BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 14/05/2008 CORAM THE HONOURABLE MR. JUSTICE S. NAGAMUTHU CRL. O.P (MD)No.17682 of 2002 A. Jayagopal, S/o. Anand Alwar, 1667 H Block 9th Street, Anna Nagar, Chennai - 600 040. ..... Petitioner Vs The Assistant Commissioner of Central Excise (Legal), Office of the Commissioner of Central Excise, Central Revenue Building, Madurai. ..... Respondent Criminal Original Petition filed under Section 482 Cr.P.C., to call for the records and to quash the proceedings in C.C.NO.13 of 2002 on the file of the Additional Chief Judicial Magistrate, Madurai. !For Petitioner ... Mr. B. Kumar Senior Counsel for Mr. M. Ramasamy ^For Respondent ... Mr. C. Arul Vadivel alias Sekar Special Public Prosecutor :ORDER
Seeking to quash the private complaint in C.C.No.13 of 2002 on the
file of the learned Additional Chief Judicial Magistrate, Madurai, the
petitioner, who is the one of the accused in the said case has come forward with
this petition under Section 482 Cr.P.C.
2. Admittedly, the petitioner was employed as Senior Marketing
Executive in a company known as M/s. Indian Aluminium Company Limited (in short
hereinafter referred to as “INDAL”) at Chennai. Yet another company known as
M/s. Shree Meenatchi Aluminium Extrusions Limited, Madurai (in short hereinafter
referred to as “SMALEX”) was engaged in the manufacture of Aluminium Extrusions
at Vellaripatti in Madurai District.
3. According to the allegations in the complaint, INDAL is the real
manufacturer of Aluminium extrusions in terms of Section 2(f) of Central Excise
Act 1944 and by suppressing the said fact, INDAL has engaged SMALEX by means
of a Memorandum of understanding for getting their goods manufactured on job
work basis and cleared the same without payment of appropriate duty on the
actual value as per Section 4 of the Central Excise Act read with Central Excise
(Valuation) Rules 1975. The Central Excise Officers verified the documents and
relevant records on 01.10.1996, during which several documents including the
Memorandum of understanding were recovered. On perusal of the invoices and the
documents, it came to light that on the raw materials supplied by INDAL, on job
work basis SMALEX manufactured Aluminium extrusions and delivered the finished
goods to the customers of INDAL as per the directions of INDAL. The Memorandum
of Understanding between SMALEX and INDAL reads as follows:-
“(i) the covenants of the manufacturer (i.e.,) SMALEX are as
follows:-
(a) SMALEX shall receive the raw materials supplied by INDAL along with
excise invoice, delivery challan and sales tax form, SMALEX shall take Modvat
credit for the same.
(b) SMALEX shall thoroughly study the details of orders placed by INDAL
and draw out time bound production plan and intimate the same to INDAL.
(c) SMALEX shall manufacture the product and will also adhere to the
schedule given by INDAL in this respect from time to time.
(d) SMALEX shall keep the finished products in the manner as prescribed by
INDAL to avoid damage or mix up with other goods.
(e) SMALEX will adhere to the quality control requirement as per
specifications given by INDAL and also as per the sectional drawings supplied by
INDAL.
(f) SMALEX will furnish weekly statement / report of the stock of the
extrusion and raw materials shipped to INDAL.
(g) SMALEX will provide secretarial services to INDAL for documentation as
and when required.
(ii) The owners (ie) INDAL hereby covenants to SMALEX as follows:-
(a) communicate with SMALEX regarding size, profiles, sections or solids
to be extruded from the raw materials supplied by INDAL. INDAL shall intimate
SMALEX regarding technical specifications such as tolerances on dimensions,
weight, length other technical details etc.,
(b) despatch the raw material to SMALEX with a delivery challan, excise
invoice and the relevant sales tax form prescribed by the State Government
concerned.
(c) INDAL shall assess the order position and accordingly decide upon the
production schedule specification and requirement of raw material in
consultation with SMALEX.
(d) INDAL shall intimate SMALEX regarding despatch details such as
particulars of the customer to whom the extrusions have to be despatched sales
tax numbers, insurances, method of packing and other information like choice of
transporters etc., in details and intimate SMALEX regarding the delivery date
while placing the order”.
4. In paragraph 14 of the complaint, it is stated thus:-
“Thus, it is well established that A1 manufactured the Aluminium
Extrusions on job work basis during the period from 01.04.1994 to 30.09.1996 as
the agent of A3. Since the goods were manufactured on account of A3, A3 is the
real manufacturer of the above said goods in terms of Section 2(f) of Central
Excise Act 1944. A3 had never disclosed the existance of Memorandum of
Understanding between A1 and A3 to the Central Excise Department and evaded
payment of Central Excise duty to the tune of Rs.38,22,550/- during 01.04.1994
to 30.09.1996. The said failure in compliance with the provision of Central
Excise Law to the extent was intentional on the part of A-1 to A-4 and the
Central Government was deprived of legitimate revenue to the tune of
Rs.38,32,550/- during the said period and thereby A-1 to A-4 have committed
offences covered under Section 9(1)(a), 9(1)(b), 9(1)(bb) and 9(1)(c) of the
Central Excise Act 1944 read with Rules 9(1), 52A, 173G, 173 F, 174 and 226 of
CER 1944. Accordingly, A1 to A4 are punishable under Section 9(1)(a)(i),
9(1)(b)(i), 9(1)(bb)(i) and 9(1)(c)(i) of Central Excise Act 1944 read with
Section 9AA”.
Based on the above materials collected during verification and on the basis of
the statements recorded from various persons, including the petitioner, the
respondent laid the private complaint before the learned Additional Chief
Judicial Magistrate, Madurai against a total number of six accused. The first
accused is SMALEX company; the second accused is the Project Manager of the
SMALEX; the third accused is INDAL ; the fourth accused (the petitioner herein)
is the Senior Marketing Executive in INDAL; the fifth accused is another company
known as M/s. Agents Aluminium Co., Ltd., and the sixth accused is the Director
of the fifth accused. The offences said to have been committed are punishable
under Sections 9(1)(a), 9(1)(b), 9(1)(bb), 9(1)(c), 9(1)(d) of Central Excise
Act 1944 read with Rules 9(1), 52A, 53, 173 C, 173 G, 173 Q, 226 of the Central
Excise Rules 1944 read with Section 9AA. It appears that the case against
INDAL and the SMALEX was split up separately in which the petitioner is the
second accused, which is now pending before the learned Additional Chief
Judicial Magistrate, Madurai. Seeking to quash the same, the petitioner has come
forward with this petition.
5. Admittedly, a show cause notice dated 14.08.2007 was issued,
wherein demand for an amount of Rs.38,32,550.00 from INDAL as differential duty
on aluminium extrusions manufactured and cleared from the factory premises of
SMALEX under INDAL’s invoices covering the period from 1994-95 to 1996 – 97
(upto 30.09.1996) by invoking the proviso to Section 11A(1) of the Central
Excise Act, 1944 was made and also to recover interest under Section 11AB;
impose penalty under Section 11AC and under erstwhile rules 9(2) and 173 Q of
Central Excise Rules, 1944; demand an amount of Rs.4,450 as differential duty
from SMALEX on the clearances effected from their premises to the customers of
AACL using the latters’ invoices by invoking the proviso to Section 11 A(1) of
the Central Excise Act, 1944, recover an amount of Rs.84,499.00 from SMALEX
towards the shortage of modvated inputs, penalise SMALEX under Section 11AC and
under erstwhile rules 9(2) and 173Q of Central Excise Rules, 1944 and also under
erstwhile rule 209 A, and to penalise AACL under erstwhile Rule 209A. The
details pertaining to the demand proposed were given in Annexures A to C to the
Show Cause Notice.
6. Thereafter, a final order was made by the Commissioner of Central
Excise, Madurai, directing the first accused INDAL to pay the amount under
Section 11A(2) of the Central Excise Act, 1944. The Company, viz., INDAL
challenged the same before the Customs, Excise and Gold (Control) Appellate
Tribunal, South Zonal Bench at Madras. The Bench, by order dated 14.01.1999 set
aside the order of the Commissioner and remanded the matter back to the
Commissioner for fresh disposal. On such reconsideration, the Commissioner, by
order dated 29.01.2002 has passed the following order:-
“35. In view of my foregoing findings, it is ordered as under:-
(i) I hereby hold INDAL as the manufacturers of goods. However the
proceedings initiated for recovery of differential duty are dropped on grounds
of limitation. Consequently the proceedings initiated against INDAL for recovery
of interest and for imposition of penalty also abate;
(ii) The penal proceedings proposed on SMALEX under erstwhile rule 209A
are hereby dropped;
(iii) I hereby confirm an amount of Rs.4,450.00 (Rupees Four Thousand four
hundred and fifty only) under Section 11A(2) of the Central Excise Act, 1944 as
differential duty on SMALEX towards the goods cleared to buyers under AACL’s
invoices, by invoking the larger period of limitation under the proviso to
Section 11A(1). The amount of Rs.4,450.00 paid under T.R.Challan No.23/97-98
dated 19.01.1998 is adjusted towards the same after vacating the protest;
(iv) I hereby confirm an amount of Rs.84,499.00 (Rupees Eighty Four
Thousand Four Hundred and ninety nine only) on SMALEX under erstwhile rule 57(2)
read with erstwhile rule 57(1) of Central Excise Rules, 1944 by invoking the
larger period of limitation under the Proviso to Section 11A(1) of the Central
Excise Act, 1944. The amount of Rs.84,499.00 paid under T.R.Challan No.24/97-98
dated 19.01.1998 is adjusted towards the same, after vacating the protest;
(v) I impose a combined penalty of Rs.5,000/- (Rupees Five Hundred only)
on SMALEX under erstwhile rules 9(2), 173Q and 226 of Central Excise Rules,
1944.
(vi) I impose a penalty of Rs.1,500.00 (Rupees One Thousand Five Hundred
only) on AACL under erstwhile rule 209A of Central Excise Rules, 1944.”
7. In the meantime, this private complaint was launched before the
learned Additional Chief Judicial Magistrate, Madurai in the year 2002 i.e.,
some time before the order dated 29.01.2002 was passed by the Commissioner. Now,
it is urged that the private complaint is liable to be quashed since the
Commissioner of Central Excise in the order referred to above has dropped the
recovery of differential duty and also the penal proceedings.
8. A detailed counter has been filed by the respondent wherein it
has been stated that the proceedings were dropped by the Commissioner only on
the ground of limitation and therefore that will not have any effect in the
criminal prosecution launched against the petitioner. It has been further stated
that the Commissioner in the order referred to above has clearly held that INDAL
is the manufacturer and so, the failure of the petitioner and INDAL to comply
with the provisions of Sections 9(1)(a), 9(1)(b), 9(1)(bb), 9(1)(c) and 9(1)(d)
of the Central Excise Act, 1944 would amount to offences.
9. I have carefully considered the rival submissions.
10. A careful scrutiny of the materials available on record,
including the final order made by the Commissioner of Central Excise in his
proceedings C.No.V./76/15/40/97.Adjn. dated 29.01.2002 would go to show that the
Commissioner has held that INDAL is the manufacturer of the goods. There is also
no dispute that the petitioner is the Senior Marketing Executive of the said
Company, who is responsible for the day to day affairs of the company. Under
Section 9(1)(a) of the Act, if any one contravenes any of the provisions of
Section 8, then it is an offence. Prima facie, in this case there are
allegations that as per the findings of the Commissioner of Central Excise,
INDAL was found in possession of excisable goods at the premises of SMALEX in
violation of Section 8 of the Act. Thus, there is a prima facie case, making out
an offence punishable under Section 9(1)(a) of the Act. Similarly, evasion of
payment of any duty payable under this Act is punishable under Section 9(1)(b)
of the Act. As found by the Commissioner in his final order and also from the
statement of the petitioner as well as the other persons, there are materials to
show that INDAL manufactured goods at the premises of SMALEX, sold away the same
to various customers during the relevant period and did not pay the duty in time
and thus, there is evasion of payment of duty. Thus, there are strong materials
available making out a prima facie case.
11. The next penal provision is Section 9(1)(bb) of the Act. It says
that removal of excisable goods in contravention of any of the provisions of the
Act or any rules is punishable. In this case, as stated above, there are
materials to make out a prima facie case that excisable goods which were
manufactured by INDAL at the premises of SMALEX at Madurai were sold to various
customers and they were also removed. The statement of the carrier of the goods
viz., one Mariyappan, Branch Manager of Rajalakshmi Transport, Madurai would go
to show that he used to take delivery of Aluminium finished goods from SMALEX
and transported the same to various destinations and when the consignments were
loaded in his lorries, the consignor’s name was always indicated as INDAL in the
way bills as well as in the outward Register. These materials would make it
clear that excisable goods were removed from SMALEX premises by INDAL in
contravention of the provisions and thus, there is no reason to quash the
proceedings in respect of the offence under Section 9(1)(bb) of the Act.
12. In respect of the offence under Section 9(1)(c), it is to be
seen that failure to supply any information to the Central Excise Department is
an offence punishable under this provision. In this case, there are materials to
show that information regarding manufacture of aluminium extrusions by INDAL at
the premises at SMALEX were not allegedly submitted to the Department. Thus,
there are prima facie allegations making out offences punishable under Sections
9(1)(c) and 9(1)(d) of the Act.
13. The learned Senior Counsel for the petitioner would submit that
since the proceedings for recovery of the amount, including the penal
proceedings have been dropped as per the order of the Commissioner, the private
complaint is liable to be quashed. But, I am not able to agree with the said
argument advanced for the simple reason that as per Section 11-A of the Act,
recovery of any duty which has not been levied or paid should be made within a
period of one year from the relevant date. The Commissioner in his order, though
has held that INDAL is the manufacturer and therefore liable to pay the duty,
still he has ordered for dropping of the proceedings only on the ground of
limitation. If the Commissioner has given a finding that INDAL is not the
manufacturer and therefore INDAL is not liable to pay any duty, then, there will
be every force in the argument of the learned Senior Counsel, requiring this
Court to accept the said argument. On the other hand, as stated above, in this
case, the Commissioner has specifically held that INDAL is the manufacturer. The
Government has been put to loss only on the ground of limitation. When the
Commissioner has so held that INDAL is the manufacturer, it goes without saying
that INDAL and the persons in charge of the company are liable to comply with
the provisions of the Act.
14. The learned Senior Counsel would rely on an unreported judgment
of this Court in Crl.O.P.No.35264 of 2005 dated 13.12.2006 (M/s.Together Textile
Mills ..Vs.. The Deputy Commissioner of Central Excise), wherein a learned
Single Judge has quashed the private complaint on the ground that the order
levying duty made by the Commissioner was set aside by the Appellate Authority
and when the matter is so pending before the Commissioner for adjudication, on
remand, private complaint for non-payment of duty is not maintainable. But, in
the case on hand, final order has been passed by the Commissioner wherein he has
clearly stated that INDAL is the manufacturer. So, the argument advanced by the
learned Senior Counsel that the private complaint is liable to be quashed in
view of the order passed by the Commissioner cannot be accepted at all.
15. The next ground raised by the learned Senior Counsel is that the
Central Board of Excise and Customs, New Delhi by letter F.No.208/31/97-CX.6,
dated 12.12.1997 has enhanced the monetary limit to launch prosecution from Rs.5
lakhs to Rs.25 lakhs prospectively so as to ensure better utilization of man
power, time and resources of the Department. Relying on the said letter, the
learned Senior Counsel would submit that since the levy in this case is for less
than Rs.25 lakhs, the prosecution is liable to be quashed. The learned Senior
Counsel would rely on a Judgment in Laxmi Narayan Sharma ..Vs.. Superintendent,
C. Ex & Cus. reported in 1996 (87) E.L.T. 345 (Raj) to substantiate his
contention that such circulars are binding on the officers of the Central Excise
Department.
16. Of course, it is true that in the said circular, the Board has
instructed the officers of the Central Excise Department to launch prosecution
against persons where the monetary limit exceeds Rs.25 lakhs. But, in my
considered opinion, such a circular is not binding on the criminal Court as held
by the Hon’ble Supreme Court in The Assistant Collector of Customs, Bombay ..Vs.
Melwani reported in A.I.R. 1970 S.C. 962 and this Court in South India Surgical
Company ..Vs.. K. Govindan, The Income Tax Officer reported in 2001 M.L.J.
1031. In my considered opinion, the said circular has got no relevance to the
facts of the present case at all. If it is a case relating to prosecution in
respect of non payment of duty alone, then the circular may be utilised by the
accused. But, in this case, the Prosecution is not only for evasion of duty but
also for non-furnishing of the information etc., which have got nothing to do
with the monetary limits mentioned in the circular. That apart, the said
circular is not binding on the Criminal Court. Under the provisions of the Act,
the offences stated in the complaint are cognizable. There are no fetters on the
power of the Court as mentioned in Section 190 Cr.P.C., to take cognizance of
these offences enumerated in the complaint. By means of such a Circular, no
Authority shall have the power to curtail the jurisdiction of a Judicial
Magistrate to take cognizance of an offence on a private complaint. Therefore,
the argument of the learned Senior Counsel that the lower Court ought not to
have taken cognizance on the private complaint since the respondent is precluded
from launching such a prosecution in view of the circular cannot be countenanced
at all.
17. Thus, this Court is of the considered opinion that prima facie
materials are available on record, requiring full fledged trial by the learned
Judicial Magistrate. I do not find any valid ground to quash the proceedings.
Hence, this Criminal Original Petition is dismissed. However, considering the
fact that the case has been pending for about six years, the Trial Court is
directed to dispose of the same as expeditiously as possible. It is also made
clear that the Trial Court shall not get influenced by any of the observations
made by this Court in this order.
Dpn/-
To:
1. The Additional Chief Judicial Magistrate,
Madurai.
2. The Assistant Commissioner of Central
Excise (Legal),
Office of the Commissioner of Central
Excise,
Central Revenue Building,
Madurai.