“The Rimjhim Ispat Doctrine” – Parallel Criminal Prosecution Survives Procedural Set-Aside of Departmental Adjudication under the Central Excise Act

1. Introduction

M/s. Rimjhim Ispat Ltd. v. Union of India (2025 INSC 901) presented the Supreme Court of India with a familiar but unresolved tension: does a criminal prosecution under Sections 9 and 9AA of the Central Excise Act, 1944 (“CEA 1944”) inevitably collapse if the underlying departmental adjudication order is quashed or remanded on procedural grounds? The appellants—a steel conglomerate (Rimjhim Ispat), an associated company (Juhi Alloys) and their director—sought discharge from criminal proceedings after the Commissioner’s first adjudication order was set aside by the CESTAT and a second order was later quashed by the High Court for procedural improprieties.

Both the Trial Court and the Allahabad High Court rejected the discharge plea, prompting an appeal to the Supreme Court. In affirming the lower courts, the Supreme Court crystallised a new working rule: when departmental adjudication fails on technical or procedural grounds, the prosecution survives if independent investigative material discloses a prima facie offence; exoneration on merits, not mere procedural nullity, is the necessary pre-condition for terminating prosecution. This commentary labels the ruling the “Rimjhim Ispat Doctrine” and explores its ramifications.

2. Summary of the Judgment

• The Court dismissed Criminal Appeal No. 268 of 2017 and upheld the High Court’s refusal to discharge the appellants.
• It held that:
  • Departmental adjudication and criminal prosecution are legally independent and may proceed in parallel.
  • Setting aside or remanding an adjudication order on procedural grounds does not render the prosecution “groundless”.
  • Discharge under Section 245(2) CrPC is inappropriate where the complaint and investigation independently reveal a prima facie case.
  • Stay of a fresh adjudication order (subject to conditions) equally does not extinguish criminal liability.
• Consequently, the appellants must face trial; the Court left merits of guilt open.

3. Analysis

3.1 Precedents Cited and their Influence

1. Radheyshyam Kejriwal v. State of West Bengal (2011 3 SCC 581)
   – Established that adjudication and prosecution can coexist; quashing possible only after a clean exoneration on merits. The Supreme Court relied heavily on this template, extending it to cases where adjudication has merely been procedurally invalidated.
2. Air Customs Officer v. Pramod Kumar Dhamija (2016 4 SCC 153)
   – Re-affirmed Kejriwal; dismissal of departmental proceedings on technicalities does not bar prosecution. Used to reinforce that the CESTAT’s remand had no exonerative effect.
3. Ajoy Kumar Ghose v. State of Jharkhand (2009 14 SCC 115)
   – Explained the scope of discharge under Sections 245(1) and 245(2) CrPC. Appellants invoked it; Court distinguished, noting the Trial Court followed correct parameters.
4. State of Tamil Nadu v. R. Soundirarasu (2023 6 SCC 768) and Ram Prakash Chadha v. State of U.P. (2024 10 SCC 651)
   – Relate to “groundless” charge and Article 21 due process. The Court found them inapplicable because investigatory material here was substantive.
5. A.R. Antulay v. R.S. Nayak (1988 2 SCC 602)
   – Quoted for natural-justice principles, but Court ruled no violation occurred.
6. Videocon Industries Ltd. v. State of Maharashtra (2016 12 SCC 315), Vishnu Kumar Shukla v. State of U.P. (2023 15 SCC 502) & N. Suresh Rajan (2014 11 SCC 709)
   – Dealt with discharge jurisprudence; cited to demonstrate that the complaint in question met prima facie thresholds.

3.2 The Court’s Legal Reasoning

1. Independent Bases for Prosecution
   The Bench emphasised that the prosecution’s factual substratum was derived from (i) search-and-seizure materials of 2007, and (ii) DGCEI’s investigative report. References to the quashed 2011 order were only “addendum” narrative. Therefore, even without a subsisting adjudication order, the complaint held its own.
2. Distinction Between Procedural and Meritorious Exoneration
   A procedural set-aside does not declare the assessee innocent. Only meritorious findings of no evasion/stated contravention would destruct the criminal case.
3. Section 245(2) CrPC Threshold
   Discharge at the pre-charge-evidence stage is permitted only when the charge is “groundless”. The Court approved the Trial Court’s reliance on all material (including post-complaint filings) for assessing whether any offence was disclosed.
4. Constitutional Argument Rejected
   Alleged Article 21 violation was brushed aside because procedure established by law (CEA 1944 + CrPC) was precisely followed.

3.3 Anticipated Impact

4. Complex Concepts Simplified

• Parallel Proceedings: Civil/departmental adjudication ascertains tax liability and penalties; criminal prosecution seeks punishment (imprisonment/fine) for statutory offences. They can run concurrently because their objectives differ.
• Set-Aside on “Procedural Grounds”: When a tribunal/court nullifies an order due to violation of natural justice, incorrect joinder of parties, or lack of jurisdiction—not because the facts were incorrect.
• Sections 9 & 9AA, CEA 1944: Create offences for evasion and provide vicarious liability (making company officials personally answerable when the company commits an offence).
• Discharge under Section 245 CrPC: A mechanism in warrant cases enabling the Magistrate to terminate proceedings before trial if the charge is “groundless” (≈ no prima facie evidence).
• De novo Adjudication: Starting the adjudicatory process afresh, as if the previous annulled order never existed.

5. Conclusion

Rimjhim Ispat decisively clarifies the relationship between departmental adjudication mishaps and criminal prosecution under fiscal statutes. The Court’s pronouncement that only a merits-based exoneration terminates prosecution aligns Indian jurisprudence with the functional realities of tax-crime enforcement. Practitioners should note that:

• The defence arsenal of “procedural quashing” has lost much potency in criminal forums.
• Revenue authorities must still strive for procedurally robust adjudications, but a lapse will no longer sabotage prosecution per se.
• Trial Courts retain wide discretion to examine all available material, including post-complaint developments, when confronted with discharge motions.

In broader context, the decision balances two imperatives: safeguarding personal liberty (through prima facie scrutiny) and protecting the exchequer (by preventing tactical evasion of trial). By articulating the “Rimjhim Ispat Doctrine,” the Supreme Court advances a coherent, predictable standard that will govern future intersections of fiscal adjudication and criminal law.