M/S Dhllon Kool Drinks And Beverages Ltd. And Ors vs Govt. Of India, Central Excise Department

Mandeep Pannu, J

Present petition has been filed under Section 482 Cr.P.C. for quashing of impugned criminal complaint titled "Anil Swami Versus Dhillon Kool Drinks & Beverages Ltd. and others" dated 02.08.2008 (Annexure P/5) under Sections 9 and 9AA of the Central Excise Act, pending in the Court of learned Chief Judicial Magistrate, Panipat, as well as summoning order dated 07.01.2009 (Annexure P/6) passed therein.

Briefly stated, the complaint was filed by the Assistant Commissioner, Central Excise, Panipat, against the present petitioners under Sections 9 and 9AA of the Central Excise Act, 1944 alleging that petitioner No.1-Company was engaged in manufacturing aerated water (Pepsi) at its factory situated at Village Asgarpur, G.T. Road, Panipat and was holding Central Excise registration for manufacture of aerated water. It was alleged in the complaint that the Deputy Commissioner, Central Excise Division, Sonepat had earlier withdrawn the facility of fortnightly payment of duty and payment of duty through RG-23A Part-II for a specified period. However, despite the said order, the accused persons allegedly started showing payment of Central Excise duty by manipulating entries in the PLA account without actually depositing the requisite amount in the designated bank. The further allegations in the complaint are that the accused persons cleared goods involving Central Excise duty by making fictitious debit entries in their account current and fraudulently enhanced the credit limit in the PLA account on the basis of fictitious TR-6 challans without actual deposit of duty amount. It was alleged that in this manner inadmissible credit to the tune of Rs.1,63,00,000/- was taken and credit amounting to Rs.1,69,38,241/- was wrongly utilized, thereby causing total recoverable amount of Rs.3,32,38,241/-. It was further alleged that during investigation and inspection conducted by the department, the accused persons failed to produce relevant TR-6 challans and statements of the concerned officials were recorded. A show cause notice was thereafter issued and, pursuant to adjudication proceedings, duty amounting to Rs.1,69,38,241/- along with penalty was confirmed against the accused persons. On the basis of the aforesaid allegations, the present complaint came to be instituted against the petitioners.

Learned counsel for the petitioners contends that the entire dispute pertains to adjudication under the Central Excise Act and the petitioners had already deposited the duty amount along with interest much prior to issuance of the show cause notice. It is further contended that the adjudication order dated 11.10.2006 was initially passed ex parte by the Commissioner, Central Excise, against which the petitioners preferred an appeal before the learned CESTAT and the matter was remanded for fresh adjudication vide order dated 09.04.2007. It is further contended that thereafter fresh order dated 19.11.2007 was passed by the Commissioner confirming the demand and imposing penalty, against which the petitioners again preferred appeal before the learned CESTAT and the operation of the said order was stayed vide order dated 07.04.2008. However, despite the aforesaid stay order having been passed by the learned CESTAT, the respondent-department concealed the said fact and instituted the present complaint dated 02.08.2008 under Sections 9 and 9AA of the Central Excise Act. Learned counsel further submits that there was no fraudulent intention or mens rea on the part of the petitioners and at the most the matter pertained to clerical/accounting irregularities for which the entire duty along with interest already stood deposited much prior to issuance of show cause notice. It is argued that continuation of criminal proceedings in such circumstances amounts to abuse of process of law. It is further contended that subsequently the learned CESTAT vide detailed order dated 31.08.2016 decided the appeal in favour of the petitioners and specifically held that the petitioners had not contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2001 and accordingly the demand of Rs.1,69,38,241/- was set aside. It has also been noticed by the learned CESTAT that the disputed amount already stood deposited along with interest much prior to issuance of the show cause notice and the role of company officials was also not specifically established. Learned counsel for the petitioners further submits that though earlier two petitions bearing CRM-M-25854 of 2010 and CRM-M-3786 of 2011 were filed seeking quashing of the complaint, the same were dismissed as withdrawn vide orders dated 06.09.2010 and 25.02.2011, respectively, as at that stage the appeal before the learned CESTAT was still pending and no final adjudication had been rendered in favour of the petitioners. It is contended that after passing of the final order dated 31.08.2016 by the learned CESTAT, a fresh cause of action accrued in favour of the petitioners and therefore the present petition is maintainable, particularly when the earlier petitions were not dismissed on merits but were merely withdrawn. It is thus argued that in view of the subsequent adjudication by the learned CESTAT completely setting aside the demand and holding that there was no contravention of the Rules, continuation of the criminal complaint and summoning order would amount to abuse of the process of Court and deserve to be quashed.

Learned counsel for the respondent, on the other hand, has vehemently opposed the present petition and argued that the instant petition is the third petition filed by the petitioners seeking quashing of the same complaint and summoning order and therefore the same is not maintainable. It is submitted that earlier CRM-M-25854 of 2010 was dismissed as withdrawn vide order dated 06.09.2010 and thereafter CRM-M-3786 of 2011 was also dismissed as withdrawn vide order dated 25.02.2011 and, thus, the petitioners cannot be permitted to repeatedly invoke the inherent jurisdiction of this Court for the same relief. Learned counsel for the respondent further contends that merely because the learned CESTAT has subsequently passed order dated 31.08.2016 in favour of the petitioners, the criminal prosecution would not automatically come to an end. It is argued that adjudication proceedings under the Central Excise Act are civil proceedings whereas the present complaint pertains to criminal liability under Sections 9 and 9AA of the Central Excise Act and both proceedings can continue simultaneously. It is further submitted that even in the order passed by the learned CESTAT, there are observations regarding the conduct of the petitioners and the payments having been made subsequently and therefore criminal culpability cannot be said to have been wiped out merely on account of adjudication proceedings having culminated in favour of the petitioners. Learned counsel has, however, not disputed the fact that the duty amount along with interest stood deposited by the petitioners.

I have heard learned counsel for the parties and have gone through the paper-book as well as the judgments relied upon.

At the outset, this Court finds that the present petition cannot be held to be non-maintainable merely because earlier two petitions were dismissed as withdrawn vide orders dated 06.09.2010 and 25.02.2011 respectively. A perusal of the said orders clearly reveals that the earlier petitions were not dismissed on merits and no adjudication was made by this Court upon the controversy involved. At the relevant time, the appeal preferred by the petitioners before the learned CESTAT was still pending consideration and the final adjudication in favour of the petitioners had not yet been rendered. Subsequently, the learned CESTAT vide order dated 31.08.2016 has decided the appeal on merits and categorically held that the petitioners had not contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2001 and accordingly the demand of Rs.1,69,38,241/- was set aside. Thus, the subsequent adjudication by the learned CESTAT constituted a material change in circumstances giving rise to a fresh cause of action in favour of the petitioners and therefore the present petition is clearly maintainable.

This Court further finds that the controversy involved in the present case is substantially covered by the judgment passed by the Coordinate Bench of this Court in M/s Dhillon Kool Drinks & Beverages Ltd. and others versus Government of India in CRM-M-53768 of 2007 decided on 09.05.2008, wherein under similar circumstances criminal proceedings initiated under the provisions of the Central Excise Act were quashed after noticing that the adjudication proceedings had already been decided in favour of the assessee by the competent Appellate Tribunal. The Coordinate Bench, while relying upon various judgments including Joseph P. Bangera versus State of Maharashtra, 2005(13) SCC 558, Jagan Nath Nagpal & Co. versus Assistant Collector of Central Excise 1994 (70) ELT 63 (P&H) and Bihariji Manufacturing Company Pvt. Ltd. versus Commissioner of Central Excise, 2007 (12) RCR (Criminal) 883 held that though adjudication proceedings and criminal prosecution may simultaneously continue, however criminal prosecution cannot be permitted to continue once the competent appellate authority decides the matter on merits in favour of the assessee and the very basis of prosecution disappears.

In the present case also, the learned CESTAT has not granted relief to the petitioners on any technical ground, rather the matter has been adjudicated on merits and a categorical finding has been recorded that the petitioners had not contravened the provisions of Rule 8(3A) of the Rules. The learned CESTAT has also specifically noticed that the disputed amount along with interest had already been deposited much prior to issuance of the show cause notice. Once the very demand forming basis of the criminal complaint has been set aside by the competent Tribunal on merits, continuation of criminal proceedings would clearly amount to abuse of process of law.

Moreover, the complaint itself was instituted despite concealment of the fact that the learned CESTAT had already stayed the adjudication order vide order dated 07.04.2008. The very substratum of the prosecution thus no longer survives after the final adjudication rendered by the learned CESTAT on 31.08.2016.

Accordingly, in view of the facts and circumstances noticed hereinabove and in the light of the law laid down by the Coordinate Bench of this Court in CRM-M-53768 of 2007 decided on 09.05.2008, the present petition is allowed. Criminal complaint titled "Anil Swami Versus Dhillon Kool Drinks & Beverages Ltd. and others" dated 02.08.2008 pending in the Court of learned Chief Judicial Magistrate, Panipat, under Sections 9 and 9AA of the Central Excise Act, along with summoning order dated 07.01.2009 and all consequential proceedings arising therefrom, are hereby quashed.

All pending applications, if any, also stand disposed of.