News Update

Prosecution - Omission of a procedural rule for availing credit cannot, in any manner, affect charge of duty evasion: SC

By TIOL News Service

NEW DELHI, SEP 13, 2017: A Complaint dated 4th August, 1987 was filed by the appellant in his capacity as Superintendent, Central Excise, Ahmedabad alleging commission of offence mentioned in the complaint.

On 20th May, 1994, Rule 56A [Proforma Credit] was omitted by a notification. On that basis, the respondent filed an application for discharge.

The application was rejected and charge was framed by the trial Magistrate as follows :

"A charge is framed against the accused for the offence punishable under Section 9 of Central Excises & Salt Act, 1944 read with violation of Rule 52(A), 56(A), 173(G), 9(2) of Central Excise Rules and Rule 173(Q) read with Section 11(A) of the Central Excises & Salt Act, 1944."

The respondent moved the High Court by way of a revision petition and which was allowed.

It was held by the High Court that since Rule 56A was omitted without prescribing any saving clause, proceedings could not continue.

It was also observed that omission of the provision was not at par with repeal and Section 6 of the General Clauses Act, 1897 did not apply to repeal of a rule. [Rayala Corporation (P) Ltd. - 2002-TIOL-295-SC-FERA-LB and Kolhapur Cane Sugar Works Ltd. - 2002-TIOL-188-SC-CX-CB relied upon]

Against this order dated 17th October, 2015 of the High Court of Gujarat, an appeal has been preferred before the Supreme Court.

The Solicitor General submitted that the view taken by the High Court is erroneous. Inasmuch as the charge against the respondent was of evasion of excise duty under Section 9(1)(b) which remains unamended; that the evasion was on account of the respondent having taken credit without following the procedure under Rule 56A; that by omission of the said Rule, the charge did not suffer from any legal infirmity; that Section 6 of the General Clauses Act applied to omission which was also repeal. It was also submitted that retrospective amendment has been made to the Act by the Finance Act, 2001 [section 38A refers] making it clear that actions taken under a rule will not lapse even if the rule is omitted and the Explanation applied only to future action and not to continuing action. [Fibre Boards Pvt. Ltd. Bangalore - 2015-TIOL-178-SC-IT , Shree Bhagwati Steel Rolling Mills - 2015-TIOL-283-SC-CX relied upon.]

It is also emphasised that penalty for wrongly taking credit was upheld by the Tribunal in Reliance Industries Ltd. versus CCE Order no. 1358-59/94-WRB dated 17 August 1994, and which order had attained finality.

The respondent supported the order of the High Court.

After considering the submissions made, the Supreme Court observed -

"6. … In our view, the matter can be decided on a short point. The charge against the respondent is of evasion of duty. The ingredient of the offence is the evasion. The omission of a procedural rule for availing the credit cannot in any manner affect the said charge. The prosecution cannot be deprived of opportunity to prove evasion which by itself is an offence. In this view of the matter, there was no justification for the High Court to quash the charge merely on the ground of Rule 56A having been omitted."

The appeal was allowed by setting aside the order of the High Court and restoring the order of the trial court.

(See 2017-TIOL-344-SC-CX)