TMI Blog1990 (3) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... de to quash the proceedings pending before the Court below as not maintained as well as an abuse of process of Court. 3. The first petitioner, Plasticraft Industries is a registered partnership firm, which carries on trade in the manufacture, sale and distribution of various articles made of synthetic products like plastic P.V.C. Polythene and Nylon and allied items. The first petitioner was granted an industrial licence on 16-6-1982. The second petitioner, in terms of the partnership deed, was put in charge and was responsible to the company for the conduct of the business of the company at the relevant time when the offences are alleged to have been committed. The third petitioner was employed as Accountant in the company of the first accused and he was representing the company by looking after its tax and Central Excise matters during the time of the alleged commission of offences. 4. The complaint against the petitioners, has been laid for offences under Section 9(1)(a) of the Central Excise Act, read with Section 6, read with Rule 174 of Central Excise Act, 9(1)(bb) of Central Excise Act read with Rule 9(1), 9(1)(bb) of Central Excise Act read with Central Excise Rule 52(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rements and repeatability of orders. The raw materials used, include in their prices excise duty, sales-tax, import duty and other levies. They were not involved in the marketing process within the purview of buyers in general. It was found that the company was not raising any credit note for the goods returned for repairing or reprocessing. The company was not maintaining any production account during the period in question and they were only preparing packing slips to indicate production. It was noticed that the quantity shown in the packing slips would not tally with the invoices. Copies of delivery challans were not maintained to correlate dispatches made. 7. Referring to the definition of 'manufacture' in the Central Excise Tariff Act, the complaint would state that the products manufactured by the first petitioner were semi-finished ones, which have already reached the essential characteristics of the finished ones. The process said to be undertaken subsequently by the customers were minor ones like drilling, cable entry making, cords connection, etc., before being used in the mixies, grinders, etc. All these processes, which were in respect of certain items only, do not ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redeemed on payment of fine of Rs. 36,000/- plus Rs. 2,50,000/- on the goods, plant and machinery. The excisable goods cleared by the accused without paying duty was valued over Rs. 1,23,78,645.00, 10. Mr. Mahesh Jet Malani, the learned counsel appearing for the petitioners had four-fold submissions to make, which are extracted hereunder :- (1) The Central Excise Tariff Act, 1985, (Act 5 of 1986) came into force with effect from 28-2-86 and on 1-3-86 notification was issued under Chapter 39, exempting plastics and articles thereof. Therefore, the complaint does not disclose commission of any offence by the petitioners. Referring to Heading 85.09 read with Rule 2-A of the Rules for interpretation of Schedule, framed under the Central Excise Tariff Act, 1985, he would contend that the stand of the respondent that the majority of the goods in respect of which the complaint has been filed are excisable since they are unfinished goods having the essential character of finished goods viz., electro mechanical domestic appliances with self-contained electric motor would be manifestly untenable, for the unfinished plastic goods manufactured by the first petitioner company do not contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (40) E.L.T. 280 (SC); (AIR 1989 S.C. 1153) wherein it has been held that marketability of goods was essential to attract excise duty as the burden of excise duty, which was an indirect tax, was passed on to the ultimate consumer. In other words, for articles to be goods they must be known in the market as such or they must be capable of being sold in the market as goods. Actual sale in the market was not necessary, user in the captive consumption was not determinative but the articles must be capable of being sold in the market or known in the market as goods. Simply because certain articles fell within the Schedule, it would not be dutiable under excise law if the said article was not "goods" known to the market. Marketability, therefore, was an essential ingredient in order to be dutiable; (3) Mens rea on the part of the petitioners, in the commission of the alleged offences, was lacking. The learned Counsel would attempt to substantiate this argument by contending that it was impossible on the facts and circumstances of the instant case to suggest that there was an intention to evade payment of excise duty and that three facts would totally negative the requisite mens rea. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factured by the petitioners were not covered under Chapter 39 and, therefore, the exemption notification No. 132 of 1986 dated 1-3-1986 was not applicable, since it applied only to the goods covered under Chapter 29. According to him, the goods manufactured by the petitioners are excisable goods, falling under heading Nos. 85.09, 85.29, 84.73 etc. He would contend that the petitioner have manufactured parts of domestic electrical appliances viz., parts of mixie, wet grinder, television sets and typewriter which would attract excise duty under Chapters 84 and 85 of the Central Excise Tariff Act, 1985. He would specifically urge that the goods cannot be classified as articles of plastics under Chapter 39 of the Central Excise Tariff Act, 1985 as those goods were not for general use and made for a specific purpose. Referring to Note No. 2(n) of Chapter 39, which reads as hereunder- "This Chapter does not cover articles of Section XVI (Machines and Mechanical or electrical appliances)" he would contend that parts of mixies, wet grinders etc. should be classified along with those machines under the respective heading numbers in view of note 2(b) of Section XVI. Elaborating his argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text. 13. The respondent has chosen to classify the goods, which are the subject matter of this prosecution as base and adopters for sumeet mixies. As far as the other goods are concerned, they have been christened as typewriter parts, grinder bottom plates, circular grill, large grinder body, large bottom plate etc. The heading of Chapter 39 reads as 'Plastics and articles thereof'. Chapter note 1 indicates that the expression plastics meant those materials of Heading Nos. 39.01 to 39.14, which were or had been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which were retained on the removal of the external influence. Reference to "plastics" also included vulcanised fibre. However, the expression "plastics" did not apply to materials regarded as textile materials of Section XI and would not cover under Note 2(n), articles of Section XVI (machines and mechanical or electrical appliances). This naturally leads us to Section XVI. Section XVI (Chapters 84 and 85) under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have to be done during trial, especially when the prosecution chooses to classify the parts manufactured by the first petitioner as parts of mixies, grinders and television and not mere plastic goods. The question of marketability of the articles manufactured by the first petitioner will again relate to the realm of evidence to be placed before the trial Court. The question regarding nature of the goods, their marketability and use to which they could be put to, cannot be gone into in a petition filed under Section 482 of the Criminal Procedure Code, when there is divergence between the petitioners and the prosecution on all these important aspects. It is of course, true, as contended by the learned counsel for the petitioners, that the law enunciated by the apex court, in Bhor Industries Limited v. Collector of Central Excise, Bombay (A.I.R. 1989 S.C. 1153) and in the Union Carbide India Limited v. Union of India and Others (1986 (7) ECR 217 (S.C.)) is to the effect that marketability of goods is essential to attract excise duty, as the burden of excise duty, which is an indirect tax, is passed on to the ultimate consumer, and in that context the expression "goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture of flashlights and were not sold as aluminum cans in the market. Also the aluminum cans, at the point of time at which the excise duty had been levied existed in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans had sharp uneven edges and in order to use them as a component in making flashlight cases the cans have to undergo various processes, such as, trimming, threading and redrawing. After the cans were trimmed, threaded and redrawn, they were reeded, beaded and anodised or painted. Only at that point, they became a distinct and complete component capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case. Therefore, it is apparent that the nature of the goods, the goods being complete components, capable of being used as a part of mixie, wet grinder or television will be matters of evidence to be adduced before the trial Magistrate. At this stage, it cannot be gauged whether the parts manufactured by the petitioners would constitute spare parts for being used solely or principally with the mixie, wet grinder or television, permitting its classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent placed reliance on the decision of the Supreme Court in Chhotabhai Jethabhai Patel and Co. v. The Union of India and Another (A.I.R. 1962 S.C. 1006) with specific reference to the following observations made therein. "In dealing with excise duty (1) there is no mention of a direct or indirect taxes; the Indian Legislature has avoided this incidence to be characteristic of the tax: (2) taxable event is the manufacture or production of goods; it is in material what happens to them afterwards whether they are sold, consumed, destroyed or given away; (3) it is not a necessary incidence that the manufacturer must be able to pass it on to the consumer or indemnify himself; (4) the general tendency of its being passed on may be there but it may be prohibited by the circumstances, economic or otherwise. The fact that the manufacturer has no chance to get the tax from the buyer does not affect the legality of the tax". 19. The conspectus of the case law referred to above will not permit the proceedings pending in the lower Court being quashed at this stage, for evidence will have to be brought on record before any decision could be rendered on the liability of the petitioners t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of mens rea will enure in favour of the petitioners, even at this preliminary stage. 21. The last ground relating to stay of all further proceedings in the prosecution pending disposal of the appeal by CEGAT can now be considered. The Supreme Court in catena of decisions has held that the pendency of an appeal before the appellate authorities against adjudication proceedings would not be a bar for the criminal proceedings to be proceeded with, since the criminal Court will have to decide the issues arising out of the criminal proceedings on the evidence let in before the Criminal Court independently. However, the observations of the Supreme Court in P. Jayappan v. S.K. Peruimal (A.I.R. 1984 S.C. 1673) may be of some significance. The apex Court, while dealing with the pendency of the reassessment proceedings under the Income Tax Act, held that such proceedings cannot act as a bar to the institution of the criminal prosecution for offences under the Income-Tax Act and Indian Penal Code. The Institution of Criminal Proceedings cannot in such circumstances amount to an abuse of the process of Court. However, it may be that in an appropriate case the Criminal Court may adjourn o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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