IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 13.08.2010 Coram The Honourable Mr. Justice M. SATHYANARAYANAN Crl.OP.Nos.8222 & 8223 of 2007 and M.P.Nos.1 & 1 of 2007 Smt.Rukshana Deshpande Proprietrix M/s.Dagger Die Cutting Having her office at Plot No.31-A/5, North Phase Developed Plots, Industrial Estate Ambattur, Chennai – 600 098. ... Petitioner in CRL.OP.No.8222/2007 Shri Nilanjan Deshpande Chief Executive Officer M/s.Dagger Die Cutting No.5, Thangam Colony First Street, Anna Nagar West, Chennai – 600 040. ... Petitioner in CRL.OP.No.8223/2007 ..vs.. The Additional Commissioner of Central Excise, Prosecution Unit, Office of the Commissioner of Central Excise, MHU Complex, 692 Anna Salai, Nandanam, Chennai – 600 035. ... Respondent in both Crl.OPs Criminal Original Petitions filed under Section 482 of Code of Criminal Procedure to call for the records pertaining to E.O.C.C.No.144 of 2006 pending on the file of the Addl. Chief Metropolitan Magistrate, Economic Offences, Egmore, Chennai and quash the same as against the petitioners. https://hcservices.ecourts.gov.in/hcservices/ For Petitioners in both Crl.OPs : Mr.Sivam Sivanantha Raj For Respondents in Mr.S.M.Deenadayalan both Crl.OPs : Spl.Public Prosecutor for Central Govt. COMMON ORDER The petitioner in Crl.OP No.8222 of 2007 is the Proprietrix of M/s.Dagger Die Cutting, Chennai -98 and she is arrayed as Accused No.1. The petitioner in Crl.OP No.8223 of 2007 is the Chief Executive Officer of the above said concern and he is the husband of Accused No.2 and he is arrayed as Accused No.2 in E.O.C.C.No.144 of 2006 pending of the file of the the Court of Additional Chief Metropolitan Magistrate, Economic Offences, Egmore, Chennai. 2. The above said petitioners filed Criminal Original Petitions to quash the above said case. 3. Facts in brief for disposal of these petitions are as follows [a] The respondent in these original petitions filed a complaint in E.O.C.C.No.146 of 2006 on the file of the above said Court for prosecuting the petitioners herein for the commission of the offences under Sections 9(1)(b)(i), 9(1)(bb)(i), 9(1)(bbb)9(i) and 9(1)(d)(i) r/w Section 9AA of Central Excise Act, 1944, as amended. As per the averments made in the complaint, the Accused No.1 namely Tmt.Rukshana Deshpande is the Proprietrix of M/s.Dagger Die Cutting and the Accused No.2 namely Mr.Nilanjan Deshpande - the husband of the first accused is the Chief Executive Officer of the above said concern and he is incharge for the day-to-day affairs of the concern. The above said concern is manufacturing cutting knives falling under Chapter Heading 8208.00 of the Central Excise Tariff Act 1985 and M/s.Dagger International is the Proprietary concern of the second accused and it is the sole selling agents of excisable goods manufactured by M/s.Dagger Die Cutting. It is further averred in the complaint that as per the intelligence gathered by the Preventive Officers of the respondent, the transactions between M/s.Dagger Die Cutting (in short "DDC") and M/s.Dagger International (in short "DI") are related according to Section 7 of the Companies Act and M/s.DDC purported to have sold the goods to various buyers at higher price and they also failed to take registration as per Rule 174 of Central Excise Rules, 1944. It is further averred that Accused No.1 sold the goods at a lesser price for the purpose of evading payment of excise duties and the statement of Accused No.1 and 2 were also recorded by the officers of the Central Excise. https://hcservices.ecourts.gov.in/hcservices/ [b] The Commissioner of Central Excise, Chennai - 2 Commissionerate, based on materials available on record, has made an adjudication vide his proceedings under Order-in Original No.5/2001 dated 10.04.2001 after receiving the reply to the Show Cause Notice on 19.05.2000 and by taking into consideration the explanations submitted by the Accused to Show Cause Notice has passed the order dated 10.04.2000 holding that - (i)M/s.Dagger Die Cutting had manufactured and cleared the excisable goods without payment of duty and without following the excise procedure ; (ii)that M/s.Dagger Die Cutting and M/s.Dagger International, the Accused-1 and Accused-2, are related persons in terms of M/s.Dagger International sold the goods to customers has to be regarded as the assessable value and the goods assessed accordingly; and (iii) that all the above facts together clearly constitute suppression of facts with an intent to evade payment of duty on the part of the M/s.Dagger Die Cutting, justifying the demand involving the larger period under proviso to Section 11a of Central Excise Act 1944. [c] Accused No.1 and 2 aggrieved by the said adjudication, had filed an appeal before CESTAT and the matter was remanded to the original authority for grant of benefit of Modvat Credit to treat the price as cum duty. On demand, duty payment of Rs.45,31,233/- under Section 11A and charged proportionate interest under Section 11AB of the Central Excise Act 1944 and was once confirm. A penalty of Rs.38,98,258/- was also imposed under Section 11AC of the above said Act on Accused No.1 and penalty under Rule 173Q of Central Excise Rules 1944 amounting to a sum of Rs.19,00,000/- was imposed on Ms.DDC and also a penalty of Rs.9,00,000/- was imposed upon Accused No.2 under Rule 209A of Central Excise Rules 1944. According to the respondent/complainant, Accused No.2 was incharge of day-to-day affairs of Accused No.1 and was found to have been contravened the provisions of Rule 9(1), 52A, 53, 173B, 173C, 173F, 173G and 174 read with Rule 226 of the Central Excise Rules 1944 since they - (i) had not applied for and obtained a Central Excise Registration Certificate for the manufacture and clearance of excisable goods, immediately after crossing the prescribed exemption limits under Notification No.1/93-CE dated 28.02.93 as amended during the above period, (ii) had failed to issue Central Excise Invoices for the clearances of excisable goods manufactured, https://hcservices.ecourts.gov.in/hcservices/ (iii) had failed to account for the production and clearance of excisable goods in the Statutory Central Excise records, (iv) had failed to declare the appropriate classification and value of the excisable goods; (v) had cleared excisable goods without determining the appropriate excise duty leviable thereon and without payment of excise duty. The sum and substance of the allegations levelled in the complaint are that Accused No.1 and 2 in collusion and with common intention,evaded payment of Central Excise Duty. 4. Mr.Sivam Sivanantha Raj, learned counsel appearing for petitioners has submitted that as regards adjudication done by the authorities, M/s.DDC has filed W.P.No.25580 of 2003 and this Court by an order dated 15.09.2003 has granted the stay of the operation of order passed by CESTAT. The Accused No.1 had also deposited a sum of Rs.29,00,000/- under protest in the Central Excise authority to show her bonafide. It is further contended by the learned counsel for the petitioner that the respondent had kept quite for nearly six years and suddenly filed a complaint in E.O.C.C.No.144 of 2006 suppressing the above said fact. 5. It is also the submission of the learned counsel for the petitioners that the petitioners are sought to be prosecuted only on the basis of mutuality of interest and there is not even an iota of material available to sustain the case of the respondent/complainant. 6. The learned counsel appearing for the petitioners has also brought to the knowledge of the Court that W.P.No.25580 of 2003 filed by M/s.DDC challenging the order passed by CESTAT, was allowed where the issue relating to related persons has also been gone into. This Court while passing final orders dated 30.04.2010 passed in the above said writ petition has held that Accused No.1 had no interest directly or indirectly in the business of M/s.DI and the fact that the second accused who is the husband of the first accused had acted as Chief Executive Officer on a gratuitous basis will not establish that there was mutuality of interest. This Court further held that the respondent was not able to establish that Accused No.1 and M/s.DI which is run by the second accused are related persons. Citing the said reason, this Court has allowed the above writ petition and according to the learned counsel appearing for the petitioner, even though the said order came to be passed as early as on 30.04.2010, no appeal has been filed by the respondent and as such the findings regarding 'related person', had attained finality. https://hcservices.ecourts.gov.in/hcservices/ 7. The learned counsel for the petitioners would further submit that the criminal proceedings came to be lodged against the petitioners/accused solely on the basis of the findings recorded by CESTAT on the premise that the accused are related persons and are having mutuality of interest and since the order passed by CESTAT has been set aside in the above said writ petition, the complaint is liable to be quashed. 8. The learned counsel appearing for the petitioner in support of his statement has placed reliance upon the following decisions :- [a] 1982 (2) SCC 543 [Uttam Chand v. I.T.O.] [b] 1995 Supp (2) SCC 724 [G.L.Didwania and another v. Income Tax Officer] [c] 2002 (130) E.L.T. 498 (Mad.) [Swathy Chemicals Ltd. V. Union of India] [SB] 9. Per contra, Mr.S.M.Deenadayalan, learned Special Public Prosecutor would submit that the steps are being taken to challenge the order dated 30.04.2010 made in W.P.No.25580 of 2003. It is also submitted by the learned Special Public Prosecutor that a cursory perusal of the averments made in the complaint would prima facie disclose that ingredients of the offences have been met out against the accused and that the points urged by the learned counsel for the petitioners can be trashed out or adjudicated only during the course of trial. It is the further submission of the learned Special Public Prosecutor that writ petition challenging the order passed by the CESTAT, is not at all maintainable as the remedy available to the petitioners herein to prefer an appeal to the Hon'ble Supreme Court of India. 10. The learned Special Public Prosecutor in support of his submission, placed reliance upon the following judgments :- [a] 1990 SCC (Cri) 579 [Collector of Customs & Central Excise v. Paradip Port Trust] = 1990 (4) SCC 250. [b] 2006 (2) SCC (Cri) 221 [Standard Chartered Bank V. Directorate of Enforcement] [c] 2009 (15) SCC 429 [Ramesh Dutt V. State of Punjab] 11. This Court has carefully considered the submissions made by the learned counsel for the petitioners and the learned Special Public Prosecutor and also perused the materials available in the https://hcservices.ecourts.gov.in/hcservices/ record in the form of typed set of documents and also gone through the decisions relied upon by the learned counsel for the petitioner and the respondent. 12. A perusal of the order dated 03.05.2002 passed by the CESTAT South Zonal Bench at Chennai in Appeal No.772 and 773 of 2001 would disclose that there was mutuality of interest in the business of the first and second accused and consequently there was a evasion of payment of Central Excise duty. CESTAT further found that the relationship between DDC and DI was not at arms length but there is mutuality of interest. The tribunal further found the manner in which the two concern function show that there was mutuality of interest in the arrangement and recorded elaborate reasons and also placed reliance upon number of decisions to negative the claim made by the accused. The vires of the said order was challenged by M/s.DDC represented by the first accused in W.P.No.25580 of 2003 and the writ petition was allowed on 30.04.2010 by setting aside the order passed by CESTAT. 13. The learned counsel for the petitioners has placed heavy reliance upon the above said order passed in the writ petition and would submit that since this Court has found that there was no mutuality of interest and that the respondent herein was not able to establish that Accused No.1 and M/s.DI are related persons, the continuance of the criminal proceedings launched by the respondent would clearly amount to an abuse of process of law and therefore the said proceedings are liable to be quashed. 14. Let this Court consider the decisions relied upon by the learned counsel appearing for the petitioners. In 1982 (2) SCC 543 [Uttam Chand v. I.T.O.], Income Tax Authorities launched prosecution against the appellant and others on the ground that when the Partnership firm was not genuine and a false return was filed. The Income Tax Appellate Tribunal found that the firm in question is a genuine one. Based on such findings, the accused therein sought for quashment of the criminal proceedings and it was negatived and challenging the legality of the same, an appeal was filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court of India on the above cited decision held that in view of the finding recorded by the Income Tax Appellate Tribunal, criminal proceedings could not be continued and therefore allowed the appeal and quashed the proceedings. 15. In 1995 Supp (2) SCC 724 [G.L.Didwania and another v. Income Tax Officer], prosecution was launched under Income Tax Act against the assessee on the ground that he had intentionally concealed his income derived from a particular company which belonged to him. The assessee filed an appeal challenging the order of assessment and the Appellate Tribunal has allowed the appeal by setting aside the order of assessment holding that there was no https://hcservices.ecourts.gov.in/hcservices/ material available to hold that a particular company belong to assessee. The appellant placed reliance upon the said decision and filed an application before the jurisdictional Magistrate to drop the criminal proceedings and also moved an application before High Court under Section 482 of Cr.P.C to quash the criminal proceedings. Since it ended in dismissal, he preferred an appeal before the Hon'ble Supreme Court of India. 16. The Hon'ble supreme Court of India, by taking into consideration the orders passed by the Income Tax Appellate Tribunal holding that there was no material available to hold that a particular company belong to a assessee held that criminal proceedings cannot be sustained and by recording the same, had allowed the appeal and quashed the proceedings. 17. In 2002 (130) E.L.T. 498 (Mad.) [Swathy Chemicals Ltd. V. Union of India] [SB], prosecution was launched against the company for mis-declaration with an intention to evade payment of duty. It was contended on behalf of the assessee that CESTAT by an order has set aside the order of Commission with regard to the payment of duty and also the penalty and since the said order has become final, criminal proceedings cannot be continued. Reliance was also placed upon G.L.Didwania V.Income Tax Officer case reported in 1999 (108) E.L.T. 16 (S.C.) = 1995 Supp (2) SCC 724 cited supra and also Uttam Chand case reported in 1982 (2) SCC 543 cited supra. 18. This Court in the above cited decision having taken into consideration all the factual aspects and the decisions cited before it, has found that the Department not chosen to challenge the decisions of CEGAT and had reached finality and therefore it is not legal to prosecute the petitioners on the same set of events. This Court by recording the said reasons had quashed the criminal proceedings. 19. In so far as the decisions relied upon by the learned Special Public Prosecutor for the respondent, the decision reported in 1990 SCC (Cri) 579 [Collector of Customs & Central Excise v. Paradip Port Trust] = 1990 (4) SCC 250 pertains to the confiscation of goods and conveyance and imposing of penalty under Customs Act and also launching prosecution and punishment under Chapter 16 of the Customs Act 1962. The Hon'ble Supreme Court in Para 10 of the said judgment has held as follows :- "10. From the foregoing provisions, we find that for the same transaction, act or occurrence in an appropriate case, there may be prosecution and punishment under Chapter XVI and confiscation of goods and conveyances and also imposition of penalty not exceeding one thousand rupees for contravention of any of the provisions of the Act https://hcservices.ecourts.gov.in/hcservices/ or abetment of any such contravention and for failure to comply with any provisions of the Act with which it was one's duty to comply where no express penalty is elsewhere provided for such contravention or failure. It may also be possible that an act or event which entails punishment under Chapter XVI may by itself or with other ingredients also amount to a contravention of any of the provisions of the Act or abetment of any such contravention. Where the same act or event constitutes an offence under Chapter XVI and at the same time constitutes a contravention of any of the provisions of the Act or failure to perform any duty prescribed under the Act, there will be possibility of prosecution and punishment under Chapter XVI of the Act and any other provision of law and at the same time confiscation and penalty under Chapter Xvi of the Act." 20. In 2006 (2) SCC (Cri) 221 [Standard Chartered Bank V. Directorate of Enforcement], the issue pertains to adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act and prosecution under Section 56 of the same Act. Arguments were advanced on behalf of the appellant namely Standard Chartered Bank submitting that unless an adjudication proceedings under Section 51 of the FERA is completed, prosecution under Section 56 of FERA cannot be initiated. The Hon'ble Supreme Court of India in the above said decision has held that proceedings under Section 51 and 56 of FERA Act can simultaneously be launched and be pursued. 21. 2009 (15) SCC 429 [Ramesh Dutt V. State of Punjab] pertains to the alleged commission of offence under Section 420 and allied offences and the appellants therein filed an application to quash the FIR which was dismissed by the High Court of Punjab and Haryana. Challenging the legality of the same, appeal was preferred before Hon'ble Supreme Court of India. The Hon'ble Supreme Court of India in the above cited decision held that the Act of the appellant in transferring a portion of the property without having complete ownership over it by itself do not satisfy the ingredients of Sections 467, 468 and 469 of IPC. It is further held by the Hon'ble Supreme Court of India that by virtue of the provisions of Section 41 to 44 of the Indian Evidence Act 1942, it cannot be said that the decision of the Civil Court would be binding of the criminal course. The Hon'ble Supreme Court of India on the facts of the said case has quashed the criminal proceedings. 22. The learned counsel for the petitioner by placing reliance on the above said judgments cited by him, more importantly the judgment of this Court reported in 2002 (130) E.L.T. 498 (Mad.) cited supra would submit that since the order by CSETAT has been quashed / https://hcservices.ecourts.gov.in/hcservices/ set aside by this Court in W.P.No.25580 of 2003 and as on date no appeal has been filed challenging the legality of the said order, the criminal proceedings on the same set of facts cannot be continued. However, the learned Special Public Prosecutor would contend that the findings recorded by this Court in the above said writ petition cannot be put as a bar to continue the criminal prosecution against the petitioners as the averments made in the complaint prima facie disclose the commission of the offences for which the accused are charged and that urgent steps are being taken to prefer writ appeal challenging the legality of the order passed in writ petition including the maintainability. 23. It is the further submission of the learned Special Public Prosecutor that the criminal prosecution and adjudication proceedings act on different field and therefore quashment of the CESTAT order will have no baring on the criminal proceedings. 24. The issue arise for consideration is whether the criminal prosecution in E.O.C.C.No.144 of 2006 pending on the file of the Addl. Chief Metropolitan Magistrate, Economic Offences, Egmore, Chennai can continue inspite of the fact that the order of CESTAT was quashed by this Court in W.P.No.25580 of 2003 ? 25. No doubt the decisions relied on by the learned counsel for the petitioners lay down the preposition that once the tribunal had decided the case in favour of the assessee, criminal prosecution cannot continue and a Single Bench of this court in the decision reported in 2002 (130) E.L.T. 498 (Mad.) by following the decision of Hon'ble Supreme Court of India, has laid down the same preposition. However taking into consideration the submission made by the learned Special Public Prosecutor that steps are being taken to challenge the order dated 30.04.2010 made in W.P.No.25580 of 2003 are on the way including maintainability of the writ petition and obtaining of legal opinion from the Central Government Law officers, to be followed by further steps, this Court is of the view that the criminal proceedings cannot be quashed on the ground that the writ petition challenging the order passed by CESTAT came to be allowed. In the considered opinion of the Court, proceedings culminated by way of disposal of writ petition does not amount to a verdict of acquittal in favour of the petitioners so as to attract the rule of issue estoppel. 26. It is pertinent to point out at this juncture that if the criminal proceedings are quashed by virtue of the orders passed in the above writ petition and in the event of writ appeal against the said order being entertained and allowed, the criminal proceedings cannot be revived. Therefore, this Court finds force in the said submission made by the learned Special Public Prosecutor. This Court, taking into consideration of the said submission is not https://hcservices.ecourts.gov.in/hcservices/ inclined to quash the proceedings in E.O.C.C.No.144 of 2006 pending on the file of Addl. Chief Metropolitan Magistrate, Economic Offences, Egmore, Chennai. Therefore, the Criminal Original Petitions are dismissed. 27. However, the petitioners are at liberty to seek for the quashment of the criminal proceedings in the event of the writ appeal being decided against the respondent. Consequently the connected Miscellaneous Petitions are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar rgr To The Addl. Chief Metropolitan Magistrate, Economic Offences, Egmore, Chennai. 2 cc To Mr.S.M.Deenadayalan , Advocate, SR.25685,25986 1 cc To Mr.Sivam Sivanantha Raj , Advocate, SR.59688 Crl.OP.Nos.8222 & 8223 of 2007 gg(co) pmk.30.8.2010. https://hcservices.ecourts.gov.in/hcservices/