judgement:
Appeal No. 1467 of 1967.
Appeal from the judgment and order dated July 1, 2, 1965 of the Bombay High Court in Appeal No. 69 of 1963.
V. A. Seyid Muhammad and section P. Nayar, for the appellants.
C. K. Daphtary, Anil B. Diwan, Suresh A. Shroff, Ravinder Narain and O. C. Mathur, for the respondent.
section J. Sorabjee and O. C. Mathur, for the intervener.
The circumstances leading up to the filing of the writ petition may be mentioned. ', The respondents own a textile mill at 508 Elphinstone Road, Parel, Bombay where they manufacture, inter alia, grey cloth.
They also have a factory situated at Tulsi Pipe Lane Road, Bombay for processing grey cloth into various other .goods like leather cloth, book binding cloth and other coated fabrics.
Under section 3 of the Central Excise and Salt Act, 1944 (hereinafter to be referred as the Act) duty is Imposed on all ,excisable goods produced or manufactured in India at the rates set forth in the First Schedule to the Act.
Item 19 of the First Schedule includes cotton fabrics.
Section 3 of the Act provides that excise duty is to be collected in such manner as may be prescribed by rules made under the Act.
On cotton fabrics additional excise duty called handloom cess is also imposed under the additional Duties of Excise (Goods of Special Importance) Act, 1957 and Khadi and other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, respectively.
Under :section 37 of the Act, the Central Government has made rules called the Central Excise Rules, 1944 (hereinafter to be referred as the ,Rules).
Rule 8 gives power to the Central Government to exempt by notification subject to such conditions as may be specified therein any excisable goods from whole or any part of duty leviable on such goods.
Accordingly the Central Government issued a notification exhibit A dated January 5, 1957 exempting cotton fabrics mentioned therein wholly from excise duty.
hem No. 2, related to 'leather cloth and inferior or imitation leather cloth ordinarily .Used in book binding '.
The exemption granted in respect of this item and another item was withdrawn by the Central Government with effect from July 30, 1960 by notification exhibit D dated July 29, 1960.
There does not appear to have been any controversy before the High Court that the two notices dated November 3, 1961 and the notice dated December 2, 1961 related only to goods falling under item No. 2. of the notification exhibit A. The respondents between July 4, 1958 and July 30, 1960 manufactured grey cloth in the textile mill and sent some of those items to their factory for being processed and manufactured into leather cloth and imitation leather cloth.
During the material period the company used to manufacture grey, cloth and used to store them in a bonded godown.
Periodically they used to send to the factory such quan tities of grey cloth as were required after filling in the necessary forms prescribed by the rules and after obtaining the necessary permission in the manner prescribed by the rules from the Excise Inspector Incharge of the textile mill.
The respondents had, however, not obtained the requisite licence and so they paid excise duty on grey cloth manufactured in their mill during the period July 4, 1958 and July 30, 1960 manufactured grey cloth in the manufacturing leather cloth and imitation cloth.
The respondents later on obtained the necessary licence with the result that 509 they became entitled to remove the grey cloth manufactured at their textile mill to their factory without paying excise duty on the grey cloth at the time when the goods were removed.
The grey cloth so removed after September 30, 1959 and before July 30, 1960 used to be kept in the bonded godown.
Those goods were removed to the factory after filling up the necessary forms and obtaining the permission of the Excise Inspector Incharge of the factory.
The grey cloth after it was processed and made into leather cloth or imitation leather cloth was again stored in another bonded godown in the factory and they were removed by the company as finished products after filling in form A.R.I. prescribed by the rules.
There is again no dispute that in each of these A.R.I. forms the company had shown and made a declara tion that the excise duty payable on the goods governed by the forms was 'nil '.
Under the heading 'Assessment Memorandum. ' in the said form the particulars regarding rate of duty and amount of total duty payable on the goods referred to in the form had to be filled up and signed by the Excise Inspector.
There is no controversy that in each of the A.O.1.
forms filed by the respondents during the period July 4, 1958 and July 30, 1960, the Excise Inspector Incharge, Leather Cloth Division has made an assessment in the appropriate portion of those forms showing the rate of duty and the amount of total duty payable as "nil ' and has affixed his signature under such 'Assessment Memorandum '.
Therefore, it will be seen that all the goods removed by the, respondents during the said period were shown by them as not liable to pay any excise duty and were also assessed by the Excise Inspector as not liable to pay any duty.
Later on, the excise authorities appear to have entertained some doubt whether the goods covered by these A.R.I. forms were of the description exempted under item No. 2 of the notification exhibit A.
Some correspondence took place between the department and the respondents.
On November 3, 1961, the second appellant issued two notices marked exhibit G.
The first notice issued under rule 10A required the respondents to pay a sum of Rs. 1,07,146,39.
In the particulars of demand it was stated that the amount represented duty on leather cloth manufactured out of (i) non duty paid cloth and (ii) duty paid cloth cleared without payment of duty from October 1, 1959 to March 31, 1960.
The second notice of the same day issued under rule 9 called upon the respondents to pay a sum of Rs. 1,502,24 representing the extra processing duty on leather cloth manufactured out of duty paid cloth from July 4, 1958 to September 30, 1959.
These two notices were followed by the first appellant by issuing a letter of demand dated December 2, 1961, exhibit H, calling 510 upon the respondents to pay up the amount as per the notice issued by the second appellant.
The respondents were advised that if they are aggrieved with the decision they may go up in appeal to the Collector of Central Excise, Bombay.
The respondents sent a reply dated December 28, 1961 exhibit I, contesting validity of the notices dated November 3, 1961 and December 2, 1961.
They objected to the demand on the ground that the notices were illegal and neither rule 9 nor rule 10A gave power to the authorities to issue such notices.
They further contended that the demands were barred by time.
The respondents also addressed a letter on the same lines to the Central Board of Revenue.
As there was no favourable response from the appellants they, filed the writ petition, out of which these proceedings arise, in the High Court to quash Exhibits G and H. The respondents contended before the High Court that neither rule 9 nor rule 10A gave power to the appellants to issue the demand notices.
Their stand was that if at all it was rule 10 that applied and as the demands have been made long after the period of three months prescribed in the said rule, the notices were illegal and void.
On behalf of the appellants it was urged that rule 10 has no application as that rule will apply only when duties and charges have been 'short levied '.
As initially no amount has been levied in this case, rule 10 has no application.
According to the appellants the rule applicable was rule 10A.
Alternatively it was contended that if rule I OA did not apply, the demands made by them were amply covered by rule 9(2).
The learned Single Judge accepted the contention of the res pondents and held that rule 10 applied and as the demand notices had been issued long after the expiry of three months, exhibit G and H, the notices, were illegal and void.
In this view the learned Single Judge quashed the said notices.
On appeal the Division Bench confirmed the order of the learned Single Judge.
This is a convenient stage to refer to the relevant rules.
They are rules 7, 9, 10, 10A, 52 and 52A(1).
We have already referred to the fact that the rules have been made by the Central Government under section 37 of the Act.
Those rules, referred to above, are as follows : "(7) Recovery of Duty : Every person who produces, cures, or manufactures any excisable goods, or who stores, such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated, in or 511 under the authority of these Rules whether the payment of such duty or duties is secured by bond or otherwise.
(9) Time and manner of payment of duty: (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form; Provided that such goods may be deposited without payment of duty in a store room or other place of storage approved by the Collector under rule 27 or rule 47 or in a warehouse appointed or licensed under rule 140 or may be exported under bond as provided in rule 13; Provided further that such 'goods may be removed on part payment of duty leviable thereon if the Central Government, by notification in the Official Gazette, allow the goods to be so removed under rule 49; Provided also that the Collector may, if he fit instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from a store room or warehouse duly approved, appointed or licensed by him keep with any person dealing in such goods an account current of the duties payable thereon and such account shall be settled at internal, not exceeding one month and the account holder shall periodically make deposit therein sufficient in the opinion of the Collector to cover the duty due on the goods intended to be removed from the place of production, curing, manufacture or storage.
(2) If any excisable goods are, in contravention of sub rule (i) deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand made by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which 512 may extend to two thousand rupees, and such goods shall be liable to confiscation.
(10) Recovery of duties or charges short levied, or erroneously refunded When duties or charges have been short levied through inadvertence, error, collusion or mis construction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable with the duty or charge, so short levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account current, if any, or from the date of making the refund.
(10 A) Residuary powers for recovery of sums due to Government Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify.
(52) Clearance on payment duty When the manufacturer desires to remove goods on payment of duty, either from the place or a premise specified under rule 9 or from a store room or other place of storage approved by the Collector under rule 47, he shall make application in triplicate (unless otherwise by rule or order required) to the proper officer in the proper Form and shall deliver it to the officer at least twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require or allow) before it is intended to remove the goods.
The officer, shall, thereupon, assess the amount of duty due on the goods and on production of evidence 513 that this sum has been paid into the Treasury or paid in the account of the Collector in the Reserve Bank of India or the State Bank of India, or has been despatched to the Treasury by money order shall allow the goods to be cleared.
52A (1) Goods to be delivered on a Gatepass No excisable goods shall be delivered from a factory except under a gatepass in the proper Form or in such other form as the Collector may in any particular case or class of cases prescribe signed by the owner of the factory and countersigned by the proper officer. " Dr. Syed Mohammad, learned counsel for the appellants urged that going by a plain reading of rule 10, it is clear that the said rule will apply only to cases : (1) when an assessment has been made that same amount is due as duty and(2) when the said amount so assessed has been paid by the party concerned.
In this case, he pointed out, there has been, no doubt, an order of assessment passed when the goods were cleared by the party, but that order of assessment was not one making the party liable to pay any duty, on the other hand, it was an order of 'nil assessment ' under which the party was to pay no duty whatsoever.
In consequence of such assessment, no duty having been paid, it cannot be stated that there has been a short levy for any of the reasons mentioned in rule 10.
According to the learned counsel rule 10 will apply only when there has been an assessment making the party liable to pay some ,duty and that amount so assessed has also been actually paid or adjusted by the party, as the case may be.
When later on it is found that the amount so levied and paid falls short of the correct amount that ought to have been levied and paid by the ,party, rule 10 will stand attracted.
In this connection he placed very great reliance on the concluding part of rule 10 where a period of three months by way of limitation has been provided for calling upon the party to pay the deficiency and the period of three months is to be calculated "from the date on which the duty or charge was paid.
He stressed that the use of the expression "paid" clearly indicates that some duty must have been actually paid by a party on a particular date and if that were not so, it would be difficult to calculate the period of three months within which a party can be called upon to make good the deficiency.
The counsel also urged that the word 'levy ' in rule 1 0 means actual collection and that short levy, therefore, denotes that full duty has not been collected.
He also urged that rule 10A covers all cases of short levy or non levy for any reason whatsoever and the notices issued by the appellants in this case are legal and valid.
He finally urged that even if it is held that rule 10A does not 514 apply , the notices could be sustained under rule 9(2) in as much the respondents have removed the goods without payment of duty in contravention of rule 9(1).
The mere fact that one of the notices issued on November 3, 1961 refers to rule 10A is not ,on that ground invalid when the authorities have ample.
, power to issue, such notices under rule 9(2).
Mr. Daphtary, learned Counsel for the respondents and Mr. Sorabjee, learned counsel for an intervener, have both contended that the notices issued by the appellants squarely come under rule 10 and as they have been issued beyond the period of three months, they have been rightly held to be invalid and illegal. 'Though the words used in rule 10 "duty or charge so paid", reading the rule as a whole it is clear that the rule does not contemplate that any amount should have been levied as a duty and that the said amount should have been paid. 'Me word "paid" has only been used to provide a starting point of limitation of three months.
Though the ordinary meaning of the expression "paid" is that some amount should have been actually paid as such, both the counsel pointed out, that the said word should be construed in the context in which it appears.
So read, it is pointed out that the proper interpretation to be placed on the word "paid" is that it has been used to denote the stage or time when the duty or ,charge ought to have been paid.
Such a reading will not do any violence to the language of rule 10.
It is further pointed out that the expression "short levied" in rule 10 will cover cases not only levy of smaller amount that what is due but also of making the party not liable to pay any duty.
In one case the short levy will 'be the difference of the amount actually levied and the correct amount due; and in the other case the short levy will be the entire amount of duty that is found to be actually due by a party.
Ile counsel further pointed out that rule 10A will apply only to those ,cases where no specific provision for collection of duty or any deficiency in duty has been made by the rules and that will apply also to any other sum of.
any other kind payable to the Central Government under the Act or the Rules.
In this case, as the party admittedly has been assessed to 'nil duty ' by the officers concerned and allowed to remove the goods, the specific provision for recovery of any short levy is specifically provided for by rule 10, which will exclude rule 10A.
On these grounds, both the ,counsel urged, that the High Court was right in holding that rule 10 applies and that the notices having been issued beyond the period of three months are illegal and invalid.
We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy ' in rule 10 means actual collection of some amount.
The charging provision section 3(i) specifically says "There shall be levied and collected in such, a 515 manner as may be prescribed 'the duty of excise.
It is to be noted that sub section (i) uses both the expressions ,levied and collected" and that clearly show that the expression "levy" has not been used in the Act or the Rules as meaning actual collection.
Dr. Syed.
Mohammad is, no doubt, well founded in his contention that if the appellants have power to issue notice either under rule 10A or rule 9(2), the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has be held by this Court in J. K. Steel Ltd. vs Union of India(1) : If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise, of the power in question.
This is a well settled proposition of law.
In this connection reference may usefully be made to the decisions of this Court in B. Balakotaiah vs The Union of India and ors (2 ) and Afzal Ullah vs State of U.P.(3).
In this case, the officer who issued the two notices is competent to make demands under both rules 9(2) and rule 10 A.
But in order to sustain the validity of the demand either under rule 9(2) or rule 10 A, the appellants will have to go further and establish that the demands can be justified under either of the rules.
Before we deal with the contentions of the learned counsel we may state that rule 10 A was incorporated because of the decision of the Nagpur High Court in Messrs Chhotabhai Jethabhai Patel vs Union of India(4).
The assessees in that case were a firm of tobacco merchants and manufacturers of bidis holding licence under the Central Excise Rules.
On the introduction in Parliament of Bill No. 13 of 1951 on February 28, 1951, the assessees paid the requisite duty on tobacco stored by them under the declared provision read with sections 3 and 4 of the Provincial Collection of Taxes Act, 1931.
The assessees cleared tobacco from the warehouse between March 1, 1951 and April 28, 1951, after obtaining clearance certificates from the Range Officer, Central Excise.
The rate of duty payable on un manufactured tobacco was increased by the Finance Act of 1951.
On June 4, 1951 a demand was made by the Range Officer, Central Excise at the increased rate and the assessees therein were asked to pay the said increase.
The assessees challenged the demand before the High Court under article 226 of the Constitution on various grounds.
The Nagpur High Court held that rule 10 did not apply and that the demand was invalid.
(1) [1969] 2 S.C.R.481.
(3) ; (2) ; (4) I.L.R. 516 After the decision of the Nagpur High Court, the Central Government by a notification dated December 8, 1951 amended the Central Excise Rules, 1944 by the addition of a new rule 10 A.
On the basis of this rule in respect of the same assessees a further and fresh demand was made for payment of duty as per ' the Finance Act, 1951.
The assessees challenged the validity of the demand on the same ground as before.
The Full Bench of the Nagpur High Court rejected the assessees ' contention and held that rule 10A covers a case for increased levy on the basis of a change of law.
This decision was sought to be challenged before this Court but without any success.
In fact this Court in Chhotabhai Jethabhai Patel and Co. vs The Union of India and another(1) specifically rejected the assessees ' claim regarding non applicability of rule 10A stating that it had been specifically designed "for the enforcement of a demand like the one arising in the circumstances of the case".
The decision of this Court is an illustration of certain types of cases to which rule 10 A will apply.
This now takes us to the question of proper interpretation to be placed on the expression "short levied" and "paid" in rule 10.
Does the expression "short levied" mean that some amount should have been levied as duty as contended by Dr. Syed Mohammad or will that expression cover even cases where the assessment is of 'nil duty ', as contended by Mr. Daphtary.
What is the meaning of the word "paid" in rule 10 ? It is contended on behalf of the appellants that it means "actually paid", whereas, according to the respondents ', it means "ought to have been paid".
Taken literally, the word "paid" does mean actually paid in cash.
That means that a party or an assessee must have paid some amount of duty whatever may be the quantum.
If this literal interpretation is placed on the expression "paid" in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohmmad that rule 10 contemplates a short levy in the sense ,that the amount which falls short of the correct amount has been assessed and actually paid.
In our opinion, the expression "paid" should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid.
That word will have to be understood and interpretted in the context in which it appears in order to discover its appropriate meaning.
If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word "paid".
It must be remembered that rule 10 deals with recovery of duties or charges short levied or erroneously refunded.
The expression "paid" has been used to denote the starting point of limitation of three months for the issue of a written demand.
The Act and the (1) [1962] Supp.
[2] S.C.R. 1.
517 Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party.
If the literal construction that the amount should have been actually paid is accepted, then in case like the present one on hand when no duty has been levied, the Department will not be able to take any action under rule 10.
Rule 10 A cannot apply when a short levy is made.
through error or misconstruction on the part of an officer, as such a case is specifically provided by rule 10, Therefore, in our opinion, the proper interpretation to be placed on the expression " 'paid" is "ought to have been paid".
Such an interpretation has been placed on the expression "paid" occuring in certain otherenactments as in Gursahai Saigal vs Commissioner of Income tax, Punjab(") and in Allen vs Thorn Electrical Industries Ltd. (2 .
In Gursahai Saigal vs The Commissioner of Income tax, Punjab(1), the question arose as follows : In certain assessment proceedings under the Indian Income tax Act, 1922, an assessee was charged with interest under subsection (8) of section 18A of that Act.
Under that sub section interest calculated in the manner laid down in sub section (6) of section 18A was to be added to the tax assessed.
Sub section 3 of section 18A dealt with cases of a person who has not been assessed before and he was required to make his own estimate of the tax payable by him and pay accordingly.
Sub section (3) of section 18A was applicable to the assessee in that case.
However, he neither submitted any estimate nor did he pay any advance tax.
Under sub section ' (6) of section 18A it was provided : "Where in any year an assessee has paid tax under sub section (2) or sub section (3) on the basis of his own estimate, and the tax so paid is less than eighty Per cent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in ' which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent." This sub section is to apply to cases where tax has been paid ' by an assessee according to his own estimate but that estimate was on regular assessment found to be deficient.
Further, interest has to be calculated from 1st January of the Financial Year in which tax mentioned therein was paid and calculation has to be made on the short fall between the amount paid and eighty.
per cent of ' the tax which was found payable on regular assessment.
Subsection (8) of section 18A provided : (1) ; (2) 1968 1 .Q.B. 487.
518 .lm15 "where, on making the regular assessment the Income tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid down in sub section (6) shall be added to the tax as determined on the basis of the regular assessment.
" The assessee in that case did not dispute that sub section(3) ,of section 18A applied to him and that he should have made an estimate and paid advance tax.
He also admitted that he never made an estimate nor did he pay any advance tax whatsoever.
While admitting that sub section (8) of section 18 A applied to him, the assessee contended before this Court that since he had not paid any tax at all, it is not possible to calculate interest in the manner laid down in sub section (6).
According to the assessee 'there was no 1st day of January of a financial year in which the tax was paid and there was no question of a short fall between eighty per cent of the tax payable on regular assessment and the ,amount paid because he. had paid nothing.
While rejecting the said contention this Court held : "The proper way to deal with such a provision is to give it an interpretation which, to use the words of the Privy Council in Mahairam Kamjidas 's (case) (1) makes the machinery workable utres valeat potius quam pereat".
We, therefore, think that we should read sub section (6) according to the provision of which interest has to be calculated as provided in subsection (8) in a manner which makes it workable and thereby prevent the clear intention of sub section (8) being defeated.
Now, how is that best done? As we have earlier said sub section (6) deals with a case in which tax has been paid and therefore it says that interest would, be calculated "from the 1st day of January in the financial year in which the tax was paid".
This obviously cannot literally be applied to a case where no tax has been paid.
If however the portion of subsection (6) which we have quoted above is read as "from the 1 st day of January in the financial year in which the tax ought to have beep paid", the provision becomes workable.
It would not be doing too much violence to the words used to read them in this way.
The tax ought to have been paid on one or other of the dates earlier mentioned.
The intention was that interest should be charged from January 1, of the financial year in which the tax ought to have been paid.
Those, 519 who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended.
" Regarding the further contention that there was no short fall, as no tax has been paid it was observed : "With regard to the other question about there being no shortfall between eighty per cent of the amount of tax found payable on the regular assessment and the amount of tax paid in a case where no tax was paid, it seems to us the position is much simpler.
If no tax is paid, the amount of such shortfall will naturally be the entire eighty per cent.
We also think that the case before us is very near to Allen 's case.(1)" The above decision establishes two propositions : (1) though the expression used was "paid" it is open to read it as "ought to have been paid" having regard to the context in which it appears and to make the provision of law in which that expression appears workable; and (2) the short fall will be the entire eighty per cent referred to subsection (6) of section 18A.
Applying the above principles to the case on hand, the expression "paid" in rule 10 can be reasonably read as "ought to have been paid".
Similarly even in cases where there has been a nil assessment due to one or other of the circumstances mentioned in, rule 10 and if subsequently it is found that duty is payable, then the entire amount of duty should be considered to have been short levied.
The literal meaning of the expression "paid" as actually paid in cash has again not been adopted by the Court of Appeal in Allen vs Thorn Electrical Industries Ltd.(2).
Having regard to the context in which the said expression appeared in the particular provision which came up for interpretation, the Court of Appeal construed the expression to mean "contracted to be paid".
Therefore, the contention of Mr. Daphtary that the expression "Paid" should be construed as "ought to have been paid" and even when no duty has been assessed, the entire duty when subsequently assessed will be a short levy, which is also supported by the decision of this Court in Gursahai Saigal vs Commissioner of Income tax, Puniab(3) has to be accepted.
It follows that in order to attract rule 10, it is not necessary that some amount of ' duty should have been assessed and that the said amount should have also been actually paid.
That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty (1) , 16, 17.
(2) (3) ; 520 originally short levied.
There is also no difficulty in calculating the period of three months.
As pointed out above, the Act and the Rules provide very elaborately the stage and the time when the duty is to be paid and if that is so that must be considered to be the stage or time when the duty ought to have been paid and if so the period of three months will run from the time when the duty ought to have been paid.
Dr. Syed Mohammad referred us to certain decisions of the High Courts where a demand has been sustained under rule 10 or rule 10A.
We have considered those decisions.
In some of those decisions there has been a short levy due to the reasons mentioned in rule 10 and the demand also has been issued within the period of three months and hence the notice had been sustained under rule 10.
In other cases, it was specifically held that the demand covered by the notice issued under rule 10A has not been specifically provided for by any other rule and the demand therefore, was valid.
These decisions, in our opinion, do not in any manner advance the case of the appellants and we do not think it necessary to deal with them individually.
We may point out that if the contention of Dr. Syed Moham mad that in order to constitute short Levy, some amount should have been assessed as payable by way of duty so as to make rule 10 applicable, is accented the result will be rather anamolous.
For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of Rs. 2/ is managed to be assessed by way of duty when really more than thousand times that amount is payable anD if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty.
On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants rule 10A will apply.
We do not see any reason to distinguish the above two cases one ' 'from the other.
Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under rule 10.
Whereas in the same case of collusion where no duty has been levied there will be no period of limitation.
In our opinion, that will not be a proper interpretation to be placed on rule 10A by us.
By the interpretation placed by us on rule 10, the position will be that an assessee who has been assessed to a smaller amount as well as an assessee who has been assessed to nil duty will all be put on a par and that is what is intended by rule 10.
The above reasoning leads to the conclusion that rule 10A ,does not apply to the case on hand.
Then the question is whether 521 the demands could be justified under rule 9(2).
Even here we find considerable, difficulty in sustaining the notice under this rule.
Sub rule (1) of rule 9 provides for the time and the manner of payment of duty.
In this case there is no controversy that whenever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty.
To attract sub rule 2 of rule 9, the goods should have been removed in contravention of sub rule (1).
It is not the case of the appellants that the respondents have not complied with the provisions of sub rule 1.
We are of the opinion that in order to attract sub rule 2, the goods should have been removed clandestinely and without assessment.
In this case there is no such clandestine removal without assessment.
On the other hand, goods had been removed with the express permission of the Excise authorities and after order of assessment was made.
No doubt the duty payable under the assessment order was nil.
That, in our opinion, will not bring the case under sub rule (2).
That sub rule (2) is a penal provision is shown from the fact that apart from the duty payable, the party is also made liable to a penalty and he also incurs the risk of the goods being confiscated.
That rule 9(2) applies only to cases where there has been an evasion from payment of duty is clear from the decision of this Court in J. K. Steel Ltd. vs Union of India(1).
Though on certain other aspects there was a difference of view amongst the learned Judges, on this aspect the decision is unanimous.
There is absolutely no material placed before us by the appellants which would justify the issue, of the notice under rule 9(2).
To conclude rule 10A does not apply as the specific provision for collection of duty to cases like the one before us is specifically provided by rule 10 nor does rule 9(2) apply to the case on hand.
The proper provision under which action should have been taken if at all is rule 10.
The demands having admittedly been made long after the expiry of the period of three months, referred to in the said rule, it follows that the demands were not valid.
The High Court was justified in striking down the notices dated November 3, 1961 exhibit G as well as the demand dated December 2, 1961 under Et.
The appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed.

summary/full:
Under r. 8 of the Central Excise Rules, 1944, made under the Central Excise and Salt Act, 1944 the Central Government issued a notification exempting cotton fabrics from excise duty.
The respondents owned a textile mill and factory.
They manufactured grey cloth which was removed from the mill and kept in a godown and later removed to the factory for being processed into leather cloth which was stored in another godown in the factory, from where it was taken Out as finished product.
The removal at each stage was done after filling the prescribed forms and with the permission of the Excise Inspector Incharge.
In each of the forms filled by the respondents upto July 30, 1960.
the Excise Inspector had made an assessment showing the rate of duty and the amount of total duty payable as 'nil '.
Later, the excise authorities thought the goods were not of the description exempted under the notification and on November 3, 1961, two notices were issued calling upon the respon dents to make certain payments, one under r. 10A and the other under r. 9 of the Rules.
The respondents protested and filed a writ petition in the High Court.
The High Court held that the proper rule applicable was r. 10 but that as the demand notices were not issued within 3 months .Is required by that rule, the notices were illegal and void.
In appeal to this Court, HELD : (1) Rule 10A cannot apply when a short levy is made ,through error or misconstruction on the part of an officer as such a case is specifically provided for by r. 10, because, r. 10A deals with residuary powers and does not apply when specific provision for collection of duty is provided or by other rules.
[516 H; 517 A: 521 D] (2) The proper provision under which action should have been taken, if at all, is r. 10.
Under r. 10, when duties or charges have been shortlevied through inadvertence, error, collusion or Misconstruction on the part of an officer, the person chargeable with the duty or charge shall pay the deficiency on written demand being made within three month from the date on which the duty or charge was paid.
Though the words used are 'short levied ' and paid, in order to attract r. 10 it is not necessary that some amount of duty Should have been assessed and that the said amount should also have been actually paid.
It will apply even duty later on assessed must be considered to be the duty originally short levied.
1519 F G; 520 E F; 521 D E] (a) The expression 'levy ' is not used in the Act or the Rules as meaning actual collection, because, section 3(1) of ' the Act use.
,,, both the 'levied ' and 'collected '.
1514 G H] 507 (b) The expression 'paid ' in r. 10 should not be read in a vacuum and it will not be right to construe it literally as 'actually paid '.
The word will have to be understood and interpreted in the context in which it appears.
If the literal construction is accepted, then in a case where an assessee, in collusion, manages to have a very petty amount of duty assessed, he can, if he paid the amount, effectively plead limitation of three months, but, when no duty has been levied there would, be no period of limitation, a result which would be anomalous.
Therefore, the proper interpretation to be placed on the expression 'paid ' is 'sought to have been paid. ' (c) This interpretation will not cause any difficulty in calculating the period of three months.
The Act and the Rules provide very elaborately the stage and the time when the duty is to 'be paid and that must be considered to be the stage,or time when the duty 'ought to have been paid ', and the period of three months will be counted from that time.
[519 G H] Gursahai Saigal vs C.I.T. Punjab, ; followed, Allen vs Thorn Electrical Industries Ltd. , referred to.
(3) Rule 9 does not also apply to the facts of the case.
Rule 9(1) provides for the time and manner of payment of duty.
To attract r. 9(2) the goods should have been removed in contravention of sub r.
(1), that is, clandestinely and without assessment; but in this case there is no such clandestine removal without assessment.
Moreover, sub r.
(2) is a penal provision applicable where there is evasion of payment of duty, since the party is also made liable to a penalty and confiscation.
[520 G H; 521 A C] J. K. Steel vs Union. ; , followed.
Therefore, the demands having been made long after the expiry of the period of three months referred to in r. 10, the demands are not valid,


judgement:
Appeal No. 90 of 1953.
Appeal under Article 132(1) of the Constitution of India from the Judgment and Order dated the 29th August, 1952, of the High Court of TravancoreCochin at Ernakulam in Original Petition No. 51 of 1952.
K.Thomas and M. R. Krishna Pillai, for the appellant.
Mathew P. Muricken, Advocate General for the State of Travancore Cochin (T. R. Balakrishna Ayyaiand Sardar Bahadur, with him), for the respondent.
November 25.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C. J.
This appeal by leave of the High Court of Judicature of TravancoreCochin at Ernakulam is directed against an order of a Full Bench of that court dismissing an application for the issue of a writ of certiorari quashing the order of the Government of the united State of TravancoreCochin removing the appellant from service of the State and permanently debarring him from reappointment in service.
The facts giving rise to the petition and the appeal are these: The petitioner entered the service of the erstwhile Travancore State in the year 1928.
By promotion he became the Executive Engineer, Electricity Department in August 1937 and subsequently Electrical Engineer to Government in October 1944.
He was the Electrical Engineer to Government on the 1st July 1949 when the States of Travancore and Co chin were integrated by a Covenant entered into between the rulers of the two States.
By an order of the Government of the united State of Travancore Cochin dated the 11th August 1949, he was appointed as the officiating Chief Engineer (Electricity) in the State.
In or about September 1949 the Government of the 1014 united State received serious complaints about the conduct and dealings of some of their senior officers and allegations of corruption, communalism, etc. were made against them.
In December 1949 the Council of Ministers decided to take action against the appellant on a number of charges indicated in the resolution.
On the 22nd December 1949, immediately after this resolution was passed, the petitioner was informed that he was suspended from service pending enquiry and he was requested to hand over charge to Sri K. P. Sridharan Nair forthwith.
The petitioner complied with this order and handed over charge as directed.
On the 21st March 1950 the following notification was issued: "Whereas Government are of opinion that there are sufficient grounds for making a formal and public inquiry into the truth of the imputation of misconduct of the officers mentioned below: Government, under section 3 of the Travancore Public Servants (Inquiries) Act, XI of 1122, hereby commit the said inquiry to Sri K. Sankaran, Judge, High Court, appointed Commissioner for the purpose.
Government are further pleased under section 4 of the said Act to nominate Sri T. R. Balakrishna Ayyar, Government Pleader, High Court, to prosecute the inquiries on their behalf.
The inquiries shall be conducted as early as possible.
The officers referred to in para.
1 supra are: I. . . . . . . 2.
Sri P. Joseph John".
The petitioner was informed by notice of the 24th April 1950 about this inquiry.
The notification was signed by Shri K. G. Menon, Chief Secretary to Government.
Mr. Justice Sankaran took charge as Enquiry Commissioner and on the 11th May 1950 forwarded the articles of charges against the petitioner, the list of witnesses and the list of documents placed before him together with the notice regarding the commencement of the enquiry to Shri K. section Raghavan, Secre 1015 tary to Government, for service on the petitioner.
A few days before the date fixed for the commencement of the enquiry the petitioner made an application to the Enquiry Commissioner for a direction to the Prosecutor to produce the files and papers relating to the various charges in the office of the Commissioner and for permission to him and his counsel to inspect the same.
This application was allowed and he and his advocate were allowed to inspect the relevant files in the presence of the prosecutor or his deputy.
On the 20th May 1950 when the enquiry commenced, the petitioner pleaded not guilty to the charges by a written statement.
He was defended during the enquiry by Shri K. P. Abraham, a leading member of the Bar.
A preliminary objection was taken to the Tribunal 's jurisdiction on the basis of Article 20 of the Covenant entered into between the rulers of Tra vancore and Cochin and it was contended that the proceedings before the Commissioner were criminal in nature and could not be commenced without the sanction of the Rajpramukh and that its absence was fatal to the enquiry.
This objection was not immediately decided by the Commissioner but was ultimately overruled.
On the 22nd November 1950 the peti tioner submitted detailed answers in writing to the various charges.
The enquiry concluded on the 27th December 1950 and the Commissioner submitted his report to Government on the 17th February 1951.
Some of the charges were held proved, while others were held not established.
On the 5th July 1951 the following communication was sent to the petitioner by the Chief Secretary to Government: "I am to enclose here with a copy of the above report and to point out that the Government agree with the findings of the Inquiring Commissioner on the several charges against you.
Government also agree with the Commissioner that the objections raised by you challenging the validity of the en quiry itself are not tenable.
As against the 26 charges framed 1016 against you, the nine charges noted in the margin have not been established and they are accordingly dropped.
As regards Charge No. IX in view of the extenuating circumstances, the irregularity is condoned.
It is evident from the remaining charges, which have been established, that you have misused your official position as Electrical Engineer to Government and shown undue favouritism at the expense of State revenues, to private firms and issued materials from Government stores to private companies and individuals in violation of all rules (vide List A).
It is also evident that departmental stores and departmental lorries have been diverted for your personal use in a number of cases.
(Vide List B).
You are also found guilty of having shown defiance and insubordination towards the authority of the Government by your refusal, in connection with the supply of power to the Nagercoil Electric Supply Corporation, to supply certain particulars which were called for and which it was your duty to furnish and by your refusal to withdraw the objectionable statement in your reply to the Government in spite of the Government order directing you to withdraw the same.
The Government therefore propose to remove you from service from the date on which you were placed under suspension with permanent bar against future reappointment in service.
You are requested to show cause within 15 days of the date of receipt of this notice with enclosures why action should not be taken against you as proposed in paragraph 4 above".
The petitioner on receipt of this notice applied for time till the 10th September 1951 for showing cause.
Time as prayed for was allowed.
On the 10th September 1951 when the time granted at his own request 1017 was due to expire, he again applied for further time till the 10th November 1951.
He was allowed further time till the 24th September 1951.
On that date he again asked for further time till the 31 st October 1951 but this request was not granted.
In spite of the fact that the petitioner was granted the time which he originally asked for and this was further extended by a fortnight, he furnished no explanation and did not show any cause against the notice issued to him.
The petitioner having failed to avail himself of the opportunity to show cause against the action proposed against him, a draft of the proceedings relating to the enquiry was submitted to H. H. the Rajpramukh oil the 30th September 1951 and thereupon an order was issued for his removal from service from the date of suspension and debarring him from reappointment to service.
The order was in proper form as having been made by H. H. the Rajpramukh and was authenticated by the Chief Secretary to Government.
This order is dated the 1st October 1951.
It may be mentioned that before the papers were submitted to H. H. the Rajpramukh, the report of the Commissioner was submitted to the Public Services Commission for their consideration.
The Public Services Commission supported the action which the Government proposed to take against the petitioner.
On the 9th October 1951 the petitioner was removed from service with effect from the 26th December 1949.
Two months after the order of his removal, the petitioner submitted an ap plication for a reconsideration of the order removing him from service.
This was rejected by an order dated the 25th January 1952.
On these facts and in these circumstances an application was made before the High Court of Travancore Cocliin at Ernakulam on the 2nd June 1952 praying that the court may be pleased to issue a writ in the nature of certiorari or any other writ, directions or orders calling for the records relating to the orders dated the 9th October 1951 and the 25th January 1952 and to quash the same and direct the respondent to restore the petitioner to the office which he was lawfully to hold.
It was contended in the application 1018 that the applicant had no reasonable opportunity of showing cause against his removal and that he was entitled to show cause twice, once after he was found guilty and next after the punishment had been decided and that the denial of this right rendered the order of dismissal illegal and void and that it offended against the principles of natural justice.
It was further contended that the consultation with the Public Services Commission was not held in terms of the provisions of procedure for disciplinary action against Government servants and prescribed in Article 320, sub section 3(c) of the Constitution of India.
A number of other grounds were also taken against the order of dismissal.
The High Court negatived all the contentions of the petitioner and dismissed the petition.
It however certified that the case involved substantial questions of law as to the interpretation of the Constitution and was a fit one for appeal to this Court.
Mr. Thomas who argued the appeal on behalf of the appellant raised a number of points against the validity of the order removing the appellant from service and contended that the enquiry conducted into the charges made against him was wholly illegal and void.
In our judgment, none of the points urged by the learned counsel was of a substantial character and all of them concerned matters of mere form and no valid reasons have been shown for disturbing the decision of the High Court.
The question of the validity of an order of removal of a person employed in a civil capacity under the Union or a State falls to be determined on the provisions of Article 311 of the Constitution of India.
This Article is in these terms: " (1) No person who is a member of a civil service of the Union or an all India service or a civil service of a State or holds a civil post under the Union or a State shall be, dismissed or removed by an authority subordinate to that by which he was appointed.
(2) No such person as aforesaid shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause 1019 against the action proposed to be taken in regard to him. . . . . . . . .
It is not said that the petitioner was removed by an authority subordinate to that by which he was appointed.
There was no occasion to raise this issue because the order of removal had been made by the Rajpramukh and was expressed according to the provisions of Article 166 of the Constitution.
The requirement therefore of sub clause (1) of Article 311 was fully satisfied.
As regards the question whether the petitioner was given reasonable opportunity of showing cause against the action proposed to be taken in regard to him, the legal position in that respect and the nature of opportunity to be granted was stated by the Privy Council in the case of High Commissioner for India vs I. M. Lall(1) and it was held that when a stage is reached when definite conclusions have been come to as to the charges, and the actual punishment to follow is provisionally determined on, that the statute gives the civil servant an opportunity for which subsection (3) of section 240 of the Government of India Act, 1935 (which corresponds to Article 311) makes provision, and that at that stage a reasonable opportunity has to be afforded to the civil servant concerned.
It was also held that there was no anomaly in the view that the statute contemplates a reasonable opportunity at more than one stage.
In our opinion, in the present case the petitioner had reasonable opportunity at both stages to enter upon his defence.
He fully availed himself of the first opportunity and though a reasonable opportunity was also given to him at the second stage, he failed to avail himself of it and it is not open to him now to say that the requirements of clause (2) of Article 311 have not been satisfied.
It was not denied that the petitioner was given by the Enquiry Commissioner all facilities for entering on his defence.
Before filing his written statement before the Enquiry Commissioner the petitioner and his counsel were afforded facility to inspect the (1) 131 1020 various files concerning the charges which he had to meet.
After inspecting those files he filed a full written statement explaining those charges.
He was defended in the enquiry by a leading lawyer and was afforded fullest opportunity to examine and cross examine the witnesses examined by the Commissioner.
He was able to satisfy the Enquiry Comniissioner that out of the charges levelled against him a number of them were not established; but he failed to satisfy the Commissioner as regards the rest and the Enquiry Commissioner held them proved.
After the enquiry was concluded the petitioner was furnished with a copy of the report of the Commissioner and was asked to show cause against the action proposed to be taken against him.
He applied for two months ' time to show cause.
This was granted.
He made a further application for further time.
This was also partially granted.
He again asked for further time which was refused.
It is difficult to say that the time allowed to him was not reasonable in view of the fact that be bad taken part in the enquiry before the Commis sioner and all the evidence had been taken in his presence and he had full opportunity to defend himself.
All the material on which the Commissioner had reported against him on the charges found proved, was given in the report of the Commissioner and that was supplied to him with a show cause notice.
The time allowed, in our opinion, was more than sufficient for him to enter on his defence and having failed to do so, he cannot be heard to say that he was not given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him.
Mr. Thomas argued that the show cause notice was not in accordance with the provisions of Article 166 of the Constitution inasmuch as it was not expressed to have been made in the name of the Rajpramukh.
As above mentioned, this notice was issued on behalf of the Government and was signed by the Chief Secretary of the united State of Travan core Cochin who had under the rules of business framed by the Rajpramukh the charge of the portfolio of "service and appointments" at the Secretariat level 1021 in this State.
This was in our opinion substantial compliance with the directory provisions of Article 166 of the Constitution.
It was held by this court in Dattatreya Moreshwar Pangarkar vs The State of Bombay(1) that clauses (1) and (2) of Article 166 are directory only and non compliance with them does not result in the order being invalid, and that in order to determine whether there is compliance with these provisions all that is necessary to be seen is whether there has been substantial compliance with those requirements.
In the present case there can be no manner of doubt that the notice signed by the Chief Secretary of the State and expressed to be on behalf of the Government and giving opportunity to the petitioner to show cause against the action proposed to be taken against him was in substantial compliance with the provisions of the article.
The petitioner accepted this notice and in pursuance of it applied for further time to put in his defence.
He was twice granted this time.
In these circumstances, the contention of Mr. Thomas that as the notice was not expressed as required under Article 166 it was invalid and therefore the requirements of Article 311 were not satisfied in this case must be held to be devoid of force.
We are satisfied that all the requirements of Article 311 have been fully complied with in this case.
It may also be mentioned that the High Court held that H. H. the Rajpramukh had intimation of the decision of the Council of Ministers and the action proposed to be taken against the petitioner and that in fact His Highness approved of the proposed action.
Mr. Thomas further contended that the enquiry at the first stage also was invalid and irregular.
He argued that the order appointing the Enquiry Commissioner was not expressed in proper form and that the Commissioner did not conduct the enquiry in accordance with the provisions of the Act. 'The notification ordering an enquiry set out above was issued after the Council of Ministers had passed a resolution to that effect.
It must be presumed that in (1) ; 1022 the normal course.
of business that resolution was communicated to the Rajpramukh.
The order thus substantially complies with the requirements of law and in any case the effect of its not being expressed as directed by Article 166 does not vitiate the notification.
The appellant, as already stated, took part in the enquiry, defended himself and fought every inch of the ground.
That being so, it is not possible to hold that he was not given reasonable opportunity at the first stage to defend himself.
It was contended that under the Travancore Public Servants (Inquiries) Act, 1122) it was only the Maharaja who could make an order under the provisions of that Act, and that the Ministers could not take any action.
Emphasis was lai on the expression "Our Government" in the different provisions of the Act.
We are unable to see any force in this contention.
The expression "Our Government" means the Maharaja 's Government, in other words, the Government of the State of Travancore.
After the integration of the two States of Travancore and Cochin and the formation of the United State of Travancore Cochin the expression "Our Government" has to be construed according to the new set up of Government and when the Council of Ministers had come into being, it is obvious that the expression "our Govern ment" as adapted to fit in with the new Constitution means "The Council of Ministers".
It is an elementary principle of democratic Government prevailing in England and adopted in our Constitution that the Rajpramukh or the Governor as head of the State is in such matters merely a constitutional head and he is bound to accept the advice of his Ministers.
In this situation it cannot be held that the order of the Government appointing the Enquiry Commissioner *as ultra vires and without jurisdiction.
Another point taken by Mr. Thomas was that without the sanction of the Rajpramukh the proceedings could not be started against the petitioner and reliance for this contention was placed on Article 20 of the Covenant of the united State of Travancore and Cochin.
This article is in these terms: "Except with the previous sanction of the Raj 1023 pramukh, no proceedings, civil or criminal, shall be instituted against any person in respect of any act done or purporting to be done in the execution of his duty as a servant of either Covenanting State before the appointed day".
The High Court negatived this contention with the following observations: "Article 20 refers to the institution of civil and criminal proceedings, two well known expressions which are terms of art and clearly relate to civil and criminal proceedings before civil and criminal courts.
The said two kinds of proceedings do not exhaust the totality of matters which can be called proceedings.
is only in respect of civil and criminal proceeding that the sanction of the Rajpramukh is required under Article 20 of the Covenant.
It is not contended on behalf of the petitioner that the proceedings before the Commissioner are criminal proceedings.
The only contention is that they partake of the nature of criminal proceedings.
In our judgment, Article 20 of the Covenant does not apply to proceedings which are not criminal but merely partake of that character".
In these observations we fully concur.
In our view departmental proceedings do not come within the ambit of the Article.
Lastly it was urged that there was non compliance with the provisions of Article 320, clause 3(c) of the Constitution which provides that on all disciplinary matters affecting a person serving under the Government of India or the Government of a State in a civil capacity, including memorials or petitions relating to such matters, the Union Public Service Commission.
or the State Public Service Commission, as the case may be, shall be consulted.
In this case the Public Service Commission was in fact consulted in the matter of the action proposed against the petitioner by removing him.
The Public Service Commission agreed to the proposed action.
This consultation and the agreement was before the petitioner was asked to show cause why he should not be removed from service.
The complaint of the petitioner is that the 1024 consultation with the Public Service Commission sould have been after he was asked to show cause but the petitioner did not show cause and that being so, no question arose of consulting the Public Service Commission over again.
It was contended that the Public Service Commission should have been consulted on the review petition.
To accede to this argument will mean that the State will have to consult the Public Service Commission as many times as he may choose to file review petitions.
In our opinion the consultation envisaged by Article 320 does not extend so, far.
In this case the report of the Commissioner was placed before the Public Service Commission and the latter approved of the action proposed to be taken.
The appellant was given another opportunity to show cause but he did not avail himself of that opportunity or submit any explanation or show any cause on which the Public Service Commission could be consulted.
The order of dismissal having been made there was in the circumstances no further necessity to consult the Public Service Commission.
in our opinion therefore there is no force in this contention as well.
After having examined all the arguments of Mr. Thomas, we are of the opinion that all the rules of natural justice were fully observed during the enquiry in this case, and the petitioner had the fullest opportunity to put in his defence both before the Enquiry Commissioner and against the action proposed to be taken against him.
It was by reason of his own default that he failed to avail himself of the second opportunity.
He put in a belated review but such a review is not provided for under the rules and in our opinion, it was not necessary to consult the Public Service Commission at that stage.
Such petitions are not within the contemplation of the Constitution.
For the reasons given above this appeal fails and is dismissed.
In the circumstances of the case we make no order as to costs.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
An enquiry under the provisions of the Travancore Public Servants (Inquiries) Act, (Act XI of 1132) was held against the petitioner in pursuance of a resolution passed by the Council of Ministers.
The petitioner took part in the proceedings, denied the charges and raised legal objection to the competence of the Enquiry Commission to hold the enquiry.
Some of the charges were held proved.
The petitioner was asked by the Chief Secretary to show cause why be should not be removed from service.
The petitioner 's request for extension of time to show cause was granted twice but refused a third time.
On his failure to avail himself of the opportunity to show cause against the action proposed to be taken against him, the report of the Enquiry Commissioner was submitted to the Public Services Commission and the latter approved of the action proposed to be taken against the petitioner.
The proceedings relating to the enquiry were submitted to the Rajpramukh and thereupon an order in proper form for the removal of the petitioner from service was made by the Rajpramukh and authenticated by the Chief Secretary to Government.
Held, (i) that under the provisions of article 311 of the Constitution a civil servant is entitled to have a reasonable opportunity to defend himself and show cause, both at the time of enquiry into the charges brought against him and at the stage when definite conclusions have been come to on the charges and the actual punishment to follow is provisionally determined upon.
The position cannot be characterised as anomalous if the statute contemplates a reasonable opportunity at more than one stage.
In the present case the petitioner had reasonable opportunity to enter upon his defence at both the stages.
He fully availed himself of the first opportunity, but refused to avail himself of the second opportunity which was offered to him.
All the rules of natural justice were observed in the case.
(ii) The provisions of article 166(1) and (2) are directory, not mandatory; and, in order to determine whether there has been compliance with the said provisions, all that is necessary to see is that the requirements of the sub sections are met in substance.
(iii) After the integration of the two States of Travancore and Cochin, the expression " Our Government" means "The Council of Ministers" under the new set up of democratic Government in the United State.
The Rajpramukh as the head of the State is merely at constitutional head and is bound to accept the advice of his Ministers.
(iv) The consultation envisaged by article 320(3) does not extend to review petitions which the petitioner may choose to file as many times as he likes.
(v) The sanction of the Rajpramukli under article 20 of the Covenant of the United State of Travancore Cochin is necessary only before the institution of civil or criminal proceedings.
Departmental proceedings do not fall within the ambit of the said Article.
1013 Dattatreya Moreshwar Pangarkar vs The State of Bombay ([1952] S.C.R. 612), referred to.


judgement:
Appeal No. 2151 of 1966.
Appeal from the judgment and order dated August 3, 1965 of the Allahabad High Court in Original Suit No. I of 1964.
section V. Gupte and J., P. Gopal, for the appellants.
A. K. Sen, Rameshwar Nath and Swaranjit Sodhi, for the respondent.
575 The Judgment of Court was delivered by Ray, J. This is an appeal by certificate from the judgment and decree dated 3 August, 1965 of the High Court of Allahabad decreeing the, respondents suit for the sum of Rs. 4,11,367.92.
The respondent filed the suit on 16 May, 1953 against the appellant for the recovery of Rs. 4,11,367.92 with interest and costs.
The respondent 's case in short was that the respondent on 30 September, 1942 deposited a sum of Rs. 4,00,000 with M/s India Supplies whereof the appellants were the partners on the condition that interest would be payable @ 7/9 per cent per month and that the respondent would be entitled to withdraw the deposit on demand.
The suit was filed in the court of the First Civil Judge, Kanpur.
The evidence was concluded before the Civil Judge, Kanpur.
Thereafter by an order dated 12 May, 1964 of the High Court at Allahabad the suit was transferred to the High Court in its original ,civil jurisdiction.
The High Court heard the suit and on 3 August, 1965 decreed the suit in favour of the respondent.
At the trial the issues were first whether the respondent deposit ed the sum of Rs. 4,00,000 with the appellant and secondly whether the suit was barred by time.
The entire controversy in the suit is whether it was a case where money was deposited under an agreement and that it was payable on demand or whether it was a case of an ordinary loan of Rs. 4,00.000.
The respondent contended that Article 60 of the Indian Limitation Act, 1908 was the relevant Article because if was a case of money deposited under an agreement that it was payable on demand and therefore the limitation would commence from the date of demand and the suit was filed within three years from the demand.
The rival contention of the appellant was that it was money lent under an agreement that it was payable on demand and the loan was made on 30 December, 1942 and therefore the suit not having been filed within 3 years from the date of the loan under Article 59 was barred by limitation.
In the year 1942 Kailashpat Singhania and Pushpa Devi wife of Lakshmipat Singhania were partners of India Supplies along with the defendants.
Defendant Ram Janki Devi is the wife of Ram Ratan Gupta and the other defendant Lal Ram Gopal Gupta is a brother of Ram Ratan Gupta and married Padampat Singhania 's sister 's daughter.
The Singhania group and the Gupta 576 group were the partners of India Supplies.
The Singhania and the Gupta groups were also both interested in the business of Lakshmi Ratan Cotton Mills, The evidence on behalf of the respondent is that Lakshmi Rattan Cotton Mills a limited Company acted as financiers and bankers of India Supplies.
In the year 1942, Lakshmi Ratan Cotton Mills was the creditor of M/s. India Supplies for the approximate sum of Rs. 4,00,000.
Lakshmi Ratan Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 4,00,000.
Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies.
India Supplies could not repay Lakshmi Ratan Cotton Mills.
Thereafter India Supplies proposed that the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of India Supplies to Lakshmi Ratan Cotton Mills.
The respondent accepted the said proposal and thereafter a letter dated 29 September, 1942 was written by Ram Ratan Gupta head of the Gupta group on behalf of India Supplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rate of interest as agreed upon".
The respondent was to place to the credit of Lakshmi Ratan Cotton Mills a sum of Rs. 4,00,000 in its account with the respondent thus reducing the indebtedness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000.
Disputes and differences arose between the two groups thereafter.
In 1944 there was an arbitration award.
The Singhanias went out of both India Supplies and Lakshmi Ratan Cotton Mills and the Gupta groups carried on both the businesses.
One of the books of account of the respondent, namely, the roznamcha (daily book) under the entry 30 September, 1942 shows that according to the letter of India Supplies the sum of Rs. 4,00,000 was deposited in the name of India Supplies.
The other books of account of the plaintiff are khata (ledger) and nakalbahi (journal).
The respondent also relied on the pass book entry being Ex A 4 which shows that a sum of Rs. 4,00,000 was withdrawn on 30 September, 1942 by the appellant from the respondent as a banker and along with the interest from time to time the amount of Rs. 4,00,000 stood with the appellant in the deposit account.
The balance sheet of the appellant as on 30 June, 1943 being Ex.
A 4 showed that a sum of Rs. 4,00,000 was unsecured loan from the respondent.
Counsel on behalf of the appellant contended that the use of the word 'deposit by itself occurring either in the roznamcha or in the letter dated 29 September, 1942 written by Ram Ratan Gupta would not be decisive of the question whether it was a case of deposit of the sum of Rs. 4,00,000 by the respondent with the appellant under an agreement that the same would be paid on 577 demand.
At one stage in the proceedings there was a controversy as 'to whether Rain Ratan Gupta had authority to bind the appellant by the letter dated 29 September, 1942.
There is evidence that Ram Ratan Gupta looked after the business of the appellant and acted on behalf of the firm of the appellant in ordinary mercantile transaction.
Counsel for the appellant in all fairness did not question the authority of Ram Ratan Gupta to bind the firm of the appellant.
It was said by counsel for the appellant that there were six principal reasons to indicate that, it was a case of an ordinary loan of Rs. 4,00,000 and not an instance of the sum of Rs. 4,00,000 being deposited by the respondent with the appellant under an agreement that the same would be paid on demand.
The primary and pre eminent point emphasized by the appellant was the background of the transaction between M/s India Supplies on the one hand and Lakshmi Ratan Cotton Mills on the other, that moneys were lent and advanced by Lakshmi Ratan Cotton Mills to India Supplies from time to time and all that happened was that in place of Lakshmi Ratan Cotton Mills the respondent became the creditor of the firm of the appellants.
There was just a substitution of the creditor debitor relationship by substituting the respondent in place of Lakshmi Ratan Cotton Mills as the creditor.
Secondly, it was said that there was never any payment of money in cash and adjustment entries were made in the books of the respondent.
Thirdly, monies were not given nationally for the convenience of the respondent banker.
Fourthly, monies were required by the appellant for his own business because Lakshmi Ratan Cotton Mills refused to help the appellant any more.
Fifthly, exhibit A 4 the pass book would show that it was a case of advance of Rs. 4,00,000 by the respondent to the appellant, and finally, the appellants were not bankers and therefore it was improbable that the respondents who were bankers would deposit with the traders the sum of Rs. 4,00,000.
Counsel for the appellant relied on the decision of this Court in V. E. A. Annamalai Chettiar & Anr.
vs section V. V. section Veerappa Chettiar(1) in support of the proposition that the answer to the question as to whether it was a loan or deposit would not depend merely on the terms of the document but had to be judged from the intention of the parties and the circumstances of the case.
That is manifestly the correct approach.
The case of a deposit is something more than a mere loan of money.
It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money.
The surrounding circumstances, the relationship and character of the (1) 578 transaction and the manner in which parties treated the transaction will throw light on the true form of the transaction.
The Judicial Committee in Nawab Major Sir Mohammad Akbar Khan vs Attar Singh & Ors.
(1) spoke of the distinction bet ween the deposit and loan to be that the two terms were not mutually exclusive but that a deposit not for a fixed term did not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him.
Though,documents by themselves are not conclusive of the question they have the evidentiary value and if they corroborate the oral evidence the importance of the documents is magnified.
The letter exhibit A 5 bears the date 29 September, 1942 and is contemporaneous with the entire transaction between the appellant and the respondent.
The letter was as follows: "Messrs. Juggilal Kamlapat Kothl, Cawnpore.
Dear Sirs, As per my talk with Sir Padampat I shall thank you to credit a sum of section 4 lacs(Rupees four lacs only to the account of Messrs Lakshmi ratan Cotton Mills Co. Ltd., and debit the same to the account of India Supplies as deposit at the usual rate of interest as agreed upon by the partners of the said firm.
Thanking you, Yours faithfully, Sd/ R. Ratan Gupta".
The intrinsic evidence in the letter is that the sum of Rs. 4,00,000 was debited to India Supplies as deposit.
The words "debited as deposit", were criticised by counsel for the appellant to be meaningless.
Too much precision cannot always be expected in regard to use of foreign language by merchants and traders in their short memorandum.
The character of deposit is an inherent.impression in the writing.
The rozmancha refers to the letter and is therefore corroborative of the letter and the terms thereof.
The letter further shows that the terms were agreed to by the partners of the firm, namely, the partners of India Supplies and of ale respondent.
The respondent 's partner Padampat Singhania gave oral evidence and substantiated the terms of the letter and the respondent 's case.
Padampat Singhania was the person on behalf of the respondent who carried on the negotiations.
His evidence was therefore im portant.
The appellants did not examine themselves and did not (1) 63 I.A. 279.
579 give any evidence challenging the oral testimony of the respondent s partner.
On the contrary, the correctness of the, letter EX.
A 5 was accepted by the appellants ' witness Ram Ratan Gupta the author of the letter.
The roznamcha entry.
was proved by Gopi Kishan Saraugi a munim of the plaintiff.
The roznalucha entry was as follows "4,00,000 India Supply Ke nam Asoj Badi Chhat : 30 9 42 Lakshmiratan Cotton Mill Ki Chithi se apke nam mada deposit karaya panna 2486".
His evidence was that the books were systematically kept on 'mahaj ani" system in connection with the business.
The witness proved the Khata, the raznamcha and the nakalbahi entries.
In cross examination of Gopi Kishan Saraugi it was suggested that the entry under the date 30 September, 1942 in the roznamcha was not written at the same time.
The suggestion was that there was interpolation of the words "deposit karaya" in the roznamcha entry.
In cross examination of Padampat Singhania questions were asked about the rokar, khata, nakal bahi and roznamcha entries.
Padampat Singhania said that the entry of Rs. 4,00,000 was not recorded in the daily cash book but was recorded in the roznanicha.
He also said that credit and debit entries were made in the roznamcha, Padampat Singhania said that the entries were made by Gopi Kishan Jaipuria who was in a dying condition at the time the witness gave evidence.
It was suggested to Padampat Singhania that the words "de posit karaya" in the roznamcha entry were not written at the same sitting.
Padampat Singhania denied that, Counsel for the appellant contended that in the absence of Gopi Kishan Jaipuria the account books were not proved.
This is unacceptable for two reasons.
First, the account books were shown in cross examination of Padampat Singhania and question were asked on the same.
It is not open to the appellant to complain of lack of proof of account books when the documents are shown to the witness in cross examination.
Secondly, both Padampat Singhania and Gopi Kishan Saraugi spoke of the proper maintenance and keeping of books of account and that it was not possible to arrange the presence of the writer of the entry.
Suggestion of tampering is a serious one.
The original entries were called for from the High Court.
We had occasion to look into the originals.
We are in agreement with the High Court that the suggestion of fabrication is utterly unmeritious.
The words 'deposit karaya ' appear without any doubt to have been written at the same time as the rest of the writing.
It is in evidence that the reference to the page of the panna under that entry was written later inasmuch as the page 580 of the panna was put on when the panna was put on when the panna book was written.
The most important documentary evidence of the appellant namely, their book of account was not produced.
These books of the appellant would have shown how they treated the transaction, namely, whether it was a case of deposit or loan.
The irresistible inference from the non production of books of the appellant would arise that they would have supported the respondents case and that is why they were not produced.
The appellant 's contention that the background of the transaction was mercantile loan, would be more a conjecture than a conclusion to be arrived at.
The financial transactions between the respondent and Lakshmi Ratan Cotton Mills were running accounts.
It would, be more consistent to hold that,by allowing India Supplies a deposit of Rs. 4,00,000 India Supplies would be relieved of the situation of repaying the money immediately.
It is precisely.
because of the then inability of India Supplies to repay Lakshmi Ratan Cotton Mills that the parties resorted to the mode of having the use of the money by way of deposit.
The transaction was between the appellant, the respondent and Lakshmi Ratan Cotton Mills.
All figured in the transaction.
A more loan of Rs. 4,00,000 would not have sufficed the needs of the appellant who were then unable to pay the dues of Lakshmi Ratan Cotton Mills.
Some of the partners of the appellant and the respondent in the year 1942 were common.
It would be more explicable and natural course of events that monies would be kept in deposit with the appellant in order to enable them to have financial accommodation without immediate worry of repayment.
The mere fact that money in specie was not paid would not be destructive of deposit.
The respondent acted as bankers.
The, way in which the respondent made entries in the pass book of the appellant is consistent with their roznamcha, khata and nakal bahi books.
It was not a case of the respondent giving loan to the appellant for the obvious reason that the history of the transactions between the appellant and Lakshmi Rantan Cotton Mills show.% that the appellant had to be put on a footing of financial stability by giving the appellant the use of the sum. ' of Rs. 4,00,000 for a long time.
The absence of any negotiable instrument is significant.
A hundi or a promissory note would have been consistent with the case of a loan.
The relationship between the parties; the surrounding circumstances at the time of the transaction, the pecuniary position of the appellant are all overwhelming features to corroborats the oral as well as the documentary evidence of the respondent that the amount was deposited with the appellant.
The award dated 18 January, 1944 has also a tale to tell.
There were disputes between the partners of the various businesses in 581 which the Singhania and Gupta groups were interested.
These disputes were before the arbitrators.
One of the terms in the award was that the award in respect of Lakshmi Ratan Cotton Mills and India Supplies "do not cover the advances which either party or their separate firms may have made to all or any of them or their moneys which may be in deposit with them and they shall be payable and paid in their usual course".
This direction, in the award shows that there were advances which were in the nature of deposit and were not covered by the award.
The award would have evidentiary value to show as to how the parties treated and understood their financial dealings.
It is also significant that when the respondent demanded the money by a letter dated 27 April 1953 (exhibit 7) the appellant in their reply dated 5/6 May, 1953 (exhibit 6) totally denied the claim.
The respondent set out all the facts of deposit of the money with advancing loan.
The non production of the appellant 's accounts coupled with the appellants staying away from the witness box indicates the inherent infirmities in the appellant 's case.
Counsel for the appellant contended that there was a demand for a part of the amount in the year 1943 because Padampat Singhania said that there was demand in the month of October, 1943 and therefore limitation would start from that date.
The view of Calcutta, Bombay and Madras High Courts is that there must be an unqualified demand for the whole sum before the limitation can star in case of demand for return of the amount deposited.
(See Jogendranath Chokerbutty vs Dinkar(1) Ram Motigaur vs Naranji ( 2 ) and Subbaih Chetty & Ors.
vs Visalakshgi Achi) ( 3 ) .
That is the correct position in law.
Counsel for the appellant did not contend to the contrary in view of the consensus of opinion of the different High Courts.
It is also important to bear in mind that a demand in the year 1943 for a part of the amount would not be effective because there were common partners in the firms of the respondent and the appellant.
For these reasons we are of opinion that the High Court was correct in decreeing the suit.
The appeal therefore fails and is dismissed with costs.
G. C. Appeal dismissed.

summary/full:
Two groups known as the Singhania group and the Gupta Group were partners in M/s. India Supplies.
Both were also interested in the business of Lakshmi Ratan Cotton Mills.
In the present litigation the Gupta group was represented by the appellants and the Singhania group by the respondent.
In the year 1942 Lakshmi Rattan Cotton Mills was the creditor of M/s. India Supplies for the approximate sum of Rs. 4,00,000.
Lakshmi Ratan Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 400,000.
Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies.
India Supplies could not repay Lakshmi Ratan Cotton Mills.
Thereafter India Supplies proposed that the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of the India Supplies to Lakshmi Ratan Cotton Mills.
The respondent accepted the 'said proposal and thereafter a letter dated 29, September 1942 was written by the head of the Gupta group on behalf of India Supplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rate of interest as agreed upon.
" The respondent was to place to the credit of Lakshmi Ratan Cotton Mills a sum of Rs. 4,00,000 in its account with the respondent thus reducing the indebtedness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000.
Disputes and differences arose between the two groups thereafter.
In 1944 there was an arbitration award.
The Sing Hanias went out of both India Supplies and Lakshmi Ratan Cotton Mills, and the Gupta group carried on both the businesses.
The present suit was, filed by the respondent in 1953.
The claim was based on the aforesaid deposit of Rs. 4,00,000.
The suit though originally filed in the court of the Civil Judge, Kanpur was tried by the Allahabad High Court in its original jurisdiction.
The suit was decreed in favour of the respondent.
With certificate appeal was filed in this Court.
The questions for consideration were : (i) whether the money was deposited under an agreement and payable on demand so that limitation would commence from the date of demand within three years of which it was filed, or whether it was a loan made on 30th December 1942 in respect of which the suit was barred under article 59 by limitation, the same not having been filed within three years from the date of the loan; (ii) whether there was a demand for a part of the amount in 1943 and therefore limitation would start from that date.
HELD: (i) The amount was a deposit and not a loan.
The case of a deposit is something more than a mere loan of money.
It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money.
The surrounding circumstances, the relationship and character of the transaction and the manner in which the parties treated the transaction will throw light on the true form of the transaction.
[577 H] 574 V.E, A. Annamalai Chettiar & Anr.
vs section V. V. section Veerappa Chettiar, and Nawab Major Sir Mohammad Akbar Khan vs Attar Singh & Ors., 63 I.A. 279, referred to.
Some of the partners of the appellant and the respondent in the year 1942 were common.
It would be more explicable and natural course of events that monies would be kept in deposit with the appellant in order to enable them to have financial accommodation without immediate worry of repayment.
The mere fact that money in specie was not paid would not be destructive of the case of deposit.
The respondent acted as bankers.
The way in which the respondent made entries in the pass book of the appellant was consistent with the roznamcha, khata and nakalbahi books.
It was not a case of the respondent giving loan to the appellant for the obvious reason that the history of the transaction between the appellant and Lakshmi Cotton Mills showed that the appellant had to be put on a footing of financial stability by giving the appellant the use of the sum of Rs. 4,00,000 for a long time.
The absence of any negotiable instrument was significant.
A hundi or a promissory note would have been consistent with the case of a loan.
The relationship between the parties the surrounding circumstances at the time of the transaction, the pecuniary position of the appellant were all overwhelming features to corroborate the oral as well as the documentary evidence of the respondent that the amount was deposited with the appellant.
[580 E H] The arbitration award in the dispute between the parties gave directions on the basis that there were advances between the parties which were in the nature of deposit and were not covered by the award.
, [581 A B] In contemporarious documents the appellant never said that it was a case of advancing loan.
The non production of the appellant 's accounts coupled with the appellant 's staying away from the witness box indicated the inherent infirmities of the appellant 's case.
[581 D] (ii)There is a consensus among the High Courts that there must be an unqualified demand for the whole sum before the limitation can start in case of demand for return of the amount deposited.
Further, a demand in the year 1943 for a part of the amount would not be effective because there were common partners in the firms of respondent and the appellant.
1581 E G] Jogendranath Chakerbutty vs Dinkar Ram, A.I.R. 1921 Cal.
644, Motigauri vs Naranji, A.I.R. 1927 Bom.
362 and Subbaih Chetty & Ors.
The appeal must accordingly be dismissed.