passed the following order :- 1. The petitioners are the authorised distributors of Maruti cars. They have been filing returns under the Value Added Tax Act, 2003 (hereinafter referred to as 'the Act') regularly. It is the contention of the petitioners that they recover certain handling charges from the customers, which are in the nature of post sales services. On such handling charges, according to them, they are not required to pay the Value Added Tax (hereinafter referred to as VAT), since such handling charges cannot form a part of sale value of the car. The respondents carried out search operations in the premises of the petitioners on December 25, 2013 and raised the issue of non-payment of VAT on handling charges. 2. The learned counsel for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indisputably, as on date, the adjudication at the end of the competent authority under the Act is yet to take place. I find it extremely difficult to accept the argument of the learned counsel appearing for the department that the liability was fixed on the basis of the statements made by the applicant no. 2 herein dated 7th November 2012 and 8th November 2012 respectively under Section 14 of the Central Excise Act, 1944. It appears that the department construed the two statements recorded under Section 14 of the Act, 1944 as a confession on the part of the applicants of indulging into fraudulent availment of the Cenvat Credit of Rs.3.27 crore on the basis of phony convertible invoices issued by the various ship breaking units of Bhavnagar. Let me assume for the moment that at the end of the search operation the officials were able to collect something incriminating against the applicants as regards the evasion of the excise duty. However, it cannot be said that the cheques which were obtained by the department were towards the discharge of the existing enforceable debt or liability. The liability was yet to be determined by the competent authority under the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. We are of the view that the question whether a post-dated cheque is for discharge of debt or liability depends on the nature of the transaction. If on the date of the cheque liability or debt exists or the amount has become legally recoverable, the Section is attracted and not otherwise. 10. Reference to the facts of the present case clearly shows that though the word security is used in clause 3.1(iii) of the agreement, the said expression refers to the cheques being towards repayment of installments. The repayment becomes due under the agreement, the moment the loan is advanced and the installment falls due. It is undisputed that the loan was duly disbursed on 28th February, 2002 which was prior to the date of the cheques. Once the loan was disbursed and installments have fallen due on the date of the cheque as per the agreement, dishonour of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability. 11. The judgment in Indus Airways (supra) is clearly distinguishable. As already noted, it was held therein that liability arising out of claim for breach of contract under Section 138, which arises on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashed as the cheques were given as security as per defence of the accused. Negativing the contention, this Court held :- 10. Having heard the learned counsel for the parties, we are of the view that the accused (Respondent 1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncomplied with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t could not have discharged the respondents of the said liability at the threshold. Unless the parties are given opportunity to lead evidence, it is not possible to come to a definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the respondents ceased to be the partners of the firm. 15. We are in respectful agreement with the above observations. In the present case, reference to the complaint (a copy of which is Annexures P-7) shows that as per the case of the complainant, the cheques which were subject matter of the said complaint were towards the partial repayment of the dues under the loan agreement (para 5 of the complaint). 16. As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for quashing does not adjudicate upon a disputed question of fact. Thus, the dictum of law explained by the Supreme Court is, whether the cheque represents discharge of existing enforceable debt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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