Supreme Court Quashes Criminal Prosecution Against Company Granted Immunity Under S.32K Central Excise Act

The Supreme Court set aside the criminal prosecution against a company under the Customs Act, 1962 (CA), Central Excise Act (CE Act), 1944 and Indian Penal Code (IPC) from prosecution.

The Appellant/Company having registered under the Companies Act, 1956 engaged in manufacturing and exporting of cosmetics and toilet preparations. It was alleged that instead of payment of Countervailing Duty (CVD) on the Maximum Retail Price (MRP) the appellant had paid the CVD on the invoice value of the concerned goods which had caused loss to the Government exchequer to the tune of INR 8,00,00,000/- (Rupees Eight Crores only). Therefore, a case was registered against the Appellant under Section 120B read with Section 420 of the Indian Penal Code, 1860, and Section 13(1)(d) of the Prevention of Corruption Act, 1998.

After the registration of FIR, the Appellant/Company received an order granting immunity from prosecution as per Section 32K of the CE Act 1944..  However, an order was passed by the trial court taking cognizance of the offence ignoring the immunity already granted to the Appellant. Subsequently, the Appellant filed a discharge application before the Special Judge, however, it was rejected. The High Court upheld the rejection of the discharge application. Following this, an appeal was preferred before the Supreme Court.

On the grant of immunity, there arises an explicit bar from prosecution in cases where the proceedings for any offence have been instituted after the date of receipt of the application seeking such immunity under the relevant law.

The immunity was granted on 20.08.2007. The FIR was registered on 04.04.2005. Addressing the issue whether the registration of FIR would amount to the initiation of proceedings prior to the grant of immunity, the Court observed :

"A perusal of the scheme of the CrPC 1973 allows us to infer that mere registration of FIR cannot be interpreted to mean that it constitutes the initiation of such proceedings. A registration of FIR necessitates an investigation by a competent officer as per the detailed process outlined in Sections 155 to 176. It is only after a Final Report (or as referred in the common parlance, a Challan or a Chargesheet) is submitted as per the compliance of Section 173(2) of CrPC 1973, cognizance for the offence(s) concerned is taken. However, undoubtedly, the Court is not bound by the said report", the bench comprising Justice Abhay S Oka and Justice Augustine George Masih said.

“Furthermore, the Appellant-Company had successfully claimed immunity from prosecution under the CA 1962, CE Act 1944, and IPC 1860 vide Order dated 21.08.2007. In such a circumstance, there was no fiscal liability on the Appellant-Company, and accordingly, the Order dated 01.08.2010 passed by learned Special Judge, taking cognizance against the Appellant-Company, ought not to have sustained. As the very basis of the allegation of offence against the Appellant-Company was found to be nonexistent, it would have amounted to misuse rather abuse of the process of law.”

The Court noted that the immunity from prosecution was granted to the Appellant on the note that there existed no fiscal liability on the Appellant towards the payment of CVD as the Appellant had made payment to the Revenue Authorities as per the demand made earlier for clearance of the concerned goods.

In this regard, the Court took reference to the case of Hira Lal Hari Lal Bhagwati v. CBI, New Delhi (2003) where the Court invalidated the criminal proceedings/prosecution lodged by the respondent against the Appellant despite there being a full and final settlement between the parties.

Since, the Appellant was not required to pay the CVD based on MRP, but as per the invoice value that he had paid to the revenue authorities, therefore there existed no financial liability upon the Appellant and accordingly, the Order passed by the Special Judge, taking cognizance against the Appellant-Company, ought not to have sustained, the judgment authored by Justice Masih held.

Accordingly, the appeal was allowed, and pending criminal proceedings were quashed.

Appearance:

For Petitioner(s) Mr. Kapil Sibal, Sr. Adv. Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Raheel Patel, Adv. Mr. Prabhakar Yadav, Adv.

For Respondent(s) Mrs. Chitrangda Rastavara, Adv. Ms. Shagun Thakur, Adv. Mr. Shantanu Sharma, Adv. Mr. Rajat Nair, Adv. Ms. Rajeshwari Shankar, Adv. Mr. Akshaja Singh,Adv. Mr. Mukesh Kumar Maroria, AOR Ms. Swati Ghildiyal, AOR Mr. Prashant Bhagwati, Adv. Ms. Devyani Bhatt, Adv.

Case Title: BACCAROSE PERFUMES AND BEAUTY PRODUCTS PVT. LTD VERSUS CENTRAL BUREAU OF INVESTIGATION & ANR., CRIMINAL APPEAL NO. 3216 OF 2024

Citation : 2024 LiveLaw (SC) 667

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