S. Hodayathullah vs Government of India

Chief Justice

This is an appeal against the orders of V. Ramaswami J. dated 13-12-1979 dismissing W.P.No. 20006 of 1971 filed by the appellant herein.

There is a fairly long history spread over nearly two decades, and for the purpose of the disposal of this writ appeal, it is necessary to refer to the

same very briefly. The appellant herein is carrying on business in the manufacture and sale of bidis and cheroots under the name and style of

Messrs. Speed Lever bidi Co. and he had been stocking beedi tobacco and cheroot tobacco in five warehouses in different streets in Trivellore

under the licences granted by the Central Excise authorities at Madras. The annual stock taking to the materials in the warehouses took place on 3-

9-1961. Two of the inspectors of the Excise department attached to the Collector''s office at Madras inspected the warehouses on 15-10-1961,

16-10-1961 and 17-10-1961 and checked the stock and continued the same till 21- 10-1961. As a result of the verification of the stock,

weighment of the existing stock were made and the weighment sheets were signed by the appellant himself. Finding that there was large deficiency

in the stock, and bidi tobacco and cheroot tobacco were not stored in an orderly manner as required by the Rules and were made up together, the

Central Excise department served an order on the appellant herein demanding payment of duty in an aggregated sum of Rs. 69,606.50 on the

entire shortages found at the time of the special stock taking. Complaining against this order, the appellant herein filed W.P.No 1394 off 1961

praying for the issue of a writ of certiorari to quash the demand served on him without giving an opportunity to put forward his care by the issue of

a show cause notice. the writ petition was allowed by this court on 20-8-1962. Thereafter, the department issued a show cause notice on 3-1--

1962, required the appellant herein to show cause why two separate penalties should not be imposed on him under Rules 223 and 223-A of the

Central Excise Rules 1944, and why the duty on the deficiencies noted should not be demanded under Rule 1944, and why the duty on the

deficiencies noted should not be demanded under Rule 233-A of the said Rules. The appellant submitted his explanation on 8-11-1962 putting

forward certain objections. these objections were over-ruled and a demand was made on him and a penalty was levied. During the pendency of

those proceedings there was a departmental proceeding initiated against one Inspector and another Deputy Superintendent in regard to certain

dereliction of duty and non-compliance with the rules relating to the checking of the appellant''s warehouses prior to the annual stock taking in the

present case. In those departmental proceedings, the two Inspectors, who made a special inspection of the appellant''s warehouses, were

examined as witnesses. The appellant herein wanted copies of the depositions of those inspectors to be made available to him in connection with

the enquiry with regard to the shortages found in the warehouses of the appellant herein. but the enquiry officer refused to make available copies of

those depositions on the ground that the department did not propose to rely on the said depositions in respect of the charges framed against the

appellant. Against this refusal, the appellant preferred an appeal to the Central board of Revenue, New Delhi, represented by its Chairman New

Delhi. The said Central Board of Revenue stated that no appeal lay to it. It is thereafter the appellant filed W.P.No. 971 of 1968 on the file of this

court. In that writ petition the prayer as is found in the original records of this court is to call for the records issue writ of certiorari of any other

appropriate writ or direction and quash the order of the first respondent therein namely the Central board of Revenue, New Delhi represented by

its Chairman, New Delhi being No. 4-B/92/67- CX, V, dated 8-9-1967 and direct the first respondent to re- entertain the appeal preferred by the

appellant herein and determine the same according to law. That writ petition was dismissed by a single Judge of this court on 13-3-1968. Against

the said dismissal the appellant preferred W.A.No. 189 of 1968 before a Division Bench of this court. That appeal was dismissed at the stage of

admission itself on 24-4- 1968 but the court made the following observations -

I earned counsel for the writ petitioner strenuously contends that his client is the best judge of how far these statements will aid him in his defence,

and that when he bona fide feels that copies of the statements will assist his defence, it is not in accordance with the principles of natural justice to

deny him the simple relief of the grant of copies. We think it is sufficient to observe that there is much to be said for this view as if the enquiry

intimately results in a finding or findings adverse to the writ petitioner the departmental authorities obviously will not desire that the proceedings

themselves could be impugned as vitiated by failure to observe principle of natural justice. For this reason we think that the departmental authorities

will do well to reconsider the question of the grant of these copies.

Basing himself upon those observation the appellant requested the Central Excise authorities to grant him copies of the depositions of the two

inspectors in the departmental enquiry. The departmental officers declined to grant any such copies on the ground that the writ petition and the writ

appeal have been dismissed that those observations have been made in the absence of departmental officers that the departmental officers were

not relying open the evidence of those witnesses in the proceedings they are taking against the appellant herein and that consequently they were not

prepared to grant copies of the depositions. After having taken this stand the authorities after making the said two inspectors available for cross

examination by the appellant, in the enquiry as we have pointed out already, levied duty as well as penalty referred to above, and the appeal

preferred by the appellant to the Collector of Central Excise, Madras, was rejected. Thereafter the appellant filed a revision petition tot he Central

government under Sec. 36 of the Central Excises and Salt Act 1944 and the Central Government itself dismissed the revision petition on 16-4-

1977. It is thereafter the appellant herein filed the present writ petition praying for the issue of a writ of certiorari to quash the order of the Union of

India dated 16-4- 1977.

Before the learned Judge, two points were taken on behalf of the appellant herein. One was that the special inspection made on 15-10- 1961

and on subsequent dates was unauthorised because under Rule 196 of the Central Excise Rules such an inspection could be made only after

obtaining the sanction of the Collector of Central Excise and in this case no such sanction had been obtained and no such sanction has been

communicated to the appellant herein. The second was that the refusal on the part of the authorities to grant copies of the deposition of the two

inspectors given in the departmental proceedings constituted failure of the principles of natural justice which prevented the appellant herein from

patting forward his dauphins effectively. V. Ramaswami J. rejected both these content is and dismissed the writ petition and hence the present writ

appeal.

Even before us the above two contentions were repeated by the learned counsel for the appellant. Rule 197of the Central Excise Rules, 1944,

states -

Any officer duly empowered by the Collector in this behalf shall have free access at all reasonable times to any premises licensed under these rules

and to any place where excisable goods are grown, processed stored, sold or manufactured or to any place where composition for match-hoods

or saltpeter for the manufacture of matches are made processed or stored, and may with or without notice to the owner inspect the building the

plant, the machinery and the stocks and the accounts, and may at any time require the owner to furnish such informant on relating to the stocks as

he may deem fit and make a physical check of such stocks and may at any time check the records made of the goods stocked in or removed from

the factory, warehouse or place, or their transfer within a factory to that part of the premises, if any in which they are to be used for the

manufacture of any other commodity, whether for the purpose of testing the accuracy of any return submitted under these rules, or of informing

himself as to any particulars regarding which information is required for the purpose of the Act or those Rules.

It is seen from the affidavit filed in support of the earliest writ petition held by the appellant herein, namely, W.P.No. 1394 of 1961 that no

contention was taken that the two Inspectors inspected the premises without the authority or sanction of the Collector, nor was it the case that the

appellant questioned those inspectors to show any such authority and they refused to do so. Apart from this V. Ramaswami J. rejected this

contention in the following terms -

There could be no doubt that such an order was issued by the Collector on 17-10-1061 as the original writing of the then Collector of Central

Excise is found in file and in fact during the enquiry on 17-4-1970, a letter was written to the petitioner''s consultant when the petitioner raised the

question of sanction by the Collector for such stock taking, informing him that on 17-10-1961 the Collector of Central Excise has ordered a

special stock taking to be conducted in the above warehouses.

Mr. M. R. Narayanaswami the learned of counsel for the appellant challenges this conclusion of the learned judge by contending that even in the

counter affidavit filed by the respondents herein they did not take up the stand that the Inspectors had the sanction of the Collector on 17-10-

1962, but only during the time of the hearing of the writ petition the respondents produced a file and on a perusal of the file, the learned Judge

passed the order in question. The point taken by the appellant in the writ petition is found in paragraph 18 of the affidavit filed in support thereof. In

that paragraph the appellant contended, that the said order of the first respondent namely, Union of India was vitiated by errors on the face of the

record. Then the affidavit proceeds to state -

The order proceeds (a) on the erroneous assumption which the departmental authorities have been persisting right through, that there has an order

for special stock taking by the second respondent (The Collector of Central Excise Madras), when there was none as required by Rule 213-A of

the Central Excise Rules; (b) that such an order need not be intimated to me; (c) that the non-furnishing of the copies required by me did not

infringe or violate any principles of natural justice.

This contention contained in paragraph 18 had been traversed in, paragraph 10 of the counter affidavit filed by the respondents. In that it is stated -

it has already been held in the judgment dated 11-3-1977 passed by the High Court in Crl. R.C. 235 of 1974 in Crl. R.P. 229 of 1974, that the

inspectors who are Central Excise officers can conduct special stock taking in the warehouses on the direction issued by the Collector of Central

Excise and Salt Act 1944 or in the rules made thereunder that the order for conducting the special stock taking in the petitioner''s warehouses has

to be served on him.

The learned counsel''s contention is that there is no specific averment that there was an order by the Collector on 17-10-1967. Though all the three

grounds have been put together by the appellant himself in paragraph 18 of the affidavit and the respondents in the counter affidavit had dealt with

all the issues, still we are of the opinion because of one clinching factor present in the case, that the contention of the appellant in this behalf is not

correct. We have already extracted the portion of the order of V. Ramaswami J. dealing with this aspect of the matter and that portion refers to the

learned Judge looking into the file and finding -

...in fact during the enquiry on 17-4-1970 a letter was written to the petitioner''s consult it when the petitioner raised the question of sanction by

the Collector for such stock taking, informing him that on 17-10-1961, the Collector of Central Excise has ordered a special stock taking to be

conducted in the above warehouses.

In the grounds of appeal filed before this court the fact that such a letter was written to the appellant''s consultant has not been denied. Therefore,

we have to proceed on the basis that there was an order of the Collector on 17-10-1961 and that fact was communicated to the consultant of the

appellant by a letter written by the Central Excise officers.

Apart from this, we are clearly of the opinion that even if there had been no sanction on the part of the Collector, the result of the stock taking

made by the Inspectors in the present case cannot be ignored or held to be illegal. When a stock taking is done and as a result of the stock taking

shortage is found, the authorities can take note of the shortage and proceed on that basis even though the initial action in entering into the premises

and the verification of the stocks may not be in accordance with the rules for want of sanction by the Collector. As far as the present case is

concerned, even this fact, namely, want of sanction on the part of the Collector may not be of much significance with regard to the evidentiary

value of the result of the stock taking for the simple reason that the weighment sheets were all attested by the appellant himself and that is the view

taken by the learned Judge. Not merely that is the view taken by the learned Judge, the appellant himself at the earliest opportunity had not

questioned the correctness of the weighment made in his presence by Central Excise officers. Not only this, the appellant proceeded only on the

basis that the stock taking took place with the sanction of the Collector. In paragraph 4 of the affidavit field in support of the earliest writ petition,

namely W.P. No 1394 of 1.61, the appellant stated -

It would, however, appear that the Collector of Central Excise, Madras, ordered a special stock taking of the petitioner''s warehouses on or

before 15-10-1961, under Rule 223-A of the Central Excise Rules, though no copy of such an order was served on me upto date, by the

executive officers attached to his office. In pursuance of the said order the said officers began weighment of the stocks in my licensed premises on

15-10-1961, and continued to do so day and night till 21- 10-1961. The said officers after weighment, several times, of the various lots of cheroot

and beedi non-duty paid tobacco, found quantities of tobacco short. Mahazars were prepared on 15-10-1961 and 16-10- 1961, of such

weighment and on subsequent days records of weighment were made. Statements were also recorded from me in respect of the shortages during

the course of their investigation. In the statements I have made it clear that I was not personally responsible for the shortages and the shortages

might have been brought about by the machinations of my political opponents.

Two comments are called for with reference to this averment in the affidavit. One is that the appellant himself proceeded on the basis that there

was sanction of the Collector. The second is even assuming that the appellant was under a misapprehension with regard to the existence of the

sanction of the Collector, with regard to the later part about shortage, there can be no doubt whatever that the appellant admitted the existence of

the shortage, but only contended that he was not responsible for the shortage and that the shortage was brought about by the machinations of his

political opponents. In view of this, we are clearly of the opinion that even in fact if there was no sanction by the Collector, the result of the stock

taking cannot be ignored and can be acted upon lawfully by the departmental officers.

As far as the second point is concerned, the learned judge referred to the observations made by a Division Bench of this court in the writ appeal

referred to already and proceeded to state that the departmental officers could have supplied copies of the depositions of the two officers to the

appellant which were innocuous and which would not be of much help to the appellant, but yet he was not satisfied that the non-supply of the

depositions had prejudiced the appellant in any way. Though we cannot agree with the observations of the learned Judge, we are clearly of the

opinion that he was correct in his conclusion. The observations of the Division Bench were made in a writ appeal which was not concerned with

the supply of copies at all, but was concerned with the complaint that the Central Board of Revenue, erroneously rejected the appeal preferred by

the appellant therein on the ground that such an appeal was not maintainable and the prayer of the appellant therein was to quash that order and

direct the Central Board of Revenue to re-entertain the appeal and dispose it of on merits. We agree with the conclusion of the learned Judge not

merely because the appellant had signed the weighment sheets prepared at the time of the special inspection but in the affidavit filed by the

appellant in his earliest writ petition he had not questioned the correctness of the weighment and the existence of the shortages. Therefore, this

point also fails and hence the writ appeal fails and is dismissed.