Section 482 Cr.P.C by the petitioner/A4 seeking to quash the proceedings against him – dismissed – creditor can maintain a civil and criminal proceeding at the same time. Both the proceeding, thus, can run parallely.= standard of proof in a criminal case vis-a-vis a civil suit, indisputably is different. Whereas in a criminal case the prosecution is bound to prove the commission of the offence on the part of the accused beyond any reasonable doubt; in a civil suit `preponderance of probability’ would serve the purpose for obtaining a decree. Therefore, though the order of the CESTAT attained finality on civil side, still criminal proceedings against fraud and cheating can be independently established by the prosecution. HIGH COURT-HYDERABAD

THE HONBLE SRI JUSTICE U. DURGA PRASAD RAO

 

Criminal Petition No.2265 of 2015

 

02.03.2018

 

Anil Kumar Aggarwal…. Petitioner/Accused No.4

 

The State of Andhra Pradesh, Inspector of Police, Central Bureau of Investigation,Visakhapatnam,Rep. By its Public Prosecuto

 

Counsel for Petitioner : Pillix Law Firm

 

Counsel for Respondent : Sri K. Surender,

Special Public Prosecutor for CBI

 

<Gist:

 

>Head Note:

 

? Cases referred:

1)AIR 1992 SC 604

2)AIR 2010 SC 3624

3)AIR 2002 SC 3372 = 2002 Crl.L.J. 43l43

4)AIR 2009 SC 2195

5)(2008) 9 SCC 677

6)(2009) 13 SCC 729

 

HONBLE SRI JUSTICE U.DURGA PRASAD RAO

 

CRIMINAL PETITION No.2265 of 2015

 

ORDER:

This petition is filed under Section 482 Cr.P.C by the petitioner/A4

seeking to quash the proceedings against him in C.C.No.29 of 2006 on the

file of Special Judge for CBI cases, Visakhapatnam.

2) The Inspector of Police, CBI, SPE, Visakhapatnam filed charge

sheet against A1 to A5 for the offences under Sections 120B, 420, 468,

471 IPC and under Section 13(2) r/w 13(1)(d)(ii) of Prevention of

Corruption Act, 1988.

a) A1 to A3 are the officials of Customs Department. A4Anil Kumar

Aggarwal is the Managing Director and A5 is the Director of M/s.Kumars

Cotex Limited (M/s.KCL). A4 and A5 were engaged in manufacture and

clearance of cotton yarn and cotton waste having their factory at Dokiparu

in Guntur District.

b) A4Company imported six numbers of autoconers (capital goods)

during the year 1996 valuing Rs.5,91,84,990/- availing 100% Customs

Duty Waiver facility as per Notification No.13/81-Customs. While so,

on 05.02.2002 it made an application to the Development Commissioner,

Visakhapatnam Export Processing Zone, Visakhapatnam seeking

permission to destroy two autoconers out of six, stating that the said two

autoconers were burnt due to short circuit and not serviceable.

Accordingly, on 27.02.2002 the Development Commissioner accorded

permission for disposal of two autoconers subject to observance of

customs formalities. Then, A4 requested the Deputy Commissioner,

Central Excise, Guntur to pass orders for destruction, who in turn passed

orders on 24.07.2002 permitting the petitioner/A4 to destruct two

autoconers in the presence of Central Excise Officials.

c) When the matter stood thus, A1 to A3Excise Officials entered

into criminal conspiracy with A4 and in pursuance of the same they went

to the premises of A4Company on 25.07.2002 to supervise the

destruction of two autoconers, but did not ensure destruction. A1 by

abusing his position as a public servant sent compliance report to Deputy

Commissioner as if two autoconers were destroyed by breaking into pieces

in their presence; the scrap was transported through lorry bearing No.AP

7T 1436 and sold the same to M.Venkateswar Raoscrap dealer for

Rs.1,90,000/- and a sum of Rs.30,400/- was deposited in the bank towards

Central Excise Duty. However, the investigation revealed, on 09.10.2003,

A4 sold the said two autoconers to M/s.Sri Jayalakshimi spinning Mills

limited, Chebrolu (M/s.SJSML) for of Rs.50 lakhs. In fact, the said two

autoconers were found in working condition at M/s.SJSML by

Superintendent, Preventive, Central Excise, Gu`ntur by evading tax hence

they were seized. Therefore, the Central Excise Department issued show

cause notice to petitioner/A4 demanding customs duty of Rs.52.61 lakhs.

Accordingly charge sheet was filed.

Hence, the instant Criminal Petition for quashment.

3) Heard learned counsel for petitioner and learned Special Public

Prosecutor for CBI.

4) Learned counsel for petitioner would challenge the proceedings in

C.C.No.29 of 2006 on the main plank of argument that against the order

passed by the Commissioner of Customs and Central Excise, Guntur

petitioners Company preferred an appealC/270-272/2007 before the

Customs Excise and Service Tax Appellate Tribunal (CESTAT),

Bangalore and final order was passed in order Nos. 445-447/2012 allowing

the appeal in favour of petitioner on 13.06.2012 holding that machinery

was dismantled under the supervision of the Central Excise Officers and

cleared from the factory as scrap. As such, it should be considered as

Domestic Tariff Area (DTA) clearance by the Export Oriented Unit (EOU)

attracting Central Excise duty. It was not a clearance of the capital goods

from the factory. Therefore, payment of Central Excise duty by the

assessee at the time of clearance of the scrap to M/s.SJSML cannot be

faulted. Added to it, there is no valid case to hold that there was

suppression or wilful misstatement of facts, let alone fraud, with intent to

evade payment of duty has been made out against the petitioner. Learned

counsel argued that the said order of CESTAT remained unchallenged.

In that view of the matter, the prosecution launched by CBI on the same

facts and continuation of the criminal proceedings is nothing but abuse of

process of law. Hence, the proceedings in C.C.No.29 of 2006 may be

quashed.

5a) Opposing the petition, learned Special Public prosecutor for CBI

would argue that A1 to A3 who are the officials of Central Excise

Department, in collusion with A4 and A5 have created documents as if two

autoconers have been destructed without there being any factual

destruction. On the other hand, A4 and A5 have sold the said two

autoconers to M/s.SJSML for Rs.50 lakhs on 09.10.2003 and those two

autoconers were very much found in working condition with M/s.SJSML

by Superintendent, Preventive, Central Excise, Guntur, hence they were

seized. Since two autoconers were disposed of by A4 and A5 evading

customs duty with the conveyance of A1 to A3, who are deputed to

witness the physical destruction, which in fact was not done, the

prosecution is very much maintainable in view of fraudulent acts

committed by the accused.

b) Learned Special Public Prosecutor would staunchly further argue

that the order of CESTAT dated 13.06.2012 being the order in civil

proceedings is not binding in the criminal proceedings. He submitted that

for another reason also the order passed by the CESTAT is not binding in

the criminal proceedings. Before CESTAT the department argued that in

September, 2004 the department conducted investigation and after seizing

the goods in question from the premises of M/s.SJSML, they have issued a

show cause notice to appellant and M/s.SJSML clearly stating that A4 and

A5 committed fraud, wilful misstatement, suppression of facts and

M/s.SJSML have purchased the two autoconers without payment of

appropriate duty of customs. In spite of said contention, CESTAT held

as if the department has not disputed the machinery was dismantled under

the supervision of Central Excise Range Officers and cleared from the

factory as scrap. The allegation of the department that two autoconers were

sold by A4 and A5 to M/s.SJSML was not clearly discussed. Therefore,

the order of CESTAT is not binding in the criminal proceedings. He thus

prayed to dismiss the petition.

6) The point for consideration is:

Whether there are merits in this Criminal Petition to quash the

proceedings in C.C.No.29 of 2006.

7) POINT: The fulcrum of prosecution case is that A4 and A5 having

obtained permission from the Deputy Commissioner, Central Excise,

Guntur for destruction of two autoconers, indeed, did not do so, but they,

with the conspiracy of A1 to A3, fabricated record of destruction in their

premises and sold the two autoconers to M/s.SJSML for Rs.50 lakhs and

this fact was exhumed when the two autoconers were found in working

condition at M/s.SJSML by Superintendent, Preventive, Central Excise,

Guntur and thus A4 and A5 evaded tax hence, the charges against all the

accused.

8) The Honourable Apex Court in State of Haryana and others

vs. Ch. Bhajan Lal and others have laid down the following guidelines

relating to exercise of inherent power under Section 482 Cr.P.C. to quash

the proceedings to prevent abuse of process of Court. They are:

1. Where the allegations made in the First Information Report or

the complaint, even if they are taken at their face value and

accepted in their entirety do not prima-facie constitute any offence

or make out a case against the accused.

2. Where the allegations in the First Information Report and other

materials, if any, accompanying the F.I.R. do not disclose a

cognizable offence, justifying an investigation by police officers

Under Section 156(1) of the Code except under an order of a

Magistrate within the purview of Section 155(2) of the Code.

3. Where the uncontroverted allegations made in the FIR or

complaint and the evidence collected in support of the same do not

disclose the commission of any offence and make out a case against

the accused.

4. Where, the allegations in the F.I.R. do not constitute a

cognizable offence but constitute only a non-cognizable offence, no

investigation is permitted by a police officer without an order of a

Magistrate as contemplated Under Section 155(2) of the Code.

5. Where the allegations made in the FIR or complaint are so

absurd and inherently improbable on the basis of which no prudent

person can ever reach a just conclusion that there is sufficient

ground for proceeding against the accused.

6. Where there is an express legal bar engrafted in any of the

provisions of the Code or the concerned Act (under which a

criminal proceeding is instituted) to the institution and continuance

of the proceedings and/or where there is a specific provision in the

Code or the concerned Act, providing efficacious redress for the

grievance of the aggrieved party.

7. Where a criminal proceeding is manifestly attended with mala

fide and/or where the proceeding is maliciously instituted with an

ulterior motive for wreaking vengeance on the accused and with a

view to spite him due to private and personal grudge.

9) When the material placed by the prosecution is tested on the anvil of

the above guidelines, the said material if uncontroverted would certainly

shed prima facie case against the accused for the offences charged against

them. It is pertinent to note here that prosecution claims seizure of two

autoconers in working condition in the premises of M/s.SJSML against the

contention of the accused that those two autoconers were destructed in the

premises of A4Company on 25.07.2002. If this fact is convincingly

established by the prosecution in the trial, the accused will be liable for the

offences charged against them. Therefore, as the matter stands, none of the

guidelines extracted above in Bhajanlal (1 supra) would attract in this case

to quash the proceedings.

10) Now, coming to the argument of learned counsel for petitioner

regarding the order passed by CESTAT, I have gone through the said order

dated 13.06.2012 in appeal Nos.C/270-272/2007. Those appeals are filed

by A4 against the order passed by Commissioner of Customs and Central

Excise, Guntur in his proceedings No.CEX-15/2006 (Commissioner) dated

14.12.2006.

a) A perusal of said order would show that in Para-29 he gave a clear

finding thus:

Para-29: xx xx xx.. From the above facts, it is evident that the

entire operation of applying for destruction of autoconers and

transferring the same to M/s.Sri Jayalakshimi Spinning Mills

Limited M/s.Sri Jayalakshimi Spinning Mills Limited are able to

make use of them with the technical adjustments of their own staff is

a planned one. xx xx xx. Though the permission for destruction

accorded to them vide Deputy Commissioner, Central Excise,

Gunturs letter C.No.2/2002/DC/Steno dated 24.07.2002, if the

destruction was completed, how the obsolete machinery still

available to them for clearance on 09.10.2003 i.e. for one year after

permission is accorded. Thus the machinery was not destructed and

the same were cleared on 09.10.2003.

b) With the above and other findings, the learned Commissioner passed

an order demanding Customs Duty of Rs.26,83,590/- from M/s.Kumar

Cotex Limited, Dokiparru (A4) along with interest and penalty of

Rs.26,83,590/-. In the said order the Commissioner also directed

confiscation of two numbers of autoconers which were already under

seizure from M/s. Sri Jayalakshimi Spinning Mills Limited. Further, he

imposed penalty of Rs.25 lakhs on A4 and Rs.20 lakhs on M/s.Sri

Jayalakshimi Spinning Mills Limited and Rs.20 lakhs on Sri Anil Kumar

Agarwal and Abhishek Aggarwal. Against the aforesaid order appeals

were preferred by A4 and others before CESTAT, Bangalore. The

CESTAT in its order dated 13.06.2017 has set aside the order of the

Commissioner as per its findings mentioned in Paras-6 and 7 which, in my

view, are germane in this petition and hence extracted thus:

Para-6 As it is not in dispute that the machinery was

dismantled under the supervision of the Central Excise

Range Officers and cleared from the factory as scrap, in our

view, it should be considered to be a DTA clearance by the

EOU attracting Central Excise duty. It was not the

clearance of the capital goods as such from the factory.

Therefore the payment of Central Excise Duty by the

assessee at the time of clearance of the scrap to M/s.SJSML

cannot be faulted. The Department has no case that there

can be no penalty on the assessee or co-appellants under the

Customs Act in relation to clearance of goods on payment of

excise duty under the provisions of the Central Excise Act.

Para-7 Apart from the above, we have also found force in

the plea of limitation raised by the assessee. The entire

demand is beyond the normal period of limitation. No valid

case of suppression or wilful misstatement of facts, let alone

fraud, with intend to evade payment of duty has been made

out against the assessee by the Revenue. As a matter of fact,

no such finding has been recorded in the impugned order.

Therefore, the entire demand is also barred by limitation.

11) The petitioners contention is that since CESTAT has held that

machinery was dismantled and payment of Central Excise Duty by the

assessee as scrap and not as a capital good cannot be faulted, the criminal

prosecution on the same accusation that the machinery was not destructed

and the accused have fabricated documents in that regard, is unsustainable.

12) I am afraid this argument cannot be countenanced for the following

reasons.

a) Firstly, in this case the department has initiated simultaneous civil

and criminal proceedingscivil proceedings for recovery of tax evaded

with interest and penalty before the Commissioner and criminal

proceedings for punishing the accused for their conspiratorial acts of

cheating and falsification of records etc.

b) It is a well known principle that when the same cause of action give

rise to civil and criminal proceedings, both can be initiated simultaneously.

The emancipation of the accused in the corresponding civil proceedings

will have no binding effect on the criminal proceedings and vice-versa

because the civil and criminal proceedings operate on different spheres.

The civil proceedings proceed on the principle of preponderance of

probabilities whereas the criminal proceedings take the course of proof to

the hilt.

13) In Kishan Singh (D) through LRs. vs. Gurpal Singh and others ,

the question that came up for consideration before the Apex Court was

whether criminal proceedings can be quashed by the High Court relying

upon the finding of civil court on an issue involved in criminal proceedings

in respect of same subject matter. The respondents/accused sought for

quashment of FIR on the ground that the appellant after losing the suit for

specific performance, lodged a false FIR stating that the signature of

Kishori Lal was forged on agreement to sell. The High Court quashed the

FIR on the ground that the finding in the civil suit to the effect that

agreement to sell was not forged or fabricated is binding in the criminal

proceedings. The Apex Court after verifying the previous judgments on

the issue, held:

Para-19: Thus, in view of the above, the law on the issue

stands crystallized to the effect that the findings of fact

recorded by the Civil Court do not have any bearing so far

as the criminal case is concerned and vice-versa. Standard

of proof is different in civil and criminal cases. In civil cases

it is preponderance of probabilities while in criminal cases

it is proof beyond reasonable doubt. There is neither any

statutory nor any legal principle that findings recorded by

the court either in civil or criminal proceedings shall be

binding between the same parties while dealing with the

same subject matter and both the cases have to be decided

on the basis of the evidence adduced therein. However, there

may be cases where the provisions of Sections 41 to 43 of

the Indian Evidence Act, 1872 dealing with the relevance of

previous Judgments in subsequent cases may be taken into

consideration.

However, in view of the facts peculiar to that case, the Apex Court

approved the decision of the High Court.

14) The Apex Court in K.G.Premshanker vs. Inspector of Police and

another happened to consider the effect of a previous judgment on the

subsequent proceedings with reference to Sections 40 to 43 of Evidence

Act. The Apex Court observed thus:

Para-30: What emerges from the aforesaid discussion is —

(1) the previous judgment which is final can be relied upon

as provided under Section 40 to 43 of the Evidence Act; (2)

in civil suits between the same parties, principle of res-

judicata may apply; (3) in a criminal case, Section 300

Cr.P.C. makes provision that once a person is convicted or

acquitted, he may not be tried again for the same offence if

the conditions mentioned therein are satisfied; (4) if the

criminal case and the civil proceedings are for the same

cause, judgment of the civil Court would be relevant if

conditions of any of the Sections 40 to 43 are satisfied, but it

cannot be said that the same would be conclusive except as

provided in Section 41. Section 41 provides which judgment

would be conclusive proof of what is stated therein.

Para-31: Further, the judgment, order or decree passed in a

previous civil proceedings, if relevant, as provided under

Sections 40 and 42 or other provisions of the Evidence Act

then in each case, Court has to decide to what extent it is

binding or conclusive with regard to the matter(s) decided

therein.

Take for illustration, in a case of alleged trespass by ‘A’ on

‘B’s property, ‘B’ filed a suit for declaration of its title and to

recover possession form ‘A’ and suit is decreed. Thereafter,

in a criminal prosecution by ‘B’ against ‘A’ for trespass,

judgment passed between the parties in civil proceedings

would be relevant and Court may hold that it conclusively

establishes the title as well as possession of ‘B’ over the

property. In such case, ‘A’ may be convicted for trespass.

The illustration to Section 42 which is quoted above makes

the position clear. Hence, in each and every case, first

question which would require consideration is–whether

judgment, order or decree is relevant?, if relevant — its

effect. It may be relevant for a limited purpose. Such as,

motive or as a fact in issue. This would depend upon facts of

each case.

15) In Smt. Rumi Dhar vs. State of West Bengal and another , the

Apex Court was considering the application of provision of Section 320

Cr.P.C. The factual background was that the appellant and her husband

(A4) along with others including the officers of Oriental Bank of

Commerce was facing prosecution for the offences under Sections 120B,

420, 468, 461 IPC and also Section 13(2) r/w 13(1)(d) of Prevention of

Corruption Act, 1988. The bank for realization of the amount, initiated

parallel civil proceedings before the Debt Recovery Tribunal wherein the

appellant and bank entered into settlement, pursuant to which, a sum of

Rs.25.51 lakhs was paid. Thereafter, the appellant filed a petition under

Section 320 Cr.P.C. for discharge submitting that in view of the settlement

arrived at by the parties and payment of the amount, no criminal

proceedings can be continued. The CBI opposed the petition contending

that mere payment of the loan to the bank would not exonerate the

appellant from criminal proceedings. The Special Court dismissed the

application of the appellant. The matter was carried in revision to the High

court and it was dismissed. Then, the appellant went to the Apex Court,

which observed thus:

Para-18: It is now a well settled principle of law that in a

given case, a civil proceeding and a criminal proceeding can

proceed simultaneously. Bank is entitled to recover the

amount of loan given to the debtor. If in connection with

obtaining the said loan, criminal offences have been

committed by the persons accused thereof including the

officers of the bank, criminal proceedings would also

indisputably be maintainable. When a settlement is arrived at

by and between the creditor and the debtor, the offence

committed as such does not come to an end. The judgment of

a tribunal in a civil proceeding and that too when it is

rendered on the basis of settlement entered into by and

between the parties, would not be of much relevance in a

criminal proceeding having regard to the provisions

contained in Section 43 of the Indian Evidence Act.

Para-19: The judgment in the civil proceedings will be

admissible in evidence only for a limited purpose. It is not a

case where the parties have entered into a compromise in

relation to the criminal charges. In fact, the offence alleged

against the accused being an offence against the society and

the allegations contained in the first information report

having been investigated by the Central Bureau of

Investigation, the bank could not have entered into any

settlement at all. The CBI has not filed any application for

withdrawal of the case. Not only a charge sheet has been

filed, charges have also been framed. At the stage of framing

charge, the appellant filed an application for discharge. One

of the main accused is the husband of the appellant. The

complicity of the accused persons was, thus, required to be

taken into consideration for the purpose of determining the

application for discharge upon taking a realistic view of the

matter. While considering an application for discharge filed

in terms of Section 239 of the Code, it was for the learned

Judge to go into the details of the allegations made against

each of the accused persons so as to form an opinion as to

whether any case at all has been made out or not as a strong

suspicion in regard thereto shall subserve the requirements of

law.

It should be noted, attention of the Apex Court was drawn to the decision in

Nikhil Merchant vs. Central Bureau of Investigation and another

wherein the Apex Court, in similar case considering that the dispute

between the parties had overtones of a civil dispute with certain criminal

facets and also considering the compromise arrived at between the

Company and the Bank and observing that continuation of the criminal

proceedings in view of compromise arrived at by the parties would be a

futile exercise, allowed to quash the proceedings. However, in Rumi

Dhars case (4 supra) the Apex Court did not incline to follow the said

decision and observed thus:

Para-23: The jurisdiction of the Court under Article 142 of

the Constitution of India is not in dispute. Exercise of such

power would, however, depend on the facts and circumstance

of each case. The High Court, in exercise of its jurisdiction

under Section 482 of the Code of Criminal procedure, and

this Court, in terms of Article 142 of the Constitution of India,

would not direct quashing of a case involving crime against

the society particularly when both the learned Special Judge

as also the High Court have found that a prima facie case has

been made out against the appellant herein for framing

charge.

16) In Sh.Vishnu Dutt Sharma vs. Smt. Daya Sapra observing that

acquittal of the accused in a criminal prosecution under Section 138 of

Negotiable Instruments Act would not operate as res judicata in the civil

suit filed by the plaintiff for recovery of money, the Apex Court held thus:

Para-11: There cannot be any doubt or dispute that a

creditor can maintain a civil and criminal proceeding at the

same time. Both the proceeding, thus, can run parallely. The

fact required to be proved for obtaining a decree in the civil

suit and a judgment of conviction in the criminal

proceedings may be overlapping but the standard of proof in

a criminal case vis-a-vis a civil suit, indisputably is different.

Whereas in a criminal case the prosecution is bound to

prove the commission of the offence on the part of the

accused beyond any reasonable doubt; in a civil suit

`preponderance of probability’ would serve the purpose for

obtaining a decree.

17) So, the above precedential jurisprudence would give a clear

understanding that civil and criminal proceedings can be initiated

simultaneously and judgment in one proceeding will not have impact on the

other. In the case on hand also, merely because CESTAT held that A4 and

A5 need not pay the tax as claimed before the Commissioner, Customs and

Central Excise, Guntur and approved by him, the criminal proceedings

cannot be quashed. The judgment in civil case will not be relevant under

Sections 40, 41, 42 or 43 of the Evidence Act. At best, the said judgment

will be relevant to consider the quantum of punishment to be imposed to

the accused in case the criminal proceedings culminate in conviction.

18) Secondly, as extracted supra, in para-6 of its order, the CESTAT

observed as if it was not in dispute that machinery was dismantled under

the supervision of the Central Excise Range Officers and cleared from the

factory as scrap. When the foundation for case of the Department was that

two autoconers were not destructed despite obtaining permission, it is quite

astounding as to how the CESTAT observed that the destruction of two

autoconers was not in dispute. Therefore, though the order of the CESTAT

attained finality on civil side, still criminal proceedings against fraud and

cheating can be independently established by the prosecution.

19) Thus, on a conspectus, I find no merits in the case of petitioners.

Accordingly, the Criminal Petition is dismissed.

As a sequel, miscellaneous petitions pending, if any, shall stand

closed.

_________________________

U. DURGA PRASAD RAO, J

Date: 02.03.2018