R.T. Paper Board Ltd. and Others vs Central Excise

S. Ravindra Bhat, J.—In this petition u/s 482 Cr. P.C. the summoning order issued by the learned Metropolitan Magistrate has been

questioned. According to the complainant the petitioner had issued cheques in the sum of Rs. 25 lakhs and Rs. 19 lakhs to the Central Excise

Department which were dishonoured, in March, 2004.

In response to the notice u/s 138, the petitioner/respondent had on 17.02.04 contended that the sums were payable as security towards balance

amount of demand by the Department on the specific understanding, in writing, that they would not be presented without the written consent of the

drawer/petitioner. It was also stated that the petitioner''s appeal by special leave against the assessment by the respondent was heard by the

Supreme Court on 30.01.04 when the same was admitted and was directed to be placed for final hearing in March, 2004. On these grounds, the

notice had resisted the petitioner''s liability.

After hearing materials on record, the trial Court issued the summons and decided to proceed with the matter.

Mr. Rajesh Chugh, learned Counsel urged that in the interregnum, on 29.07.04, the petitioner''s appeal was allowed by the Supreme Court. The

demand made by the Central Excise Department, namely, the complainant was based on clubbing of two premises and its

understanding/assessment that the establishment was common. According to the adjudication orders of the Department which was ultimately

upheld by the Tribunal, there was a commonality between the two establishments and Therefore, a higher duty was payable.

The Supreme Court, however, overturned the adjudication orders as well as the order of Tribunal and held as follows:

Simply because both the factories are in the same premises that does not lead to the inference that both the factories are one and the same. In the

present case, from the facts it is apparent that there is no commonality of the purpose, both the factories have separate entrance, there is a passage

in between and they are not complementary to each nor they are subsidiary to each other. The end product is also different, one manufactures

duplex board and the other manufactures paper. They are separately registered with the Central Excise Department. The staff is separate, their

management is separate. It is also not the case of revenue that end produce of one factory is raw material for the other factory. From the above

facts it is apparent that there is no commonality between the two factories, both are separate establishments run by separate managers though at

the apex level it is maintained by the appellant company. There are separate staff, separate finished goods. Simply because both the factories may

have common boundaries that will not make it one factory. Accordingly, we are of the opinion that the view taken by the Tribunal does not appear

to be well-founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the

order of the Tribunal passed on June 7, 2002 as well as the order passed by the Commissioner, Central Excise, New Delhi-III on September 28,

2001 in both the appeal. No order as to costs.

Learned Counsel contended that in view of the above judgment, the foundation of the complaint itself did not survive and ends of justice require

that the complaint proceedings ought to be quashed.

Learned Counsel for the respondent submitted that the mere presentation of an appeal without any interim order did not lead to an inference that

the demands made by the Central Excise Department had been stayed by the Court. He, further submitted that as on the dates the cheques were

presented, debts were legally recoverable from the petitioner/assessed. He stated that even though subsequently the assessment order (and the

basis for the demands which led to issuance of the two cheques) and the Tribunal''s findings were set aside, the request for quashing of

proceedings ought not to be conceded since that would not be conducive to public interest.

The above narrative shows that the debts sought to be satisfied by the cheques drawn by the petitioner, and furnished to the Central Excise

Department were on the footing that it was liable to be assessed as one establishment. That order undoubtedly had become final as on the date

when the cheques were issued. However, the reply to the notice unequivocally mentions that the Central Excise Department had been asked not to

present the cheques without the consent of the petitioner. Further, and more importantly, the assessment orders and indeed the basis for the

demands, which led to issuance of the cheques were set aside by the Supreme Court which upheld the assessed''s contention. Therefore, the

question of its being liable for duty or for depositing any amount did not arise.

Although the counsel for the respondent is technically correct in urging that the debt existed as on the date when the cheque was issued and

presented, what cannot be lost sight of is that the legality of the demand was undermined by the Supreme Court ''s judgment when it set aside the

assessments. Section 482 is used in cases where the Court is of the opinion that ends of justice require that the parties in criminal proceedings

should be, inter alia, spared of the necessity of going through the full trial.

In the present case, with the subsequent event of the judgment of the Supreme Court, which has not been disputed and indeed cannot be

disputed, the legality of the assessment and the basis for the cheque itself ceased to exist. Therefore, I am satisfied on the facts of this case that the

petitioner''s claim for quashing of the proceedings is entitled to succeed.

The petition is accordingly allowed. All other proceedings pursuant to complaint case are hereby quashed.