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TMI Blog1999 (8) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Services (Classification, Control and Appeal) Rules, 1965 informing him that the President proposes to hold an inquiry against him on the allegation that he favoured M/s. Hari Vishnu Packaging Ltd., Nagpur (assessee) by not imposing penalty on it under Rule 173Q of the Central Excise Rules, 1944 (`Rules for short) when he passed an Order-in-Original No. 20/95, dated March 2, 1995(sic) holding that the assessee had clandestinely manufactured and cleared the excisable goods wilfully and evaded the excise duty and had ordered confiscation of the goods. 3. The appellant approached the Central Administrative Tribunal, Mumbai (CAT) challenging the proposed inquiry by filing Original Application No. 250 of 1998 on March 18, 1998. While admitting the application CAT granted interim relief and stayed the disciplinary proceedings against the appellant. This application was, however, dismissed by CAT by order dated August 12, 1998 with the result the interim order stood vacated Immediately thereafter the appellant filed a writ petition in the Bombay High Court, it being Writ Petition No. 4717 of 1998. It was dismissed in limine by a Bench of the High Court by order dated September 7, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1944." 6. The assessee was asked to show cause as to why Central excise duty of Rs. 4,81,950/- be not recovered from him under Rule 9(2) read with proviso to Section 11A of the Act and why not 95,000 numbers and 25,500 numbers of HDPE bags seized in transit and from its factory premises be confiscated and why penalty be not imposed on it under Rule 173Q of the Rules. 7. After examining the evidence on record and hearing the assessee the appellant by his Order-in-Original No. 20 of 1995 held as under :- In view of the foregoing, I hereby pass the following order :- I confirm the excise duty of Rs. 3,57,000/- on 25,500 Nos. of HDPE woven sacks removed by Noticee-1 clandestinely under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A of the CESA, 1944. 95,000 bags cleared clandestinely by Noticee-1 and seized on 16-1-1994 are liable for confiscation under Rule 173Q of C. Ex. Rules, 1944. However, I find that the goods had been released provisionally on execution of bond for the full value of the goods and cash security of Rs. 1 lakh. As the goods are not available for confiscation, I appropriate the amount of Rs. 10,000/- in lieu of confiscat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this Act regarding appeals, including the provisions of sub-section (4) of Section 35B shall, so far as may be, apply to such application. (5) ......................" 10. By order dated February 26, 1996 made under Section 35E of the Act Board directed the appellant to file appeal to the Appellate Tribunal to determine whether his Order-in-Original No. 20/95, dated March 20, 1995 against the assessee was correct, legal and proper and whether the appellant ought to have imposed penalty. Accordingly appeal was filed before the Appellate Tribunal which, it is stated, is still pending. 11. Mr. Raju Ramachandran, learned Senior Advocate, appearing for the appellant, raised the following points in support of the appeal :- 1. Adjudication order by the appellant is quasi-judicial in nature whereby he confirmed the confiscation of the goods and the duty demanded. He did not choose to impose any penalty in the facts and circumstances of the case. Merely on that ground he could not be subjected to the disciplinary proceedings. 2. The undisputed facts which appear from the record are as follows :- (a) Admittedly by the said order, the goods in question stood confiscated and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant and that the CAT and the High Court were right in not interfering in the disciplinary proceedings at the very threshold. He said the appellant would have the opportunity to defend himself in the proceedings which have been initiated against him. He said provisions of Rule 173Q are mandatory and that Section 11AC also mandates levy of penalty. 13. In the course of the arguments in support of the rival contentions we were referred to various judgments of this Court. Before we examine these judgments we may set out the provisions of Rule 173Q and Section 11AC :- 173Q.Confiscation and penalty. - (1) If any manufacturer, producer, registered person of a warehouse or a registered dealer - (a) removes any excisable goods in contravention of any of the provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him; or (bb) ........ (bbb) ...... (c) ........ (d) contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer, registered person of a warehouse or a registered dealer, as the case may be, shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a view to conferring undue favour upon the assessee concerned . An application filed by the respondent against the proposed action was allowed by the Central Administrative Tribunal and it was held that orders passed by the respondent as Income Tax Officer were quasi-judicial and could not have formed the basis of disciplinary action. Charge Memorandum was, thus, set aside. The question before this Court was whether an authority enjoyed immunity from disciplinary proceedings with respect to matters decided by him in exercise of quasi-judicial functions. After examining the early decisions of this Court in V.D. Trivedi v. Union of India [(1993) 2 SCC 55]; Union of India v. R.K. Desai [(1993) 2 SCC 49]; Union of India v. A.N. Saxena [(1992) 3 SCC 124] and also in S. Govinda Menon v. Union of India [AIR 1967 SC 1274] this Court held as under : Certainly, therefore, the officer who exercises judicial or quasi-judicial powers acts negligently or recklessly or in order to confer undue favour on a person is not acting as a Judge. Accordingly, the contention of the respondent has to be rejected. It is important to bear in mind that in the present case, we are not concerned with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, Union of India come to this Court. Again this Court examined its earlier decisions and said that the Tribunal or Court can interfere only if on the charged framed (read with imputation or particulars of the charges, if any) no misconduct or other irregularity alleged can be said to have been made out or the charges framed are contrary to any law and that at that stage the Tribunal had no jurisdiction to go into the correctness or truth of the charges. Order of the Tribunal was set aside. 17. In Dy. Inspector General of Police v. K.S. Swaminathan [(1996) 11 SCC 498] a charge memo imputing misconduct on the part of the respondent, an inspector of police, was issued to him. Tamil Nadu Administrative Tribunal on an application filed by the respondent set aside the charge memo on the ground that the charges were vague. On appeal to this Court, it was held that at the stage of framing of the charge, the statement of facts and the charge sheet supplied are required to be looked into by the Court or the Tribunal as to the nature of the charges, i.e., whether the statement of facts and material in support thereof supplied to the delinquent officer would disclose the alleged misco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient cause for not applying for registration. This Court then said as under : Under the Act penalty may be imposed for failure to register as a dealer : Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the discretion to levy lesser amount, depending upon the facts and circumstances of each case. Construing Section 7(5) in this manner the decision of the High Court that Section 7(5) is ultra vires cannot be sustained. 24. It will be thus seen that once there was a case of imposition of penalty only the amount of penalty to be levied was left to the discretion of the assessing authority on the facts of the case. 25. In Government of Tamil Nadu v. K.N. Ramamurthy [1997 (7) SCC 101] it has been held that failure to exercise quasi-judicial power properly amounts to misconduct. In this case, the respondent working as Deputy Commercial Tax Officer was served with the following charges : (i) That he failed to analyse the facts involved in each and every case referred to above; (ii) that he failed to check the accounts deeply and thoroughly while making final assessment; (iii) that he failed to subject the above turnover to tax originally; and (iv) that he failed to safeguard government revenue to a huge extent of Rs. 44,850." 26. These charges were held proved against him and he was imposed with a punishment of stoppage of increment for three years with cumulative effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule of action or code of conduct but not mere error of judgment, carelessness or negligence in performance of the duty; the act complained of bears forbidden quality or character. Its ambit has to be construed with reference to the subject matter and the context wherein the term occurs regard being had to the scope of the statute and the public purpose it seeks to serve. 28. Keeping in view the provisions of law and guidelines led by various judgments of this Court, we may now refer to the Article of Charge given to the appellant. It reads as under : Shri Z.B. Nagarkar while working as Collector, Central Excise, Nagpur (now redesignated as Commissioner of Central Excise) has passed an Order-in-Original No. 20/95, dated 20-3-1995 in which he had favoured M/s. Hari Vishnu Packaging Ltd., Nagpur by not imposing any penalty on the said party even though he had held that M/s. Hari Vishnu Packaging Ltd. had clandestinely manufactured and cleared the excisable goods and evaded the excise duty wilfully. Shri Nagarkar has thus failed to maintain absolute integrity and devotion to duty and acted in a manner unbecoming of a Govt. Servant and contravened Rule 3(1)(i) and (ii) and (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word liable used both in Rule 173Q and Section 11AC? Under Rule 173Q apart from confiscation of the goods the person concerned is liable to penalty. Under Section 11AC the word also has been used but that does not appear to be quite material in Interpreting the word liable and if liability to pay penalty has to be fixed by the adjudicating authority. The word liable in the Concise Oxford Dictionary means, legally bound, subject to a tax or penalty, under an obligation . In Black s Law Dictionary (sixth edition), the word liable means, bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution.......... Obligated; accountable for or chargeable with. Condition of being bound to respond because a wrong has occurred. Condition out of which a legal liability might arise......... Justly or legally responsible or answerable . 31. When we examine Rule 173Q it does appear to us that apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty up to the amount specified in the Rule. It is difficult to accept the argument of the appellant tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fifty per cent of the amount of the tax, if any, which would have been avoided if the Income returned by such person had been accepted as the correct income; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars, of such income : ..." 32. It would, thus, be seen that under provisions of Section 271 of the Income-Tax Act in the first instance there is a discretion with the assessing authority whether to impose any penalty or not and if the assessing authority finds that it is a case for imposition of penalty then it has no discretion in the matter and the certain amount of penalty depending on the facts and circumstances of each case has to be imposed subject to the maximum limit mentioned in the section. 33. Now when show cause notice was issued to the assessee he was also asked to show cause as to why penalty be not imposed upon him. The stand of the Union of India before us, as stated in the counter affidavit is : It was observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demanded could have been jeopardized. 34. The question is : If such a stance by the appellant was to favour the assessee or the officer was rightly of the view that it was not a case of levy of penalty. It is a quasi-judicial order. Merely because penalty imposable has not been imposed, which was obligatory for the officer to impose, could it be said that if it is a case of misconduct and he is liable to be proceeded against? The officer did impose the excise duty and also ordered confiscation of the goods. What is the evidence before the authority to come to prima facie view of levying charge of misconduct on the officer? He was served with the memorandum dated September 2, 1997. It was accompanied with Annexure 1 (Article of charge) Annexure II (Statement of imputations of misconduct or misbehaviour in support of the Article of Charge), Annexure III (List of documents) and Annexure IV (List of witnesses). Article of charge we have reproduced above. Statement of Imputations of misconduct or misbehaviour referred to the Order -in-Original passed by the officer and his explanation as to why he did not think it fit to .impose penalty. List of documents mentions only three documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for illegal manufacture, sale, etc., of drugs and is an under - Whoever himself or by any other person on his behalf manufacture for sale, sells, stocks or exhibits for sale or distributes - (a) any drug - (i) ..... (ii) without a valid licence as required under clause (c) of Section 18. shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to ten years and shall also be liable to fine : Provided that the court may, for any special reasons to be recorded in writing, impose a sentence of imprisonment of less than one year : ..." 37. This Court said that the High Court imposed a fine of two thousand rupees on each of the three appellants for the offence under Section 18(c) of the Act when Section 27(a)(ii) makes a sentence of imprisonment of not less than one year compulsory for such offence in addition to fine unless for special reasons a sentence of imprisonment for lesser period was warranted. It would, thus appear that this Court was of the opinion that in such a case the imprisonment and fine both are imperative. 38. When we talk of negligence in a quasi -judicial adjudication, it is not negligence perceiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was imperative. But then, there is nothing wrong or improper on the part of the appellant to form an opinion that imposition of penalty was not mandatory. We have noticed that Patna High Court while interpreting Section 325 IPC held that imposition of penalty was not mandatory which again we have said is not a correct view to take. A wrong interpretation of law cannot be a ground for misconduct. Of course it is a different matter altogether if it is deliberate and actuated by mala fides. 39. When penalty is not levied, the assessee certainly benefits. But, it cannot be said that by not levying the penalty the officer has favoured the assessee or shown undue favour to him. There has to be some basis for the disciplinary authority to reach such a conclusion even prima facie. Record in the present case does not show if the disciplinary authority had any information within its possession from where it could form an opinion that the appellant showed `favour to the assessee by not imposing the penalty. He may have wrongly exercised his jurisdiction. But that wrong can be corrected in appeal. That cannot always form basis for initiating disciplinary proceedings for an officer while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mature and highly irresponsible . 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. 2. There is a charge of misconduct against the Collector (now Commissioner) of Central Excise. While disciplinary proceedings are pending against him, he is transferred to the National Academy of Custom, Excise and Narcotics to guide the probationers. 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 honour and not punishment. Our comment is no reflection on the appellant herein as we have set aside the initiation of disciplinary proceedings against him. 44. With these observations, the appeal is allowed with costs. The Order of the Central Administrative Tribunal dated August 12, 1998 and the impugned judgment dated September 7, 1998 of the High Court are set aside. Article of Charge issued against the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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