LAW FOR ALL

Friday, May 8, 2015

the accused respondent has not successfully rebutted the presumption under Section 20 of the P.C. Act. The prosecution, on the other hand, has established the demand and acceptance of the tainted money. The recovery also has gone unchallenged. Therefore, we strike down the order of acquittal passed by the High Court in Criminal Appeal No.149 of 2000. We restore the judgment and order dated 24.1.2000 rendered by the Principle Special Judge for SPE & ACB cases, City Civil Court, Hyderabad, in C.C. No.10 of 1996, convicting the accused respondent under Sections 7 and 13(1)(d) read with Section 13(2) of P.C. Act and sentence him to suffer one year rigorous imprisonment under each count and also to pay a fine of Rs.1000/- under each count, in default to suffer simple imprisonment for two months under each count. Both the substantive sentences are to run concurrently. This appeal is accordingly allowed.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1317 OF 2008

State of Andhra Pradesh … Appellant

:Versus:

P. Venkateshwarlu … Respondent

J U D G M E N T

Pinaki Chandra Ghose, J.

1. This appeal, by special leave, has been filed by the State of Andhra
Pradesh against the judgment and order dated 10.7.2006 passed by the High
Court of Andhra Pradesh at Hyderabad, whereby the High Court has set aside
the conviction and sentence of the respondent herein and acquitted him
allowing the criminal appeal filed by him.

2. The facts of the present matter before us are that the accused
respondent was working as Sub Registrar in the office of Sub Registrar and
Assurance, Sattypali, Khammam District. On 18.3.1995 one Sri Burra
Venkateshwara Rao, complainant, approached the respondent to get a Will
deed registered in the name of his wife for transfer of certain extent of
land. As alleged, the accused respondent demanded a sum of Rs.1000/- for
the said registration work. After some bargain the demand was reduced to
Rs.500/-. Since the complainant was not willing to pay the said bribe
amount, he approached the Deputy Superintendent of Police, Anti Corruption
Bureau, Warrangal (P.W. 8) and lodged a complaint on 20.3.1995, who
registered a case in Crime No.1/ACB-WKH/95 under Sections 7 and 11 of
Prevention of Corruption Act, issued FIR and took up investigation.
Thereafter, P.W.8 requested the complainant to come to Neeladri Guest House
at Penuballi on 21.3.1995 with the necessary amount. Accordingly the
complainant along with his friend, namely, V. Edukondalu (P.W.1), went to
Neeladri Guest House at Penuballi on a motorcycle at about 1.00 P.M. and
P.W.8 introduced the complainant to one V. Yugender (P.W.7) and another.
Thereafter, the complainant was asked to give the money only when the
officer demanded it. The trap party consisting of P.W.8, two mediators, two
inspectors and two constables, left the Guest House in a Jeep while the
complainant, P.W.1 and P.W.2 went on a motorcycle. The raid party stopped
the Jeep at a little distance from the office of the respondent at
Sattupally. The complainant and P.W.1 went to a hut situated within the
premises of Sub Registrar’s office, where the complainant collected the
Will document prepared by P.W.5 N.V. Chalapathi Rao, the document writer
and stamps necessary for registration from P.W.4 B. Lakshmaiaha, the stamp
vendor. Before handing over the Will document to the complainant,
attestation was obtained from P.Ws. 1 and 2. Later on the complainant along
with P.Ws. 1 and 2 went to the office of the respondent and gave the Will
deed to the respondent, who after examining the Will deed, obtained the
signatures of P.W.1, P.W.2 and P.W.3 K. Srinivas Rao, who were present
there. When the complainant enquired about the registration fee of the
document, the respondent said it would amount to Rs.81/-. The complainant
took out Rs.81/- from inner pocket of his banian (vest) and gave it to
respondent, who placed it in the table drawer. Thereafter, he prepared a
receipt and handed it over to the complainant. It was subsequently alleged
that the respondent demanded the bribe of Rs.500/- and that the complainant
took out the tainted amount from his shirt pocket and gave it to the
respondent, who kept the amount in the table drawer. Then P.W.1 came out of
the office and gave the pre-arranged signal, pursuant to which the trap
party entered into the office and P.W.8 - the Deputy Superintendent of
Police (ACB) asked the respondent whether he has received the bribe amount
to which the respondent denied. Then the phenolphthalein test was performed
on fingers of both the hands of the respondent and the test on the right
hand fingers proved positive. The respondent denied having received any
bribe even when he was so asked by the mediators. On instructions of P.W.8,
the mediators searched the right side drawer of the office table of the
respondent and found three batches of currency notes in it, out of which
one bundle containing currency notes of Rs.500 and Rs.100 denominations,
tallied with the numbers noted by the mediators. The other bundle of
Rs.9000/- was given account according to the records. An amount of Rs.9.50
paise was found in the drawer which was left by the customers due to non
availability of change. Again on being asked, the respondent said that he
did not know who kept the amount in the drawer. Post trap Panchnama was
prepared and the respondent was arrested and released on bail. After
completion of investigation, the Inspector of Police filed the charge-
sheet. During the pendency of the trial, the de facto complainant Burra
Venkateshwar Rao died on 10.6.1997.

3. In the Court of the Principal Special Judge for SPE & ACB cases, at
Hyderabad, the learned judge after considering the material facts and
evidence, found the accused guilty under Sections 7 and 13 (1)(d) read
with Section 13 (2) of Prevention of Corruption Act. He was awarded
conviction under Sections 7 and 13 (1)(d) read with Section 13 (2) of
Prevention of Corruption Act and sentenced to suffer rigorous imprisonment
for one year under each count and also to pay a fine of Rs.1000/- under
each count, and in default, he would suffer simple imprisonment for 2
months.

4. On appeal by the respondent before the High Court, the learned Single
Judge was of the view that the lower Court erred in coming to the
conclusion that the accused was guilty of the offences under the above
mentioned Sections of the Prevention of Corruption Act and the conviction
and sentence imposed on the accused by the Court below were set aside and
the accused was acquitted of the charges against him. The reasons adduced
by the High Court for acquitting the accused respondent are as follows: The
High Court disbelieved the testimony of P.W.1 as truthful. The High Court
considered the theory of the defence that the document writer had foisted a
false case, from the cross examination of P.W.1 and came to the conclusion
that Chepu Chennaiah had visited the room of the Public Prosecutor. Another
circumstance was that the prosecution did not record the statement of the
so called complainant under Section 164 Cr.P.C. The prosecution got the
statement of P.W.1 recorded, but not that of the complainant, under Section
164 Cr.P.C. However, the High Court noticed that it was not imperative in
the instant case. The alleged trap was dated 21.3.1995 and the complainant
died on 10.6.1997. Thus, the prosecution cannot take the plea that the
complainant was not available for the recording of statement under Section
164 Cr.P.C. Another circumstance favouring the accused as noticed by the
High Court was that whether it was necessary for the complainant to execute
a Will in favour of his wife. The High Court was of the view that the
complainant was a petty vendor, having no legal heirs, with only a second
wife. In such a situation the property would automatically devolve upon her
and there was no necessity to execute a Will deed. The Court was of the
view that the positive result of the phenolphthalein test was not enough to
hold the accused guilty. The High Court observed that it was not disputed
that the complainant was carrying one set of amount in his banian pocket
and the other in his shirt pocket. So the possibility of his touching the
tainted currency notes at the time of taking out the registration amount
could not be ruled out.

5. We have heard the learned counsel appearing for the State of Andhra
Pradesh as also the learned counsel appearing for the respondent.

6. Learned counsel appearing for the State of Andhra Pradesh contended
before us that it was evident that P.W.1 accompanied the complainant to the
place where the trap was laid. In addition, he narrated the events in
sequence and his evidence was corroborated with the evidence of P.W.2 and
other witnesses. The suggestion made by the accused respondent that P.W1
and P.W.2 were set up by Chepu Chennaiah and Nageshwar Rao was wrong, as
nothing was elicited from their cross examination. As per the prosecution,
the High Court in the impugned judgment had given more weightage to the
evidence of defense with regard to cancellation of the license of document
writers than the evidence of prosecution with regard to the test conducted
by P.W.8. Also the High Court failed to appreciate that non-recording the
statement of the complainant under Section 164 is not fatal to the case of
the prosecution. The High Court also failed to appreciate that the evidence
of D.W.1 and D.W.2, who are subordinates to the accused respondent, would
naturally be in support of their colleague.

7. Learned counsel appearing for the respondent, on the other hand,
argued that mere recovery of money by itself cannot prove the charge of the
prosecution against the accused respondent in the absence of any evidence
to establish payment of bribe or to show that the accused respondent
voluntarily accepted the money. The positive phenolphthalein test is not
the conclusive proof that the accused respondent took the bribe. The
learned counsel cited a number of cases in support of the respective
contentions raised by them. In addition, it was submitted that the
complainant in a trap case stands in the position of an accomplice and his
evidence cannot be accepted without corroboration.

8. We are of the opinion that the case of the prosecution depends on the
testimonies of P.Ws.1, 2, 7 & 8. P.Ws. 1 and 2 are alleged to be the
eyewitnesses for the demand and acceptance of the tainted money. P.Ws.7 and
8 are the mediators and Head of the raiding party that recovered the money
from the table drawer in the office of respondent. The evidence of P.W.1
makes it clear that on 21.3.1995, he went to the house of the complainant
where he was informed that the de facto complainant had given a complaint
against the A.O. for demanding a sum of Rs.500/-. Both of them went to the
Penuballi Guest house, where they were introduced to the mediator (P.W.7)
by the D.S.P. (P.W.8) and was given instructions regarding the trap. His
evidence further showed that after the Will was presented and registration
fee paid, the A.O. demanded from the de facto complainant to pay the bribe
amount. From the evidence of P.W.2, it becomes clear that on 21.3.1995, he
went to the office of the M.R.O. on account of personal work and was
reckoned by Bora Venkateshwara Rao and P.W.1 to attest the Will Deed. His
evidence further goes to show that he accompanied P.W.1 and de facto
complainant to the office of the A.O. where he witnessed that the A.O.
firstly collected the registration fee of Rs.81/- and later demanded and
accepted the tainted amount. He has thus fully corroborated the evidence of
P.W.1 on the question of presence, on the question of signing as
identifying witness and also on the fact of demand and acceptance of the
tainted money.

9. Coming to the testimonies of P.W.7 and P.W.8, their testimonies fully
corroborate the testimony of P.W.1. The testimonies of the material
witnesses have been fully corroborated and we find them to be trustworthy.
The Phenolphthalein test goes further to prove that there was demand and
acceptance of the tainted money. The recovery of the tainted money has
gone unchallenged by the accused respondent. Thus, we find that the High
Court has wrongly disbelieved the testimony of P.W.1.

10. We are aware of the position in law, as laid down in cases involving
the relevant provisions under the Prevention of Corruption Act, that mere
recovery of the tainted amount is not a sine qua non for holding a person
guilty under Sections 7, 11 and 13 of the Act. This Court has observed in
Narendra Champaklal Trivedi Vs. State of Gujarat, (2012) 7 SCC 80, that
there has to be evidence adduced by the prosecution that bribe was demanded
or paid voluntarily as bribe. The demand and acceptance of the amount as
illegal gratification is a sine qua non for constituting an offence under
the Prevention of Corruption Act. The prosecution is duty bound to
establish that there was illegal offer of bribe and acceptance thereof and
it has to be founded on facts. The same point of law has been reiterated by
this Court in State of Punjab Vs. Madan Mohan Lal Verma, (2013) 14 SCC 153.
In the present case the factum of demand and acceptance has been proved by
the recovery of the tainted amount and the factum of there being a demand
has also been stated. The essential ingredient of demand and acceptance has
been proved by the prosecution based on the factum of the case. It has been
witnessed by the key eye witnesses and their testimonies have also been
corroborated by other material witnesses. The offence under Section 7 of
P.C. Act has been confirmed by the unchallenged recovery of the tainted
amount. Thus, it is our obligation to raise the presumption mandated by
Section 20 of P.C. Act. It is for the accused respondent to rebut the
presumption, by adducing direct or circumstantial evidence, that the money
recovered was not a reward or motive as mentioned under Section 7 of the
P.C. Act.

11. In C.M. Girish Babu Vs. CBI, Cochin, High Court of Kerala, (2009) 3
SCC 779, this Court stated:
“It is well settled that the presumption to be drawn under Section 20 is
not an inviolable one. The accused charged with the offence could rebut it
either through the cross-examination of the witnesses cited against him or
by adducing reliable evidence. If the accused fails to disprove the
presumption the same would stick and then it can be held by the Court that
the prosecution has and then it can be held by the court that the
prosecution has proved the accused received the amount towards
gratification.”

In the instant case, the defense has raised various presumptions to
disprove the prosecution case. However, it has not been able to adduce
evidence before us, on the basis of which the presumption under Section 20
of P.C. Act could be rebutted.

12. On the question of demand, learned counsel for the respondent stated
that the allegations in the complaint with regard to prior demand were
false as the A.O. was on election duty on 9.3.1995 and 10.3.1995. The
defense contended that the bribe was made for the first time on 9th or 10th
of March 1995 as alleged in the complaint. The defense has tried to take
the plea of alibi. However, in the complaint the exact date of visit is not
mentioned. On the basis of an approximation, we cannot assume that the
demand was made on 9th or 10th of March, 1995. The facts of the case also
bring to light that the complainant went to the office of the accused on
18.3.1995, he again went to the office of the A.O. and as a result the
demand was reduced from Rs.1000/- to Rs.500/-. This Court has observed in
Jitendra Kumar Vs. State of Haryana, (2012) 6 SCC 204, that “the plea of
alibi in fact is required to be proved with certainty so as to completely
exclude the possibility of the presence of the accused at the place of
occurrence and in the home of their relatives.” The accused has neither
taken the plea of alibi for the visit on the 18.3.1995 and nor has proved
the factum of not being present on the first date when the alleged demand
was made, beyond all doubt. Therefore, we are of the view that the
probability of his not being present cannot be considered.

13. One of the suggestions given by the accused respondent is that the
entire trap was laid down due to the inimical relations with document
writers, Chepu Chennaiah and his son-in-law Nageshwar Rao. The defense
also suggests that the complainant was a petty vendor who has no children
and the second wife alone is in existence, and therefore, execution of the
Will Deed was not required. Another possibility as stated by the defense
was that the complainant was carrying two sets of amounts, one in his
banian pocket and other in the shirt pocket. The amount of Rs.81/- he was
carrying in the banian pocket, whereas the tainted amount he was carrying
in the shirt pocket and he could have touched the tainted amount at the
time of taking out the registration fee. The suggestion as to Nageshwar Rao
and Chepu Chennaiah setting up the trap to implicate the accused seems to
be very farfetched. All the remaining above mentioned suggestions are not
adduced by any direct or circumstantial evidence, as required under law.

14. Thus, the accused respondent has not successfully rebutted the
presumption under Section 20 of the P.C. Act. The prosecution, on the other
hand, has established the demand and acceptance of the tainted money. The
recovery also has gone unchallenged. Therefore, we strike down the order
of acquittal passed by the High Court in Criminal Appeal No.149 of 2000. We
restore the judgment and order dated 24.1.2000 rendered by the Principle
Special Judge for SPE & ACB cases, City Civil Court, Hyderabad, in C.C.
No.10 of 1996, convicting the accused respondent under Sections 7 and
13(1)(d) read with Section 13(2) of P.C. Act and sentence him to suffer one
year rigorous imprisonment under each count and also to pay a fine of
Rs.1000/- under each count, in default to suffer simple imprisonment for
two months under each count. Both the substantive sentences are to run
concurrently. This appeal is accordingly allowed.

….....….……………………J
(Pinaki Chandra Ghose)

….....…..…………………..J
(Uday Umesh Lalit)
New Delhi;
May 06, 2015.
ITEM NO.1A COURT NO.11 SECTION II
(for Judgment)

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

Criminal Appeal No(s). 1317/2008

STATE OF A.P. Appellant(s)

VERSUS

P.VENKATESHWARLU Respondent(s)

Date : 06/05/2015 This appeal was called on for pronouncement of
judgment today.

For Appellant(s) Mr. S. Udaya Kumar Sagar, Adv.
Mr. Krishna Kumar Singh, Adv.

Mr. D. Mahesh Babu, Adv. (NP)

For Respondent(s) Ms. T. Anamika, Adv.
Mr. B.V. Chandan, Adv.

Hon'ble Mr. Justice Pinaki Chandra Ghose pronounced the reportable
judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice Uday
Umesh Lalit.

The appeal is allowed in terms of the signed reportable judgment as
follows:-

“ Thus, the accused respondent has not successfully rebutted the
presumption under Section 20 of the P.C. Act. The prosecution, on the other
hand, has established the demand and acceptance of the tainted money. The
recovery also has gone unchallenged. Therefore, we strike down the order
of acquittal passed by the High Court in Criminal Appeal No.149 of 2000. We
restore the judgment and order dated 24.1.2000 rendered by the Principle
Special Judge for SPE & ACB cases, City Civil Court, Hyderabad, in C.C.
No.10 of 1996, convicting the accused respondent under Sections 7 and
13(1)(d) read with Section 13(2) of P.C. Act and sentence him to suffer one
year rigorous imprisonment under each count and also to pay a fine of
Rs.1000/- under each count, in default to suffer simple imprisonment for
two months under each count. Both the substantive sentences are to run
concurrently. This appeal is accordingly allowed.”

(R.NATARAJAN) (SNEH LATA SHARMA)
Court Master Court Master
(Signed reportable judgment is placed on the file)

Dacoity - 14-15 members - Newmoon night - Pitch dark - wintesses at panik - Identification of Accused from a distance of 3 1/2 yards - 5/6 yards - unbelievable - Doubtful - Recovery also not proved -failed to prove that the stolen property was in the possession of the accused persons or that the accused had knowledge that the property was a stolen property or the accused persons had converted the stolen property. - mere plea taken by some of the accused that they known earlier to the prosecution witnesses and non examination of any witness in support of their claim - despite of it , the prosecution has to establish Identification of accused properly - in the absence of any other evidence like recovery of stolen jewellery or other articles strengthening the prosecution case, conviction cannot be based solely on the identification of the accused in the test identification parade. -when Serious doubts arise as regards identification of the accused regarding complicity of the appellants in the commission of dacoity and their identification by the witnesses and the prosecution has failed to prove the guilt of the accused beyond reasonable doubt and in our view, the conviction of the appellants under Section 396 IPC cannot be sustained and is liable to be set aside.- 2015 S.C. MSKLAWREPORTS

on the intervening night i.e.
on 21/22.09.1979, the complainant-Patia Singh (PW1) was sleeping in his
house. His brothers Saran Singh, Sukhbeer Singh and his children were
sleeping in their house. Both the houses were adjacent to each other. In
the midnight at about 1.00 o’clock, PW1-Patia Singh heard the noise of
gun firing and in the light of torch, he saw that in the house of his
brother Saran Singh, about 14-15 dacoits were looting the property and that
two of them on the roofs and two dacoits were standing on the gate holding
guns and they were continuously firing. All the inmates of the house
witnessed the incident in the torch light and electric light emanating from
tube well. On raising alarm, the villagers came out to help them and they
were carrying torches and they warned the dacoits from behind the walls.
When Saran Singh tried to control the dacoits, the dacoits opened fire and
he was shot dead. The miscreants looted the articles in about one and half
hours and fled away from the scene.

it is unbelievable that on a new moon night
when it was pitch dark, the witnesses who were frightened and who were
hiding themselves behind the walls in order to save themselves, could have
seen actual faces of the accused persons just by flash of torch lights on
their faces and in the light of lantern. Further, there were about 14-15
dacoits in number, all armed with deadly weapons and were continuously
making ingress and egress in the house of the deceased, it becomes
inconceivable as to how the witnesses standing at a distance in a feeble
light would have been able to identify the dacoits.

When the witnesses in a panicky state and standing at a distance of
three and half yards and five-six yards, it is doubtful whether the
witnesses would have gained enduring impression of the identity of the
accused.
In the commission of offence of dacoity, identification becomes
susceptible to errors and miscarriage of justice.
In order to bring home the guilt of the accused persons, it is the
duty of the prosecution to prove that the stolen property was in the
possession of the accused persons or that the accused had knowledge that
the property was a stolen property or the accused persons had converted the
stolen property. No such recovery was made to connect the appellants and
other non-appealing accused persons with the crime.

In the trial court, on behalf of some of the accused persons, a plea
was taken that some of the accused were known to the witnesses and that the
accused are resident of Jayee village and Buksar village and are doing
cultivation and that the accused are known to the witnesses. The
prosecution witnesses having known to the accused earlier, the witnesses
are residents of village Etmadpur and used to take the bus at village Jayee
and at village Khajoori bus stand. The courts below observed that the
identification of the appellants cannot be discarded merely on the ground
that the appellants and accused Kishnu reside in the village Buksar and
that the witnesses knew the accused long before. The accused could not
adduce evidence to substantiate the defence plea that the prosecution
witnesses had known the accused earlier. Non-adducing of evidence to
substantiate the defence plea by the accused seems to have substantially
weighed in the mind of the trial court to accept the prosecution case.

Courts below based the verdict of conviction solely on the oral
testimony of PW1 to PW3 and the identification of the appellants and other
non-appealing accused in the test identification parade. As discussed
earlier, in the absence of any other evidence like recovery of stolen
jewellery or other articles strengthening the prosecution case, conviction
cannot be based solely on the identification of the accused in the test
identification parade. Serious doubts arise as regards identification of
the accused regarding complicity of the appellants in the commission of
dacoity and their identification by the witnesses and the prosecution has
failed to prove the guilt of the accused beyond reasonable doubt and in our
view, the conviction of the appellants under Section 396 IPC cannot be
sustained and is liable to be set aside.

Conviction of the appellants under Section 396 IPC and the sentence
imposed on them is set aside and this appeal is allowed. The appellants
are ordered to be set at liberty forthwith unless they are required in any
other case.- 2015 S.C. MSKLAWREPORTS

Dacoity - 14-15 members - Newmoon night - Pitch dark - wintesses at panik - Identification of Accused from a distance of 3 1/2 yards - 5/6 yards - unbelievable - Doubtful - Recovery also not proved -failed to prove that the stolen property was in the possession of the accused persons or that the accused had knowledge that the property was a stolen property or the accused persons had converted the stolen property. - mere plea taken by some of the accused that they known earlier to the prosecution witnesses and non examination of any witness in support of their claim - despite of it , the prosecution has to establish Identification of accused properly - in the absence of any other evidence like recovery of stolen jewellery or other articles strengthening the prosecution case, conviction cannot be based solely on the identification of the accused in the test identification parade. -when Serious doubts arise as regards identification of the accused regarding complicity of the appellants in the commission of dacoity and their identification by the witnesses and the prosecution has failed to prove the guilt of the accused beyond reasonable doubt and in our view, the conviction of the appellants under Section 396 IPC cannot be sustained and is liable to be set aside.- 2015 S.C. MSKLAWREPORTS

Thursday, May 7, 2015

whether the Central Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'), Bangalore erred in disallowing the benefit of the Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.97 respectively to the appellant.

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5523 OF 2004

|M/S. B.P.L. LIMITED |.....APPELLANT(S) |
|VERSUS | |
|COMMISSIONER OF CENTRAL EXCISE, | |
|COCHIN-II COMMISSIONERATE |.....RESPONDENT(S) |

W I T H
CIVIL APPEAL NO. 6037 OF 2004

J U D G M E N T

A.K. SIKRI, J.
The issue, which arises for consideration in the present
appeals is whether the Central Excise and Service Tax Appellate Tribunal
(for short, 'CESTAT'), Bangalore erred in disallowing the benefit of the
Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated
01.03.97 respectively to the appellant.

The appellant herein is engaged in the manufacture of excisable goods
falling under Chapter 85 and 90. From January 1997 onwards the appellant
had been manufacturing and clearing two models of D.C. Defibrillators which
are known as Model No. DF2389R with recorder and Model 2389 without
recorder. The appellant had filed classification declaration from time to
time and classified the items under C.E.T. heading 9018 and claimed
exemption under Notification No.8/96 dated 23.09.1996 and Notification
No.4/97 dated 01.03.97 respectively. The Revenue, however, took a view that
the said Defibrillators were not eligible to the benefit of the aforesaid
exemption Notifications. Therefore, by letter dated 17.02.98 it directed
the appellant to modify its classifications declaration as only
miniaturized implantable defibrillators were eligible to the benefit of the
Notification. The appellant protested by giving reply and maintaining that
the Notification in question encompassed the aforesaid goods manufactured
by the appellant as well. The department was not amused by the reply given
by the appellant. It resulted in issuance of show-cause notice dated
23.09.1998 whereunder demand duty with respect to Defibrillators
manufactured during the period January 1997 to March 1998 was proposed as
duty in the said show-cause notice.

We may point out at this stage that a defibrillator is a device that
delivers electrical shock through paddles placed either directly across the
heart or on the surface of the body during cardiac emergency resulting from
ventricular fibrillation. The meaning of Cardiac Defibrillator is
explained in Medicine and Clinical Engineering Physiological and Clinical
Medicine by Bertil Jacobson Karolinska Institute, Stockholm, Sweden, Jhon
G. Webster, University of Wisconsin, Medison. It reads as follows:-
“Some cardiac arrhyhmias can be treated by passing a brief electric shock
through heart. Ventricular fibrillation can often be stopped before
circulatory arrest has caused irreversible brain damage due to oxygen
deficiency. Likewise, atrial fibrillation and atrial flutter can often be
stopped by defibrillator.”

Ventricular fibrillation may be caused by an external electric shock, which
occurs near the peak of the T wave- the vulnerable period when the
ventricle is re polarizing. It may also be caused when a PVC occurs during
this same vulnerable period; in this case the heart electrocutes itself.
Fibrillation has been likened to a dog chasing its tail, with continuous
travel of the waves of depolarization and repolarization. During
defibrillator, a large electric shock causes simultaneous depolarization of
all cardiac muscle fibres. When they recover, normal packing resumes. An
energy 50-500 ws (joules) has been found most effective, with the current
passing through the heart along the longitudinal axis. Defibrillator can be
performed externally via two electrodes placed on the chest or internally
on the exposed heart during an operation. With an electrode about 50 cm in
area, the resistance through the thorax is about 100 ft. For internal
defibrillator on an exposed heart the resistance is lower, about 50 ft.

As per the department, Defibrillators manufactured by the appellant were
designed to provide external counter shock and the apparatus for which nil
rate of duty had been prescribed was for defibrillators meant for internal
use only and not for conventional Defibrillators manufactured and cleared
by the appellant. The department had also invoked the longer period of
limitation under Section 11A of the Excise Act by alleging suppression. The
appellant filed their reply to the show-cause notice contending mainly that
the Defibrillators were meant both for internal and external use and that
the allegation of suppression of fact was totally incorrect and therefore
the demand was time barred. The appellant attended personal hearing and
thereafter the Commissioner by order dated 19.11.1999 confirmed the demand
of Rs. 27,71,326/- and imposed equivalent penalty under Section 11AC as
well as further penalty of Rs.1 lakh.

Thereafter, the appellant filed an appeal before the CEGAT, Madras (now
Chennai) against the order of the Commissioner mainly impressing upon the
CEGAT that the Commissioner in the impugned order had relied upon
extraneous grounds to come to the conclusion that the Defibrillators
manufactured by the appellant were only for external use and, therefore,
the benefit of Notification could not be extended. The appellant produced
evidence in the form of certificates from the Department of Electronics,
hospitals, invoices for clearance of the equipment with internal paddles
and other technical literature to substantiate their contention that
Defibrillators manufactured by them were put to internal use by using
internal paddles on the exposed hear during cardiac surgery. They relied
upon decisions that the term 'for use' means capable of being used and not
actual use and also on interpretation of statute. The CEGAT, by its order
dated 01.03.2002, held that the Commissioner had come to a finding on an
incomplete reading of the manual and had not considered well-settled law on
'for use'. The CEGAT, therefore, remanded the matter back to the
Commissioner to decide eligibility for exemption under above notifications.
It further directed that during the re-adjudication both the sides were
free to lead such evidence as were available to be put before the
Adjudicating Authority. They left open the question of limitation, penalty
and interest.

On remand, the appellant filed a further reply before the Commissioner and
relied upon various documents in support of its contention that its
Defibrillator was capable of internal use and the said Defibrillator and
implantable Defibrillators were two different pieces of equipment. The
appellant again contended that the demand was time barred, as there was no
suppression of facts. The appellant appeared for personal hearing and
reiterated its submissions and filed additional written submissions. It
produced photographs showing the Defibrillator being put to internal use
during open heart surgery as well as the Technical Literature to
substantiate its claim.

The Commissioner, however, by order dated 22.02.2003 upheld the
earlier order of the Commissioner and once again denied the benefit of the
notification to this product of the appellant. According to the
Commissioner the benefit of the exemption notification was available only
to implantable defibrillators coupled with pace makers.

The appellant once again filed the Appeal before the CESTAT,
Bangalore. After hearing, an order dated 31.12.2003 was passed, wherein
there was a difference of opinion between the Judicial and Technical
Member. As per the order of the Judicial Member, the Defibrillator
manufactured by the appellant could be used for internal use and therefore
they are eligible to the benefit of the notification. Since his opinion was
in favour of the appellants on merits, he did not go into the time bar
issue. The Technical Member while admitting that the Defibrillator could be
used for internal use in “rare circumstances” when the heart is open and
the paddles for internal use are fixed in the Defibrillators as there is a
build in mechanism in the Defibrillator for making it usable as internal
Defibrillator during an open heart surgery, however denied the benefit of
the notification on the ground that only Defibrillators used with pace
maker and which is implantable is eligible to the benefit of the
notification.

As there was a difference of opinion, the issue was referred to a Third
Member. The Third Member, viz. the President of the Tribunal, heard the
matter and passed the order dated 19.05.2004 disallowing the benefit of the
notification to the Defibrillator thereby concurring with the view of the
Technical Member.

This is how the matter has come up to this court in the form of present
appeal filed by the appellant under Section 35 L(b) of the Central Excise
Act (herein after refer to as Act), challenging the aforesaid order dated
19.05.2004.

We have already taken note of the product in question with its
salient features and particular uses it can be put to. Question is as to
whether it satisfies the requirement of Notification No. 8/96 and
Notification No. 4/97, under which the appellant is claiming exemption.
Thus, before we proceed further it would be apt to scan through the
ingredients of the aforesaid notifications along with earlier notifications
under which exemption is granted in respect of defibrillator, from time to
time. First notification in this behalf is the Notification No. 339/86
dated 11.06.1986, which was amended by notifications dated 01.03.1989 and
01.03.1994. Material part of these Notifications read as under:
“Notification No. 339/86-CE dated 11.06.86 amended by Notification
Nos.88/89-CE dated 01.03.89 and 58/94-CE dated 01.03.94.

8 DC Defibrillators now internal use and Pacemakers and their accessories
including patient cable, internal Defibrillators Paddles 45mm and 55mm
sizes but excluding:-

(a) Cardiac Monitors
(b) Cardioscopes
(c) E.C.G. Monitors of any type.
(d) E.C.G. Recorder

and the following components of D.C. Defibrillators, namely:-

(i) Connector.
(ii) Discharge/Damp Relay
(iii) High Voltage Retractable, Flexible Wire
(iv) Polyester/Paper Discharge Capacitor

20. Implantable Cardiac Pacemaker and
accessories.
30. Pacemaker Wires.
31. Patient Cable for Pacemaker.”

We now reproduce the relevant portion of the two Notification Nos. 8/96 and
4/97 with which we are directly concerned. These are as follows:-
“II. Notification No.8/96 dated 23.07.1996-

TABLE

(7) D.C. Defibrillators for internal use and
pacemakers.

(16) Implantable cardiac pacemakers.

(58) Pace Maker.

III. Notification No.4/97 dated 01.03.97

TABLE

217. Medical equipment and other goods
specified in List 6.

LIST 6

(7) DC Defibrillators for internal use and pace\
makers.

(16) Implantable cardiac pacemakers.

(58) Pace Maker.”

From the reading of the aforesaid notifications, it becomes apparent that
originally those D.C. Defibrillators which were meant for both internal as
well as external use and also pacemakers and their accessories etc. were
eligible for exemption. Certain goods which did not qualify for exemption
like cardiac monitor, Cardioscopes etc. were specifically excluded. On the
other hand some of the components of D.C. Defibrillators which were
exempted from payment of Excise duty were also specifically mentioned. For
our purposes what is relevant is that in the original Notification dated
11.06.1986, as amended on 01.03.1989 and 01.03.1994, the goods which
qualified for exemption were “Defibrillators for internal and external use
and pacemakers and their accessories including patient cable internal
defibrillator paddles 45mm and 55mm sizes”. Implantable cardiac pacemaker
and accessories were also specifically included. This entry under went a
substantial challenge in the notification No. 8/96 dated 23.07.1996. In
this Notification, replacing the earlier notifications, defibrillators for
external use are no more eligible for exemption. The entry now reads “D.C.
Defibrillator for internal use and pacemaker”. Thus, what is omitted is not
only external use but also accessories of these D.C. Defibrillators.
Likewise in place of earlier entry which mentioned on implantable cardiac
pacemaker and accessories, entry in this Notification confines only to
implantable cardiac pacemakers. Accessories thereof are specifically
removed from exemptions. Moreover in place of pacemaker wires now it is
only pacemaker. Though in the earlier notification, patient cable for
pacemaker was included as exempted item, it is omitted altogether in
Notification No.8/96. This position is maintained in Notification No.4/97
dated 01.03.1997.

Keeping in view the aforesaid characteristic and feature of the
Notifications in question, in contradistinction to the position which
prevailed in the earlier Notification dated 11.06.1986 as amended from time
to time and taken note of above, we have to examine as to whether the
defibrillator of the appellant would be covered by these two Notifications.

It is not disputed by the appellant that their Defibrillators are primarily
meant for external use. It is, however, contended that this can be used
internally as well. It is also admitted case that the defibrillator
manufactured by the appellant is not implantable internally in the human
body. The only justification given by the appellant is that at the time of
carrying out the open heart surgery same device can be used to deliver
electrical shock. However, it is accepted that to give the electrical
shock paddles are needed, which is sold by the appellant only as an
accessory. Not only this, while selling the defibrillators said paddlers
are not sold as an integral component/accessory of the main equipment. To
the contrary, their purchase is optional, meaning thereby the choice is
that the buyer to purchase paddle or not. During the arguments it was
conceded that 99 per cent sale of these defibrillators were without paddles
which means that predominantly the goods are sold for external use only.
We would also like to reproduce, at this stage the description of the goods
in question as given by the appellant itself in the operating and service
manual of the product in question. It reads as follows:-
“DESCRIPTION

BPL's Portable Defibrillator/Monitor is designed to provide external
counter shocks and to display hear rate and ECO wave forms on the scope
screen.

….........Delivery of the monophasic countersjock pulse (Lown/Edmark
Waveform) is triggered by depressing the discharge buttons on both of the
anterior paddles, or if internal paddles are used, by depressing the INT,
PADDLE DISCHARGE button located on the control panel Optional anterior
paddles are equipped with a CHARGE push button that functions the same way
as the SET CHARGE MANual push button does.”

Going by the aforesaid features of the appellant's goods in question which
are primarily meant for external use, simply because it can be used
internally as well but not without the paddles and paddle is optional
accessory, it is difficult to hold that conditions contained in the
exemption Notifications are satisfied. We are making these remarks in the
context of the Notification in question when contrasted with the earlier
Notification, as already described above. On these facts the Third Member
of the tribunal in the impugned order made the following analysis:
“5. As mentioned earlier, the Notification No.339/86 as amended by
Notification Nos.88/89 and 58/94 took in both DC Defibrillator for internal
and external use. While including accessories in the above items specific
reference was made to 'internal defibrillator paddles with 45mm and 55mm
sizes'. It is relevant to note that there is a marked difference in the
description of the item when it came to Notification Nos.8/96 and 4/97.
There is no reference to D.C. Defibrillator for external use or a specific
reference to 'internal defibrillator paddles'. Even according to the
assessee, its product can be treated as D.C. Defibrillators for internal
use only when it is fitted with internal defibrillators. Admittedly
assessee is clearing defibrillators without such 'internal defibrillators
paddles' also. A reference to assessee's Operating and Service Mannual also
would show that 'internal defibrillator paddles' are only optional
accessories. Defibrillators for external use which are once included in the
exempted category are not taken out of such category under Notification
Nos. 8/96 and 4/97. If the assessee’s contention is to be accepted then in
spite of such specific exclusion its product will continue to get benefit
of exemption on the basis of supply of some optional accessories like
internal paddle.

6. The material produced by the Revenue before the Commissioner and
accepted by him were later made available toe the assessee before this
Tribunal. Arguments were addressed by both on that basis. The relevant
portion from the Commissioner’s order is quoted below:-

“Internal Cardioverter Defibrillators (ICD) were originally developed and
have been most frequently used for prevention of sudden cardiac death
(www.americanheart.org). A modern internal defibrillator is much smaller
and is implanted in the upper chest. Newer devices are a combination of ICD
and pacemaker in the unit. These combination ICD/pacemakers are implanted
in patients who require both devices (www.emedicine.com)........ This
device is a small electric generator hooked up to wires called leads. A
typical ICD weighs about 4 ounces and measures about ½ inch thick by 2
inches wide and is implanted under the skin in the upper chest. Leads are
the wires that conduct the ICD to the heart the tip of which is placed
against the heart's inner wall and carries electric impulses from the ICD
to the heart through the cut vein into the heart's chambers beginning with
the right ventricle (www.chfpatients.com).”

7. The above would show that D.C. Defibrillators for internal use included
in the exempted category cannot be taken as a defibrillator for external
use cleared by the appellant with an accessory of internal defibrillators
paddles. A reference to reply received from Jerry Potts to the appellant's
query would also lead such a conclusion. The reply reads as follows:-

“Implantable defibrillators are definitely distinct from 'internal'
defibrillators used during surgery to countershock the heart. If anything,
the term internal defibrillator, as you defined it in your message, more
closely relates to an external defibrillator. That is because the device
typically used to manually deliver a counter shock to the myocardium during
open hart surgery is identical to those defibrillators that externally
deliver transthorascic shocks to a closed chest (except for the peddles
that are used.)”

Therefore, the defibrillator used during open heart surgery is identical to
the defibrillators used to deliver transthorascic shocks externally except
for the internal paddles additionally provided. Exclusion of defibrillators
for external use from the exemption provisions in Notification Nos.8/96 and
4/97 cannot be ignored. Appellant's product which is basically a
defibrillator for external use but capable of using during open heart
surgery if the optional accessory of internal defibrillators paddles are
also provided, cannot be treated as defibrillators for internal use are
contemplated in the exemption provisions.”

We approve the aforesaid reasoning and rational given by the Tribunal in
coming to the conclusion that the goods of the appellant would not qualify
the description contained in Notification Nos.8/96 and 4/97. It is trite
that strict interpretation is to be given to the exemption notifications
and it is upon the assessee to approve that he fulfills all the conditions
of eligibility under such Notifications. This is so held by this Court in
Rajasthan Spinning and Weaving Mills, Bhilwara, Rajasthan v. Collector of
Central Excise, Jaipur, Rajasthan[1], wherein this principle was stated in
the following manner:
“16. Lastly, it is for the assessee to establish that the goods
manufactured by him come within the ambit of the exemption notification.
Since, it is a case of exemption from duty, there is no question of any
liberal construction to extent the term and the scope of the exemption
notification. Such exemption notification must be strictly construed and
the assessee should bring himself squarely within the ambit of the
notification. No extended meaning can be given to the exempted item to
enlarge the scope of exemption granted by the notification.”

This principle has been reiterated time and again. It is not necessary to
take note of all such cases. We would however like to reproduce the
restatement of this member by the Constitutional bench of this Court in
Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal &
Ors.[2], as follows:
“29. The law is well settled that a person who claims exemption or
concession has to establish that he is entitled to that exemption or
concession. A provision providing for an exemption, concession or
exception, as the case may be, has to be construed strictly with certain
exceptions depending upon the settings on which the provision has been
placed in the statute and the object and purpose to be achieved. If
exemption is available on complying with certain conditions, the conditions
have to be complied with. The mandatory requirements of those conditions
must be obeyed or fulfilled exactly, though at times, some latitude can be
shown, if there is a failure to comply with some requirements which are
directory in nature, the non-compliance of which would not affect the
essence or substance of the notification granting exemption.

30. In Novopan India Ltd. (Novopan India Ltd. v. CCE and Customs, 1994
Supp (3) SCC 606) this Court held that a person, invoking an exception or
exemption provisions, to relieve him of tax liability must establish
clearly that he is covered by the said provisions and, in case of doubt or
ambiguity, the benefit of it must go to the State. A Constitution Bench of
this Court in Hansraj Gordhandas v. CCE and Customs (AIR 1970 SC 755 :
(1969) 2 SCR 253) held that (Novopan India Ltd. Case, SCC p. 614, para 16):

“16...such a notification has to be interpreted in the light of the words
employed by it and not on any other basis. This was so held in the context
of the principle that in a taxing statute, there is no room for any
intendment, that regard must be had to the clear meaning of the words and
that the matter should be governed wholly by the language of the
notification i.e. by the plain terms of the exemption.”

Having regard to the above it is difficult to accept the contention of Mr.
Datar, learned senior counsel who appeared for the appellant, predicated on
the submission that such defibrillator of the appellant is capable of
internal use and, therefore, it would be covered by the aforesaid
notifications. No doubt there is difference between the 'actual use' and
'intended for use' and even when a product is not actually used but is
capable of being used, it would be treated as the product 'for use' as held
in State of Haryana v. Dalmia Dardri Cement Limited[3]. However, in the
present case we find that defibrillator when sold without paddle is not
capable of being used internally and paddle is only sold as optional
accessory.

For the same reason, judgment in the case of Collector of Customs, Bombay
v. Handicraft Exports[4] will also have no application to the instance
case. In that case exemption from import duty was provided in respect of
'embellishment for footwear under the notification. The Court held that the
imported goods need not be capable of being exclusively used as
embellishment for footwear but may also be capable for being used for other
purposes. Here, as noted above, defibrillators are not capable of being
used internally without paddles and paddle is an accessory which does not
qualify for exemption any longer. It would be pertinent to note that in
Handicraft Export's case this Court also held that importer will have to
prove that the goods were not only capable of being utilized as
embellishment for shoes but also that the same were imported for and were
actually been used for embellishment for footwear. In the present case as
defibrillators are sold without paddles, obviously the sale as such is not
intended by the purchaser to be used for internal purpose. We are,
therefore, of the view that the majority opinion of the Tribunal is correct
in law.

This leaves us with the question of extended period of limitation invoked
by the department. It was contended that the declaration given by the
appellant was bona fide and such bona fides were clear from the fact that
law on this issue was not free from doubt which can be gathered from the
fact that even the impugned judgment of the Tribunal is not unanimous as
the Member (Judicial) had taken a different view which was in favour of the
appellant. However, we find that the Third Member did not decide this issue
and left it for the regular bench to consider the same, with the direction
that the appeal would be placed before the regular Bench. Without awaiting
the decision the appellant filed the present appeal challenging the
impugned order passed by the Third Member. Since we are affirming the
decision rendered by the majority, it will now be for the Tribunal to
consider the issue of limitation.

Insofar as the present appeals are concerned, the same are dismissed.
No costs.

.............................................J.
(A.K. SIKRI)

.............................................J.
(ROHINTON FALI NARIMAN)

NEW DELHI;
MAY 05, 2015.
-----------------------
[1] (1995) 4 SCC 473
[2] (2001) 1 SCC 236
[3] (1987) Supp SCC 679
[4] (1997) 7 SCC 144

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Friday, May 8, 2015

Thursday, May 7, 2015

whether the Central Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'), Bangalore erred in disallowing the benefit of the Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.97 respectively to the appellant.