The Commissioner of Central Excise vs G.S. Kumar

K.L. Manjunath, J.—In these two matters, the petitioners are challenging the legality and correctness of the order passed by the Central Administrative Tribunal, Bangalore, challenging the order dated 8-1-2008 in Original Application Nos. 275 and 276 of 2006. Heard the Counsel for the parties.

The facts leading to these petitions are as hereunder:

The applicants before the Tribunal joined the service of the petitioner as Inspector of Central Excise. They served in Mysore Division between 9-9-1993 to 15-5-1997. They failed to scrutinize and forward the Classification Declaration No. 2 of 1996-1997 with effect from 24-7-1996 filed by the assessee known as M/s. Shree Ganesh Gears Private Limited, Mysore, as required under erstwhile Rule 173-B of Central Excise Rules, 1944 and the Board Circular No. , dated 10-5-1995, to the Assistant Commissioner, Central Excise, Mysore. Though the assessee has classified its products, gears and shafts under Chapter Sub-Heading No. 8483.90 the assessee has claimed exemption from duty erroneously by relying upon Notification No. 16/1996-CE dated 23-7-1996, which notification was applicable to the excisable goods falling under Chapter Sub-Heading No. 8424.91.

The respondents without verifying the applicability of the exemption notification allowed the assesses claim, as a result of which there was a loss of revenue to the tune of Rs. 26,94,000/- for the period from 5-7-1996 to 31-1-1997. The loss of revenue was not noticed by the Department and it was noticed by the audit team during the course of audit of the unit in question. Since the respondents had failed to discharge their duties properly on account of non-maintaining absolute devotion to duty, resulted in acting in a manner which is unbecoming of a Government servant, contravening the provisions of Rule 3(1)(ii) and 3(1)(iii) of the Central Civil Services (Conduct) Rules, 1964. Since the charges against the respondents were grave in nature, an explanation was called for from them in regard to the lapses committed by them. Within a reasonable time, the respondents did not send a reply. Thereafter the reply sent by the respondents were meticulously examined by referring the matter to other Departments and ultimately a charge memo was issued on 16-6-2006. The charge memo issued by the petitioner was challenged by the respondents in O.A. Nos. 275 and 276 of 2006 before the Central Administrative Tribunal.

The Central Administrative Tribunal came to the conclusion there was an inordinate delay in issuing the charge memo and on account of inordinate delay, the charge memo issued by the petitioners would cause prejudice to the respondents, allowed the original applications quashing the charge memo dated 16-6-2006.

Challenging the order of the CAT, the present petitions are filed.

We have heard the learned Central Government Standing Counsel for the petitioners and Mr. Veerabhadraiah, learned Counsel appearing for the respondents.

The main contention of the petitioners Counsel is that the Tribunal did not consider the reasons for delay in issuing the charge memo. According to him, within a reasonable time from the date of detection of the lapses committed by the respondents, a show-cause notice was issued to the respondents seeking their explanation. Accordingly, a reply was submitted and after considering the reply, a further clarification was sought from the respondents by issuing further notices. On account of further clarification sought by the petitioners from the respondents, since there was a delay committed by the respondents in sending a reply there was some delay. Therefore, he contends the Tribunal without examining the date of events as stated in para 11 of the judgment has wrongly came to the conclusion that on account of delay in issuing the charge memo, it causes prejudice to the respondents by relying upon various judgments of the Courts. According to him, the Tribunal without considering the facts and circumstances of the present case and the judgments relied upon by the Tribunal without giving any positive finding how those judgments are applicable to the facts and circumstances of the present case, erroneously has allowed the petition. Therefore, he requests the Court to allow the petitions.

Per contra, Mr. Basavaraj Veerabhadra, learned Counsel for the respondents submits that when the petitioners came to know the lapses committed by the respondents in the year 1997, there were no reasons for the petitioners to issue a charge memo on 16-6-2006, eight years after coming to know of the lapses said to have been committed by the respondents. According to him, mere communication made between the petitioners and the respondents cannot be a ground to condone the delay in issuing the charge memo. He further submits that the Tribunal is justified in allowing the petition considering the conduct of the petitioners in not issuing the charge memo within a reasonable time. In the circumstances he requests the Court to dismiss the petitions.

Having heard the Counsel for the parties, we have to consider the following points in these petitions:

(1) Whether the Tribunal is justified in allowing the original applications filed by the respondents on the ground that there is an inordinate delay in issuing the charge memo?

(2) Whether the petitioners have failed to explain the reasons for delay in issuing the charge memo? and

(3) Whether the order of the Tribunal requires to be interfered?

It is not in dispute that the respondents were working in Mysore unit of the petitioner. It is also not in dispute that the allegations of the petitioners against the respondents are in regard to the grave illegality committed by them in casing loss of revenue to the tune of Rs. 26 lakhs between the period from 5-7-1996 to 31-1-1997. The amount of Rs. 26 lakhs in the year 1996-97 is a very huge amount and the respondents who were working under the petitioners were required to verify the several notifications relied upon by the assessee claiming exemption. On account of the lapses and negligence on the part of the respondents, the petitioner has sustained huge loss of revenue. This fact was not known to the petitioners. The petitioners have come to know of the same when the internal audit took place during the year 1997. The petitioners received the letter from the Deputy Accountant General on 21-4-1998 and again on 5-5-1998 the Deputy Controller, Audit, Bangalore addressed a letter to the petitioners to initiate action against the respondents within a week from thereafter on 12-5-1998 the Assistant Commissioner, Mysore, called upon the respondents seeking an explanation. Two months thereafter on 11-7-1998 reply was sent by the respondent-G.S. Kumar. The Assistant Commissioner, Mysore in turn sent a letter to the Commissioner, Bangalore on 6-2-1999. Since the explanation was not sufficient, again one more letter was addressed to the respondents calling upon them to send clarification as per letter dated 22-3-2000, for which the respondent-G.S. Kumar has sent a letter on 26-4-2002. Therefore, in a similar way the correspondences have taken place between the petitioner and the respondents. Ultimately the petitioners decided to issue a charge memo since the reply sent to the show-cause notice was not satisfactory.

The contents in paragraph 11 of the order of the Tribunal showing the date of events are not disputed. The question is while considering the dates of events narrated in para 11 of the order may be a reasonable ground for the Tribunal to hold that there is an inordinate delay in issuing the charge memo which would cause prejudice to the respondents or not.

We have also perused the impugned order of the Tribunal. From para 21 onwards the Tribunal has referred to various judgments relied upon by the respective Advocates. Upto paragraph 19 the Tribunal has considered the pleadings of the parties and from paras 21 to 31 the Tribunal has considered the various decisions relied upon by the parties. At the end, in paragraph 32, the petition is allowed, which reads as under:

For the reasons mentioned above, in view of the facts and circumstances of the present cases and ratio of the decisions referred in the earlier paras, we are of the considered view that the applicants have made out a case for grant of relief and the stand taken by the respondents is not sustainable in the eyes of law. Accordingly, we answer issues raised in para 19 above.

The Tribunal without discussing how the facts involved in the present cases can be made applicable to the judgments relied upon by the parties, from paras 21 to 31 has allowed the applications. According to us, the order of the Tribunal is without application of mind and did not consider the delay in issuing the charge memo. On account of the delay in sending a reply by the respondents and due to administrative reasons, when there was a loss of revenue of Rs. 27 lakhs in the year 1996-1997 and which was noticed by the petitioners only in 1998 on account of audit objections and if the petitioners have decided to issue a charge memo rejecting the explanation offered by the respondents on various dates, this Court is of the opinion the Tribunal has committed an error in allowing the applications without considering the background of the case.

According to us, if the Tribunal had considered the date of events referred to in para 11, certainly it would have dismissed the petitions. We have carefully considered the dates of events referred to in para 11 of the order passed by the Tribunal. On perusal of para 11, we are of the view the petitioners did not sleep over the matter in issuing the charge memo and hence the charge memo should not have been quashed by the Tribunal. In the result, these petitions are allowed. The order passed by the Central Administrative Tribunal dated 8-1-2008 in O.A. Nos. 275 and 276 of 2006 are hereby quashed. Six months time is granted to the petitioners to proceed with the enquiry and take action in accordance with law.

It is needless to state that any action initiated by the respondents by issuing a fresh charge memo during the pendency of these writ petitions has to be quashed because there was no reasonable opportunity for the respondents to defend their case. The petitioners are directed to proceed with the charge memo by giving reasonable opportunity for the respondents to file their reply and to proceed with the inquiry in accordance with law.