M/S FREEZAIR INDIA (P) LTD. & ANR V. COMMISSIONER OF CENTRAL EXCISE, DELHI -II

CRL.M.C./2220/2016

AI Insights

The case involves M/S Freezair India (P) Ltd. & Anr. versus the Commissioner of Central Excise, Delhi-II, where the petitioners sought to quash a complaint filed against them under Sections 9 and 9AA of the Central Excise Act, 1944. The complaint alleged evasion of central excise duty amounting to Rs. 45,62,325. The petitioners argued that the complaint was in violation of a CBEC circular which set a monetary threshold of Rs. 25 lakhs for launching prosecution in such cases. The court examined the applicability of the circular and the definition of habitual offenders under the Central Excise Act, ultimately deciding in favor of the petitioners.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 738134 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 01-09-2017
• Assessment Year: misc
• Other Referred Cases: Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries, Commissioner of Customs, Calcutta Vs. Indian Oil Corporation Ltd, S/S Bhasat Motor Co. P. Ltd. Vs. S.K. AbrolDCIT
• Laws Referred To: Central Excise Act, 1944, Criminal Procedure Code, 1973
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAGHAV AWASTHI
• Assessee Lawyers: S
• Keywords: Central Excise; Duty evasion; Monetary limit; Prosecution; Quashing of complaint
• Section: 9; 37B; 9AA; 482; 223

Judgement Text

"$-32 ^ . * IN THE HIGH COURT OF DELHI AT NEW DELHI + Crl.M.C. 2220/2016- ' -' M/S.FREEZAIR INDIA (P) LTD. & ANR. \" .... Petitioners Through: Mr. S. Sunii with Mr. Jagdish Advocates. versus ' n COMMISSIONER OF CENTRAL EXCISE, DELHI-II ....Respondent Through: Mr. Raghav Awasthi, Advocate . CORAM: HON'BLE MS. JUSTICE SANGITA DHINGRA SEHGAL ORDER % 01.09.2017 1. The fjresent petition has been instituted under Section 482 of the Criminal , Code of Procedure, 1973 (hereinafter referred to as 'Cr.P.C.') for quashing and setting aside complaint dated 14.09.2012 filed against the petitioners under Section 9 and 9AA of the Central Excise y ct. 1944; 2. Brief facts of the case are that, the petitioner company was incorporated on 29.01.1998 and petitioner no. 2 was instituted as a director of that company on the same date. The petitioner-company then took over a company called M/s Freezair India. 3. On 24.04.1999, acting on a specific information, the officials of respondent department conducted a search at the premises of the petitioner company. Following which, a complaint case, dated 08.06.2001, vyas filed by the respiondent departrnent against the petitioners alleging violation of Section 9 and Section 9AA of the CrLM.C. 2220/2016 Page 1 of 7 Digitally Signed By:AMULYA Signature Not Verified [■V Central Excise Act, 1944. 4. The petitioners then moved an application before the trial court, under Section 223 of the Cr.P.C. seeking separation of the trial of the present petitioners.. The application was dismissed by the trial court vide order dated 27.07.2004. 5. Thereafter, the petitioners filed a revision petition before the Additional Sessions Judge (hereinafter referred to as 'ASJ') which was subsequently allowed vide order dated 16.07.2005. 6. The respondent department alleging that they were not heard in the' revision petition then approached this court, wherein the matter was remandedfto the court of ASJ, vide order dated 17.11.2006. 7. The Additional District Judge (hereinafter referred to as 'ADJ') allowed the petition vide order dated 26.04.2007 and the trial of Petitioner No, 2 was separated from the, trial of Petitioner No. 1 and one, Kuldeep Singh Punn. The ADJ observed that \"That considering all the facts of the case, I am also of the opinion that joint trial of the present petitioners for evasion of duty for period prior to 29.01.1998 would cause prejudice to them as the said liability did not relate to the company which came into existence only on 29.01.1998:\" 8. - A fresh complaint dated 14.09.2012 (impugned complaint), was then filed before Additional Chief Metropolitan Magistrate against, the petitioners alleging that the petitioners had' evaded central excise duty of Rs.45,62,325 and thus committed offences under Section 9, Section 9AA of the Central Excise Act, 1944. 9. The petitioners filed an application before ACMM for discharge on the ground that, as per order dated 26.04.2007, the petitioners were Crl.M.C.-2220/2016 - - ' Pa'7e2of7 (( only liable for excise duty evasion post 29.01.1998 which amounted to Rs. 10,04,895 while as per Trade Notice dated ' 12.12.1997, issued by Central Board of Excise & Customs (hereinafter referred to as 'CBEC'), the prosecution was, to- be launched only if the duty evasion was more than Rs.25 Lakhs. The petition was dismissed vide order dated 12.01.2015 on,the grounds : that, the petitioners were alleged to be habitual offenders and only - at the rStage of evidence can the allegation be proved. Hence, the application was held to be not maintainable. - , ' 10. Thereafter, Criminal .Revision Petition was filed by the present petitioners before'the ASJ, whereinTt was, held that under Section 9. and Section 9AA of Central Excise Act there is nothing to suggest that CBEC is empowered to set a monetary, limit for launching prosecution. Accordingly, the petition was dismissed, vide order / dated 06.02.2Q16. Hence, the present petition was filed. 11. ; The learned counsel for the petitioner, Mr. S. Sunil, contends that circular issued by CBEC dated 12.12.^997 which enhanced the A monetary limit for launching prosecution to Rs.25 Lakhs, was . binding upon the authorities and thus, institution of complaint dated 14.09.2012 was in Violation of the said circular, thereby rendering initiation of prosecution proceedings void ab initio. The - learned, counsel further contends that in the order dated 06.02.2016 , , -the ASJ Qbser ^ed that, , \"It. may be that the petitioners/accused persons may have a case to have the proceedings quashed on the ground that the iPdhufion of the complaint was in violation of its own circular of the CBEC which was binding on all authorities - including the complainant. However, the said power is not Crl.M.C. 2220/2016 , V ' A. ^ .. . Page3of7 available with this court. \" - 12. The learned counsel 'for the petitioners places reliance upon Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries reported in 2002 (143) ELT 19 , Commissioner of Customs, Calcutta Vs. Indian Oil Corporation Ltd reported in 2004 (165) ELT 25-7 and S/S Bhasat Motor Co. P. Ltd. Vs. S.K. AbrolDCIT CrlMCNo. 1545/2001. 13. Per contra, the learned counsel for the respondent department, Mr. n Raghav Awasthi, contends that the petitioner no. 2 is a habitual offender and in such cases, there is no monetary limit for launching . , prosecution. 14. I have heard the counsel for the parties and pemsed the documents on record'. ; i , ' 15. At the , outset, it is evident that the excise dut}' evaded by the petitioners would be calculated for the period post 29.01.1998 and as per the caleulation sheet^plaeed on the record by the petitioner the excise duty evaded post 29.01.1998 is Rs.10,04,895. It is to be noted here that the petitioners had contended this amount before the court of ACMM and then before the ASJ, but . on both the occasions the respondent department did not contest this amount. 1-6. Furthermore, the CBEC liad issued following guidelines for , prosecution: , T n _ \"Prosecution under the Central , Excise Act - Enhancement of monetary limit r am directed to refer to Board's letter .F.No. . . 208/31/92-CX.- 6, dated- 04.04.1996, whereby the Board's Circular No. 15/90-CX. 6 dated 09.08.1990 was modified so.as to enhance the monetary limit'for A raunching proseciitwn from Rs. 1 lakh to Rs: 5 lakhs. I '' CrI.M.C. 2220/2016 . ' • / ' Page4of7\" The Board has decided to further enhance the monetary limit from Rs. 5 lakhs to Rs. 25 lakhs prospectively so as to ensure better utilisation of manpower, time and ' resources of the department.. ' : [Based-on Board's letter F.No. 208/31/97-CX. 6, dated 12-12-1997] \" 17. A bare perusal of the Board's letter makes it amply clear that wherever duty evaded by the accused was less than Rs.25 lakhs, officials had been instructed not to launch prosecution as the same . would amount to wastage of the resources on petty amount of duty evasion. 18. At this stage, it is relevant to go through Section 37B, the Central . Excise Act, 1944: \"Instructions to Central Excise Officers. The. Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of1963 ).may, if it considers' it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and suck officers arid aU other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board: Provided - that,no such orders, instructions or directions shall be issued- (a) so as to require any Central Excise Officer to make a • particular assessment or to^ dispose of a particular case in a particular manner; or (b) so as to interfere_ with the discretion of the Collector * of Central Excise (Appeals) in the exercise of his . appellate functions. \" ^ Cri.M.C. 2220/2016 ' 'PagGSof? 19. It is trite law as has been held by the Apex Court in plethora of decisions that the circulars issued under Section 37B of the Central Excise Act are a binding on its officials. The same has not been disputed by the learned counsel for the respondent as well.. 20. - This court while dealing with the question whether prosecution, if launched, in violation of the circular issued by the Central Board of Direct Taxes would lie or not, observed in S/S Bhasat Motor Co. P. Ltd. Vs. S.K. Abrol DCIT CrLMC No. 1545/2001, that: \"Since the alleged concealment is less than ^25000/- that the prosecution would not lie. I find force in this contention of the learned counsel for the petitioners that it is not open to the respondents to continue with the complaint which is against their own- circular. The circular of the respondent is very clear that wherever the income sought to be evaded by the petitioners happens to ' be less than Rs.25,000/-, the prosecution ought not to have been initiated against such delinquent persons. The reason for this is not far to seek. - The reason for this is that these small insignificant cases should not be taken for prosecution as it results in considerable wastage of time, energ}> and resources of the Government and they must actually go after big fi sh who are indulging in large scale and rampant concealment of the income and evasion of income tax. In order to attain this object, the circular seems to have been passed\" 21. Further, regarding the contention of the respondent that petitioners are habitual offenders, it is relevant to peruse that who is a habitual offender with respect to the proceedings relating to evasion of excise duty. The CBEC, vide its letter of F.No. 208/31/97-CX.6 dated 12.12.1997, laid out that, \"In the case of habitual offenders, the total amount of duty involved in various offences may be taken into account while deciding whether prosecution is called for. If Crl.M.C. 2220/2016 Page 6 of? IS' there is evidence existing to show mala fide intentions and systematic engagement of a person or cornpany involving evasion over a period of time, prosecution should be considered irrespective of the monetaiy limit.\" In the present case, the petitioners had allegedly evaded duty in the year 1998-99 only. . ~ There is absolutely nothing on record to show, if the petitioners had evaded duty in the past and if any confirmed, demand of excise duty was raised against the petitioners, to construe that there was systematic engagement and mala fide intention on the part of the petitioners. In the present circumstances, not even prima facie the petitioner can remotely be covered within the ambit pf the definition of habitual offender. , 22. It is evident that the complaint dated 14.09.2012, filed by the respondent department against the petitioners could not have been filed being against its own circular. Hence, in view of the facts - discussed above and the relevant case laws, it is indisputable that continuation of proceedings against the petitioner's would be futile ■and would amount to travesty of justice. 23. Thus, petition is allov/ed. The impugned order dated 06.02.2016 is- set aside and com.plaint dated ,14.09.2012. is thereby quashed and proceedings dropped. SEPTEMBER 01, 2017 //sr SANGITAiMTNGRA SEHGAL, J j CrI.M.C. 2220/2016 , .1 ' ' Page7of7' "