K.C. Vanaspati vs Asstt. Collector of C. Ex. and Cus.

Jai Singh Sekhon, J.—Messrs K.C. Vanaspati is a duly registered firm and is an assessee under the various Acts including the Central Excises and Salt Act, 1944 (for short ''the Act'')- The said firm is a licensed unit and is engaged in the manufacture of vegetable products falling under Tariff Item No. 13. Accused-respondents 2 to 7 are incharge and responsible for the conduct of the business of the firm. The audit party during its visit to the factory of accused No. 1 (the present petitioner) in the month of August and November, 1983, noticed that its partners accused respondents Nos. 1 to 7 were recovering additional amounts shown as distribution charges and levies from their dealers over and above the control price and they were not paying any Central Excise duty on those additional charges. The Range Officer, Jammu created certain demands of excise duty for the period from September 1, 1981 to March 31, 1983. The partners of the said firm-accused No. 1, however, stopped this practice of charging additional amounts after 1983. On its next visit, the headquarters audit-party in August, 1985, detected that these accused had changed the modus operandi and were issuing debit notes to their dealers in lieu of the so-called distribution charges and levies. The firm through Shri Ganesh Dass, accused No. 2 was asked to produce the sale ledger that the same was not produced before the audit-party on the plea that the said ledger was with the Dealing Assistant, who was reported to be not available in the factory. The audit party also noticed that accused Nos. 8 and 10 were lifting the entire stocks of products of accused No. 1 and that accused Nos. 8 and 10 were self-floated bogus firms existing on papers only as the products were being delivered directly to the ultimate consignee and the gate passes and invoices were being issued in the name of either of accused Nos. 8 or 10 purportedly showing the sales through accused Nos. 8 and 10. The headquarters audit party noticed the transactions to be shady and suspicious. The Chandigarh Collectorate on September 10, 1985, issued summonses requiring accused No. 1 to produce its ledgers and RT-12 while accused Nos. 8 and 10 were asked to produce their sale invoices for September 24,1985 received from Messrs K.C. Vanaspati (accused No. 1). However, these accused did not produce the said documents despite issuing summonses and registered notices on one pretext or the other. Ultimately, these accused-respondents were served to appear on January 7, 1986 alongwith the documents mentioned therein and on the failure of these accused persons to produce the relevant record, a complaint dated November 17, 1986 was filed by the Assistant Collector (Audit), Central Excise Collectorate, Chandigarh, for offence u/s 9 of the Act.

The learned Chief Judicial Magistrate vide order dated October 13, 1987, summoned the accused-petitioners for November 26, 1987, but notice was not issued for failure to file process fee, et cetera. Thereafter, on November 26, 1987, notice was ordered to be issued to the accused-respondents for January 7, 1988. The petitioner then got the orders of summoning quashed in Criminal Writ Petition No. 426 vide order dated July 28, 1989, passed by S.D. Bajaj, J. of this Court (as he then was), on the ground of non-application of mind.

Thereafter, the learned Chief Judicial Magistrate passed a detailed order dated March 9,1990 and summoned the accused including the petitioner for April 10, 1990. The accused No. 1 petitioner being aggrieved against that order had sought the quashment of the complaint, Annexure P-l as well as summoning order, Annexure P-2 on the ground of non-application of mind as well as on the ground that the allegation in the complaint does not make out any offence. The jurisdiction of the Court, at Chandigarh, to entertain the complaint was challenged on the ground that the offence was committed at Jammu and not in the territorial jurisdiction of Chandigarh. Objection was also taken regarding the complaint being barred by limitation u/s 40 of the Act. It was also maintained that the Assistant Collector (Audit) was not empowered to institute complaint or issue requisition for producing the record u/s 14 of the Act. On merits of the case, it was averred that the requisite record had already been produced before the audit party and it was returned to the petitioner after due appraisal.

This petition was resisted through return filed by Shri Malkiat Singh, Assistant Collector (Audit) Central Excise Collectorate, Chandigarh, reiterating the allegations in the complaint. It was further maintained that the Collector, at Chandigarh, was fully competent u/s 14 of the Act for summoning any assessee to produce the record at any place within the jurisdiction of Collector at Chandigarh. It was also stated that the respondents had produced incomplete records and had deliberately avoided to supply the records showing break-up of distribution charges, which are required to be included in the assessable value. It was also maintained that the Chief Judicial Magistrate had summoned the petitioner to face trial for offence u/s 9 of the 1944 Act after due application of mind.

I have heard the learned counsel for the parties, besides perusing the record.

On the point of territorial jurisdiction of the Courts at Chandigarh to take cognizance of the offence u/s 9 of the Act, it transpires that at this stage, the averment in the complaint have to be considered. The perusal of the complaint, Annexure P-l clearly shows that the headquarters audit party had detected the above referred evasion of Central Excise tax and summons were issued to the accused-respondents from Chandigarh to appear before the Collectorate and produce the specific records. On the failure of the accused-respondents to produce the records at Chandigarh, the offence u/s 9(1)(c) of the Act has been committed. Thus, ex facie the Courts at Chandigarh had jurisdiction to take cognizance of the offence and try the complaint u/s 9 of the Act.

There is no force in the second contention of Mr. S.C. Sibal, the learned counsel for the petitioner, that the Assistant Collector (Audit) was not invested with the powers u/s 14 of the Act to file complaint against the accused-respondents or to require the accused to produce certain records. As the complainant had specifically averred so in the complaint, while the accused-petitioner had failed to place any document on the record to rebut this averment. The observations of the Tribunal in 1989 (42) ELT 593 to the effect that the audit party was not authorized to record statements u/s 108 of Customs Act, 1962, as made applicable to the Act, have no relevance to the facts of the case in hand, as herein the accused-petitioner is not being prosecuted on the basis of any statement recorded by the audit party but on the basis of their refusal to produce the relevant record for examination of the concerned authorities.

Mr. Sibal further contended on the basis of the observations of the Division Bench of Allahabad High Court in Hindustan Safety Glass Works Ltd. Vs. Assistant Collector, Central Excise, that the complaint does not disclose any offence as the documents required to be produced have no relevance to the inquiry involved, but it is an attempt to collect material by wholesale production of documents during a fishing inquiry. No doubt, the Allahabad High Court had set aside the summons for production of wholesale documents by holding that the Collector cannot make fishing inquiry but should have summoned the relevant record only, yet all the same in the case in hand, these observations are not helpful to the case of the petitioner, as perusal of the complaint shows that only specific relevant record had been summoned from the accused-petitioner as well as from other accused. The petitioner was required to produce the sale ledger and RT-12 returns while the other accused Nos. 8 to 10 were required to produce the sale invoices received from Messrs K.C. Vanaspati, i.e. the present petitioner. Thus by no stretch of imagination, it can be said that the irrelevant documents or production of wholesale documents were called for by the Collector in this case.

Regarding the claim of the petitioner having already produced the relevant record before the Audit Authorities or the Central Excise Collector, Chandigarh vide receipts Annexures P-3 and P-4 and the return of these documents vide Annexure P-5, it transpires that vide receipt Annexure P-3, Ledger Book (G-19) and RT-12 returns of Messrs K.C. Vanaspati (petitioner) were produced before the Superintendent (Audit) Central Excise Collector, Chandigarh on 19-12-1988, while the receipt Annexure P-4 reveals that Messrs K.C. Vanaspati produced the balance sheet for the year 1984-85 while other accused Nos. 8 to 10 had produced the sale invoices from 1-10-1984 to 31-3-1985 and 29-9-1984 to 31-3-1985 respectively. This receipt is dated 23-1-1989 whereas the complaint was filed on 17-11-1986. The refusal to produce the document is a continuing offence u/s 9(1)(c) of the Act as every refusal gives rise to a fresh cause of action. Thus, the production of these documents much after the filing of the complaint is of no consequence to absolve the petitioner or other accused of the offence u/s 9(1)(c) of the Act having been committed by them before the filing of the complaint. The factum that these documents were returned to the petitioner on 30-3-1990 by the Assistant Collector (Audit) is also of no consequence.

Lastly, Mr. Sibal contended that the learned Chief Judicial Magistrate had failed to apply its mind to the facts and circumstances of the case before summoning the accused respondent to face trial for offence u/s 9 of the Act. There is considerable force in this contention as the perusal of para 3 of the impugned order dated 9-3-1990 reveals that after going through the complaint, the learned Chief Judicial Magistrate concluded that the accused had defaulted in making payment of excise duty and also avoided service. Thus, a prima facie case is made out against the accused for offence u/s 9 of the 1944 Act. The provisions of Section 9 of the Act read as under :-

xx xx xx xx xx xx xx xx xx A bare perusal of the same leaves no doubt that the accused had committed the offence u/s 9(1)(c) of the Act on their failure to produce the relevant record. The evasion of the tax is yet to be assessed by the authorities after examining the said record. There is no question of avoiding service by the accused including the petitioner because as per averments in the complaint, they have accepted service but failed to produce the summoned record on one pretext or the other. Thus, the above referred conclusion of the trial Court regarding the accused having defaulted in making payment of excise duty and also avoided service, to reveal non-application of mind to the controversy involved in this complaint.

Consequently, there is no escape but to quash the summoning order and resultant proceedings therefrom on the ground of non-application of mind in view of the observations made by this Court in Krishan Murari and Ors. v. Mohinder Pal 1983 (1) R.C.R. 21 and Lachhman Dass v. Union Territory, Chandigarh 1985 (2) C.L.R. 120. It is ordered accordingly. It is, however, clarified that the trial Court shall be at liberty to pass a fresh order after due application of mind in accordance with law regarding the summoning or non-summoning of all the accused-respondents in this complaint. The Criminal Misc. Application stands partly accepted to the extent indicated above. A copy of this order be sent to the trial Court for necessary action.