ORDER
1. This petition coming on for hearing upon perusing the petition the counter affidavit filed herein on 6-3-90 and upon hearing the arguments of Mr. Mahesh Jet Malani for Mr. Raju K. Lukose Advocate for the Petitioners and of Mr. P. Raja Manickam, Central Government Public Prosecutor on behalf of the respondent and having stood over for consideration till this date, the court made the following order :-
The Petitioner are the accused in CC No. 31 of 1989 pending on the file of the Judicial Magistrate, Poonamallee. The prosecution has been initiated against the petitioners on a private complaint preferred by the Assistant Collector of Central Excise, Headquarters Preventive Unit, Madras, the respondent herein, for violation of the provisions of the Central Excise Act and Rules framed thereunder.
2. This petition has been filed seeking to invoke inherent powers of this Court under Section 482 of the Criminal Procedure Code to quash the proceedings pending before the Court below as not maintained as well as an abuse of process of Court.
3. The first petitioner, Plasticraft Industries is a registered partnership firm, which carries on trade in the manufacture, sale and distribution of various articles made of synthetic products like plastic P.V.C. Polythene and Nylon and allied items. The first petitioner was granted an industrial licence on 16-6-1982. The second petitioner, in terms of the partnership deed, was put in charge and was responsible to the company for the conduct of the business of the company at the relevant time when the offences are alleged to have been committed. The third petitioner was employed as Accountant in the company of the first accused and he was representing the company by looking after its tax and Central Excise matters during the time of the alleged commission of offences.
4. The complaint against the petitioners, has been laid for offences under Section 9(1)(a) of the Central Excise Act, read with Section 6, read with Rule 174 of Central Excise Act, 9(1)(bb) of Central Excise Act read with Rule 9(1), 9(1)(bb) of Central Excise Act read with Central Excise Rule 52(A) under Section 9(1)(b) of Central Excise Act, 1944 read with Rules 173B, 173C, 173F, 173G, punishable respectively under Sections 9(1)(a)(i), 9(1)(bb)(i) (2 Counts) and 9(1)(b)(i) (4 counts of) of the Central Excise Act, 1944, as amended.
5. Certain brief facts stated in the complaint need narration. On 22-10-1986 the Officers of Central Excise, Madras, visited the factory of the first petitioner. They then noticed that the first petitioner was engaged in the manufacture of parts of mixies, wet grinders, typewriters, T.V. sets and various components for different industrial applications, made of plastics and clearing them to their customers without obtaining a Central Excise licence and without observing Central Excise formalities and without payment of duty. The Officers found among other things goods manufactured and kept ready for clearance. It was found that the goods were excisable and liable to duty under the new Central Excise Tariff Act and its Schedule, 1985, which was brought into force with effect from 28-2-1986. On a reasonable belief that the excisable goods kept ready for clearance were liable for confiscation, the same were seized under a mahazar dated 22-10-1986 and entrusted for safe custody with the Petitioners after obtaining an undertaking to that effect from them.
6. Statements were recorded from Petitioners 2 and 3, who were respectively the Managing Partner and Accountant of the first petitioner company and those statements reveal that the factory, which was started in 1964 was engaged in the manufacture of various types of plastic articles produced against customers' specification and they had no item of their own. The articles manufactured by them did not attract excise duty in the past, but they were made aware by the Excise Officials that though the components manufactured by them would not constitute finished products, they would still come under the revised regulations of excise, attracting duties. The third petitioner had also stated that they were ignorant of duty liability of the products produced and cleared by them, since in the past they had been carrying on business on the basis of exemption notifications. The statements also reveal that there was no standard pattern of production and marketing and quotations were given after studying the drawings/sketches/samples received after considering factors like quantity requirements and repeatability of orders. The raw materials used, include in their prices excise duty, sales-tax, import duty and other levies. They were not involved in the marketing process within the purview of buyers in general. It was found that the company was not raising any credit note for the goods returned for repairing or reprocessing. The company was not maintaining any production account during the period in question and they were only preparing packing slips to indicate production. It was noticed that the quantity shown in the packing slips to indicate production. It was noticed that the quantity shown in the packing slips would not tally with the invoices. Copies of delivery challans were not maintained to correlate despatches made.
7. Referring to the definition of 'manufacture' in the central Excise Tariff Act, the complaint would state that the products manufactured by the first petitioner were semi-finished ones, which have already reached the essential characteristics of the finished ones. The process said to be undertaken subsequently by the customers were minor ones like drilling, cable entry making, cords connection, etc., before being used in the mixies, grinders etc. All these processes, which were in respect of certain items only, do not change the essential character of the goods. The complaint further states that though Chapter-39, excludes plastic items, which were parts of equipment, instrument/apparatus of the machineries/articles falling under Section XVI, XVII, Chapters 90, 91, 92, 95 and 96 will have to be read with Note 1(g) of Section XVI. Therefore, the goods manufactured by the first petitioners, by no stretch of imagination can be called 'parts of general use'. The goods manufactured by the first petitioner were not in the crude form or primary form, for not being treated as goods, since they had attained the essential character of the products such as, base, adopter etc., and any post-manufacturing process cannot change their essential characteristics. It is the definite allegation in the complaint that the products manufactured by the petitioners are classifiable as parts or components of different machinery or apparatus and not as articles of plastic for the various reasons mentioned in the complaint.
8. It has been further averred in paragraph 25 of the complaint that the common good and wealth of the society cannot be sacrificed at the altar of individual liberty of an accused in the case of economic offences. The accused had neglected their duty and initial liability in getting classification of their products, but had suppressed the facts of manufacturing and had cleared the excisable goods clandestinely, in which process, they had enriched themselves and caused wrongful loss to the public revenue.
9. A show cause notice was issued to the first petitioner on 29-1-1987 and the same was replied on 9-4-1987. After personal hearing in the adjudication proceedings, the Collector of Central Excise, Madras, held that the goods manufactured by the first petitioner company were excisable and were classifiable under 85.09 and serial No. 33 of the said Annexure under 8529.00. The Collector of Central Excise also concluded that the first petitioner had violated the Central Excise Rules 9, 174, 173B, 173C, 173F, 173G and 52A. In view of the findings aforestated, the Collector imposed a penalty of Rs. 5,00,000/- on the first petitioner and demanded the evaded excise duty of Rs. 24,42,049/-. The goods seized from the firm on 22-10-1986 worth Rs. 3,57,450/- were directed to be confiscated. The plant and machinery of the firm utilised for the manufacturing of the goods were allowed to be redeemed on payment of fine of Rs. 36,000/- plus Rs. 2,50,000/- on the goods, plant and machinery. The excisable goods cleared by the accused without paying duty was valued over Rs. 1,23,78,645.00.
10. Mr. Mahesh Jet Malani, the learned counsel appearing for the petitioners had four-fold submissions to make, which are extracted hereunder :-
(1) The Central Excise Tariff Act, 1985, (Act 5 of 1986) came into force with effect from 28-2-86 and on 1-3-86 notification was issued under Chapter 39, exempting plastics and articles thereof. Therefore, the complaint does not disclose commission of any offence by the petitioners. Referring to Heading 85.09 read with rule 2-A of the Rules for interpretation of schedule, framed under the Central Excise Tariff Act, 1985, he would contend that the stand of the respondent that the majority of the goods in respect of which the complaint has been filed are excisable since they are unfinished goods having the essential character of finished goods viz., electro mechanical domestic appliances with self-contained electric motor would be manifestly untenable, for the unfinished plastic goods manufactured by the first petitioner company do not contain any self-contained electric motor. They were only semi-plastic parts, such as, base and caps of mixies or grinders, not attracting the Heading 85.09 which provides that electro mechanical domestic appliances must have a self-contained electric motor. For this contention he relied upon the observations of Venkataswami, J, in Alco Industries, Madras v. Collector of Central Excise, Madras and Another : 1987(32)ELT279(Mad) wherein it was observed that the Wet Grinder in question was certainly a domestic appliance and it was primarily designed to operate on electrical energy; that the electrical motor was an integral part of the grinder and a grinder of the nature in question without motor would be a misnomer in the market and that only after the fitment of the motor, the wet grinder was brought to the market and called as such in the commercial parlance. . . . Ultimately the ratio seems to be that only when the electric motor, rotor or starter was inbuilt in the electric appliance that such domestic appliance would attract duty under Entry 33C. In all those cases under consideration by Venkataswami, J., it was not disputed that electric motor was a separate unit and it was connected with the wet grinder by V-belt. Therefore, it was held that wet grinders in question would not fall under Entry 33C of the Central Excise Tariff;
(2) The articles manufactured by the first petitioner company which formed the subject matter of the complaint, have no identity or recognised name in common parlance. The plastic articles were manufactured and moulded to suit the specific requirements of individual customers. The settled law, according to the learned counsel, was that the goods were not excisable unless and until they were marketable. Relying upon the averment in paragraph 9 of the complaint that the petitioners produced goods only against specific orders and, therefore, they were not involved in any marketing activity, taken along with the averments in paragraph 6 of the counter affidavit filed by the respondent, the learned counsel while contending that marketability was an essential ingredient for levying excise duty, placed reliance on the decision of the Supreme Court in the Union Carbide India Limited v. Union of India and Others : [1987]165ITR1(SC) and Bhor Industries Limited, Bombay v. Collector of Central Excise Bombay - : [1990]184ITR129(SC) wherein it has been held that marketability of goods was essential to attract excise duty as the burden of excise duty, which was an indirect tax, was passed on to the ultimate consumer. In other words, for articles to be goods they must be known in the market as such or they must be capable of being sold in the market as goods. Actual sale in the market was not necessary, user in the captive consumption was not determinative but the articles must be capable of being sold in the market or known in the market as goods. Simply because certain articles fell within the Schedule, it would not be dutiable under excise law if the said article was not 'goods' known to the market. Marketability, therefore, was an essential ingredient in order to be dutiable;
3. Mens rea on the part of the petitioners, in the commission of the alleged offences, was lacking. The learned Counsel would attempt to substantiate this argument by contending that it was impossible on the facts and circumstances of the instant case to suggest that there was an intention to evade payment of excise duty and that three facts would totally negative the requisite mens rea.
(a) Immediately on the enactment of the new Tariff Act, 1985, the first petitioner sought the opinion of the Excise Consultant, who informed that the articles manufactured were exempted from the levy of excise duty and, therefore, it was not incumbent upon them to pay excise duty on the articles manufactured;
(b) The Excise Officials, who had inspected the factory premises in July, 1986, did not even suggest that the goods manufactured by the first petitioner were liable for levy of excise duty; and
(c) Once they received the notice dated 22-10-86 the first petitioner immediately obtained a L4 licence and commenced paying excise duty, under protest in respect of the manufactured articles.;
4. The basis for the allegations in the complaint has its foundation on the adjudication order passed under Section 33 of the Act by the Collector of Central Excise. The order of the Collector of Central Excise has been challenged in the statutory appeal preferred by the petitioners under Section 35(a) of the Act before the Central Excise Gold Control Appellate Tribunal (CEGAT) New Delhi. The Tribunal has dispensed with the payment of penalty, but has ordered deposit of the full amount of duty demanded. However, this Court in W.P. No. 1182 of 1987 had directed the Tribunal to proceed with the appeal on the first petitioner depositing a sum of Rs. 5,00,000/- within eight weeks from the date of the order (the order was passed on 16-9-1988) without insisting on any further deposit by the first petitioner. The complaint having been filed during the pendency of the appeal before the Tribunal and each and every one of the allegations which are alleged to constitute offences under Central Excise Act are all subject matter of the appeal, all further proceedings in the prosecution may have to be stayed, on the peculiar facts of this case, till the disposal of the appeal by CEGAT, on the sole ground that the prosecution would become infructuous, if the petitioners succeed in the pending appeal before the Tribunal. The question of liability under the new Tariff, brought in 1985, not having been decided, the continuance of the proceedings in the Criminal Court, pending disposal of the appeal by the Tribunal, would not be for the furtherance of the cause of justice.
11. Mr. P. Rajamanickam, the learned counsel appearing on behalf on the respondent contended that the goods manufactured by the petitioners were not covered under Chapter 39 and, therefore, the exemption notification No. 132 of 1986 dt. 1-3-1986 was not applicable, since it applied only to the goods covered under Chapter 29. According to him, the goods manufactured by the petitioners are excisable goods, falling under heading Nos. 85.09, 85.29, 84.73 etc. He would contend that the petitioner have manufactured parts of domestic electrical appliances viz., parts of mixie, wet grinder, television sets and typewriter which would attract excise duty under Chapters 84 and 85 of the Central Excise Tariff Act, 1985. He would specifically urge that the goods cannot be classified as articles of plastics under Chapter 39 of the Central Excise Tariff Act, 1985 as those goods were not for general use and made for a specific purpose. Referring to Note No. 2(n) of Chapter 39, which reads as hereunder -
'This Chapter does not cover articles of Section XVI (Machines and Mechanical or electrical appliances)'
he would contend that parts of mixies, wet grinders etc. should be classified along with those machines under the respective heading numbers in view of note 2(b) of Section XVI. Elaborating his arguments, he would submit that mixie is a domestic electrical appliance, classifiable under Chapter heading No. 85.09 of Section XVI and, therefore, the base and adopter being the parts of mixies are for use solely or principally with mixies, which should also take the classification of mixie under heading No. 85.09. He would also urge that parts of goods if suitable for use solely or principally with a particular kind of machine, they have to be classified with the machine of that type, which have their exclusive use. Even if the goods had not attained completeness, they were classifiable under 85.09 in view of Rule 2(a) of the interpretative rule to the Schedule of the Central Excise Tariff Act. These parts, according to him, are parts of finished goods and cannot be termed as unfinished goods. On the aspect of marketability, he would specifically contend that the goods manufactured by the petitioners, cannot be stated to the unmarketable and they were certainly marketable for the specific use and purpose for which they have been manufactured. It is his submission that the duty liability was attracted once the goods were manufactured even for captive consumption, even if those goods were manufactured and fitted in some other goods, since on that score, excise liability cannot be erased. On the argument relating to mens rea, he contended that mens rea was a matter of inference from all facts and circumstances arising out of the evidence to be let in during trial. Mens rea, according to him, has to be presumed under Section 9(c) of the Act, which ensures for the benefit of the prosecution. It will be open to the petitioners to establish by evidence during trial that there was no mens rea. In short, the question of mens rea being one of evidence, that issue cannot be gone into in this petition. On the last ground regarding the pendency of the appeal before the Tribunal, he would urge that the pendency of an appeal would not be a bar for the criminal proceedings being continued, since the criminal court will have to decide the issues arising before it on the evidence let in, independently of the other proceedings.
12. I have carefully considered the rival contentions put forth by either counsel. The arguments were heard on 6-3-1990 and on 7-3-1990 both the counsel placed before me certain other decisions of various courts, which I will consider at the relevant context.
13. The respondent has chosen to classify the goods, which are the subject matter of this prosecution as base and adopters for sumeet mixies. As far as the other goods are concerned, they have been christened as typewriter parts, grinder bottom plates, circular grill, large grinder body, large bottom plate etc. The heading of Chapter 39 reads as 'Plastics and articles thereof'. Chapter note 1 indicates that the expression plastics meant those materials of Heading Nos. 39.01 to 39.14, which were or had been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which were retained on the removal of the external influence. Reference to 'plastics' also included vulcanised fibre. However, the expression 'plastics' did not apply to materials regarded as textile materials of Section XI and would not cover under Note 2(n), articles of Section XVI (machines and mechanical or electrical appliances). This naturally leads us to Section XVI. Section XVI (Chapters 84 and 85) under the heading 'Section Notes' states that transmission or conveyor belts or belting, of plastics of Chapter 39 or of vulcanised rubber (Heading No. 40.10) or other articles of a kind used in machinery or mechanical or electrical appliances or for other technical use, of unhardened vulcanised rubber (Heading No. 40.16) were not covered. Under No. 1(g) the Section would not cover parts of general use, as defined in Note 2 to Section of base metal (Section XV), or similar goods of plastics (Chapter 39). Under Note 2(a) and (b) subject to Note 1 to that Section, parts which are goods included in any of the Headings of Chapter 84 or Chapter 85 (other than Heading Nos. 84.85 and 85.48) are in all cases to be classified in their respective headings. Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading, are to be classified with the machines of that kind.
14. It will be relevant at this stage to refer to 85.09, 85.29 and 84.73 of Section XVI of the Central Excise Excise Tariff Act, 1985. The excise duty under 84.73 for parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of Heading Nos. 84.69 to 84.72 is 20%. Under 85.09 the excise duty is 30% on electro-mechanical domestic appliance with self-contained electro motor. Under 85.29, parts suitable for use solely or principally with the apparatus of Heading Nos. 85.25 to 85.28, the excise duty is 15%. They deal with transmission apparatus, radar apparatus, television receivers (including videomonitors and video projectors) etc.
15. The learned counsel for the petitioners would attempt to classify the articles involved in his prosecution as pal plastic articles exempted under Chapter 39 of Central Excise Tariff Act, 1985 but the prosecution would have it, that they cannot be so classified, as these goods are not for general use and have been made for a specific purpose. The learned counsel for the petitioners attempted to place before the Court certain material objects, which he sought to classify as to classify as to and bottom of mixies and wanted to impress upon the Court, that those goods will not have marketability and, therefore, this prosecution on that score alone will have to be quashed. I did not permit the petitioners' counsel to exhibit those articles, since such exhibition may have to be done during trial, especially when the prosecution chooses to classify the parts manufactured by the first petitioner as part of mixies, grinders and television and not mere plastic goods. The question of marketability of the articles manufactured by the first petitioner will again relate to the realm of evidence to be placed before the trial Court. The question regarding nature of the goods, their marketability and use to which they could be put to, cannot be gone into in a petition filed under Section 482 of the Criminal Procedure Code, when there is divergence between the petitioners and the prosecution on all these important aspects. It is of course, true, as contended by the learned counsel for the petitioners, that the law enunciated by the apex court, in Bhor Industries Limited v. Collector of Central Excise, Bombay : [1990]184ITR129(SC) and in the Union Carbide India Limited v. Union of India and Others 1986 (7) ECR 217 (S.C.) is to the effect that marketability of goods is essential to attract excise duty, as the burden of excise duty, which is and indirect tax, is passed on to the ultimate consumer, and in that context the expression 'goods manufactured or produced' refer to articles which are capable of being sold to a consumer. Marketability, therefore, is an essential ingredient in order to be dutiable. In paragraph 9 of the complaint it has been stated that M/s. Plasticraft Industries produced goods only against specific order and, therefore, they are not involved in any marketing activities. This portion of the complaint was harped upon by the learned counsel for the petitioners to contend, that the essential ingredient of marketability gets destroyed on the averments in the complaint and, therefore, no useful purpose would be served in allowing the prosecution to continue any further. Marketability of goods, known to the market, apparently is different from the petitioners not involving themselves in any marketing activities. In the counter affidavit filed by the prosecution in this Court dated 2-2-1990 in paragraph 6, a definite averment has been made that the goods manufactured by the petitioners cannot be said to be unmarketable for the specific use and purpose for which they were being manufactured. Though the counter states that marketability is not a criterion for the levy of excise duty of the goods manufactured, which is against the law laid down by the Supreme Court, it cannot be disputed that duty liability would be attracted once the goods are manufactured even for captive consumption to be fitted in some other goods, though captive consumption alone may not be determinative. The whole question would, therefore, depend on the nature of the articles manufactured by the petitioners inclusive of such articles being in elementary or crude form or having becoming distinct and complete components capable to being used in the whole unit, either separately or as a unit known in the market as week grinder, mixie or television. The ruling of Venkataswami, J., in Alco Industries, Madras v. Collector of Central Excise, Madras and Another : 1987(32)ELT279(Mad) cannot be applied at this stage to the acts of this case, since evidence has to be adduced regarding separability of the articles manufactured in its initial stage by the petitioners vis-a-vis the final product known by certain names in the market.
16. The Supreme Court in the Union Carbide India Limited v. Union of India and Others 1986 (7) ECR 217 (S.C.) took note that aluminium cans prepared by the manufacturer were employed entirely in the manufacture of flashlights and were not sold as aluminium cans in the market. Also the aluminium cans, at the point of time at which the excise duty had been levied existed in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans had sharp uneven edges and in order to use them as a competent in making flashlight cases the cans have to undergo various processes, such as, trimming, threading and redrawing. After the cans were trimmed, threaded and redrawn, they were reeded, beaded and anodised or painted. Only at that point, they became a distinct and complete component capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case. Therefore, it is apparent that the nature of the goods, the goods being complete components, capable of being used as a part of mixie, wet grinder or television will be matters of evidence to be adduced before the trial Magistrate. At this stage, it cannot be gauged whether the parts manufactured by the petitioners would constitute spare parts for being used solely or principally with the mixie, wet grinder or television, permitting its classification under the Heading No. 85.09 etc. There is not doubt that the heading 85.09 reads as electro-mechanical domestic appliances with self-contained electric motor. It was sought to be argued that since the appliances with self-contained electric appliances manufactured by the Petitioners did not contain self-contained electric motor, this Schedule will not be attracted. I am unable to overlook at this stage Chapter Note 2(n) in chapter 39 which states that the Chapter which deals with plastic and articles thereof, did not cover articles of Section XVI (Machines and Mechanical or electrical appliances). This note taken along with Section XVI, note 1(g) and 2(a) and (b) detailed earlier in this order will not permit quashing of the proceedings at this stage, before positive evidence is brought on record on the nature, quality, use and effectiveness of these articles before excise tax liability could be determined and to consider if there had been any violation of the excise law, justifying this prosecution.
17. The learned counsel for the Petitioners referred to the law laid down by the Supreme court in S. B. Sugar Mills v. Union of India and Others : 1973ECR9(SC) and Union of India v. Delhi Cloth & General Mills A.I.R. 196 S.C.791 to support his contention, that the mere production of goods of the nature as done by the petitioners, will not be liable for excise duty. These decisions, as stated earlier, cannot be applied at this stage, for there is no evidence on record to arrive at a conclusion on most of the important aspects relating to the nature and use of the goods. Evidence is bound to be produced by the prosecution before the trial Court to substantiate its case. If the evidence let in by the prosecution falls short of the scope of attracting levy of excise duty as contemplated in these decisions, the petitioners are bound to be exonerated. In this light, the Division Bench Judgment of the Delhi High Court in Delhi Cloth and General Mills Co. Ltd. and Another v. Joint Secretary, Government of India and Another 1978 E.L.T. (J. 121) cannot also be applied to the facts of this case. None of these cases have dealt with halting of the prosecution at its threshold, when certain definite allegations have been made in the complaint, classifying the goods manufactured by the petitioners as attracting the levy of excise duty.
18. Mr. P. Rajamanickam, the learned counsel for the respondent placed reliance on the decision of the Supreme Court in Chhotabhai Jethabhai Patel and Co. v. The Union of India and Another : AIR1962SC1006 with specific reference to the following observations made therein.
'In dealing with excise duty (1) there is no mention of a direct or indirect taxes; the Indian Legislature has avoided this incidence to be characteristic of the tax : (2) taxable event is the manufacture or production of goods; it is immaterial what happens to them afterwards whether they are sold, consumed, destroyed or given away; (3) it is not a necessary incidence that the manufacturer must be able to pass it in to the consumer or indemnify himself; (4) the general tendency of its being passed on may be there but it may be prohibited by the circumstances, economic or otherwise. The fact that the manufacturer has no chance to get the tax from the buyer does not affect the legality of the tax.'
19. The conspectus of the case law referred to above will not permit the proceedings pending in the lower Court being quashed at this stage, for evidence will have to be brought on record before any decision could be rendered on the liability of the petitioners to pay excise duty on the manufactured articles and the feasibility of a resultant prosecution. Therefore, on the first and second grounds of challenge the petitioners cannot succeed at this stage.
20. The third ground urged by the learned counsel for the petitioners, relates to the mens rea on the part of the petitioners vis-a-vis the commission of the alleged offence. Merely because an Excise Consultant of the Petitioners had expressed an opinion that the articles manufactured were exempt from excise duty, the petitioners cannot be exonerated, though this aspect can have a bearing during trial, if the petitioners were able to prove, that the offence was committed without their knowledge or that they had exercised all due diligence to prevent the commission of such offence. Equally the non-mention, if any, of the Excise Officials to the Petitioners during inspection that the articles manufactured by them were liable for levy of excise duty, cannot at this state be gone into to terminate the proceedings before the learned Magistrate. The fact remains that a show cause notice was issued and the petitioners became aware of their liability. It is, of course, true that soon thereafter, the petitioners have paid the duty under protest and they have also taken out as L. 4 licence from October, 1986 and commenced paying excise duty under Section 9AA, of the Act. These facts will have to be gone into by the trial Court and in a petition under Section 482 of the Criminal Procedure Code, detailed probe on this issue cannot be undertaken, since necessarily it pertains to the realm of evidence and its appreciation. As rightly pointed out by the learned counsel for the respondent, mens rea will be a matter of inference to be arrived at on all the facts and circumstances, that will be placed in evidence before the trial Court. The presumption of culpable mental state contemplated under Section 9C of the Act cannot also be overlooked at this stage. Mere failure or negligence on the part of the producer or manufacturer in either not having taken out a licence or where there was scope for doubt whether the goods were dutiable or not, as rightly contended by the learned counsel for the petitioners, will be favourable circumstances; but findings on these aspects could be rendered only after the evidence is recorded. Under these circumstances, I am unable to accept that the aspect of mens rea will enure in favour of the petitioners, even at this preliminary stage.
21. The last ground relating to stay of all further proceedings in the prosecution pending disposal of the appeal by CEGAT can now be considered. The Supreme Court in catena of decisions has held that the pendency of a appeal before the appellate authorities against adjudication proceedings would not be a bar for the criminal proceedings to be proceeded with, since the criminal Court will have to decide the issues arising out of the criminal proceedings on the evidence let in before the Criminal Court independently. However, the observations of The Supreme Court in P. Jayappan v. S. K. Perumal : [1984]149ITR696(SC) may be of some significance. The apex Court, while dealing with the pendency of the reassessment proceedings under the Income Tax Act, held that such proceedings cannot act as a bar to the institution of the criminal prosecution for offences under the Income-Tax Act and Indian Penal Code. The Institution of Criminal Proceedings cannot in such circumstances amount to an abuse of the process of Court. However, it may be that in an appropriate case the Criminal Court may adjourn or postpone the hearing of a criminal case in exercise of its discretionary power under Section 309 of the Criminal Procedure Code, if the disposal of any proceeding under the Act which has a bearing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein. Even here the discretion should be exercised judicially and in such a way as not to frustrate the object of the Criminal Proceedings. There is no rigid rule which makes it necessary for a criminal Court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period, only because some proceedings which may have some bearing on it is pending elsewhere. On this aspect the learned counsel for the petitioners brought to my notice the judgment of the Gujarat High Court in Digvijay Cement Co. v. State of Gujarat 1989 (22) ECR 638 (Guj) wherein S. S. Kapadia, J. held that when the matter was pending before the Tribunal and the possibility of allowing the appeal could not be ruled out, the petitioner cannot be said to have committed any offence and it was in the interest of justice, stay of criminal proceedings could be ordered, till the hearing of the appeal pending before the Tribunal. Since I have quoted the view of the Supreme Court relating to exercise of such power in appropriate cases, as a general rule, the view of the Gujarat High Court cannot be accepted. This question has no relevance to the maintainability of the prosecution. Though the prosecution cannot be quashed on this ground in the pending proceedings before the Judicial Magistrate, Poonamallee, the facts narrated leading to this prosecution certainly portrays that this is an appropriate case where the proceedings in the criminal Court could be stayed for a certain period to facilitate disposal of the appeal preferred by the Petitioners before the CEGAT. If the Tribunal were to hold that the articles manufactured by the petitioners would not fall within the taxable net, the prosecution probably may be infructuous. Taking note of the steps taken by the petitioners at every stage, after the receipt of instructions by the Excises Authorities, I am of the view that the Criminal Proceedings now pending in C.C. No. 31 of 1989 on the file of the Judicial Magistrate, Poonamallee, can be stayed for a reasonable period. In that view, I direct stay of proceedings in C.C. No. 11 of 1989 aforementioned for a period of six months from today. Meanwhile, the prosecution as well the defence are bound to take appropriate steps to have the appeal pending before the C.E.G.C.A.T. disposed of.
22. While dismissing Crl. M.P. No. 5415 of 1989 by refusing to call for the records in C.C. No. 31 of 1989 on the file of the Judicial Magistrate, Poonamallee, and quashing the proceedings therein, I direct that the proceedings in the said Calendar case be stayed for six months from today. Subject to the limited stay, this petition is otherwise dismissed.