Crl.Rev.No. 1028 of 2008 1 In the High Court of Punjab and Haryana at Chandigarh Crl.Rev.No. 1028 of 2008 Date of decision: 7.9.2011 M/s Joshika Laminations Pvt. Ltd. and another ......Petitioners Versus Kuldeep Singh Lubana .......Respondent CORAM: HON'BLE MRS. JUSTICE SABINA Present: Mr.Bipin Ghai, Sr. Advocate with Mr.Deepak Garg, Advocate, for the petitioners. None for the respondent. **** SABINA, J. This petition has been filed under Section 401 of the Code of Criminal Procedure, 1973 (Cr.P.C. for short) challenging the order dated 3.5.2008 (Annexure P-1), whereby the application of the petitioners for discharge under Section 245 (2) Cr.P.C. was dismissed. Learned senior counsel for the petitioners has submitted Crl.Rev.No. 1028 of 2008 2 that in the departmental proceedings, it was found that the petitioners were not guilty of the alleged offence. Hence, the criminal proceedings against the petitioners were also liable to be quashed. Although written statement was filed by the respondent but none has appeared on his behalf. After hearing learned senior counsel for the petitioners, I am of the opinion that this petition deserves to be allowed. Complaint under Section 9 and 9 AA of the Central Excise Act, 1944 has been filed against the petitioners. The case of the complainant, in brief, is that the factory of accused No.2 was visited by the officers of the Central Excise Anti Evasion Branch on 23.3.1998. Accused were engaged in the manufacture of commercial plywood, block board, flush doors and panel doors. On conducting physical verification of the stock of finished goods, the goods valued at ` 5,01,500/- involving duty of excise amounting to ` 15,045/- were found in excess of recorded balance in the register. It was further averred that from the investigation conducted, it appeared that accused No.1 had cleared the goods manufactured by it without payment of central excise duty. A show cause notice was issued to accused No.1 and penalty of ` 25,00,000/- was imposed on accused No.2. The demand of ` 57,45,425/- was confirmed by the Commissioner, Central Excise Delhi-III against accused No.1. Admittedly, the Commissioner, had confirmed the demand and had imposed penalty of ` 25,00,000/- on the petitioners but the said order was set aside by the Tribunal vide order dated 22.8.2005 (Annexure P-4). Crl.Rev.No. 1028 of 2008 3 It has been held in 'K.C.Builders and another versus Assistant Commissioner of Income-tax, Income Tax Reporters (Vol. 265) 562 as under:- “In our view, once the finding of concealment and subsequent levy of penalties under section 27(1)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under section 154 of the Act as per the directions of the Tribunal. As already notices, the subject matter of the complaint before this court is concealment of income arrived at on the basis of the finding of the Assissing Officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eyes of law and, therefore, the prosecution cannot be proceeded with by the complaint and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income-tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration. In our view, the High Court has taken the view that the charges have been framed and the matter is in the stage of further cross-examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned magistrate and the High Crl.Rev.No. 1028 of 2008 4 Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of the Tribunal exhibited as a defence document inasmuch as the passing of the order as aforementioned is unsustainable and unquestionable.” It has further been held in 'Gupta Constructions Co. and others versus Income-Tax Officer and others, 2003 (Vol. 260) Income Tax Reports 415 (P&H), as under:- “In view of the judgment of the Supreme Court, mentioned above, wherein, it has been held that if the penalty proceedings have been set aside in the deparmental proceedings then the very basis of launching of the prosecution against the assessee stands knocked down. In such facts, the Supreme Court had quashed the proceedings initiated under the Income-tax Act against the assessee. In view of the said judgment, I find that the prosecution against the petitioner is an abuse of the process of law. The very basis of penalty has been struck down by the authorities under the Act.” Thus, a penalty imposed by the assessing authority as upheld by the Commissioner was set aside by the Tribunal in appeal filed by the petitioners vide order dated 22.8.2005 (Annexure P-4). Hence, the criminal proceedings against the petitioners are liable to be quashed as the order, whereby the penalty was imposed upon the Crl.Rev.No. 1028 of 2008 5 petitioners, has been set aside in the departmental proceedings. Accordingly, the present petition is allowed. Impugned order dated 3.5.2008 (Annexure P-1), and all the subsequent proceedings arising therefrom, are quashed. (SABINA) JUDGE September 07, 2011 anita Crl.Rev.No. 1028 of 2008 6 Crl.Rev.No. 1028 of 2008 7