SEPTEMBER 04, 2006
By I J Rao, Former Vice President of CEGAT
JUDGEMENTS of courts, especially those of Supreme Court, deserve maximum respect. Judicially it is absolute respect. Academically, these judgements should be studied with respect and understood. What follows is an academic view on two judgments of the Supreme Court, in Z.B. Nagarkar and Dulichand. These lines reflect the reaction of a lay reader on reading them together and nothing more. Both Judgments have gone to the final stage and there is nothing left to do about them even if some one wants. I pen these lines so that the purpose of what follows will not be misunderstood.
Nagarkar judgment (Z.B.Nagarkar Vs Union of India 2002-TIOL-130-SC-CX and Duli Chand judgment (Union of India Vs Duli Chand, 2006-TIOL-78-SC-MISC-LB ) are two separate judgments in respect of two different matters of somewhat similar nature. They involved similar questions. The facts are different. But the Supreme court, while deciding Duli Chand case made a reference to Nagarkar judgment. That is the reason for reading and viewing these two judgments together.
Very briefly the facts in Nagarkar case were that Nagarkar was a Commissioner of Central Excise in Nagpur. In 1995 he passed an adjudication order which dealt with some omissions and commissions of a factory manufacturing HDPE sacks. He ordered confiscation of the seized goods, as also of the illegally removed goods, imposed fines for redemption and demanded duty. He also confiscated the vehicle used in the carriage of the contraband goods. He did not impose any penalty under Rule 173Q of the Central Excise Act.
That omission brought him into trouble. He had some explanation why he did not impose the penalty to which the party was liable under the law. But the Government was not impressed. They charged him under the conduct rules. His appeals to the Tribunal and High Court failed. He approached the Supreme Court for vacation of the charge-sheet.
In a patient and detailed order, their Lordships of the Supreme Court passed the judgment under reference. They took into note that Sec. 11AC which was said to make levy of penalty mandatory was enacted after the Commissioner passed the adjudication order. They examined the words employed in Rule 173Q, namely, 'shall be liable' and compared the provision with similar provisions in Income Tax Act and referred to the judgments of the Supreme Court in some cases. These cases are most important for the present study. I briefly refer to them:
1. Union of India vs. K.K.Dhawan (2002-TIOL-441-SC-MISC-LB) (Referred in Duli Chand also). In this case, an ITO was charged with 'completing assessments of nine firms in an irregular manner, in undue haste and apparently with a a view to conferring undue favour upon the assessee concerned'. We can pass over the further details. But in a detailed order the Apex Court concluded that disciplinary action can be taken in cases where :
- An officer had acted in a manner as would reflect on his reputation for integrity or good faith or devotion to duty;
- If there is prima facie material to show recklessness of misconduct in the discharge of his duty;
- If he has acted in a manner which is unbecoming of a Government servant;
- If he had acted negligently or that he omitted the prescribed conditions which are essential for the exercise of the statutory powers;
- If he acted in order to unduly favour a party; and,
- If he has been actuated by corrupt motive, however small the bribe may be- because lord Coke said long ago 'though the bribe may be small yet the fault is great'
These were the criteria laid down in Dhawan case to decide if acts of judicial and quasi-judicial officers were to be punished or not. But with the usual foresight and thoroughness, the Supreme Court added the following to their order:
'The instances above catalogued are not exhaustive, however, we may add that for a mere technical violation or merely because the order is wrong and the action not falling under the above enumerated instances, disciplinary action is not warranted. Here, we may utter a word of caution. Each case will depend upon the facts and no absolute rule can be postulated.' (Emphasis supplied).
The Hon.Court took notice of some other judgements, which appear to have been cited before the bench. Important among these was M.S. Bindra vs Union of India & ors {1998} 7 SCC 310). In this judgment, the court observed that the reputation of the officer concerned should be taken into consideration. The principle cited was that no one becomes dishonest all of a sudden. I am not referring to other judgments examined, as there is no necessity for the purpose of this article. It is enough to say that the examination of these judgments was detailed and meticulous so that a third party reading the judgment would get a proper understanding of the matter.
Ultimately in Nagarkar case the Court concluded that there has to be some basis for the disciplinary authority to reach such a conclusion even prima facie. Initiation of disciplinary proceedings against an officer cannot take place on an information which is vague or indefinite. Suspicion has no role to play in such matter. There must exist reasonable basis for the disciplinary authority to proceed against the delinquent officer. The court also noted that 'there is no other instance to show that in similar case the appellant invariably imposed penalty'. The Hon.Court finally held that it was not a case for initiation of any disciplinary proceedings against the appellant but not before observing that 'If every error of law were to constitute a charge of misconduct, it would impinge upon the independent functioning of quasi-judicial officers like the appellant'.
Before letting go the matter the court also made its observations on two matters arising out of the case. Summarising them would not give the full flavor. So, I reproduce the main observations:
- .....In the whole body of counter affidavit strong language has been used. Union of India is not a private litigant. Such language in the pleading should be avoided. One can be firm without being impolite.
- ..(referring to Nagarkar's posting to National Academy of Customs, Excise & Narcotics)..'It is certainly a paradoxical situation that a man who is not fit to hold the post of Collector is fit enough to impart training to the probationers entering the service. Best talent should be sent to the academy to teach the probationers. Posting to the academy should be considered as an honor and not punishment.......'
The court allowed the petition and Nagarkar was held free of blame. It is important to point out that the court repeatedly pointed out that if there was any error or illegality in the order passed by the officer, available judicial remedies should be pursued to correct the error. In this case an appeal was already filed before the Tribunal and the matter was pending at the time of hearing.
This judgment was referred to, inter alia, in Duli Chand matter, obviously cited by the respondent Duli Chand who was punished but was acquitted by the tribunal and the High Court. The tribunal applied the ratio of Nagarkar case when deciding the case and the High Court observed that no ulterior motive was alleged against him. The Supreme Court allowed the appeal of the Union of India. They rejected the applicability of the Nagarkar case observing that in their opinion, 'Nagarkar's case was contrary to the view expressed in K.K. Dhawan's case.' They further observed that 'the decision in K.K.Dhawan being that of a larger bench would prevail. The decision in Nagarkar's case therefore does not correctly represent the law.' The Hon. Court further held that inasmuch as the impugned order of the Tribunal and the High Court were passed on the law enunciated in Nagarkar's case this appeal must be allowed. They accordingly set aside the High Court's order which upheld the Tribunal's order, having come to the conclusion that since no ulterior motive was alleged against the respondent, the Tribunal was correct in quashing the proceedings against Duli Chand.
Having studied and analyzed the order in Nagarkar's case above and having done a detailed study of K.K.Dhawan (supra), I feel that the order in Duli Chand, may confuse a lay man or a learner. After all, Dhawan judgment was meticulous and allowed a look into and examination of other evidence of misconduct like corruption though not in those words. It also laid down that the facts and circumstances of each case are vital for deciding its merits. To the ordinary mind, it appears that irrespective of the number of judges deciding Dhawan case, its ratio was applied meticulously and with insight in Nagarkar's case. It is especially so when there is no light thrown on why Nagarkar's case was contrary to Dhawan's case.. Perhaps there was no scope in the somewhat short order in Duli Chand. For students of law the two cases studied together may present a chance of academic exercise. I hope so. Generally the higher the court the more illuminating and clear are the orders. When, for reasons not apparent on the face of the orders, full elucidation is not there, there may be some confusion about the reason for the conclusions arrived at.
There is a certain irony in the situation. Like in a short story, while Nagarkar lost in the Tribunal and the High Court, he got relief in Supreme Court on the basis of Dhawan judgment. Duli Chand, who was successful before both the bodies, lost in the Supreme Court, on the basis of the same judgment!
There is another angle. If Duli Chand judgment prevails, every time an adjudicator commits what the govt. thinks an omission, he will be charge-sheeted. This will inhibit the fair judgment of those few conscientious officers who think liberally.
Besides, what about the other side of the coin? Not long ago I came across a case in which the Commissioner, adjudicating a series of show notices (he went on issuing them, once every six months without finalizing the matter) in a case of interpretation of an exemption notification, not only demanded duty but imposed equivalent penalties and confiscated the plant and machinery. No allegation of any clandestine removal was there, reliance was only on the company's documents. His interpretation of the notification was against what the Board laid down in its circulars. For those with a sense of smell, the stink should have reached all the way to Delhi and North Block. The officer almost caused the ruination of a small unit. There would be hundreds of such cases all over India. Should not the Govt take a look at the unholy approach of such adjudicators? There would be hundreds of such cases all over India. Should not the government take a look at the unholy approach of such adjudicataors? If not imposing a penalty is punished, should not such brazen exercise of power in the guise of quasi-judicial proceedings too attract the attention of the ever vigilant big bosses? Or, is the assessee always guilty?
Students will do well to ponder.
Editor's note : There was a Commissioner who imposed a penalty of Rs 251/- on BHEL and imposed a penalty of Rs 50 Crores on a DGM of the company. Please see - Z. U. ALVI v COMMISSIONER OF C. EX., BHOPAL - 2002-TIOL-281-CESTAT-DEL .
(The views expressed are strictly personal) |
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