The Supreme Court of India, in a judgment delivered on July 24, 2025, has held that the setting aside of a departmental adjudication order on procedural grounds does not automatically render a criminal complaint for the same offence “groundless.” A bench of CJI B.R. Gavai and Justice Augustine George Masih dismissed a criminal appeal filed by M/s Rimjhim Ispat Limited and others, who sought discharge from criminal proceedings under the Central Excise Act, 1944. The Court affirmed that adjudication and criminal prosecution are independent proceedings and that a remand for de novo consideration by departmental authorities is not equivalent to an exoneration on merits, thus allowing the criminal trial to proceed.
Background of the Case
The case originated from a search conducted on November 22, 2007, at the premises of M/s Rimjhim Ispat Limited (Appellant No. 1), which led to the issuance of two Show Cause Notices (SCNs) by the Central Excise authorities.
The first SCN, dated May 16, 2008, alleged clandestine manufacture and illicit removal of excisable goods. These proceedings were eventually dropped by the Additional Commissioner of Central Excise, Kanpur, a decision later affirmed by the Commissioner (Appeals).
The second SCN, dated March 6, 2009, was issued against the company, its director Shri Yogesh Aggarwal (Appellant No. 3), and a related entity, M/s Juhi Alloys Limited (Appellant No. 2). It alleged evasion of excise duty and sought to impose liability on the directors. In these proceedings, the Commissioner of Central Excise, Kanpur, passed an order on March 31, 2011, confirming a demand of ₹6,68,94,028 along with interest and imposing a penalty of ₹25,00,000 on Shri Yogesh Aggarwal.
The appellants challenged this order before the Customs Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi. On February 25, 2013, CESTAT set aside the Commissioner’s order on procedural grounds, observing that joint confirmation of duty against separate legal entities was impermissible. The matter was remanded for de novo consideration without any finding on the merits of the case.
Subsequently, based on the findings in the now-set-aside order of March 31, 2011, the Directorate General of Central Intelligence (DGCEI) sanctioned the prosecution of the appellants. A criminal complaint (Complaint Case No. 841 of 2014) was filed before the Special Chief Judicial Magistrate, Kanpur Nagar, under Sections 9 and 9AA of the Central Excise Act, 1944.
The appellants first approached the Allahabad High Court under Section 482 of the CrPC to quash the proceedings, but the High Court directed them to seek discharge from the Trial Court. Their discharge application under Section 245(2) CrPC was dismissed by the Trial Court on October 9, 2015. A criminal revision against this dismissal was also rejected by the High Court on February 5, 2016, leading to the present appeal before the Supreme Court.
Arguments of the Parties
For the Appellants (M/s Rimjhim Ispat & Ors.):
The learned Senior Advocate for the appellants argued that the criminal complaint was not maintainable as its entire basis, the adjudication order of March 31, 2011, had been set aside by CESTAT. It was contended that even a subsequent re-adjudication order dated August 28, 2015, was quashed by the High Court in a writ petition. Therefore, no valid order existed to sustain the prosecution.
The counsel further submitted that the Trial Court had erred by failing to distinguish between an application for discharge under Section 245(1) and Section 245(2) of the CrPC, as it considered evidence that emerged after the complaint was filed. Relying on Ajoy Kumar Ghose v. State of Jharkhand and Another, it was argued that for an application under Section 245(2), only the contents of the complaint should have been considered.
Placing reliance on State of Tamil Nadu v. R. Soundirarasu and Others, the appellants asserted that with no legal evidence on record, the charge against them was “groundless,” and compelling them to face trial would violate Article 21 of the Constitution.
For the Respondents (Union of India & Anr.):
The learned Additional Solicitor General (ASG) contended that adjudication and criminal proceedings are parallel and can proceed simultaneously. The primary reliance was placed on the Supreme Court’s decision in Radheshyam Kejriwal v. State of West Bengal and Another.
The ASG also cited Air Customs Officer IGI, New Delhi v. Pramod Kumar Dhamija, arguing that where exoneration in adjudication proceedings is not on merits, the quashing of criminal proceedings is erroneous. It was denied that the complaint was vindictive or lacked an independent basis, asserting that the investigation report itself provided sufficient prima facie material for prosecution.
Supreme Court’s Analysis and Decision
The Supreme Court, after perusing the records, rejected the appellants’ contentions. Justice Augustine George Masih, writing for the bench, made the following key observations:
- Basis of the Complaint: The Court found that the criminal complaint was not solely reliant on the set-aside adjudication order of March 31, 2011. It noted, “The contents of the Complaint reveal that there is no reliance placed on the now-set aside Order dated 31.03.2011 rather it was only referred as an addendum to complete the sequence of facts… The irregularities which came to light on search and the contents of the investigation report, are sufficient to observe and opine prima facie on the existence of allegations as mentioned in the complaint…”
- Procedural Remand vs. Exoneration on Merits: The Court held that a remand for de novo proceedings on procedural grounds cannot be treated as an acquittal on merits. It observed, “…a direction for de novo proceedings on technical or procedural grounds cannot be assumed to be in equivalence to having been set-aside on merits, when it was specifically mentioned that the merits have not been considered.”
- Parallel Proceedings: Affirming the principle of parallel proceedings, the Court endorsed the High Court’s reliance on Radheshyam Kejriwal (supra). It distinguished the appellants’ case by noting that their argument hinged on the incorrect premise that the complaint was based only on a non-existent order. The bench stated, “Hence, we are inclined to accept and adopt the decision in Pramod Kumar Dhamija (supra) as referred by the learned ASG.”
- Charge Not “Groundless”: The Court dismissed the argument that the charge was “groundless,” stating that this contention was based on the flawed assumption that the departmental orders were set aside on merits.
- Discharge Jurisprudence: The Court found the appellants’ arguments on the jurisprudence of discharge under Section 245 CrPC to be misconceived, noting that the objections were never raised before the lower courts. It held that the Trial Court had complied with the law on discharge as the complaint’s contents prima facie made out an offence.
Concluding that the appellants’ claims were unsubstantiated, the Supreme Court dismissed the appeal. “We are in favour of the submissions made by the learned ASG and accordingly, are not inclined to interfere with the Impugned Judgment,” the Court ordered, affirming that the High Court’s judgment dated February 5, 2016, is “good in law, calling for no interference.”
The Court clarified that its observations were made only for the purpose of disposing of the appeal and would have no bearing on the merits of the proceedings before the Trial Court.
