Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Circular No. 1009/16/2015-CX
New Delhi, dated the 23rd October, 2015
To
Principal Chief Commissioner/ Chief Commissioner of Central Excise (All),
Principal Chief Commissioner/ Chief Commissioner of Central Excise and Service
Tax (All),
Madam/ Sir,
Sub: Central Excise Guidelines for launching of Prosecution under the Central
Excise Act, 1944 and Finance Act, 1994 regarding Service tax-reg.
I am directed to refer to following circulars/instructions issued by the Board
regarding guidelines for launching of prosecution under the Central Excise Act,
1944 and the Finance Act, 1994:
- Circular No. 15/90-CX.6 dated 09.08.1990 issued from F. No. 218/7/89-CX.6.
-
Circular No. 30/30/94-CX dated 04.04.1994 issued from F. No. 208/20/93/CX.6.
- Letter F. No. 208/31/97-CX.6 dated 04.04.1994 regarding enhancement of monetary
limit.
-
Circular No. 35/35/94-CX dated 29.04.1994 issued from F. No. 208/22/93-CX.6.
- Letter F. No. 203/05/98-CX.6 dated 06.04.1998 regarding making DG, CEI competent
authority to sanction prosecution in respect of cases investigated by DGCEI.
- Letter F. No. 208/05/98-CX.6 dated 20.10.1998.
- Letter F. No. 208/21/2007-CX.6 dated 15.06.2007.
-
Circular no 140/9/2011-Service Tax dated 12-5-2011.
2. In supersession of these instructions and circulars, following consolidated
guidelines are hereby issued for launching prosecution under the Central Excise
Act, 1944 and the Finance Act, 1994.
- Person liable to be prosecuted
3.1 Whoever commits any of the offences specified under sub-section (1) of
Section 9 of the Central Excise Act, 1944 or sub-section (1) of section 89 of
the Finance Act, 1994, can be prosecuted. Section 9AA (1) of Central Excise Act,
1944 provides that where an offence under this Act has been committed by a
company, every person who, at the time offence was committed was in charge of,
and was responsible to, the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished accordingly. Section 9AA
(2) of Central Excise Act, 1944 provides that where an offence under this Act
has been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to any neglect
on the part of, any director, manager, secretary or other officer of the
company, such director, manager, secretary or other officer shall be deemed to
be guilty of that offence and shall be liable to be proceeded against and
punished accordingly. Explanation to Section 9AA provides that (a) Company means
anybody corporate and includes a firm or other association of individuals and
(b) director in relation to a firm means a partner of the firm. These provisions
under Section 9AA of Central Excise Act, 1944 have been made applicable to
Service Tax also vide Section 83 of the Finance Act, 1994.
- Monetary limits: Central Excise and Service Tax
4.1 Monetary Limit: In order to optimally utilize limited resources of the
Department, prosecution should normally not be launched unless evasion of
Central Excise duty or Service Tax, or misuse of Cenvat credit in relation to
offences specified under sub-section (1) of Section 9 of the Central Excise Act,
1944 or sub-section (1) of section 89 of the Finance Act, 1994 is equal to or
more than Rs. One Crore.
4.2 Habitual evaders: Notwithstanding the above limits, prosecution can be
launched in the case of a company/assessee habitually evading tax/duty or
misusing Cenvat Credit facility. A company/assessee would be treated as
habitually evading tax/duty or misusing Cenvat Credit facility, if it has been
involved in three or more cases of confirmed demand (at the first appellate
level or above) of Central Excise duty or Service Tax or misuse of Cenvat credit
involving fraud, suppression of facts etc. in past five years from the date of
the decision such that the total duty or tax evaded or total credit misused is
equal to or more than Rs. One Crore. Offence register (335J) may be used to
monitor and identify assessees who can be considered to be habitually evading
duty.
4.3 Sanction of prosecution has serious repercussions for the assessee and
therefore along with the above monetary limits, the nature of evidence collected
during the investigation should be carefully assessed. The evidences collected
should be adequate to establish beyond reasonable doubt that the person, company
or individual had guilty mind, knowledge of the offence, or had fraudulent
intention or in any manner possessed mens-rea (guilty mind) for committing the
offence.
- Authority to sanction prosecution
5.1 The criminal complaint for prosecuting a person should be filed only after
obtaining the sanction of the Principal Chief/Chief Commissioner of Central
Excise or Service Tax as the case may be.
5.2 In respect of cases investigated by the Directorate General of Central
Excise Intelligence (DGCEI), the criminal complaint for prosecuting a person
should be filed only after obtaining the sanction of Principal Director General/
Director General, CEI.
5.3 An order conveying sanction for prosecution shall be issued by the
sanctioning authority and forwarded to the Commissionerate concerned for taking
appropriate action for expeditious filing of the complaint.
- Procedure for sanction of prosecution
6.1 Prosecution proposal should be forwarded to the Chief Commissioner /
Principal Chief Commissioner or Director General / Principal Director General of
DGCEI ( in respect of cases booked by DGCEI) after the case has been carefully
examined by the Commissioner/ Principal Commissioner or Additional Director
General /Principal Additional Director General of DGCEI who has adjudicated the
case. In all cases of arrest, examination of the case to ascertain fitness for
prosecution shall be necessarily carried out.
6.2 Prosecution should not be launched in cases of technical nature, or where
the additional claim of duty/tax is based totally on a difference of opinion
regarding interpretation of law. Before launching any prosecution, it is
necessary that the department should have evidence to prove that the person,
company or individual had guilty knowledge of the offence, or had fraudulent
intention to commit the offence, or in any manner possessed mens rea (guilty
mind) which would indicate his guilt. It follows, therefore, that in the case of
public limited companies, prosecution should not be launched indiscriminately
against all the Directors of the company but it should be restricted to only
against persons who were in charge of day-to-day operations of the factory and
have taken active part in committing the duty/tax evasion or had connived at it.
6.3 Prosecution should not be filed merely because a demand has been confirmed
in the adjudication proceedings particularly in cases of technical nature or
where interpretation of law is involved. One of the important considerations for
deciding whether prosecution should be launched is the availability of adequate
evidence. The standard of proof required in a criminal prosecution is higher as
the case has to be established beyond reasonable doubt whereas the adjudication
proceedings are decided on the basis of preponderance of probability. Therefore,
even cases where demand is confirmed in adjudication proceedings, evidence
collected should be weighed so as to likely meet the test of being beyond
reasonable doubt for recommending prosecution. Decision should be taken on
case-to-case basis considering various factors, such as, nature and gravity of
offence, quantum of duty/tax evaded or Cenvat credit wrongly availed and the
nature as well as quality of evidence collected.
6.4 Decision on prosecution should be normally taken immediately on completion
of the adjudication proceedings. However, Honble Supreme Court of India in the
case of Radheshyam Kejriwal [2011(266)ELT 294 (SC)] has interalia, observed the
following :- (i) adjudication proceedings and criminal proceedings can be
launched simultaneously; (ii) decision in adjudication proceedings is not
necessary before initiating criminal prosecution; (iii) adjudication proceedings
and criminal proceedings are independent in nature to each other and (iv) the
findings against the person facing prosecution in the adjudication proceedings
is not binding on the proceeding for criminal prosecution. Therefore,
prosecution may even be launched before the adjudication of the case, especially
where offence involved is grave, qualitative evidences are available and it is
also apprehended that party may delay completion of adjudication proceedings.
6.5 Principal Commissioner/Commissioner or ADG (Adjudication) acting as
adjudicating authority should indicate at the time of passing the adjudication
order itself whether he considers the case to be fit for prosecution so that it
can be further processed and sent to Principal Chief Commissioner/ Chief
Commissioner or Principal Director General/ Director General of DGCEI, as the
case may be, for sanction of prosecution. Where at the time of adjudication
proceedings no view has been taken on prosecution by the Adjudicating Authority
then the adjudication wing shall re-submit the file within 15 days from the date
of issue of adjudication order to the Adjudicating Authority to take view of
prosecution. Where, prosecution is proposed before the adjudication of the case,
Commissioner/Principal Commissioner or Principal Additional Director
General/Additional Director General, DGCEI who supervised the investigation
shall record the reason for the same and forward the proposal to the sanctioning
authority. The adjudicating authority shall also be informed of the decision to
forward the proposal so that there is no need for him to examine the case at the
time of passing of adjudication order from the perspective of prosecution.
Principal Chief Commissioner/ Chief Commissioner or Principal Director General/
Director General of DGCEI may on his own motion also, taking into consideration
the seriousness of an offence, examine whether the case is fit for sanction of
prosecution irrespective of whether the adjudicating authority has recommended
prosecution.
6.6 In respect of cases investigated by DGCEI, the adjudicating authority would
intimate the decision taken regarding fitness of the case for prosecution to the
Principal Additional Director General/ Additional Director General of the Zonal
Unit or Headquarters concerned, where the case was investigated and show cause
notice issued. The officers of unit of Directorate General of Central Excise
Intelligence concerned would prepare an investigation report for the purpose of
launching prosecution, within one month of the date of receipt of the decision
of the adjudicating authority and would send the same to the Director General,
CEI for taking decision on sanction of prosecution. The format of investigation
report is annexed as Annexure-I to this Circular.
6.7 In respect of cases not investigated by DGCEI, where the Principal
Commissioner/Commissioner who has adjudicated the case is satisfied that
prosecution should be launched, an investigation report for the purpose of
launching prosecution should be carefully prepared within one month of the date
of issuance of the adjudication order . Investigation report should be signed by
an Assistant/Deputy Commissioner, endorsed by the jurisdictional Principle
Commissioner/Commissioner and sent to the Principal Chief/ Chief Commissioner
for taking a decision on sanction for launching prosecution. The format of
investigation report is annexed as Annexure-I to this circular. A criminal
complaint in a court of law should be, filed by the jurisdictional
Commissionerate only after the sanction of the Principal Chief / Chief
Commissioner or Principal Director General/Director General of DGCEI has been
obtained.
6.8 Principal Commissioner/Commissioner or Additional Director General
(Adjudication) shall submit a report by 10th of every month to the Principal
Chief /Chief Commissioner or the Principal Director General/ Director General of
CEI, who is the sanctioning authority for prosecution, conveying whether a view
on launching prosecution has been taken in respect of adjudication orders issued
during the preceding month.
6.9 Once the sanction for prosecution has been obtained, criminal complaint in
the court of law should be filed as early as possible by an officer of the
jurisdictional Commissionerate authorized by the Commissioner.
6.10 It has been reported that delays in the Court proceedings are often due to
non-availability of the records required to be produced before the Magistrate or
due to delay in drafting of the complaint, listing of the exhibits etc. It shall
be the responsibility of the officer who has been authorized to file complaint,
to take charge of all documents, statements and other exhibits that would be
required to be produced before a Court. The list of exhibits etc. should be
finalized in consultation with the Public Prosecutor at the time of drafting of
the complaint. No time should be lost in ensuring that all exhibits are kept in
safe custody. Where a complaint has not been filed even after a lapse of three
months from the receipt of sanction for prosecution, the reason for delay shall
be brought to the notice of the Principal Chief/ Chief Commissioner or the
Principal Director General or Director General of DGCEI by the Principal
Commissioner/ Commissioner in charge of the Commissionerate responsible for
filing of the complaint.
- Monitoring of Prosecution
7.1 Prosecution, once launched, should be vigorously followed. The Principal
Commissioner/Commissioner of Central Excise/Service Tax should monitor cases of
prosecution at monthly intervals and take the corrective action wherever
necessary to ensure that the progress of prosecution is satisfactory. In DGCEI,
an Additional/ Joint Director in each zonal unit and DGCEI (Hqrs) shall
supervise the prosecution related work. For keeping a track of prosecution
cases, a prosecution register in the format enclosed as Annexure-II to this
Circular should be maintained in the Prosecution Cell of each Commissionerate.
The register shall be updated regularly and inspected by the Principal
Commissioner/Commissioner at least once in every quarter of a financial year.
7.2 For keeping a track of prosecution cases, a prosecution register in the
format enclosed as Annexure-III to this Circular should be maintained in the
Zonal Units of DGCEI and DGCEI (Hqrs.) pertaining to cases investigated by them.
- Appeal against Court order in case of inadequate punishment/acquittal:
8.1 Principal Commissioner/Commissioner responsible for the conduct of
prosecution or Principal Additional Director General or Additional Director
General of DGCEI (in respect of cases booked by DGCEI), should study the
judgement of the Court and, where it appears that the accused person have been
let off with lighter punishment than what is envisaged in the Act or has been
acquitted despite the evidence being strong, appeal should be considered against
the order. Sanction for appeal in such cases shall be accorded by Principal
Chief/ Chief Commissioner or Principal Director General/ Director General of
DGCEI.
- Publication of names of persons convicted:
9.1 Section 9B of the Central Excise Act, 1944 also made applicable to Service
Tax vide section 83 of the Finance Act,1994 grants power to publish name, place
of business etc. of the person convicted under the Act by a Court of Law. The
power is being exercised very sparingly by the Courts. It is directed that in
deserving cases, the department should make a prayer to the Court to invoke this
section in respect of all persons who are convicted under the Act.
- Procedure for withdrawal of Prosecution:
10.1 Procedure for withdrawal of sanction-order of prosecution
10.1.1 In cases where prosecution has been sanctioned but complaint has not been
filed and new facts or evidences have come to light necessitating review of the
sanction for prosecution, the Commissionerate or the DGCEI unit concerned should
immediately bring the same to the notice of the sanctioning authority. After
considering the new facts and evidences, the sanctioning authority namely
Principal Chief/ Chief Commissioner or Principal Director General or Director
General of DGCEI, if satisfied, may recommend to the Board (Member of the policy
wing concerned) that the sanction for prosecution be withdrawn.
10.2 Procedure for withdrawal of Complaint already filed for prosecution
10.2.1 In cases where the complaint has already been filed complaint may be
withdrawn as per Circular No. 998/5/2015-CX dated 28.02.2015 which provides that
where on identical allegation a noticee has been exonerated in the
quasi-judicial proceedings and such order has attained finality, Principal Chief
Commissioner/ Chief Commissioner or the Principal Director General/ Director
General of DGCEI shall give direction to the concerned Commissionerate to file
an application through Public Prosecutor requesting the Court to allow
withdrawal of the Prosecution in accordance with law.
- Transitional Provisions
11.1 All cases where sanction for prosecution is accorded after the issue of
this circular shall be dealt in accordance with the provisions of this circular
irrespective of the date of the offence. Cases where prosecution has been
sanctioned but no complaint has been filed before the magistrate shall also be
reviewed by the prosecution sanctioning authority in light of the provisions of
this circular.
- Compounding of offences
12.1 Section 9A(2) of the Central Excise Act, 1944 also made applicable to
Service Tax vide section 83 of the Finance Act,1994 provides for compounding of
offences by the Principal Chief/ Chief Commissioner on payment of compounding
amount. Circular no. 54/2005-Cus dt 30-12-2005 and Circular no 862/20/2007-CX-8
dated 27-12-2007 on the subject of compounding of offences may be referred in
this regard which inter alia provides that all persons against whom prosecution
is initiated or contemplated should be informed in writing, the offer of
compounding.
- Inspection of prosecution work by the Directorate of Performance Management:
13.1 Director General, Directorate of Performance Management and Chief
Commissioners, who are required to inspect the Commissionerates, should
specifically check whether instruction contained in this Circular are being
followed scrupulously and to ensure that reasons for pendency and non-compliance
of pending prosecution cases are looked into during field inspections apart from
recording of statistical data.
- The field formations may suitably be informed. Receipt of this Circular may
please be acknowledged. Hindi version will follow.
Yours faithfully,
(ROHAN)
Under Secretary to the Govt. of India
F. No. 96/54/2014-CX.1
Annexure-I
F. No.
INVESTIGATION REPORT FOR THE PURPOSE OF LAUNCHING PROSECUTION AGAINST
..
COMMISSIONERATE
DIVISION
..
- Name & address of the person(s) (including legal person(s):
- Central Excise/Service Tax Registration No.(If any):
- Nature of offence including commodity:
- Charges:
- Period of offence:
- Amount of evasion involved
- Particular of persons proposed to be prosecuted :
Name:
Fathers Name:
Age : Sex:
Address:
Occupation:
Position held in the Company/Firm:
Role played in the offence :
Material evidence available against the accused (please indicate separately
documentary and oral evidence).
Action ordered against the accused in adjudication.
- Brief note why prosecution is recommended :
(Deputy/Assistant Commissioner or Deputy/ Assistant Director, DGCEI)
Placee
Date
I have carefully examined the Investigation Report and find it in order for
filling criminal complaint under Section 9 and 9AA of the Central Excise Act,
1944.
(Commissioner, Central Excise_________)/
(Additional Director General, DGCEI-------)
Place
Date
- The proposal should be made in the above form in conformity with the guidelines
issued by the Ministry. With regard to column 4 above, all the charging sections
in the Central Excise Act/Service Tax and other allied Acts should be mentioned.
With regard to column 7, information should be filled separately for each person
sought to be prosecuted.
- A copy of the Show Cause Notice as well as the Order of Adjudication (Wherever
adjudication has been issued) should be enclosed with this report.
- If any appeal has been filed, then this fact should be specifically stated.
Annexure-II
FORMAT OF PROSECUTION REGISTER
Sl. No. |
Case investigated by |
Division/Range |
File no. |
Criminal complaint no. |
Date of detection |
Name of assessee and address |
Registration no. |
Nature of offence |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Amount of tax/duty confirmed |
Period of evasion |
Name of accused person (s)
|
Date of sanction of prosecution |
Date of compounding offer |
Date of filing of complaint |
10 |
11 |
12 |
13 |
14 |
15 |
Name, address and phone no of the counsel |
Date of judgement |
Appeal status- date/ court in which filed |
Date of hearing |
Remarks/sign with name and date (Officer filing the information) |
16 |
17 |
18 |
19 |
20 |
ANNEXURE-III
FORMAT OF PROSECUTION REGISTER TO BE MAINTAINED BY DGCEI
Sl. No. |
Date of Receipt of O-in-O in DGCEI |
Date of submission of Investigation report |
Date of Receipt of Sanction Order from DG,CEI |
Sanction Order No. & Date |
1 |
2 |
3 |
4 |
5 |
|
|
|
|
|
|
|
|
|
|
Date of filing of Complaint in Court |
Criminal Complaint No. |
File No. of Commission - -erate |
Name of Commiss- -ionerate |
Details of Order passed by Court |
6 |
7 |
8 |
9 |
10 |
|