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Judgment
V. Rengasamy, J.—This appeal is against the order of acquittal of the learned Principal Sessions Judge, Chennai, in C.A. No. 78 of 1988 for the offences under Ss.9(1)(b)(i) of the Central Excises and Salt Act, 1944, hereinafter to be referred to as the Act, read with Rule 9(1) of the Central Excise Rules, hereinafter to be referred to as the Rules, under S.9(1)(bb)(i) of the Act read with Rule 52-A of the Rules, S. 9(1)(bb)(i) of the Act Read with 173-F of the Rules, S. 9(1)(bb)(i) of the Act read with Rules 53 of the Rules, S.9(1)(bb)(i) of the Act read with Rule 173-B of the Rules and S.9(1)(bb)(i) of the Act read with Rule 173-G of the Rules for the evasion of Excise duty on the manufactured goods.
This respondent, who is the Director of M/s. Technovision (P) Limited, was prosecuted alongwith the abovesaid Technovision (P) Limited by the appellant herein, the Assistant Collector of Central Excise for the abovementioned offences before the Additional Chief Metropolitan Magistrate (E.O.II) Egmore, Chennai, in E.O.CC. No. 1662 of 1987 and the learned Additional Chief Metropolitan Magistrate (E.O.II) has found this respondent and his company liable for the offences alleged and the first accused company was sentenced to pay a fine of Rs. 2,000/- for the offence under S.9(1)(b)(i) of the Act read with Rule 9(1) of the Rules and for other offences, the Company was sentenced to pay a fine of Rs. 1,000/- whereas this respondent, who was the second accused before the trial Court, was sentenced to undergo rigorous imprisonment for six months and to pay a fine ranging from Rs. 500/- to Rs. 1,000/- for each of the offences. The accused, aggrieved of this conviction and the sentences imposed on them, filed the appeal before the learned Principal Sessions Judge, Chennai, in C.A. No. 78 of 1988 in which the learned Principal Sessions Judge confirmed the conviction and sentence imposed on the first accused, but acquitted the second accused, the respondent herein, holding that the offences are not proved against him. The appellant, the Assistant Collector of Central Excise, therefore, has come forward with this appeal against the order of acquittal of the respondent herein.
Mr. P. Rajamanickam, learned Special Public Prosecutor, appearing for the appellant, contended that the Lower Appellate Court, without considering the implication of the law, has acquitted the second accused/respondent herein, simply holding that the second accused was prosecuted only in his capacity as Director of the first accused company, and that without any specific evidence against him, the prosecution of the second accused in his mere official capacity, cannot be a ground for his conviction when especially S. 9AA of the Act was amended, later, that the learned Principal Sessions Judge has failed to note me specific evidence available in this case to prove the participation of the second accused in the offence and therefore, the order of acquittal passed by the learned Principal Sessions Judge is not correct.
P.W. 4, the Superintendent of Central Excise Headquarters (Preventive Unit) conducted a search in the premises of the first accused company along with his subordinate, P.Ws.1 to 3, on 6.2.1985 and he found the first accused company, which was manufacturing the printed circuit board for colour televisions and V.I.F. for black & white televisions, had not paid the duty as per the Act from the years 1983-84 and 1984-85. Under the statute, the production upto Rs. 30 Lakhs is exempted from the duty but the Inspecting Squad found the first accused company had manufactured the abovesaid articles far exceeding the exempted limit and therefore, the appellant herein prosecuted the company as well as one of the Directors, viz. the respondent herein, as he was actually responsible for the conduct of the business though another Director, a lady, was merely continued to be the Director without actual participation in the business of the company. Bodi the accused, that is the company and the respondent herein, one of the Directors, contended that they were not manufacturing the articles, viz. the printed circuit black for colour televisions and V.I.F. for block & white televisions, but they are doing only the job work for Hi-beam electronics and B.L.R.S. company on the materials provided by them, that the finished products were sent back to the respective companies, who supplied the materials, that as they do not sell the finished products in the open market but send back to the companies which supplied the materials, they are not the manufacturers and therefore, they are not bound to pay the duty. The trial Court, as well as the Lower Appellate Court has found that the first accused company was actually engaged in the business of manufacturing the printed circuit boards and V.I.F. for which the excise duty was to be paid for the respective years and therefore the offences are proved. The conviction of the first accused namely, the company, has not been challenged by filing the revision before this Court. Therefore, the finding against the first accused company has become final. But the Lower Appellate Court has acquitted the second accused, the Director of the Company for the reason that he cannot be convicted for the vicarious liability without further evidence for his individual liability. It is therefore the Department has filed this appeal against the acquittal of the second accused.
Mr. Habibullah Badsha, learned Senior counsel appearing for the respondent herein, contended before me that though there was different opinions among the High Courts as to the duty leviable on such job works, that some Courts holding that as the materials were supplied by some other company to manufacture an article, the value of the materials received by the job work shall be deducted while assessing the value of the article for the purpose of assessment and in such cases, if the value does not exceed the prescribed limit, the job worker was not liable to pay the duty whereas some other Courts took a different view that the finished product in the hands of the job worker is liable for excise duty, and this controversy was settled by the Apex Court only in Ujagar Prints v. Union of India (AIR 1989 S.C. 516) wherein the Apex Court took the view that even if an article was manufactured from the materials supplied by somebody for sending back the finished product, the finished product has the independent ownership and therefore, the duties are excisable on such manufactured goods as per the Act, that in view of this decision of the Apex Court, it is not open to him to contend that the first accused company and its Directors were engaged only in the job works and the first accused company, therefore, was bound to pay the duty as fixed under the Rules and the evasion to pay the duty will amount to the offence. However, the learned senior counsel for the respondent contended that even though the first accused has been rightly convicted, the second accused/respondent herein, who was prosecuted only for his position as Director of the first accused company, cannot be convicted without any independent evidence for his participation individually and as the evidence of this nature is wanting in this case, the Lower Appellate Court was right in acquitting the respondent/second accused. Learned senior counsel for the respondent refers to the evidence of P.W. 4, who concedes in his evidence, that be did not conduct any investigation against the second accused for his part played in the commission of the offence except for the fact that he was a Director of the Company, that as the appellant/department has not probed into the matter as to the participation of the second accused and as he has been prosecuted only in his capacity as the Director of the first accused company, his connection with the Company as Director, by itself, is not sufficient to warrant a conviction when especially section 9AA of the Act, which binds the Directors and all persons in charge of the affairs of the Company, was inserted in the Act in December 1985 whereas the inspection of the officers of the appellant, PWs.1 to 4 was on 6.2.1985 on which date offence is alleged and therefore, the various liability cannot be extended to the Director of the company on the date of the inspection. Learned senior counsel further contended that there is no specific allegation in the complaint for the commission of the offence by the second accused/respondent and the four prosecution witnesses also have not stated specifically anything about the respondent for his commission of the offence in his individual capacity and therefore, the order of acquittal passed by the Court below is perfectly correct. The learned senior counsel submitted that S.9 of the Act begins with the words, ''whoever commits any of the following offences namely, (a)..(b) evades the payment of any duty payable under the Act, "making it very clear that the word ''whoever'' would govern the person only if he has committee (sic) offences and the vicarious liability cannot be brought under S.9 of the Act before the amendment of the Act by introducing S. 9AA. The learned senior counsel relies upon certain decisions in support of this argument. The first decision is Kendar Nath Goenka & others v. Superintendent of Central Excise & others (1978 E.L.T. (J 538) , which has been referred to by the Lower Appellate Court also. In that case, the Calcutta High Court has held that from the words ''whoever commits'' found in the Act, it makes a person personally liable for an offence, if he commits any offence mentioned in tire said section and there must be specific averment, in the complaint to the effect that the Directors, who had been implicated by virtue of their office, were personally responsible for the acts of commission and omission for which they have been sought to be made liable under S.9 of the Act and the liability cannot be extended merely by virtue of any position they hold in a company or firm. The learned senior counsel has referred to another decision in Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi and Others, in which case the complaint was filed against the company, its directors and the Manager for the offence under the prevention of Food Adulteration Act. The Supreme Court has found that in so far as the Directors were concerned, there was not even a whisper to show that the Directors had committed any act amounting to offence and in such circumstances, they cannot be made accused. However, the Apex Court has found that the Manager of the Company was responsible for the affairs of the business and therefore, the proceeding against him should not be quashed.
The above decision was at the state of the trial when proceedings were initiated for quashing.
Now, if we look into the complaint against the respondent/second accused, in paragraph 4 of the complaint, it is specifically mentioned that this offence was committed with his (second accused''s) knowledge and he had not exercised all due diligence to prevent the commission of the offence. Therefore, there is specific allegation in the complaint itself that the offence was committed with the knowledge of the second accused, who is the Director of the Company. This allegation in the complaint would amount to his connivance in evading the payment of duty, which is an offence under S. 9 of the Act. The charges have been framed against the second accused and in all the six charges, it is specifically mentioned that the second accused and the first accused had removed the printed circuit boards and failed to maintain the accounts as required under law and that they evaded the payment of the duty. There are specific charges against the second accused also.
Now, coming to the evidence, no doubt P.W. 4 has stated that he did not investigate as to the part played by the second accused but for that reason alone, it cannot be stated that there is no evidence for the participation of the second accused in the commission of the offence. Learned senior counsel for the respondent contended that even though in the complaint it is merely stated that the second accused had knowledge about the commission of the offence, there is no direct evidence for his participation in the offence and as P.W. 4 would simply say that the second accused is prosecuted as he happens to be the Director, the vicarious liability cannot be extended without specific overt act against the second accused and as the witnesses examined on the side of the prosecution have not stated anything about the second accused, he cannot be convicted when especially the Lower Appellate Court has acquitted him. The learned senior counsel for the respondent, referring to the ratio laid down by the Apex Court in Dhanna, etc. Vs. State of Madhya Pradesh, would argue that when the Lower Appellate Court had acquitted the accused in the appeal against the acquittal, the Appellate Court has to proceed more cautiously and unless there is absolute assurance of the guilt of the accused, upon the evidence on record, the order of acquittal shall not be interfered with or disturbed. In the same decision, the Apex Court would observe that the High Court has full power to review the evidence and to modify on its own independent conclusion whether the appeal is against the conviction or acquittal. The above view has come out because the acquittal by the Lower Court is an added strength for the presumption of innocence. It is the principle of criminal jurisprudence that an accused is an innocent unless the offence is proved against him. As observed by the Apex Court above, whether it is acquittal or conviction, the Court has to assess the evidence on its own independent conclusion.
In this case, the statements Exs.P-26 and P-29, are said to be the statements made by the second accused, and they themselves are sufficient to prove the participation of the second accused, in the offence alleged against him. Even though the second accused, at the time of trial, took the stand that he did not give the statements Ex. P-26 and Ex. P-29 but would state that he simply signed the statements what they wrote, P.W. 2, the Inspector of Central Excise, Head Quarters, who accompanied the squad, which inspected the premises of the company on 6.2.1985, has stated that the second accused gave the statement Ex. P-26 and he recorded the statement on the request of the second accused before P.W. 4. The details in Ex. P-26 could not have been known to the inspecting squad and therefore, it is made clear that Ex. P-26 statement was given by the second accused himself. In Exs.P-26 and P-29, the respondent would state that his unit was engaged in the activities of assembling the printed circuit board for colour television and V.I.F. for black and white television boosters and for television control modules and his unit had obtained the secondary manufacturers licence on 12.10.1984. He also would say that though he and the company were maintaining their own records for clearance and stocking goods assembled in the premises of his factory, he did not maintain the records and transport documents as required by the Central Excise Rules. He also has stated that the officers of the Central Excise Department checked the stock and accounts on 6.2.1985. He has further stated that they were doing only labour work for Hi-beam Electronics and another and that the finished goods were sent back to the suppliers and as they were getting only the labour charges, there was no question of adding the material value when it happened to be the contract per piece. In the statement Ex. P-29 also, he has stated about the change in the name from Video Consortium Pvt. Ltd. to Technovision Pvt. Ltd., for sentimental reasons, they changed the premises according to the space requirement and though they maintained certain records to satisfy the excise formalities, the issue of gate pass was not followed. Again he has stated that the process was only assembly and soldering of the components supplied by the suppliers to whom the assembled boards were given back. When these statements have been proved and accepted by the Courts below as true and mere is also no reason to disbelieve the evidence of P.W. 2, who has recorded the statements, the contents of Exs.P-26 and P-29 have to be accepted. On a perusal of these statements of the respondent, it shows that he was running his factory with the job work of assembling the printed circuit boards and V.I.F. and also the boosters for the antennas and he did not pay the required excise duty for the manufactured products for the sole reason that he received the components from certain other companies like HI-fi Beam Electronics and B.L.Rs., to whom the finished products were sent and as he did not treat the finished products as manufactured goods of his company, he did not pay the excise duty. It is not the case of the second accused that he was not aware of the affairs of first accused company as if he was a sleeping partner or that he had no occasion to go into the manner in which the business was carried on by the first accused company. On the other hand, he was fully conscious of the fact that the company need not pay the excise duty because it was sending back the finished products to the companies which supplied the components. When he has the full knowledge that his company is not paying the excise duty for the above mentioned reason and he did not direct his accountant or the other staff members to pay the duty as per the Act, certainly, it will amount to the commission of the offence with his connivance, he being the Director of the company. His description as the Director of the Company in the complaint is not to indicate his position in the office of the first accused. But it is to show that he had the absolute control and management over his company, the first accused, and he having the full knowledge that the excise duty was not paid by his company, but has been actively assisting the commission of the offence, not only as Director but also in his individual capacity. Exs.P-26 and P-29, which are part of the evidence, cannot be eschewed, irrespective of the question from which source it has come to light, when Exs.P-26 and P-29 are the documentary evidence before the Court, they cannot be rejected for any reason and they have to be properly appreciated. These two documents, as mentioned above, reveal the role of the second accused Director in allowing his company to despatch the manufactured goods to other companies for marketing contrary to the provisions of the Act. As a matter of fact, the second accused, when questioned under S. 313 Code of Criminal Procedure, has stated that he did not do anything wantonly and he had taken best cautions. Therefore, it cannot be stated that the second accused stands before the Court only for the vicarious liability. The Bench of this Court in State of Rajasthan Vs. Kalyan Sundaram Cement Industries Ltd. and Others, would observe at paragraph 23 as follows:-
The word ''evidence'' in the Act signifies only the instruments by means of which relevant facts are brought before court, viz. witnesses and documents and by means of which, the court is convinced on these facts. In judging whether a fact is or is not proved, the court is entitled to take into consideration not only the statements and probabilities of the case. Even if the statement of witnesses standing by themselves, are open to criticism, a fact may be held established on such evidence read in the light of the surrounding circumstances. The term ''matter before it'' in the definition of the expression ''proved'' includes ''matters'' which do not fall within the definition of ''evidence'' and such matters may include ''inference for facts''. The proof of a fact depends not upon the accuracy of statements made at different stages of the case, but on the probability of its having existed. ''Evidence of a fact'' and ''proof of a fact'' are, therefore, different and distinct in the sense of they not being synonymous. It is the broad facts, made up of those fact of the case and not the little details that go to make up those facts that will make the extent of those facts probable or not If a fact is to be held proved, the Court must either believe it to exist or consider its existence so probable that a prudent man ought, under the circumstances, to act upon the suppositions that it had existed. Thus, it is crystal clear that the positive statements of witnesses is subject the rule of probability or otherwise such statements of witnesses have to be excluded from the purview of consideration as being not proved.
In the view of the Bench, the Court is entitled to take into consideration of not only the statements of the witnesses but also the surrounding circumstances and the probabilities of this case for the proof of a fact. As a matter of fact, the appellant has not prosecuted the other Director, who is a lady, because this respondent himself was actually taking part in the business affairs of the first accused and he also would admit that he did not do anything wantonly. So, even if his statement that he did not pay the duty as he thought that it was only a job work, is taken into consideration, the offence is made out against him also because when the statute requires to comply with certain conditions, which are mandatory in nature, but the same was not complied with, even if it is taken, that the person, who failed to comply with that, had no mens rea, the non-compliance will amount to the commission of the offence for which he is liable to be punished. In Deputy Commissioner of Income Tax Vs. Modern Motor Works and Others, , the Punjab & Haryana Court, while considering the noncompliance of S. 194 of the Income Tax Act, has held that when a provision is mandatory, mens rea is not a requisite ingredient of the offence. In this case, S. 9(1)of the Act directs the payment of the duty for the manufactured goods and S. 9(1)(bb)(i) of the Act also directs to maintain the Gate Passes whenever the manufactured goods were moved out of the factory to deliver to another person and also to maintain the account books. When the Sections are mandatory in nature, the non-compliance will certainly amount to the offence even if the accused had no intention of violating the provisions of law.
Taking into consideration of the above facts and the circumstances, the second accused also has committed the offence and as the charges have been proved against him, the Lower Appellate Court was not correct in acquitting the respondent. When it is so, the order of acquittal passed by the Lower Appellate Court has to be set aside.
Mr. Habibullah Badsha, learned senior counsel for the respondent, contended that till the correct position of law was settled by the Apex Court in Ujagar Prints v. Union of India (Supra) not only the second accused but many others were under the impression that for the job works, they were not bound to pay the excise duty, in view of the conflicting decisions of various High Courts and as the second accused never intended to commit the offence, this extenuating circumstance might be taken into consideration for awarding the lesser sentence. The learned senior counsel further submitted that now the first accused company has become defunct and more than ten years have lapsed since the time of the prosecution and the Department has not imposed any penalty in the adjudication proceedings and as this is an appeal against acquittal, leniency might be shown to the second accused/respondent herein in the matter of punishment.
The trial court has awarded six months imprisonment to this respondent in addition to the fine. Under S. 9 of the Act the minimum sentence of six months has to be imposed in the absence of any special and adequate reasons. But I feel that the reasons given by the learned senior counsel are convincing. As there might have been element of confusion as to the liability to pay the duty, in view of the conflicting decisions of various High Courts. As the first accused company itself has become defunct now, I feel that the imprisonment need not be imposed against the second accused. In my opinion, the fines as imposed by the trial Court themselves will be sufficient punishment to the respondent herein.
In the result, the respondent/second accused is found guilty of all the offences alleged in the charges and therefore the order of the Lower Appellate Court is set aside. The order of conviction passed by the trial Court is restored. In so far as the sentence is concerned, as the substantive sentence of six months imposed by the trial Court, minus the substantive sentence, is confirmed (the total fine amount of Rs. 10,500/- is payable, if not paid already). Subject to the above modification the Appeal is allowed.