Case Law Details

Case Name : Anil Govindbhai Metaliya Vs State of Gujarat & Other(S) (Gujarat High Court)
Appeal Number : R/Criminal Misc. Application (For Quashing & Set Aside FIR/order) No. 17170 of 2014
Date of Judgement/Order : 08/11/2023
Related Assessment Year :

Anil Govindbhai Metaliya Vs State of Gujarat & 1 Other(S) (Gujarat High Court)

Gujarat High Court held that criminal proceedings in case of Central Excise Duty evasion quashed as there is no legally enforceable debt on the date of issuance of cheques.

Facts- The present applications are filed under section 482 of the Code of Criminal Procedure praying 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 pending in the Court of the Additional Chief Metropolitan Magistrate.

Notably, the that the impugned complaints are 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. Thereafter, the applicant was arrested in connection with the offence registered by the Central Excise Department for the offences punishable u/s. 9 of the Central Excise Act. The applicant had preferred bail application before the trial Court.

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/-, when he was in the jail which were 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.

Conclusion- Held 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.

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. Accordingly, 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.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

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 submitted that the impugned complaints are filed for dishonor of the cheques, the details of which are mentioned as under:

Sr. No. Application No. Cheque No. Date Amount
1. Criminal Miscellaneous Application No.17170 of 2014 000260 11.10.2011 30,00,000/-
2 Criminal Miscellaneous Application No.17171 of 2014 000267 01.01.2012 25,00,000/-
3 Criminal Miscellaneous Application No.17172 of 2014 000257 22.11.2011 30,00,000/-
4 Criminal Miscellaneous Application No.17172 of 2014 000258 10.11.2011 30,00,000/-
5 Criminal Miscellaneous Application No.17173 of 2014 000254 22.12.2011 30,00,000/-
6 Criminal Miscellaneous Application No.17173 of 2014 000255 12.12.2011 30,00,000/-
7 Criminal Miscellaneous Application No.17173 of 2014 000256 30.11.2011 30,00,000/-

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 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 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 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 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 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 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 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 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 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. No. Cheque
No.
Date Amount
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 ‘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 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 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 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 Cen vatable 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 manufacturer or the provider of 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 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 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 sub­section in respect of the duty so paid or any penalty leviable under the provisions of this 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 sub­section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub­section 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

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 sub­section (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  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 sub­section (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

(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 sub­section (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.

(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;

(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 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 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 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.

“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 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 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 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 Road lines 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 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
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 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 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 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 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 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 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. 2010­11 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 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 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 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 company on 7th 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 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, (4th 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 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 Station (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 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 applicants, to one order passed by a Division Bench of this Court in the Special Civil Application No.959 of 2014 decided on 14th 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 :

“On 22nd  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 (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 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 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 from the petitioner to them latest by 28th 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 7th November 2012 and 8th November 2012 respectively under Section 14 of the Central Excise Act, 1944.

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 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 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 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, dishonor of such cheques would fall under Section 138 of the Act. The cheques undoubtedly represent the outstanding liability.

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 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 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 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 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 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 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 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 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, 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.

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