Gujarat High Court
Anil Govindbhai Metaliya vs State Of Gujarat on 8 November, 2023
Bench: Sandeep N. Bhatt
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 17170 of 2014
With
R/CRIMINAL MISC.APPLICATION NO. 17171 of 2014
With
CRIMINAL MISC.APPLICATION (FIXING DATE OF EARLY HEARING) NO.
1 of 2022
In R/CRIMINAL MISC.APPLICATION NO. 17171 of 2014
With
R/CRIMINAL MISC.APPLICATION NO. 17172 of 2014
With
CRIMINAL MISC.APPLICATION (FIXING DATE OF EARLY HEARING) NO.
1 of 2022
In R/CRIMINAL MISC.APPLICATION NO. 17172 of 2014
With
R/CRIMINAL MISC.APPLICATION NO. 17173 of 2014
With
CRIMINAL MISC.APPLICATION (FIXING DATE OF EARLY HEARING) NO.
1 of 2022
In R/CRIMINAL MISC.APPLICATION NO. 17173 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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ANIL GOVINDBHAI METALIYA
Versus
STATE OF GUJARAT & 1 other(s)
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Page 1 of 64
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Appearance:
NANDISH THACKAR FOR THAKKAR AND PAHWA ADVOCATES(1357) for
the Applicant(s) No. 1
for the Respondent(s) No. 2
MR SIDDHARTH H DAVE(5306) for the Respondent(s) No. 2
MS MONALI H BHATT, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 08/11/2023
COMMON ORAL JUDGMENT
1. Since the issues and facts involved in all these
applications are the same, at the request of learned advocates
for the parties, they are heard and disposed of together by
this common judgment.
2. These applications are filed under Section 482 of
the Code of Criminal Procedure (`the Code' for short) praying
to quash and set aside the 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' for short), pending in the Court of the learned
Additional Chief Metropolitan Magistrate, Court No.36,
Ahmedabad and consequential proceedings pursuant thereto.
3. Heard learned advocates for the parties.
4. Learned advocates Mr.Thackar for the applicant
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submitted that the impugned complaints are filed for
dishonour of the cheques, the details of which are mentioned
as under:
Sr.No. Application No. Cheque No. Date Amount
1. Criminal 000260 11.10.2011 30,00,000/-
Miscellaneous
Application No.17170
of 2014
2 Criminal 000267 01.01.2012 25,00,000/-
Miscellaneous
Application No.17171
of 2014
3 Criminal 000257 22.11.2011 30,00,000/-
Miscellaneous
Application No.17172
of 2014
4 Criminal 000258 10.11.2011 30,00,000/-
Miscellaneous
Application No.17172
of 2014
5 Criminal 000254 22.12.2011 30,00,000/-
Miscellaneous
Application No.17173
of 2014
6 Criminal 000255 12.12.2011 30,00,000/-
Miscellaneous
Application No.17173
of 2014
7 Criminal 000256 30.11.2011 30,00,000/-
Miscellaneous
Application No.17173
of 2014
5. Learned advocate Mr.Thackar submitted that
search was carried out by the respondent no.2-Director
General of Central Excise Intelligence at premises of the
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applicant on 13.7.2011; that the applicant was arrested on
16.8.2011 in connection with the offence registered by the
Central Excise Department for the offences punishable under
Section 9 of the Central Excise Act; that the applicant had
preferred bail application before the learned trial Court
wherein the applicant had made following averment in the
bail application:
"30. The applicant has already deposited Rs.25,00,000/-
and cheque of Rs.25,00,000/- is 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. That
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 the period of 18 months."
6. Learned advocate Mr.Thackar submitted that
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 learned 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 were dishonoured
and therefore a statutory notice was issued by the respondent
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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.
7. Learned advocate Mr.Thackar further submitted
that the cheques were not issued and discharge of any
enforceable debt and liability; that the cheques were issued
by the applicant merely to show his bonafides before the
learned trial Court at the time of praying for bail. Though
the volition is shown by applicant but as such the cheques
were obtained by the officers of the department under threat,
pressure and duress. Thereafter, the demand raised by the
department was challenged by way of statutory appeal, which
was also allowed and such assessment was quashed and
therefore, on date of issuance of cheque as well as on deposit
of cheques, no legally enforceable debt was existing.
8. Learned advocate Mr.Thacker submitted that in
cognate matters being Criminal Miscellaneous Application
No.11461 of 2015, 11467 of 2015 and 11468 of 2015, this
Court (J.B.Pardiwala, J, as His Lordship then was) had
considered identical set of facts and allowed the applications
of the applicants therein and therefore, prayed to allow these
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applications.
9. Learned advocate Mr.Thackar further submitted
that cheques cannot be collected by the authority without
assessment and a show cause notice proposing to recover the
amount towards the duty has to be issued in accordance with
law.
10. Learned advocate Mr.Thackar for the applicant
relied on the judgments of the Hon'ble Apex Court in the
cases of
(i) M/s Indus Airway Pvt.Ltd. V/s M/s Magnum Aviation Pvt.
Ltd. Reported in 2014(12) SCC 539.
(ii) Sampelly Satyanarayana Rao V/s Indian Agency Limited,
reported in 2016(10) SCC 458.
(iii) Dashrathbhai Trikambhai Patel V/s Hitesh Mahendrabhai
Patel, reported in 2023(1) SCC 578.
and submitted that there should be a legally enforceable debt
or other liabilities subsisting on the date of drawal of the
cheque as well as on the date of presentation of the cheques,
which is not the case in the matters on hand and therefore
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also, he prayed to allow these applications.
11. Per contra, learned advocate Mr.Dave appearing for
respondent no.2 has mainly submitted that there is a specific
admission of exact amount of evasion of duty and 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 and very specific and the amount is
also specifically entered by the applicant who had issued the
cheques; it is not the case in the impugned complaint that
the cheque was given for the purpose of security and
therefore the judgments relied upon the applicant wherein the
duty was uncertain and the cheque was given as security
would have no application to the facts and circumstances of
the present case; that the payment in this case was made
voluntarily and therefore the judgment relied on by learned
advocate for the applicant in cognate matters will not help
the case of the applicant as the payment was made therein
under threat and coercion. He, therefore, submitted that in
view of this, it cannot be said that it is identical to the
facts of this case and therefore, these applications be
dismissed.
12. I have considered the submissions made by learned
advocates for the parties, the material produced on record
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and the judgments relied on by learned advocates for the
parties.
13. The judgment dated 4.4.2017 passed in cognate
matters being Criminal Miscellaneous Application Nos.11461
of 2015, 11467 of 2015 and 11468 of 2015 reads as under:
" The complaint filed by the respondent
no.2 reads as under :
"1. That, as per the Central Excise Act,
1944, the Government of India has
constituted various Commissionerate of
Central Excise Department for the
recovery of Central Excise Duty from
various manufacturers who are covered
under the said Act and rules, Directorate
General of Central Excise Intelligence is
a Special Wing of the Central Excise
Department constituted by the Central
Government to detect the evasion of
Central Excise duty by the manufacturer
and proceed against them.
2. That, the accused No.1 M/s.
Nandeshwari Steel Ltd. is a Public
Limited Company and registered under
the Indian Companies Act and engaged
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in manufacture of SS ingotes, SS Round
Bars falling under chapter - 72 of The
Central Excise Tariff Act, 1985. The
accused No.2 Shri Mitesh Patel is the
director of the said Company and looking
after day to day affairs of the said
company and is responsible for the said
company M/s. Nandeshwari Steel Ltd.
falls within the Jurisdiction of the
Commissioner of Central Excise
Ahmedabad III and are registered with
Central Excise Division Office,
Gandhinagar. Directorate General of
Central Excise Intelligence, (herein after
refereed to as DGCEI) having jurisdiction
over the entire state of Gujarat for
detecting and investigation of the cases of
Central Excise duty evasion.
3. That on behalf of DGCEI, Senior
intelligence officer Shri M.K.Sharma, has
been instructed and authorised to file
this complaint by the order of the
Additional Director General, DGCEI,
Zonal Unit, Ahmedabad, Shri
M.K.Sharma is an employee of the
Central Government and a public servant
within the meaning of section 21 of the
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Indian Penal Code, in his such official
capacity the complaint is filed.
4. That, acting on the intelligence, the
searches were carried out at the
factory/office premises of the accused
No.1, transporters etc. by the officers of
DGCEI, Ahmedabad on 07.11.2012 and
various incriminating documents were
recovered under the panchnamas drawn
at the respective premises, preliminary
scrutiny of the records resumed from the
various premises revealed that the
accused No.1 has cleared SS Round bars
clandestinely on cash basis without
payment of Central Excise Duty leviable
thereon. It was also revealed that the
accused No.1 has availed fraudulently
cenvat credit on the strength of invoices
issued by the various Ship- breaking
units of Bhavnagar, without receipt of
goods maintained therein and to adjust
the quantity of goods maintained in such
bogus invoices, they have procured scrape
from local market on cash basis.
5. That, during the inquiry the accused
No.2 Shri Mitesh Patel has admitted that
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they have wrongly availed the CENVAT
credit of Rs.3.27 Crores merely on
purchase of Cenvatable invoices from
various Ship breaking units without
physically receiving the corresponding
goods along with the Central Excise
invoices during the period from 2009-10
to 2012-13. The accused No.1 has
debited voluntarily an amount of Rs.75
Lakhs vide challan No.0018l dated
07.11.2012 for Rs.50,000 Lakhs and
challan No.00182 dated 07.11.2012 for
Rs.25,00 Lakhs by e-payments to the
government. Further more it was also
revealed that the accused No.1 has
cleared finished goods clandestinely
involving duty of Rs. 1.00 Crore or more
without payment of Central Excise duty
leviable thereon.
6. That, on behalf of accused No.1
Company, accused No.2 Shri Mitesh
A.Patel in the capacity of director of the
company vide his letter dated 08.11.2012
willingly and voluntarily tendered
following seven post dated cheques signed
by him towards the duty evasion and
wrong availment of Cenvat Credit. The
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cheques drawn on Bank of Baroda,
Naroda Road Branch, Ahmedabad in the
name of Commissioner of Central Excise,
Ahmedabad-III A/c. M/s.Nandeshwari Steel
Ltd. as their account for Central Excise
duty is being maintained with
Commissioner Central Excise, Ahmedabad-
III.
Sr. Cheque Date Amount
No. No.
1. 000851 01.12.12 Rs.50,00,000/-
2. 000852 15.12.12 Rs.50,00,000/-
3. 000853 31.12.12 Rs.50,00,000/-
4. 000854 15.01.13 Rs.50,00,000/-
5. 000855 31.01.13 Rs.50,00,000/-
6. 000856 15.02.13 Rs.50,00,000/-
7. 000857 28.02.13 Rs.50,00,000/-
Total Rs.3,50,00,000/-
7. That, out of the cheques mentioned in the
table above three cheques mentioned at serial
No.04 and 05 above the cheque No.000854,
000855 were deposited in the State Bank of
India, Ashram Road Branch, Ahmedabad on
05.02.2013 for crediting the same in
Government of India Account and the same
were returned unpaid by their Bank of
Baroda on 07.02.2013 with a remark of
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'Payment Stopped by Drawer'. Therefore, the
complainant could not recover their legal
dues of Rs.1,00,00,000/- (Rupees One Crore
Only) from the accused.
8. That on 05.03.2013, the complainant
through their advocate have served a legal
notice U/s.138 of the Negotiable Instrument
Act to the accused to make the payment of
the aforesaid returned and unpaid cheques
by Regd. Post AD. The notice were served at
the Registered office as well as factory
premises of the accused No.1. The notice has
been received by the accused on or about
07.03.2013. However, the accused have not
made payment of the returned and unpaid
cheques. The accused have on 20.03.2013
replied the notice through their advocate Shri
Minesh Vaghela and refused to make the
payment of the returned and unpaid cheques
to the complainant. The accused have
contended that they have issued the cheques
under pressure, threat and duress, I submit
that this is contrary to the documentary
evidence. I further submit that, the cheque
have been voluntarily issued by the accused
towards their duty liability. The evasion of
Central Excise Duty is legally enforceable
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debt of the accused. During the ongoing
inquiry uptil now the complainant has
determined the Central Excise Duty evasion
of more than Rs.4.25 Crores. After the
completion of inquiry show cause notice would
be issued and adjudication proceedings for the
recovery of the Central Excise Duty, interest
thereof and appropriate penalty would be
held. The order by the adjudicating authority
would be passed. The procedure of
adjudication proceedings has been laid down
in various Special Acts for the recovery of
evasion like Central Excise Duty, Customs
duty, service tax etc. for which the Central
Government need not have to go civil court
for the recovery of the duty evasion etc.
Therefore, the accused have committed the
offence punishable U/s. 138 of The Negotiable
Instrument Act, 1884."
Thus, it appears from the averments made
in the complaint that the applicants herein
issued seven cheques drawn in favour of the
complainant of different dates aggregating to
the tune of Rs.3.50 crore. Such cheques are
alleged to have been issued by the
applicants to discharge their liability
towards the Central Excise duty. As all the
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cheques returned unpaid with a remark
"payment stopped by drawer", the complaints
came to be lodged.
Mr.D.K.Trivedi, the learned counsel appearing
for the applicants, vehemently submitted that
the cheques in question were not issued by
his clients in discharge of any legally
enforceable debt or liability. It is submitted
that the cheques were obtained by the
officers of the Central Excise department
under threat, pressure and duress. The
applicant no.2 was pressurised by the officers
to give a statement in writing on a
letterhead of the company that the cheques
were being drawn voluntarily and without
any threat or duress.
Mr.Trivedi submits that the adjudication
proceedings under the Central Excise Act
have not been initiated till this date. A
show-cause notice proposing to recover a
particular amount towards the duty has to
be issued in accordance with law.
The adjudicating authority, thereafter, will
have to consider the claim put forward by
the department by giving the applicants
opportunity of leading appropriate evidence.
Mr.Trivedi submits that the exact amount of
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the alleged evasion of duty is yet to be
determined in accordance with law, and on
the date when the cheques were obtained by
the officers under threat, pressure and
duress, there was no legally enforceable debt
payable by the applicants to the complainant.
Mr.Trivedi submits that the applicants have
been charged with the offence under
Section 9 of the Central Excise Act, 1944,
i.e. for wrongly availing the Cenvat Credit
of Rs.3.27 crore. Such allegations have been
levelled merely on the ground of purchase
of cenvatable invoices from the various ship
breaking units without physically receiving
the corresponding goods along with the
Central Excise invoices during the period
between 2009-10 and 2012-13. Mr.Trivedi
invited the attention of the court to certain
provisions of law. First, he invited the
attention to Rule 14 of the Rules, which
reads as under :
"14. Recovery of CENVAT credit wrongly
taken or erroneously refunded.- (1) (i) Where
the CENVAT credit has been taken wrongly
but not utilised, the same shall be recovered
from the maufacturer or the provider of
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output service, as the case may be, and the
provisions of section 11A of the Excise Act or
section 73 of the Finance Act, 1994 (32 of
1994), as the case may be, shall apply
mutatis mutandis for effecting such recoveries;
(ii) Where the CENVAT credit has been
taken or utilized wrongly or has been
erroneously refunded, the same shall be
recovered along with interest from the
manufacturer or the provider of the output
service, as the case may be, and the
provisions of sections 11A and 11AA of the
Excise Act or sections 73 and 75 of the
Finance Act, 1994, as the case may be, shall
apply mutatis mutandis for effecting such
recoveries."
(2) For the purposes of sub-rule (1), all
credits taken during a month shall be
deemed to have been taken on the last day
of the month and the utilisation thereof
shall be deemed to have occurred in the
following manner, namely :-
(i) the opening balance of the month has
been utilised first;
(ii) credit admissible in terms of these rules
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taken during the month has been utilised
next;
(iii) credit inadmissible in terms of these
rules taken during the month has been
utilised thereafter.
Thereafter, he invited the attention of this Court
to Section 11A of the Act, which reads as under :
"Section 11A. Recovery of duties not levied or
not paid or short-levied or short-paid or
erroneously refunded.-
(1) Where any duty of excise has not
been levied or paid or has been short-
levied or short-paid or erroneously
refunded, for any reason, other than the
reason of fraud or collusion or any
willful misstatement or suppression of
facts or contravention of any of the
provisions of this Act or of the rules
made thereunder with intent to evade
payment of duty,-
(a) the Central Excise Officer shall,
within one year from the relevant
date, serve notice on the person
chargeable with the duty which has
not been so levied or paid or which
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has been so short-levied or short-
paid or to whom the refund has
erroneously been made, requiring
him to show cause why he should
not pay the amount specified in the
notice;
(b) the person chargeable with duty
may, before service of notice under
clause (a), pay on the basis of,-
(i) his own ascertainment of such duty;
or
(ii) the duty ascertained by the
Central Excise Officer, the
amount of duty along with
interest payable thereon under
section 11AA.
(iii) The person who has
paid the duty under clause (b)
of sub-section (1), shall inform
the Central Excise Officer of
such payment in writing, who,
on receipt of such information,
shall not serve any notice
under clause (a) of that sub-
section in respect of the duty
so paid or any penalty leviable
under the provisions of this
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Act or the rules made
thereunder.
(2) Where the Central Excise Officer is of
the opinion that the amount paid under
clause (b) of sub-section (1) falls short of
the amount actually payable, then, he
shall proceed to issue the notice as
provided for in clause (a) of that sub-
section in respect of such amount which
falls short of the amount actually payable
in the manner specified under that sub-
section and the period of one year shall
be computed from the date of receipt of
information under sub-section (2).
(3) Where any duty of excise has not been levied or
paid or has been short-levied or short-paid or
erroneously refunded, by the reason of-
(a) fraud; or
(b) collusion; or
(c) any wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this
Act or of the rules made thereunder with
intent to evade payment of duty, by any
person chargeable with the duty, the Central
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Excise Officer shall, within five years from the
relevant date, serve notice on such person
requiring him to show cause why he should
not pay the amount specified in the notice
along with interest payable thereon under
section 11AA and a penalty equivalent to the
duty specified in the notice.
(4) to (7) Omitted
(7A) Notwithstanding anything contained in
sub-section (1) or sub-section (3) or sub-section (4),
the Central Excise Officer may, serve, subsequent
to any notice or notices served under any of those
sub-sections, as the case may be, a statement,
containing the details of duty of central excise not
levied or paid or short-levied or short-paid or
erroneously refunded for the subsequent period,
on the person chargeable to duty of central excise,
then, service of such statement shall be deemed to
be service of notice on such person under the
aforesaid sub-section (1) or subsection (3) or sub-
section (4) or sub-section (5), subject to the
condition that the grounds relied upon for the
subsequent period are the same as are mentioned
in the earlier notice or notices.
(8) Where the service of notice is stayed by an
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order of a court or tribunal, the period of such
stay shall be excluded in computing the period of
one year referred to in clause (a) of sub-section
(1) or five years referred to in sub-section (4), as
the case my be.
(9)Where any appellate authority or Tribunal or
court concludes that the notice issued under sub-
section (4) is not sustainable for the reason that
the charges of fraud or collusion or any willful
mis-statement or suppression of facts or
contravention of any of the provisions of this Act
or of the rules made thereunder with intent to
evade payment of duty has not been established
against the person to whom the notice was issued,
the Central Excise Officer shall determine the
duty of excise payable by such person for the
period of one year, deeming as if the notice were
issued under clause (a) of sub-section (1).
(10) The Central Excise Officer shall, after
allowing the concerned person an opportunity of
being heard, and after considering the
representation, if any, made by such person,
determine the amount of duty of excise due from
such person not being in excess of the amount
specified in the notice.
(11) The Central Excise Officer shall determine
the amount of duty of excise under sub-section
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(10)-
(a) within six months from the
date of notice in respect of cases
falling under subsection (1);
(b) within one year from the date
of notice, where it is possible to do
so, in respect of cases falling under
sub-section (4)
(12) Where the appellate authority or
tribunal or court modifies the amount
of duty of excise determined by the
Central Excise Officer under sub-
section (10), then the amount of
penalties and interest under this
section shall stand modified
accordingly, taking into account the
amount of duty of excise so modified.
(13) Where the amount as modified by the
appellate authority or tribunal or court is
more than the amount determined under sub-
section (10) by the Central Excise Officer, the
time within which the interest or penalty is
payable under this Act shall be counted from
the date of the order of the appellate
authority or tribunal or court in respect of
such increased amount.
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(14) Where an order determining the duty of excise
is passed by the Central Excise Officer under this
section, the person liable to pay the said duty of
excise shall pay the amount so determined along
with the interest due on such amount whether or
not the amount of interest is specified separately.
(15) The provisions of sub-section (1) to 14 shall
apply, mutatis mutandis, to the recovery of interest
where interest payable has not been paid or part
paid or erroneously refunded.
(16) The provisions of this section shall not apply to a
case where the liability of duty not paid or short-
paid is self-assessed and declared as duty payable
by the assessee in the periodic returns filed by
him, and in such case, recovery of non-payment or
short-payment of duty shall be made in such
manner as may be prescribed.
Explanation 1.-For the purposes of this
section and section 11AC,-
(a) "refund" includes rebate of duty of excise on
excisable goods exported out of India or on
excisable materials used in the
manufacture of goods which are exported out
of India;
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(b) "relevant date" means,-
(i)i)) in the case of excisable goods on which
duty of excise has not been levied or
paid or has been short-levied or short-
paid, and no periodical return as
required by the provisions of this Act
has been filed, the last date on which
such return is required to be filed under
this Act and the rules made thereunder;
(i)i)i)) in the case of excisable goods on which
duty of excise has not been levied or
paid or has been short-levied or short-
paid and the return has been filed, the
date on which such return has been
filed;
(i)i)i)i)) in any other case, the date on which
duty of excise is required to be paid
under this Act or the rules made
thereunder;
(i)i)v))in a case where duty of excise is
provisionally assessed under this Act or
the rules made thereunder, the date of
adjustment of duty after the final
assessment thereof;
(i)v)) in the case of excisable goods on which
duty of excise has been erroneously
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refunded, the date of such refund;
(i)v)i)) in the case where only interest is to
be recovered, the date of payment of
duty to which such interest relates.
(c) Omitted.
Explanation 2:- For the removal of doubts, it
is hereby declared that any non-levy, short
levy, non-payment, short-payment or
erroneous refund where no show cause notice
has been issued before the date on which
the Finance Bill, 2015 receives the assent of
the President, shall be governed by the
provisions of section 11A as amended by the
Finance Act, 2015."
Thereafter, to Section 35 of the Act, which
provides for appeals. It reads as under :
"Section 35. Appeals to Commissioner (Appeals). -
(1) Any person aggrieved by any decision or
order passed under this Act by a Central
Excise Officer, lower in rank than a
Commissioner of Central Excise , may appeal
to the Commissioner of Central Excise
(Appeals) hereafter in this Chapter referred
to as the Commissioner (Appeals) within
sixty days from the date of the
communication to him of such decision or
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order :
Provided that the Commissioner (Appeals)
may, if he is satisfied that the appellant
was prevented by sufficient cause from
presenting the appeal within the
aforesaid period of sixty days, allow it to
be presented within a further period of
thirty days.
(1A) The Commissioner (Appeals) may, if
sufficient cause is shown at any stage of
hearing of an appeal, grant time, from
time to time, to the parties or any of them
and adjourn the hearing of the appeal for
reasons to be recorded in writing:
Provided that no such adjournment shall
be granted more than three times to a
party during hearing of the appeal.
(2) Every appeal under this Section shall be in the
prescribed form and shall be verified in the
prescribed manner."
The idea in referring to the above
provisions of the Rules and the Act is to
show that a procedure has been prescribed
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for determining the liability towards the
payment of the excise duty. Without following
the said procedure, the liability cannot be
determined. To put it in other words, the
liability to pay the excise duty cannot be
determined solely on the statement made by
the person concerned under Section 14 of
the Act, which is in the nature of a confession.
Mr.Trivedi placed strong reliance on the
decision of the Supreme Court in the case of
Sampelly Satyanarayana Rao v. Indian
Agency Limited, reported in (2016)10 SCC
458.
On the other hand, this application has
been vehemently opposed by Mr.Chintan Dave,
the learned senior standing counsel for the
Excise Department. Mr.Dave submitted that the
cheques were issued by the applicants
towards the discharge of their liability of
payment of excise duty. According to him, the
allegations that the cheques were obtained by
threat, pressure and duress are without any
basis and are palpably false. Mr.Dave seeks to
rely on the following averments made in the
affidavit-in-reply filed on behalf of the
respondent no.2.
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"3.1 It is submitted that the case law
referred to and cited by the applicant
cannot be made applicable to the
jurisdictional facts of this case. The
applicant has taken plea of applicability
of the Order dated 17.04.2015 passed by
this Hon'ble Court in Criminal Misc.
Application No.17170 of 2014 without
producing complete documents of the said
proceedings on record. It is submitted
that reliance placed by the applicant to
the proceedings of Criminal Misc.
Application No.17170 of 2014 filed by Shri
Anil Govindbhai Metalia to support its
case, is thoroughly misconceived inasmuch
as the said Criminal Misc. Application
No.17170 of 2014 is admitted by this
Hon'ble Court for consideration of
contention raised by the said applicant
that the post-dated cheque bearing
Nos.000260 dated 11.10.2011 was drawn
in favour of ACAO, Central Excise,
Bhavnagar, Whereas, the said cheque was
submitted for realization at Junagadh by
the office of ACAO, Central Excise,
Junagadh in the State Bank of India,
Junagadh. The said applicant has also
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produced photocopy of cheque in support
of his plea, by way of draft amendment
on 17.04.2015 and in these circumstances,
this Hon'ble Court by order dated
17.04.2015 has allowed the draft
amendment and issued rule on the
petition. The applicant herein has relied
upon the said order dated 17.04.2015,
which is produced by him at PP-134. It
is respectfully submitted that no such
plea is available to the applicant in
support of prayer for quashing the
complaint filed against him by the
answering respondent. A copy of draft
amendment submitted in Criminal Misc.
Application No.17170 of 2014 is annexed
hereto and marked as ANNEXURE R-1 to
this affidavit. Therefore, the application
requires to be dismissed at the threshold
and ex-parte ad-interim relief obtained by
the applicant may also be vacated.
4. Without prejudice to the preliminary
objection as to the maintainability and
entertainability of the captioned application,
the answering respondent respectfully
submit that the facts stated by the
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applicant in paras 2 to 9 of the application
does not reflect true, complete and correct
facts. The relevant facts taken out from
the record maintained by the office of the
answering respondent are briefly
stated, as under:
4.1 The Applicant is Director of M/s Nandeshwari Steel
Ltd., Factory at Block No.76, Village Zak, Taluka
Dehgam, District Gandhinagar, Gujarat 382325
[hereinafter referred to as "M/s NSL"] are engaged
in manufacturing of SS ingots, SS Round Bars
falling under chapter 72 of the Central Excise Tariff
Act, 1985. They are holding Central Excise
Registration NO.AAABCN3464BXM001 for
manufacturing of the said goods. The applicant is
statutorily obliged to make payment of duty of
Central Excise at the rate and in the manner
prescribed under the provisions of the Central
Excise Act, 1944, Rules framed thereunder as well
as the Central Excise Tariff Act, 1985.
4.2 An Intelligence was gathered by the officers of the
respondent to the effect that M/s NSL is engaged
in the evasion of the Central Excise duty by way
of clandestine removal of SS Rounds on cash basis
through various transporters, without issuance of
invoices, without payment of Central Excise duty
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leviable thereon. It was also gathered that M/s.
NSL has availed fraudulent Cenvat credit on the
strength of phony invoices issued by the various
ship-breaking units of Bhavnagar, without receipt of
goods mentioned therein and to adjust the quantity
of goods mentioned in such phony invoices, they
procure scrap from local market on cash basis.
4.3 Acting on the above intelligence, the officers of the
answering respondent conducted a coordinate search
operation at the factory & office premises of M/s
NSL, Transporter premises of M/s TFC Roadlines
and other places on 07.11.2012. During the course of
searches various incriminating & clinching
documentary evidences were recovered, which
evidenced an evasion of a huge amount of duty of
Central Excise by way of fraudulent availment of
Cenvat Credit based on phony invoices without
receipt of goods mentioned therein as well as
clandestine removals of finished goods without
issuance of Central excise invoices & without
payment of Central excise duty. During the course
of investigation, the applicant has by making
statements dated 07.11.2012 & 08.11.2012 under
Section 14 of the Central Excise Act, 1944, confessed
that he was indulging into fraudulent availment of
Cenvat Credit of Rs.3.27 Crores on the basis of
phony cenvatable invoices issued by the various
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ship- breaking units of Bhavnagar showing sale of
old & used MS Plates, without receipt of goods
mentioned therein; that they were not having
facility/shredding machine for cutting, shredding &
using said old & used MS Plates in manufacture of
finished excisable goods at their factory premises;
that they shared duty of such phony invoices in
50:50 ratio; that he was also indulging into
clandestine removal of excisable goods i.e. SS
Rounds on cash basis without issuance of invoices &
without payment of Central Excise duty leviable
thereon. He has also admitted the modus operandi
adopted by him for evading Central Excise duty by
aforesaid manners. Duty evasion on aforesaid counts
approx. comes to Rs.4.00 Crores. Admitting the
above offence, M /s. NSL has on spot voluntarily
paid an amount of Rs.75,00,000/- in aggregate vide
GAR-7 Challan No. 00181 dated 07.11.2012 for
Rs.50,00,000/- and GAR-7 Challan No.00182 dated
07.11.2012 for Rs.25,00,000/- by e- payment to Govt.
Exchequer. Also, they, vide their letter dated
08.11.2012, have willingly tendered below mentioned
07 post dated cheques, each of Rs.50 lakhs, totally
amounting to Rs.3,50,00,000/-, all drawn on Bank of
Baroda, Naroda Road Branch, Ahmedabad:
Sr.No. Cheque No. Date Amount
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1 000851 01.12.12 Rs.50,00,000/-
2 000852 15.12.12 Rs.50,00,000/-
3 000853 31.12.12 Rs.50,00,000/-
4 000854 15.01.13 Rs.50,00,000/-
5 000855 13.01.13 Rs.50,00,000/-
6 000856 15.02.13 Rs.50,00,000/-
7 000857 28.02.13 Rs.50,00,000/-
Total Rs.3,50,00,000/-
4.4 Accordingly, the second applicant was arrested on
21.02.2013 for the offence punishable under Section
9 of the Central Excise Act, 1944 and was
produced before the learned Additional Chief
Metropolitan Magistrate, Ahmedabad who has
remanded the applicant to the judicial custody.
4.5 Thereafter, the second applicant had filed bail
application for regular bail under Section 437 of the
Criminal Procedure Code before the learned Additional
Chief Metropolitan Magistrate, Ahmedabad on
22.02.2013. The learned Additional Chief Metropolitan
Magistrate, Ahmedabad was pleased to grant bail to
the applicant vide its Order dated 22.02.2013. A copy
of bail application dated 22.02.2013 and an order
dated 22.02.2013 passed by learned Additional Chief
Metropolitan Magistrate, Ahmedabad are annexed
hereto and marked as ANNEXURE R-2 Colly. to
this affidavit.
4.6 The Respondent has submitted the post dated
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cheques bearing No.000854 dated 15.01.2013 &
No.00855 dated 31.01.2013 for crediting the same to
the Government of India Account at State Bank of
India, Ashram Road Branch, Ahmedabad on
05.02.2013 and the same were returned unpaid by
the NSL's Bank i.e. Bank of Baroda, on 07.02.2013
with remark of "Payment stopped by drawer".
4.7 On 05.03.2013, the answering respondent through
their Advocate have, served a legal Notice dated
05.03.2013 under Section 138 of the
NegotiableInstrument Act, 1881 (hereinafter referred
to as "NIA" for the sake of brevity) to M/s NSL to
make payment of the aforesaid returned and
unpaid cheques by Regd. Post AD. and the same
was replied by M/s. NSL vide letter dated
21.03.2013, inter alia, disputing and denying the
contents of the notice and it 'was further contended
that no Show Cause Notice was issued by the
Excise Department to demand the excise duty due
and payable by the applicant and that the liability
to make payment of excise duty would arise only
when the tax liability is ascertained and that there
is no provision in law to pay advance tax
compulsorily. It was further stated that the cheques
were not issued voluntarily but it was rather issued
under threat and coercion. Therefore, the answering
respondent has filed Criminal Case No.746 of 2013
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on 01.04.2013 for the offence punishable under
Section 138 of the Negotiable Instrument Act, 1881
by the applicant, which is sought to be quashed by
the applicant under the captioned application. The
learned Metropolitan Magistrate (NIA), Court No.36,
Ahmedabad is hearing the above criminal case and
evidence of the complainant is recorded.
5. With reference to the grounds
set out by the applicant in the
memo of application, seeking
quashment of the complaint filed
by the answering respondent
against him for the offence
punishable under section 138 of
the Negotiable Instrument Act,
1881, are not germane to the
jurisdictional facts of the case
and the applicant is not entitled
for the relief, as prayed in the
captioned application. The points
of contentions raised by the
applicant in the form of grounds
in terms of para 10 are
responded as under:
5.1 It is respectfully submitted
that the answering respondents
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does not admit the contention of
the applicant that the
complainant does not disclose any
criminal offence against him. It
is respectfully submitted that
reading the complainant as a
whole, it discloses commission of
offence by the applicant under
Section 138 of the Negotiable
Instruments Act, 1881 in as
much as the component of the
said offence under provision
which are; [a] drawing of the
cheque for some amount, [b]
presentation of the cheque to the
banker; [c] return of the cheque
unpaid by the drawee bank; [d]
giving of notice by the holder of
the cheque or payee to drawer
of the cheque demanding payment
of cheque amount; [e] failure of
drawer to make payment within
15 days of receipt of such notice,
present in the subject
proceedings.
5.2 It is respectfully submitted
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that the contention put- forth by
the applicant that "Legally
Enforceable Debt" would occur
only after adjudication of the
show cause notice and
determination of liability to pay
a "particular" amount in
accordance with the Central
Excise Manual, is thoroughly
misconceived and devoid of merit.
It is respectfully submitted that
the tax becomes payable when
liability to pay tax arises by the
happening of the taxable events.
The taxable event is that on
happening of which the charge is
fixed. It is that event, which on
its occurrence creates or attracts
the liability to tax, such liability
does not accrue any earlier or
later point of time. Even though
taxable event happens to be at a
particular point of time, the levy
and collection of such tax may
be postponed to a later date. It
is submitted that Section 3 of
the Central Excise Act, 1944 is
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the charging Section for levy and
collection of Central Excise duty
on the excisable goods
manufactured in India.
Accordingly, the excise duty shall
be levied and collected in such
manner as may be prescribed.
The machinery of levy and
collection of duty is made by the
rules framed in exercise of
powers conferred under the
Central Excise Act, 1944.
Accordingly, manufacturer of
excisable goods is obliged to
make payment of duty in the
manner and at the time as
prescribed under Rule 4 and
Rule 8 of the Central Excise
Rules, 2002. It is submitted
that act of omission on the part
of the manufacturer to make
payment of duty according to the
said provisions would result into
"Legally Enforceable Debt"
against such manufacturer. The
applicant has admittedly
fraudulently availed Cenvat
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Credit on the basis of phony
invoices without receipt of
corresponding goods in their
factory premises and removed the
excisable goods manufactured by
him clandestinely and without
making payment of excise duty
during the period from FY. 2010-
11 to F.Y. 2012-13 and,
therefore, in the present case as
on the date of issue of the
cheque by the applicant there
existed legally enforceable debt
within the meaning of section
138 of the Negotiable
Instruments Act, 1881. In the
premises, it is also not correct to
contend by the applicant that,
there was no legally enforceable
debt during the deposition of
the said cheques, as prescribed
under the provisions of the
Negotiable Instruments Act, 1881,
is not capable of being accepted
by this Hon'ble High Court.
5.3 The answering respondent do
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not admit the contention of the
applicant that in the present facts
and circumstances, the amount of
evasion of duty is yet to be
determined and, therefore, even
today there is no legally
enforceable debt payable by the
applicant to the complainant. It is
submitted that as on the date of
draw of the cheque, statutory
liability of the applicant to make
payment of excise duty to the
Government was subsisting. In
the circumstance, reliance placed
by the applicant on the ratio laid
down by the Hon'ble Supreme
Court of India in the case of
M/s. Indus Airways Pvt. Ltd. &
Ors. Vs. M/s. Magnum Aviation
Pvt. Ltd. & Anr. reported in
2014(2) GLH 161 cannot be made
applicable to the facts of the case
on hand.
5.4 The answering respondent
specifically deny allegation made
by the applicant that both the
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cheques in question and the
letterheads of the applicant no.1
Company, were collected by the
authority under pressure, threat
of arrest and duress and coercion.
It is respectfully submitted that a
glance to the facts stated herein
above would show that the
applicant has voluntarily tendered
said post-dated cheques after
detection of evasion of Central
Excise duty by the officers of the
answering respondent towards
their legitimate duty liability to
save future liability of interest.
Hence, allegation of coercion and
duress made by the applicants
are not capable of being
entertained by this Hon'ble
Court."
In such circumstances referred to
above, the learned counsel submits that
there being no merit in this application, the
same be rejected.
Having heard the learned counsel
appearing for the parties and having
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considered the materials on record, the only
question that false for my consideration is,
whether the complaint should be quashed.
It appears from the materials on record that
the officials of the Central Excise
department carried out a search operation
of the factory premises of the applicant no.1
th
company on 7 November 2012 and seized
certain documents/records. At the end of the
operation, the officials reached to the
conclusion that the applicants were liable to
pay an amount of Rs.3.50 crore towards
the excise duty. On the very same day,
somehow the officials procured seven cheques
of different amounts and of different dates
aggregating to the tune of Rs.3.50 crore duly
signed by the applicant no.2 and drawn in
favour of the department.
The moot question that falls for my
consideration is, whether the officials could have
acted in such a manner and asked the applicants
to make good the payment without there being
any adjudication in accordance with the provisions
of the Excise Act and the Rules framed therein.
In order to attract the penal provisions
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for the bouncing of a cheque, it is essential that
the dishonoured cheque should have been issued in
discharge, wholly or in part, or any debt or other
liability of the drawer to the payee. The
explanation to Section 138 of the Negotiable
Instruments Act defines the expression "debt or
other liability" as a legally enforceable debt or
other liability. Unless the two conditions set out in
Section 138 of the Act are satisfied, no criminal
liability can be fastened. This is also in
accordance with the general scheme as laid down
in Section 118(a) of the Negotiable Instruments
Act. It also enforces the doctrine of consideration
as laid down in Section 2(d) of the Indian Contract
Act, 1872.
Too many definitions of the word debt
have been given though the word debt is not
defined in the Act. 'Debt' is defined in the
Stroud's Judicial Dictionary, (4
th
edition, volume
2) as a sum payable in respect of a liquidated
money demand recoverable by action (Rawley v
Rawley, 1 QBD 460).
In Dictionary of Banking by F.E.Perry
(1979 edition, page 64), debt is mentioned as
something owed to another, a liability, an
obligation, a chose in action which is capable of
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being assigned by the creditor to some other
person.
Shri K.J.Aiyar's Judicial Dictionary (page
314) mentions debt as under :
"Debt is a pecuniary liability. A sum
payable or recoverable by action in
respect of money demand. It refers to the
definition given by Lindey L.J. In Webb
v Stention (1888 QBD 518)... a debt is a
sum of money which is now payable or
will become payable in future by reason
of a present obligation."
In Union of India v Raman Iron
Foundry, AIR 1974 SC 1265, it is decided as
an existing obligation to pay a sum of money
now or in future. Thus, there must be debitum
in praesenti solvendum may or may not be in
praesenti. The following passage adopted from
the judgment of Supreme Court of California
was approved by Supreme Court of India in
Keshoram Industries v CWT, AIR 1966 SC
1370.
"Standing alone, the word 'debt' is as
applicable to a sum of money which has
been promised at a future day as to a
sum not due and payable. If we wish to
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distinguish between the two, we say of
the former that it is a debt owing and of
the latter, it is a debt due."
"The above passage indicates that there is an
obligation to pay a sum of money at a future date.
It is debt owing, but when the obligation is to pay
a sum of money in praesenti it is a debt due. A
sum due would, therefore, mean a sum for which
there is an existing obligation to pay in praesenti or
in other words, it is presently payable."
The term "liability" as explained by the
Law Lexicon by P.Ramanathan is as under :
"'Liability' : A broad term, it may be
employed as meaning the state of being
liable : that for which one is responsible or
liable; obligation in general; that condition
of affairs which gives rise to an
obligation to do a particular thing to be
enforced by action, responsibility, legal
responsibility. In other words, the condition
of one who is subject to charge or duty
which may be judicially enforced."
My attention is drawn by Mr.Trivedi,
the learned counsel appearing for the
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applicants, to one order passed by a Division
Bench of this Court in the Special Civil
th
Application No.959 of 2014 decided on 14
February 2014. It was a case arising from
the proceedings under the Value Added Tax
Act, 2003. The facts were almost identical to
the one on hand. In that case also, the
authorities somehow obtained cheques
towards the VAT. A writ-application was
filed by one Atul Motors Private Limited,
questioning such action on the part of the
authorities. The Division Bench observed as
under :
nd
"On 22 January 2014, the Court had
passed the following order :-
1. The petitioners are the authorised distributors
of Maruti cars. They have been filing returns
under the Value Added Tax Act, 2003
(hereinafter referred to as 'the Act') regularly.
It is the contention of the petitioners that they
recover certain handling charges from the
customers, which are in the nature of post
sales services. On such handling
charges,according to them, they are not
required to pay the Value Added Tax
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(hereinafter referred to as VAT), since such
handling charges cannot form a part of sale
value of the car. The respondents carried out
search operations in the premises of the
petitioners on December 25, 2013 and raised
the issue of non-payment of VAT on handling
charges.
2. The learned counsel for the petitioner
submitted that under coercion the petitioners
were made to make the payment of
Rs.15,28,972/= and Rs.24,323/= in two separate
payments. Over and above this, the
respondents have also under duress taken three
cheques from the petitioners. Total amount of
such cheques is to the tune of Rs.1,86,12,518/-.
The learned counsel for the petitioner further
submitted that so far there has been no
adjudication on this issue and no assessment
orders have been passed by the authorities. He
submitted that in absence of any quantified
demand, the respondents cannot recover the
same. The petitioners are ready and willing to
participate in any adjudication proceedings and
put forth their point that they are not
required to pay any tax under the Act on the
handling charges so recovered by them. In any
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case, without any finalised demand, the
coercive recovery would not be permissible.
3. Issue notice, returnable on February 14, 2014.
Till further orders, the respondents shall not
deposit for encashment the three cheques
issued by the petitioners. Direct Service is
permitted.
In response to the notice issued, the
respondent had appeared and filed
reply.
Upon hearing learned counsel for the
parties, the controversy in the
present petition gets substantially
narrowed down. The case of the
petitioner is that there could be no
recovery of tax dues unless and
until the tax demand is
crystallized. In absence of any
assessment, the respondent cannot
recover taxes.
On the other hand, learned AGP relied on the
affidavit-in- reply to contend that in any case, the
power for passing provisional attachment order is
not taken away.
From the affidavit-in-reply filed by the
respondents, we do not notice any ground
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permitting the respondents to start recovery at
this stage. The insistence on collecting cheques
from the petitioners, therefore, cannot be
countenanced. Under the circumstances, the
respondents shall return three cheques collected
th
from the petitioner to them latest by 28
February 2014. This is without prejudice to the
power of the competent authority to pass
appropriate order, if so found necessary to protect
the interest of revenue.
Petition is disposed of accordingly."
The applicants have levelled serious
allegations against the officials of the
department of exerting undue pressure, threat
and duress while obtaining the cheques in
question. Indisputably, as on date, the
adjudication at the end of the competent
authority under the Act is yet to take place. I
find it extremely difficult to accept the
argument of the learned counsel appearing for
the department that the liability was fixed on
the basis of the statements made by the
applicant no.2 herein dated 7
th
November 2012
and 8
th
November 2012 respectively under
Section 14 of the Central Excise Act, 1944.
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It appears 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 into fraudulent
availment of the Cenvat Credit of Rs.3.27 crore
on the basis of phony cenventible invoices
issued by the various ship breaking units of
Bhavnagar.
Let me assume for the moment 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. In such circumstances, the decision of the
Supreme Court in the case of Sampelly
Satyanarayana Rao (supra) is very relevant.
The Supreme Court, in the case of Sampelly
Satyanarayana Rao (supra), considered the
earlier decision in the case of M/s.Indus
Airways Pvt. Ltd. and others v. M/s.Magnum
Aviation Pvt. Ltd. and another, (2014)12 SCC
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539, on which strong reliance has been placed
by the learned counsel appearing for the
applicants. In para 11, the Supreme Court
distinguished Indus Airways (supra). I may
quote the relevant observations thus :
"8. Reference may now be made to the
decision of this Court in Indus Airrways
Private Limited versus Magnum Aviation
Private Limited , on which strong
reliance has been placed by learned
counsel for the appellant. The question
therein was whether post-dated cheque
issued by way of advance payment for
a purchase order could be considered for
discharge of legally enforceable debt. The
cheque was issued by way of advance
payment for the purchase order but the
purchase order was cancelled and
payment of the cheque was stopped. This
Court held that while the purchaser may
be liable for breach of the contract, when
a contract provides that the purchaser
has to pay in advance and cheque
towards advance payment is
dishonoured, it will not give rise to
criminal liability under Section 138 of the
Act. Issuance of cheque towards advance
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payment could not be considered as
discharge of any subsisting liability. View
to this effect of the Andhra
Pradesh High Court in Swastik Coaters
(P) Ltd. versus Deepak Bros., 1997 CriLJ
1942, Madras High Court in Balaji
Seafoods Exports (India) Ltd. versus Mac
Industries Ltd., (1999)1 CTC 6, Gujarat
High Court in Shanku Concretes (P)
Ltd. versus State of Gujarat, 2000 CriLJ
1988 and Kerala High Court in Supply
House versus Ullas, 2006 CriLJ 4330, was
held to be correct view as against the
view of Delhi High Court in Magnum
Aviation (P) Ltd. versus State, (2010)172
DLT 91 and Mojj Engg. Systems Ltd.
versus A.B. Sugars Ltd., (2008) 154
DLT 579, which was disapproved.
9. We have given due consideration to
the submission advanced on behalf of the
appellant as well as the observations of
this Court in Indus Airways (supra) with
reference to the explanation to Section
138 of the Act and the expression "for
discharge of any debt or other liability"
occurring in Section 138 of the Act. We
are of the view that the question
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whether a post-dated cheque is for
"discharge of debt or liability" depends
on the nature of the transaction. If on
the date of the cheque liability or debt
exists or the amount has become
legally recoverable, the Section is
attracted and not otherwise.
10. Reference to the facts of the present
case clearly shows that though the word
"security" is used in clause 3.1(iii) of the
agreement, the said expression refers to
the cheques being towards repayment of
installments. The repayment becomes due
under the agreement, the moment the
loan is advanced and the installment
falls due. It is undisputed that the loan
was duly disbursed on 28th February,
2002 which was prior to the date of
the cheques. Once the loan was
disbursed and installments have fallen
due on the date of the cheque as per
the agreement, dishonour of such
cheques would fall under Section 138 of
the Act. The cheques undoubtedly
represent the outstanding liability.
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11. The judgment in Indus Airways
(supra) is clearly distinguishable. As
already noted, it was held therein that
liability arising out of claim for breach
of contract under Section 138, which
arises on account of dishonour of
cheque issued was not by itself at par
with criminal liability towards discharge
of acknowledged and admitted debt
under a loan transaction. Dishonour of
cheque issued for discharge of later
liability is clearly covered by the statute
in question. Admittedly, on the date of
the cheque there was a debt/liability in
presenti in terms of the loan agreement,
as against the case of Indus Airways
(supra) where the purchase order had
been cancelled and cheque issued
towards advance payment for the
purchase order was dishonoured. In that
case, it was found that the cheque had
not been issued for discharge of liability
but as advance for the purchase order
which was cancelled. Keeping in mind
this fine but real distinction, the said
judgment cannot be applied to a case of
present nature where the cheque was for
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repayment of loan installment which had
fallen due though such deposit of
cheques towards repayment of
installments was also described as
"security" in the loan agreement. In
applying the judgment in Indus Airways
(supra), one cannot lose sight of the
difference between a transaction of
purchase order which is cancelled and
that of a loan transaction where loan
has actually been advanced and its
repayment is due on the date of the
cheque.
12. The crucial question to determine
applicability of Section 138 of the Act
is whether the cheque represents
discharge of existing enforceable debt or
liability or whether it represents advance
payment without there being subsisting
debt or liability. While approving the
views of different High Courts noted
earlier, this is the underlying principle as
can be discerned from discussion of the
said cases in the judgment of this Court.
13. In Balaji Seafoods (supra), the High
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Court noted that the cheque was not
handed over with the intention of
discharging the subsisting liability or
debt. There is, thus, no similarity in the
facts of that case simply because in that
case also loan was advanced. It was
noticed specifically therein - as was the
admitted case of the parties - that the
cheque was issued as "security" for the
advance and was not intended to be in
discharge of the liability, as in the
present case.
14. In HMT Watches Ltd. versus M.A.
Abida[8], relied upon on behalf of the
respondent, this Court dealt with the
contention that the proceedings under
Section 138were liable to be quashed
as the cheques were given as
"security" as per defence of the accused.
Negativing the contention, this Court
held :-
"10. Having heard the learned
counsel for the parties, we are
of the view that the accused
(Respondent 1) challenged the
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proceedings of criminal complaint
cases before the High Court,
taking factual defences. Whether
the cheques were given as
security or not, or whether
there was outstanding liability
or not is a question of fact
which could have been
determined only by the trial
court after recording evidence of
the parties. In our opinion, the
High Court should not have
expressed its view on the
disputed questions of fact in a
petition under Section 482 of the
Code of Criminal Procedure, to
come to a conclusion that the
offence is not made out. The
High Court has erred in law in
going into the factual aspects of
the matter which were not
admitted between the parties.
The High Court further erred
in observing that Section 138(b)
of the NI Act stood uncomplied
with, even though Respondent 1
(accused) had admitted that he
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replied to the notice issued by
the complainant. Also, the fact,
as to whether the signatory of
demand notice was authorised by
the complainant company or not,
could not have been examined
by the High Court in its
jurisdiction under Section 482 of
the Code of Criminal Procedure
when such plea was controverted
by the complainant before it.
11. In Suryalakshmi Cotton
Mills Ltd. v. Rajvir Industries
Ltd. [(2008) 13 SCC 678], this
Court has made the following
observations explaining the
parameters of jurisdiction of the
High Court in exercising its
jurisdiction under Section 482 of
the Code of Criminal Procedure:
(SCC pp. 685-87, paras 17 &
22)
"17. The parameters of
jurisdiction of the High Court
in exercising its jurisdiction
under Section 482 of the Code of
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Criminal Procedure is now well
settled. Although it is of wide
amplitude, a great deal of caution
is also required in its exercise.
What is required is application of
the well-known legal
principles involved in the matter.
***
22. Ordinarily, a defence of an accused
although appears to be plausible should not
be taken into consideration for exercise of
the said jurisdiction. Yet again, the High
Court at that stage would not ordinarily enter
into a disputed question of fact. It, however,
does not mean that documents of
unimpeachable character should not be taken
into consideration at any cost for the purpose
of finding out as to whether continuance of
the criminal proceedings would amount to an
abuse of process of court or that the
complaint petition is filed for causing mere
harassment to the accused. While we are not
oblivious of the fact that although a large
number of disputes should ordinarily be
determined only by the civil courts, but
criminal cases are filed only for achieving the
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ultimate goal, namely, to force the accused
to pay the amount due to the complainant
immediately. The courts on the one hand
should not encourage such a practice; but,
on the other, cannot also travel beyond its
jurisdiction to interfere with the proceeding
which is otherwise genuine. The courts cannot
also lose sight of the fact that in certain
matters, both civil proceedings and
criminal proceedings would be maintainable."
12. In Rallis India Ltd. v. Poduru Vidya
Bhushan [(2011) 13 SCC 88], this Court
expressed its views on this point as under:
(SCC p. 93, para 12)
"12. At the threshold, the High Court
should not have interfered with the
cognizance of the complaints having
been taken by the trial court. The High
Court could not have discharged the
respondents of the said liability at the
threshold. Unless the parties are given
opportunity to lead evidence, it is not
possible to come to a definite conclusion
as to what was the date when the
earlier partnership was dissolved
and since what date the respondents
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ceased to be the partners of the firm."
15. We are in respectful agreement with
the above observations. In the present
case, reference to the complaint (a copy
of which is Annexures P-7) shows that
as per the case of the complainant,
the cheques which were subject matter
of the said complaint were towards the
partial repayment of the dues under the
loan agreement (para 5 of the complaint).
16. As is clear from the above
observations of this Court, it is well
settled that while dealing with a
quashing petition, the Court has
ordinarily to proceed on the basis of
averments in the complaint. The defence
of the accused cannot be considered at
this stage. The court considering the
prayer for quashing does not adjudicate
upon a disputed question of fact."
Thus, the dictum of law explained by the
Supreme Court is, whether the cheque
represents discharge of existing enforceable
debt or liability or whether it represents
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advance payment without there being any
subsisting debt or liability. In the absence of
any adjudication by a competent authority
under the provisions of the Act as regards the
liability of the applicants to pay the excise
duty, it cannot be said that on the date when
the cheques were drawn there was an existing
enforceable debt or liability."
14. In the facts of the cases on hand where
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,
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Ahmedabad and consequential proceedings
pursuant thereto are hereby quashed qua the
applicants.
15. Rule is made absolute to the
aforesaid extent in all the applications.
16. As the main matters are disposed
of, no orders are required to be passed in the
applications which are filed for fixing date of
early hearing of the main matters. Accordingly,
they are disposed of.
(SANDEEP N. BHATT,J)
SRILATHA
