And also the 1st line in bold is in the catch block and the last line is in the try block. That is why I am sure controling is flowing from catch block to try block.
Are you sure? Again what you are suggesting would mean that the basic, well understood and
extremely well tested control mechanisms in the Java language were broken. If it were me, I would be more inclined to think I had made a mistake, rather than Java is behaving in a way it has never behaved before.
FYI - your exception is almost certainly because you have leading whitespace in your XML file, though I can't be 100% sure. I'm guessing that the code you posted is not the code you are running (I don't see the message "Exception while parsing:" anywhere in the stack trace). Could you post the real code?