Excise Duty Evasion: Gujarat HC quashes Criminal Proceedings in Absence of Legally Enforceable Debt on Date of Issue of Cheque [Read Order]

The Gujarat High Court quashed criminal proceedings on excise duty evasion in the absence of legally enforceable deb on the date of issue of cheque.

Anil Govindbhai Metaliya, the applicant prayed to quash and set aside Criminal Case Nos.18 of 2011, 613 of 2012, 614 of 2012 and 615 of 2012, which are filed under the provisions of Section 138 of Negotiable Instruments Act, (`the Act’ ), pending in the Court of the Additional Chief Metropolitan Magistrate.

Mr Thackar appeared for the applicant and submitted that the impugned complaints were filed for dishonour of the cheques. A search was carried out by the respondent no.2-Director General of Central Excise Intelligence at the premises of the applicant. The applicant was arrested in connection with the offence registered by the Central Excise Department for the offences punishable under Section 9 of the Central Excise Act.  

The applicant had preferred bail application before the trial Court wherein the applicant had submitted that he had already deposited Rs.25,00,000/and a cheque of Rs.25,00,000/- was handed over to the officials. Thus the total amount of Rs.50,00,000/- is given by way of cheque and cash to the opponent. The applicant submits that without prejudice to all his rights and contentions and to show his bonafide, the applicant is willing to deposit the remaining amount of Rs.3,50,00,000/- within 18 months.

Considering the bonafide of the applicant and the merits of the case, the applicant was released on bail and no condition was imposed by the trial Court; and in view of the said fact, the applicant had issued 7(seven) cheques of different amounts totalling to Rs.2,50,00,000/- as mentioned hereinabove, when he was in the jail which was dishonoured and therefore a statutory notice was issued by the respondent no.2 and accordingly statutory notice was replied by the applicant contending that there was no assessment of the tax liability, no show-cause notice was issued and therefore, the issue of determination of the tax liability was pending at the time of deposit of cheques.

Further submitted that there is no legally enforceable debt or other liabilities subsisting on the date of draw of the cheque as well as on the date of presentation of the cheques.

Per contra, Mr Dave appearing for respondent no.2 has mainly submitted that there is a specific admission of the exact amount of evasion of duty. For that amount, the cheque is given including that the applicant has given the cheques for payment of duty, which is made in the impugned complaints. Very specific and the amount is also specifically entered by the applicant who had issued the cheques.

It was found that the department construed the two statements recorded under Section 14 of the Act, 1944 as a confession on the part of the applicants of indulging in fraudulent availment of the Cenvat Credit of Rs.3.27 crore based on phoney convertible invoices issued by the various ship breaking units of Bhavnagar.

The Court observed that at the end of the search operation, the officials were able to collect something incriminating against the applicants as regards the evasion of the excise duty. However, it cannot be said that the cheques which were obtained by the department were towards the discharge of the existing enforceable debt or liability. The liability was yet to be determined by the competent authority under the provisions of the Act.

A single bench of Justice Sandeep N Bhatt held that “there is no legally enforceable debt is found and considering the above judgment which is passed in identical facts and the ratio laid down on the aspect that there should be legally enforceable debt existing on the date of issuance as well as presentation of cheques and accordingly considering the ratio laid down in the judgments of M/s Indus Airway Pvt. Ltd. (supra), Sampelly Satyanarayana Rao (supra) and Dashrathbhai Trikambhai Patel (supra), all these applications are allowed. The proceedings of Criminal Case Nos.18 of 2011, 613 of 2012, 614 of 2012 and 615 of 2012,  pending in the Court of the learned Additional Chief Metropolitan Magistrate, Court No.36, Ahmedabad and consequential proceedings pursuant thereto are hereby quashed qua the applicants.”

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates