Cheque prosecution can be quashed when the underlying excise demand is later set aside in law.

A cheque-based prosecution founded on an excise demand may be quashed where the demand is later set aside and its legal basis no longer survives. The cheques had been issued against an excise liability that was unchallenged at the time, but the assessment orders and supporting findings were subsequently annulled by the Supreme Court. With the underlying demand extinguished in law, continuing the criminal complaint would have rested on a non-existent liability. The Court treated that supervening development as material for exercising inherent jurisdiction to prevent injustice and to secure the ends of justice.

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Issues: Whether the criminal complaint based on dishonoured cheques issued towards an excise demand could be quashed under the inherent powers of the Court after the Supreme Court set aside the very assessment and demand on which the cheques were founded.

Analysis: The cheques were issued in the context of an excise liability asserted by the department, and at the time of issuance the demand had not been stayed. However, the assessment orders and the Tribunal's findings supporting the demand were later set aside by the Supreme Court, thereby negating the basis of the alleged liability. In such circumstances, the continuing prosecution would rest on a demand that had ceased to have legal existence, and the Court treated this subsequent event as material for exercising inherent jurisdiction to prevent injustice.

Conclusion: The complaint proceedings were liable to be quashed.

Final Conclusion: The petition succeeded and all proceedings arising from the complaint were annulled because the excise demand underlying the cheque liability no longer survived in law.

Ratio Decidendi: Where the legal foundation of a cheque-based prosecution is subsequently set aside, the Court may exercise inherent powers to quash the proceedings to secure the ends of justice.

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