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Judgment
V. Rengaswamy, J.—This appeal arises against the order of acquittal passed by the learned Additional Chief Judicial Magistrate, Madurai in C.C. No. 89/1986 for the alleged offence u/s 9(1)(bb)(ii) of the Central Excise and Salt Act, read with Rule 64 of the Central Excise Rules.
The Appellant was the licensee for running M/s. Annai Valliammai Match Works, situated in Pandavarmangalam, Kovilpatti for the manufacture of the match boxes. P.W.3 on 16.6.1984 was working as Inspector of Central Excise in Bharathi Nagar Range at Kovilpatti. On that date 50 bundles of Card Board match boxes were consigned from M/s. Annai Valliammai Match Works to Deluxe Match Company situated in the same town. The bundles had two brand names viz. Sharp Brand of 25 bundles with Numbers 1301 to 1325 and Janatha Brand 25 bundles having the Numbers 1326 to 1350. P.W.3 gave the clearance for consigning these bundles by issuing the Gate Pass No. 25 marked as Ex.P.1. This Gate Pass was signed by the accused/Respondent also. These bundles were delivered in the premises of Deluxe Match Company for which one Narayanan was the Company Manager. P.W.1 the Superintendent of Preventive Group of the Central Excise Department inspected the premises of Deluxe Match company on 19.6.1984 and the 50 bundles despatched from M/s. Annai Valliammai Match Works were inspected. When they inspected the Serial No. 1311 contained in the Sharp Brand bundle, they found the Central Excise Stamp on the bundle suspicious. Therefore, they thoroughly checked the bundles containing the Serial Nos. 1313 to 1319. They were satisfied that the Central Excise Stamps on the bundle Rolls were counterfeited, but in the other bundles of Janatha Brand, no such malpractice was found. However, they seized all the 50 bundles and from the bundles containing the serial Nos. 1311, 1313 and 1319, sixteen match boxes were taken out and they were packed into four bundles. The signature of the Manager of the Deluxe Match Company also was obtained on the packets. Out of the four bundles, one bundle was handed over to Mr. Narayanan, the Manager of the Deluxe Match Company and the other three bundles together with the rest of the match box bundles of Sharp Brand and Janatha Brand were taken to their office. M.O.1 series is of the 12 match boxes seized out of the 40 match boxes. The statement Ex.P.2 was also obtained to this effect from the Manager of the Company viz. Deluxe Match Company. Ex.P.3 is the seizure mahazar for the entire 50 bundles from the said company. These seized match boxes were sent to Nasik for forensic examination and the report Ex.P.5 was received which reads that the Central Excise Stamp on the match boxes containing the Sharp Brand were counter-feited. P.W.2 the Superintendent of Preventive Group of Central Excise Stamp on the match boxes department, examined the accused Respondent on 17.9.1984 and he gave his statement Ex.P.4. As the report of the Forensic Laboratory was to the effect that the stamps were counterfeited, the Assistant Collector, Central Excise issued a show cause notice under Ex.P.6 for the adjudication proceedings. Ex.P.7 is the order of the Assistant Collector in the adjudication proceedings. As the bundles of the match boxes were despatched from the premises of the Annai Valliammai Match Works to Deluxe Match Company with the Central Excise stamps which were counterfeited for the purpose of evading the excise duty, it was violation under Rule 64 of the Central Excise Rules and therefore, this Respondent/accused was prosecuted u/s 9(1)(bb)(ii) of the Central Excise and Salt Act.
Three witnesses were examined on the prosecution side viz. P.W.1, who seized the match box bundles, P.W.2 who recorded the statement of the accused/Respondent and P.W.3 who spoke about the permission granted for the movement of the match box bundles from the factory of the Respondent. The Respondent/accused was examined. D.W.1 who have stated that the Respondent Was working in a Co-operative Match Industries viz. Kalai Vanar Co-operative Society and he had attended the factory on 16.6.1984 where he was working till 6.00 p.m. The learned Additional Chief Judicial Magistrate, Madurai after considering the evidence has found that as some other persons also were associated with Annai Valliammai Match Works, the Respondent/accused who alone was prosecuted, could not be found guilty and therefore, he acquitted the accused. Challenging this order of the learned Additional Chief Judicial Magistrate, Madurai, the complainant has come forward with this appeal.
The learned Counsel appearing for the Appellant Mr. Prakash would contend that the lower Court was misled by the adjudication proceedings under Ex.P.7 which has nothing to do with the prosecution of the Respondent/accused for the offence u/s 9(1)(bb)(ii) of the Central Excise and Salt Act, as this penal Section is for the violation of Rule 64 of the Central Excise Rules, which is more or less civil in nature, imposing the vicarious liability upon the Respondent the licence holder of the factory and therefore, the findings of the Court below is a clear error of law which has to be set aside.
On the other hand, it is contended for the Respondent/accused by Miss. Uma Venkatraman that the Respondent/accused alone was not the person responsible to carry on the business of M/s. Annai Valliammai Match Works and admittedly the other persons Selva Raj, Balakrishnan also had important role for running the said factory, the alleged malpractice could have been committed by any other person and when such a possibility is there, the Respondent/accused cannot be punished u/s 9 of the Central Excise Act.
It is worth to mention that the facts alleged by the prosecution in this case are not in dispute except the contention taken by the Respondent that he did not sign in Ex.P.1, Gate Pass. Admittedly the Respondent/accused is the license holder for Annai Valliammai Match Works in Pandavarmangalam of Kovilpatti. P.W.3 has spoken the clearance of 50 bundles of Gate Pass on 16.6.1984 from Annai valliammai Match Works to Deluxe Match Company under the Gate Pass Ex.P.1 for which he gave clearance. Therefore, the consignment of the 50 bundles containing Sharp Brand label match boxes and Janatha Brand label match boxes, is proved by the evidence of P.W.3. These bundles have been received by the Deluxe Match Company and P.W.1 has spoken about the inspection of the premises of Deluxe Match Company on 19.6.1984. At that time it was found, that the labels rolled on the Sharp Brand match box bundles, were having counterfeit Central Excise Stamps. They were seized under Ex.P.3 and the Manager of Deluxe Match Company also gave a statement Ex.P.2 for the inspection conducted by the Central Excise Official P.W.1 and seizure of the match box bundles by them. This fact also is not challenged by the Respondent/accused by suggesting anything contra in the cross examination. The seized bundles were sent to Nasik for forensic examination and Ex.P.5 report reads that the labels found on Sharp Brand bundles were counterfeited. This fact also has not been challenged in the evidence, by the accused. Therefore, it is now proved that the match boxes manufactured by M/s. Annai Valliammai Match Works were transported from the factory to a dealer viz. Deluxe Match Company with counterfeit Central Excise stamps for the purpose of evading the duty for the despatched match boxes. Even though P.W.3 would say that when die match box bundles were cleared from the premises of Annai Valliammai Match Works, by issuing the Gate Pass Ex.P.1 in which the Respondent/accused signed the Respondent would deny this fact of the signing Ex.P.1 Gate Pass. The Court below also has found that the signature found in the Gate Pass Ex.P.1 differs from the admitted signature of the accused. But one thing should be borne in mind at this stage, that is, this prosecution against the accused is not for counterfeiting the Central Excise Stamp which is punishable under the I.P.C., but this proceeding is only for the violation of Rule 64 of the Central Excise Rules for moving out the match boxes without paying the appropriate duty.
Rule 225 of Central Excise Rules reads as follows:
If any excisable goods are in contravention of any condition prescribed in these rules, removed by (any person) from the place where they are produced, manufactured or warehoused; the producer or manufacturer or the (registered person) or keeper of the warehouse shall be held responsible for such removal, and shall be liable to be dealt with according to the provisions of the Act or the Rules as if he had removed the goods himself.
This Rule empowers the complainant, the Central Excise Department to prosecute either the manufacturer or the registered person or the keeper of the warehouse for the contravention of the conditions prescribed under the Rules while removing the goods from one place to other place. Now the contention by the learned Counsel for the Respondent/accused Miss. Uma Venkatraman is that the Central Excise Department after a thorough enquiry had issued notices to the persons by names Selvaraj, Balakrishnan, Murugan the Respondent herein and die Deluxe Match Company for violation of the Rules after being satisfied that they had connection with M/s. Annai Valliammai Match Works and therefore, without prosecuting all those persons, the prosecution of this Respondent/accused alone is not in confirmity with the law. She further contended that there is no proof for the mens rea in this case for the accused, as the evidence of D.W.1 is to the effect that the Respondent/accused was working in some other Co-operative Match Industry where he was expected to work till 6.00 p.m. from the morning and as there is no evidence to hold that this Respondent/accused was a party to this violation or counterfeiting of the stamps he cannot be prosecuted without arraying the other parties who had control in the administration of M/s. Annai Valliammai Match Works. During the course of enquiry of the accused/Respondent, it appears that he had stated that one Selvaraj was the person who was actually running M/s. Annai Valliammai Match Works. When the said Selvaraj was enquired, he said that he was working only as an accountant and his brother-in-law A. Balakrishnan was the real proprietor of the match industry and though he obtained the genuine Central Excise Stamps from the Government for the purpose of affixing in the bundles, in his absence, the said Balakrishnan had displaced them with counterfeit stamps and he was responsible for this malpractice. When Balakrishnan was examined by the officials of Central Excise Department, he said that he is owning some other Match Industry and he had nothing to do with M/s. Annai Valliammai Match Works. Therefore, when each of them was pointing out a third person to be the proprietor of this match box industry, the Central Excise Department took adjudication proceedings against all of them. In the adjudication proceedings the authorities found that the said Balakrishnan had procured Central Excise Stamps in a manner otherwise than as provided in the Rules and had affixed the counterfeit Central Excise Stamps on the match box bundles. This Respondent/accused was found to have violated the Rule 178(2) of the Central Excise Rules by transferring his business to another person without getting proper permission from the proper officer. Though he would say that he is the licence holder of M/s. Annai Valliammai Match Works, the statement Ex.P.4 would show that the business was run by one Selvaraj. Therefore, in the adjudication proceedings, it was viewed that he had transferred his business to another person without proper permission which is a violation u/s 178(2) of the Central Excise Rules. Similarly the said Selvaraj also was found responsible for affixing the counterfeit Excise Stamps on the match box bundles. Therefore, Ex.P.7 order was passed by the Assistant Collector of Central Excise imposing fine upon these persons. It is this order that was very much relied upon by the lower Court to hold that in the absence of others who were parties to that proceedings, the Respondent/accused alone cannot be penalised.
The learned Counsel for the Appellant Mr. Prakash relying upon the decision of the Punjab and Haryana High Court in Arun Spinning Mills Vs. Collector of Customs and Central Excise and Others, would argue that under Rule 225 of die Central Excise Rules the violation by even a clerk under the master will make the master himself liable for the breach of the Rules. In this decision the High Court of Punjab and Haryana would observe:
Treating Rule 225 to be part of the statute, it is noteworthy that the act of removal of excisable goods from the place of their production or manufacture or warehousing in contravention of any condition prescribed in the Rules, makes the producer or manufacturer or the warehouse keeper responsible for such removal. Not only that, he is to be made liable to be dealt with according to the provisions of the Act or the Rules as if he had removed the goods himself. In other words, a producer or a manufacturer can, for the breach of the Rules committed by them, be held liable for offences and penalties u/s 9 of the Act as also to vivid adjudication of confiscation and penalties under Chapter VI and the relevant Rules (in the instant case Rule 173(Q). We find no substance in the argument of the learned Counsel that the company could not be proceeded against for the wrongs committed by their clerk Shri Jawaharlal Khanna, on the principle that vicarious liability for criminal acts of the servants could not be foisted on the masters. 225 of the Rules clearly puts the Master principally liable for the breach of rules though actually committed by another.
On a reading of the penal Section 9(1)(bb) and (bbb) show the marked difference between them. For the Sub-section (bbb) die actual participation, either by his knowledge or had reason to believe the violation, is a necessity to rope the accused in the offence, whereas such knowledge or reason is deliberately absent for the Sub section (bb) making it clear, that no personal knowledge or reason for the violation of die Rules, is necessary to attract the punishment under the provision. In the decision referred to above, it has to be viewed that the violation of Rule 225 has been read along with Rule 64 and it is only a civil liability, for the violation by any one working in the unit. Rule 64 as mentioned above, imposes a condition on the manufacturer to affix the Central Excise Stamp, on the match boxes according to the duty payable for the goods, while moving the products outside the factory. Rule 225 does not prescribe that the person who actually consigned the goods alone is responsible for such violation. On the other hand it gives option to proceed against the manufacturer or the registered person or keeper of the warehouse indicating that one of them can be liable for the violation as it is only a vicarious liability. If it is the intention of the legislature that under the said Rule person who actually despatched the goods alone is liable to be prosecuted, they would not have given the option to proceed against the registered person or the manufacturer or the keeper of the warehouse. When it gives the option to choose any one of them, the scope of the Rule is that these persons are vicariably liable for the violation committed while despatching the product. Therefore, it is very clear that all the persons connected with M/s. Annai Valliammai Match Works, need not be prosecuted for the violation under Rule 64 of the Central Excise Rules and the Department complainant has got right to choose any one of the persons mentioned above. As this Respondent/accused is admittedly, the registered person viz. the licence holder of the factory, he is one of the persons mentioned in Rule 225 of Central Excise Rules and therefore, the lower Court acquitting the Respondent/accused holding, that in the absence of the other parties mentioned in Ex.P.7, this accused cannot be penalised is a clear error. This finding of the learned additional Chief Judicial Magistrate, Madurai is against the spirit of Rule 225 of the Central Excise Rules. Therefore the contention of the Respondent''s counsel Miss. Uma Venkatraman that without prosecuting the said Selvaraj and Balakrishnan, the Respondent/accused cannot be convicted is not a sound argument and, the same is rejected. As the violation of Rule 64 is established from the evidence, spoken to, by P.W.1 and the Respondent accused being the licence holder of the manufacturing company viz. M/s. Annai Valliammai Match Works, certainly this Respondent/accused has to bear the responsibility, for the violation and therefore, he is punishable u/s 9(1)(bb)(ii) of Central Excise and Salt Act.
In view of the reasonings given above the Respondent/accused is found guilty of the offence mentioned above and the findings of the Court below is liable to be set aside.
Then coming to the question of sentence the offence has been committed in the year 1984 and now 12 years have elapsed. Therefore, I feel that no imprisonment can be imposed in this case and a fine alone is sufficient to meet the ends of justice. Considering the nature of offence I impose a fine of Rs. 1,500/- against the Respondent/accused u/s 9(1)(bb)(ii) of the Central Excise and Salt Act and die same is payable within three weeks in default to undergo Rule I for two months. The appeal is allowed.