Stay of recovery does not bar excise prosecution where the appeal remains pending on merits.

A stay of recovery granted by the appellate tribunal, subject to pre-deposit and without adjudication of the appeal on merits, does not amount to exoneration of the assessee. On that basis alone, criminal prosecution for alleged offences under Sections 9 and 9-AA of the Central Excise Act, 1944 cannot be quashed. The Supreme Court held that pending appellate proceedings and a mere stay of recovery do not negate the complaint, and the quashing order was set aside.

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Issues: Whether criminal prosecution under Sections 9 and 9-AA of the Central Excise Act, 1944 could be quashed merely because the appellate tribunal had stayed recovery of tax and penalty subject to a pre-deposit, while the appeal remained pending.

Analysis: The pending appeal before the tribunal had not been adjudicated. The stay order only required a pre-deposit and did not amount to exoneration or any finding on merits. A stay of recovery, by itself, did not furnish a basis to quash the criminal complaint arising from the alleged tax offences.

Conclusion: The prosecution could not be quashed on the sole ground of the tribunal's stay order, and the quashing order was set aside.

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