CX - Power to arrest is independent from disposal - Dept is bound to follow procedure - As petitioner was not presented before Magistrate by an authorized officer, strong case for grant of bail: HC
By TIOL News Service
CHANDIGARH, JULY 13, 2016 : THE petitioner is before the High Court and seeks grant of regular bail in criminal complaint filed u/s 9 &9AA of the CEA, 1944, pending before the CJM Court, Amritsar.
The petitioner was arrested by an Inspector of Central Excise, Amritsar u/s 13 of the CEA, 1944 and the respondent-Central Excise Department vide application dated 05.01.2016 produced and sought judicial remand from the CJM, Amritsar, who sent the petitioner to judicial custody. The respondent- Department filed Complaint No. 39 dated 03.03.2016 in the Court of CJM, Amritsar.
The petitioner was arrested being in-charge of affairs of M/s Dunar Foods Ltd., alleging evasion of duty amounting to Rs. 29.59 crores for period Aug' 2014 to Jan' 2015 and for the said amount a SCN dated 06.01.2016 has already been issued. In the said SCN, the duty has been demanded from the said company and penalty u/r 26 of the CER, 2002 has been proposed against the petitioner.
As per show cause notice, M/s Dunar Foods Ltd. has cleared in Domestic Tariff Area (DTA) goods i.e. broken rice, basmati rice (small size), rice bran and basmati rice without payment of duty leviable in terms of proviso to Section 3 of the CEA, 1944.
Vehemently opposing the bail application, the respondent department submitted that the company is liable to pay customs duty in terms of Section 12 of the Customs Act, 1962. The petitioner was supervising all the affairs of the company so he cannot claim that he is stranger to the company. The amount of the duty involved is more than 170 crores based on sales for other periods even though the petitioner was arrested in respect of the evasion of duty amounting to Rs.29crores. The arrest can be made in any case where the amount of duty involved is more than Rs.1crore as per directions of the Central Board of Excise and Customs (Board). The offence in question is an economic offence and as per judgments of Supreme Court, no leniency should be shown in case of white collared crimes because these offences are committed with cool mind and sitting in air-conditioned offices. The amount involved is very huge and the petitioner does not deserve any leniency.
After considering the elaborate submissions, the High Court inter alia observed -
+ It is neither desirable nor appropriate for this Court to consider the question of levy or exemption of duty at this stage because, as pointed out by both the parties, CESTAT is already seized of the matter, which is the final fact finding authority.
+ Petitioner has pointed out that goods in question are classifiable under Chapter Heading 1006 of first schedule to Central Excise Tariff Act. Under the Column of rate of duty there is no entry (it is left blank), so goods in question i.e. rice is exempt from Excise Duty i.e. Countervailing Duty (CVD).
+ It is revealed on a close scrutiny of the contents of the Show Cause Notice that the Department has demanded, in the light of the proviso to Section 3 (1) of the 1944 Act, only the customs duty leviable under Section 12 of the Customs Act read with entries of CTH 1006 of the First Schedule to Customs Tariff Act, 1975, notifying the rate of duty as 80% and not CVD i.e. duty equal to excise duty.
+ It would be for the Tribunal to interpret and decide as to whether or not the goods sold/cleared by the Company/petitioner would be covered under the exemption notification [23/2003-CE] and thus not liable to pay any duty.
+ As regards the claim for admitting the petitioner to bail, it is apt to notice here that company cleared goods during last couple of years and continued to reflected in their records and also filed their returns with the Department, thus, it is not an isolated instance of clearance of goods. The respondent-Department continued to issue Show Cause notices and in respect of prior periods even orders by the adjudicating officer have already been passed. The records are lying in the custody of the Department, thus there cannot be any apprehension of manipulation or tampering with the record.
+ The petitioner was arrested by the Inspector and he was produced before the Learned CJM by an Inspector. The Central Excise Officers have power to arrest under Section 13 of the 1944 Act and after arrest, Department is bound to follow procedure prescribed under the said Act. Power to arrest is independent from disposal of person arrested. The procedure of disposal of person arrested is prescribed under Section 19 and 21 of the 1944 Act.
+ In the present case, it is borne out from the produced record that the petitioner was forwarded to custody of Magistrate by an Inspector. As per the relevant Notification No. 9/99-CE (N.T) dated 10.02.1999 issued under the 1944 Act concededly governing the issue, only Superintendent can forward arrested person to custody of Magistrate. Therefore, in view of the above, the petitioner not being presented before the learned Magistrate by an authorized officer, at least a strong case for grant of bail would be made out.
On the submission by the Counsel for the Revenue that no leniency should be shown in case of white collared crimes, the High Court observed -
++ The counsel has ignored the fact that matter is pending for last more 5 years and nothing new had occurred in Jan' 2016 which prompted the department to take harsh action of arrest. Further, it is an economic offence where separate Assessment/Adjudication proceedings are going on. It is not a case of mass level cheating, as involved in the cited and relied case, where except criminal trial no effective remedy was available. In the present case, if the department succeeds in adjudication, the department shall have all rights to recover the dues. So, the contention of Department is repelled.
Conclusion:
In view of the fact that alleged offence is a compoundable offence, triable by Magistrate, custody period since 05.01.2016 and investigations are complete, complaint has already been filed, Tribunal is seized of the question of levy of duty, completion of trial would take a lot of time, this court finds it an appropriate case for releasing the petitioner on bail.
The bail application was allowed.
(See 2016-TIOL-1357-HC-P&H-CX)
