Sanjay Gadodia vs Union of India (UOI)

B.K. Patel, J.—Upon receipt of summon dated 05.11.2008 issued against the Managing Director, M/s. Scan Sponge Iron Limited (Unit-I & Unit-11) CM, Civil Township, Rourkela (for short ''the company'') from the office of the Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar-11 u/s 14 of the Central Excise Act, 1944 (for short ''the Act'') directing appearance for inquiry in "a case against M/s. Scan Sponge Iron Limited" under the Act failing which the petitioner will be liable to be punished under the law, the petitioner has filed this application for grant of anticipatory bail u/s 438 of the Criminal Procedure Code (for short ''the Cr. P.C.''). A counter affidavit has been filed on behalf of the Commissioner, Central Excise, Customs & Sales Tax, Bhubaneswar (for short ''the Department'').

It is stated in the application that the company is engaged in manufacture of M.S. Rods. In between 03.11.2008 and 05.11.2008, in the absence of the petitioner, the Department conducted search of and effected seizure in the company premises. Subsequently, the petitioner could come to understand that, in course of stock verification, shortage of M.S. rods was detected. It has been averred in the application that notice u/s 14 of the Act was issued thereafter, without assessing the petitioner''s liability to pay revenue or penalty for the alleged shortage, though an assessee is entitled to compound the demands towards tax, interest and penalty under the provisions of the Act. Due to such conduct on the part of the officers of the Department, the petitioner apprehends arrest u/s 13 of the Act. It has been averred that the petitioner''s arrest and detention shall be detrimental to his ill-health, in support of which documents have been filed, as well as prejudicial to the company. In course of hearing learned Counsel for the petitioner submitted that though the petitioner appeared before the Assistant Commissioner of the Range Office of the Central Excise Department in response to the summon, he has again been issued with another notice dated 12.12.2008 u/s 14 of the Act directing his appearance in the office of the Department at Bhubaneswar. Such circumstance has further fortified the apprehension that the officials of the Department may arrest him in the event of which he shall be subjected to humiliation, harassment and other deprivations. As the petitioner happens to-be a leading industrialist of the State, his incarceration shall be lower down his dignity in the society without benefiting the Department in any manner in as much as the petitioner is ready to co-operate with any inquiry in connection with the alleged shortage of M.S. rods and to compound any offence found to have been committed by the company.

It has been averred in the counter affidavit filed on behalf of the Department that the petitioner has "engineered the offence of irregular removal of excisable goods". Upon reference to documents brought to the notice of the Court in course of hearing it was categorically submitted by the learned Counsel appearing for the Department that there is prima facie evidence against the petitioner to have committed offence u/s 9(1)(bb) of the Act providing for punishment for commission of offence of removal of any excisable goods in contravention of any of the provisions of the Act or any rule made there under or in any way concerning with such removal. However, in opposing the motion for anticipatory bail, the learned Counsel for the Department raised two contentions. Firstly, it was argued that prosecution having been yet to be instituted against the petitioner, there is no scope for the petitioner to urge that he has reasonable apprehension of being arrested on the basis of summon issued u/s 14 of the Act requiring petitioner''s attendance to give evidence or produce documents in connection with inquiry relating to shortage of M.S. rods detected In the company premises. Secondly, upon reference to provisions under and some of the judicial pronouncements relating to the Customs Act, 1962, it was submitted that offences under the Act being economic offences, the petitioner is not entitled to be protected by exercise of jurisdiction u/s 438 of the Cr. P.C.

Apart from the above said two objections learned Counsel appearing for the Department In order to find fault with the application sought support from the decision of the Hon''ble Supreme Court in The Special Director and Another Vs. Mohd. Ghulam Ghouse and Another, . However, decision relied upon by the Department was directed against interim order passed in a writ petition by the Bombay High Court challenging issue of show cause notice under the Foreign Exchange Regulation Act, 1973 and Foreign Exchange Management Act, 1999, in which the Hon''ble Supreme Court did not approve the practice of entertaining writ petitions questioning legality of the show cause notices stalling enquiries as proposed and retarding the investigating process to find actual facts with the participation and in the presence of the parties unless it is found that the show cause notice was totally honest in the eye of law for absolute want of jurisdiction. Neither on facts nor on law the ratio of decision relied upon on behalf of the petitioner is applicable to the present application u/s 438 of the Cr. P.C.

As regards the first objection raised on behalf of the Department it may be pointed out that Section 14 of the Act simply provides for the power to summon persons to give evidence and produce documents in inquiries under the Act. It reads:

(1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purpose of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.

(2) All persons so summoned shall be bound to attend, either in person or by an authorized agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required:

Provided that the exemptions under Sections 132 and 133 of the CPC (5 of 1908) shall be applicable to requisitions for attendance under this Section.

(3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of Section 193 and Section 228 of the Indian Penal Code (45 of 1860).

In the present case it was categorically admitted that the inquiry in connection with which the petitioner has been summoned relates to accusation against the petitioner of commission of offence u/s 9(1)(bb) of the Act. u/s 9 of the Act, whoever commits any of the offences, including offence u/s 9(1)(bb), shall be punishable:

(i) in the case of an offence relating to any excisable goods, the duty leviable thereon under this Act exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine:

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such imprisonment shall not be for a term of less than six months;

(ii) in any other case, with imprisonment for a term Which may extend to three years or with fine or with both.

It was submitted on behalf of the Department that there is no basis for apprehension of arrest as prosecution is yet to be initiated. In reply, it was vehemently urged by the learned Counsel for the petitioner that the Act nowhere stipulates initiation of prosecution as a condition precedent of arrest. Rather, provision u/s 13 of the Act lays down that any Central Excise Officer not below the rank of Inspector of Central Excise may, with the prior approval of the Commission of Central Excise, arrest any person whom he has reason to believe to be liable to punishment under the Act or the rules made thereunder. In this context, relying upon the decision of this Court in Biswamitra Majhi and Another Vs. State of Orissa, it was further contended on behalf of the petitioner that initiation of prosecution is a not a condition precedent for excise of jurisdiction u/s 438 of the Cr. P.C. In the decision relied upon by the petitioner it has been observed that the Hon''ble Supreme Court in the case of Shri Gurbaksh Singh Sibbia and Others Vs. State of Punjab, has held that filing of F.I.R. is not a condition precedent to exercise power u/s 438 Cr. P.C. The imminence of a likely arrest founded on a reasonable belief can be shown to exist even If an F.I.R. is not yet filed. A plea can be said to be founded on reasonable grounds that the applicant may be arrested for a non-bailable offence and specific events and facts must be disclosed by the applicant in order to enable the Court to judge the reasonableness of the plia. In the present case, there being categorical admission by the Department to the effect that the Inquiry In connection with which summon has been issued against the petitioner u/s 14 of the Act relates to inquiry in connection with accusation of commission of offence u/s 9(1)(bb) of the Act against the petitioner, the apprehension of the petitioner to be arrested u/s 13 of the Act does not appear to be an unreasonable or unfounded plea. Rather, provisions under Sections 19, 20 and 21 of the Act support the plea of the petitioner that he has reason to believe that he may be arrested on accusation of having committed offence under the Act in course of inquiry.

Provisions u/s 19, 20 and 21 read as follows:

Disposal of persons arrested. - Every person arrested under this Act shall be forwarded without delay to the nearest Central Excise Officer empowered to send persons so arrested to a Magistrate, or, if there is no such Central Excise Officer within a reasonable distance, to the officer-in-charge of the nearest police station.

Procedure to be followed by officer-in-charge of police station - The officer-in-charge of a police station to whom any person is forwarded u/s 19 shall either admit him to bail to appear before the Magistrate having jurisdiction, or in default of bail forward him in custody to such Magistrate.

Inquiry how to be made by Central Excise Officers against arrested persons forwarded to them u/s 19(1) When any person is forwarded u/s 19 to a Central Excise Officer empowered to send persons so arrested to a Magistrate, the Central Excise Officer shall proceed to inquire into the charge against-him.

(2) For this purpose the Central Excise Officer may exercise the same powers and shall be subject to the same provisions as the officer-in-charge of a police station may exercise and is subject to under the Code of Criminal Procedure, 1898, when investigating a cognizable case:

Provided that-

(a) if the Central Excise Officer is of opinion that there is sufficient evidence or reasonable ground of suspicion against the accused person, he shall either admit him to bail to appear before a Magistrate having jurisdiction in the case, or forward him in custody to such Magistrate;

(b) if it appears to the Central Excise Officer that there is not sufficient evidence or reasonable ground of suspicion against the accused person, he shall release the accused person on his executing a bond, with or without sureties as the Central Excise Officer may direct, to appear, if and when so required before the Magistrate having jurisdiction, and shall made a full report of all the particulars of the case to his official superior.

Also, as submitted, copy of the summon annexed to the anticipatory bail application shows that the petitioner has been cautioned that he would be liable to be punished under the Act in case he fails to comply with the summon as the inquiry is deemed to be a "judicial proceeding" within the meaning of Sections 193 and 228 of the I.P.C. in view of the provision contained u/s 14(3) of the Act.

As regards the second objection, reliance by the Department on the provisions and the judicial pronouncements relating to Customs Act, 1962 is misplaced. Aims and objects of the Customs Act and the Act are different. One of the basic objects of the Customs Act is to meet the problems arising out of smuggling whereas the object of the Act is to consolidate and amend the law relating to central duties of excise on goods manufactured or produced in certain parts of India. Moreover, provisions under Sections 19, 20 and 21 of the Act go to show that Legislature has made liberal provisions relating to bail under the Act akin to provision under Sub-section (1) of Section 436 of the Cr. P.C. for grant of bail to a person other than a person accused of non-bailable offence.

A person arrested under the Act has to be immediately forwarded to the nearest Central Excise Officer empowered to send persons so arrested to a Magistrate, or, if there is no such Central Excise Officer "within a reasonable distance, to the officer-in-charge of the nearest police station as provided u/s 19 of the Act. u/s 20 of the Act, the officer-in-charge of the police station to whom any person is forwarded u/s 19 of the Act is required to admit such person to bail directing him to appear before the Magistrate having jurisdiction, or in case of default on the part of the person arrested to furnish bail, the officer-in-charge of the police station may forward him in custody to the Magistrate. When a person is forwarded to a Central Excise Officer u/s 19 of the Act, such Central Excise Officer is required u/s 21(2)(a) of the Act to either admit him to bail to appear before the Magistrate having jurisdiction in the case, or forward him in custody to such Magistrate in case the Central Excise Officer, in course of inquiry into the charge against him arrives at the opinion that there is sufficient evidence or reasonable ground of suspicion against such person. As has been pointed out by the Hon''ble Supreme Court in Badku Joti Savant Vs. State of Mysore, , the powers of arrest and search conferred on Central Excise Officers are really in support of their main function of levy and collection of duty on excisable goods.

Moreover, offences u/s 9 of the Act are not only compoundable but also non-cognizable. Section 9A of the Act reads as follows:

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), offences u/s 9 shall be deemed to be non-cognisable within the meaning of that Code.

(2) Any offence under this Chapter may, either before or after the institution of prosecution, be compounded by the Chief Commissioner of Central Excise on payment, by the person accused of the offence to the Central Government, of such compounding amount as may be prescribed.

Thus, it is abundantly clear that though, the offence, on accusation of which inquiry has been initiated against the petitioner, is punishable with such term of imprisonment which makes the offence non-bailable in view of Table II of the First Schedule to the Criminal Procedure Code, the Act has prescribed liberal provisions relating to grant of bail to persons accused of offences u/s 9 of the Act. In view the objects of the Act and the liberal provisions relating to grant of bail, it is obvious that the Act does not contemplate incarceration of a person accused of any offence u/s 9 of the Act for an indefinite period as an under-trial prisoner. Section 20 of the Act obliges officer-in-charge and Section 21 of the Act obliges the Central Excise Officers to admit person arrested in connection with commission of offences punishable under the Act to bail. Section 20 of the Act provides that the officer-in-charge of a police station shall admit such person to bail to appear before the Magistrate having jurisdiction. Therefore, the very purpose of arrest under the Act appears to be to only secure attendance before the Central Excise Officer for Inquiry or before the Magistrate having jurisdiction.

Under the scheme of the provisions under Sections 19, 20 and 21 of the Act every person arrested under this Act has to be forwarded without delay to the nearest Central Excise Officer who is empowered to send persons so arrested to a Magistrate. It is only if such an officer Is nql found within reasonable distance that the arresting officer is empowered to sendthe person arrested to the police station. The Magistrate, to whom the arrested person is forwarded can release or discharge the arrested person by exercise of power under the Cr. P.C. If an arrested person is forwarded u/s 19 of the Act to the officer-in-charge of the nearest police station, that officer is not required to conduct any investigation, but is obliged by Section 20 of the Act, either to admit him to bail, or in default of bail, forward him in custody to a Magistrate, having jurisdiction. It is pertinent to note that a police officer, u/s 20 of the Act, is bound to take bail if forthcoming. However, a Central Excise Officer, under proviso (a) to Sub-section (2) of Section 21 of the Act has a discretion.

In view of the discussion made above, considering the peculiar facts and circumstances of the case, the submissions made on behalf of the petitioners and Department as well as the statutory provisions under the Act, it is found just to allow the prayer for anticipatory bail. Accordingly, it is directed that in case the petitioner is arrested u/s 13 of the Act in connection with accusation relating to above said inquiry, he shall be admitted to bail by the arresting officer on such terms and conditions as deemed proper in order to secure the petitioner''s appearance before the concerned Central Excise Officer or Magistrate having jurisdiction in the case.

The BLAPL is, accordingly, disposed of.