S.S. Chadha, J.
1. The main question involved in this petition under Article 226 of the Constitution of India is whether the Central Board of Excise and Customs could invest in the Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi, the powers of a Collector of Central Excise for the purposes of Section 11-A of the Central Excises and Salt Act, 1944 and the assign to him any pending cases for investigation and adjudication.
2. The National Tobacco Co. of India Limited was incorporated and was an existing company at the relevant time within the meaning of the Companies Act, 1956 with its registered office at Calcutta. It was engaged, inter alia, in the business of manufacture and sale of cigarettes and smoking mixtures. It had a factory at Agarpara in the State of West Bengal and another factory at Biccavole in the State of Andhra Pradesh. With effect from March 1, 1977 it merged with M/s. Duncan's Agro Industries Limited, the petitioner herein (for short called Duncan's), another existing company with the then registered name of M/s. Birpara Tea Company. The merger and change in the name was pursuant to a scheme of amalgamation duly sanctioned by the Calcutta High Court vide its orders dated January 18, 1978 under the provisions of the Companies Act, 1956. After the merger, Duncan's had two divisions, tea division and tobacco division. The tobacco division took over the aforesaid two factories for manufacture of cigarettes and smoking mixtures, one at Biccavole, Andhra Pradesh and the other at Agarpara, West Bengal.
3. Another company called New Tobacco Company Limited (herein after called NTC) was incorporated in January, 1984. NTC became in March, 1984 a subsidiary of Duncan's. Under another scheme of arrangement under the provisions of Sections 391 to 394 of the Companies Act, 1956 entered into between Duncan's and NTC, the undertakings of the said tobacco division relating to the manufacture and sale of cigarettes and smoking mixtures were transferred to NTC. The said scheme was sanctioned by the Calcutta High Court on July 31, 1984 but became effective from April 1, 1984. Under the said scheme all the assets and liabilities relating to the tobacco division i.e. manufacture and sale of cigarettes and smoking mixtures both at Agarpara, West Bengal and Biccavole, Andhra Pradesh were transferred to NTC. However, with effect from March 6, 1986, NTC ceased to be a subsidiary of Duncan's.
4. Under the provisions of Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) excise duty was at all material times and is payable on the manufacture of cigarettes and smoking mixtures. The National Tobacco Company of India was duly licensed under the provisions of the Act and/or the Central Excise Rules, 1944 (hereinafter referred to as the Rules) in respect of both the factories, one at Biccavole, Andhra Pradesh and the other at Agarpara, West Bengal. After the merger of the National Tobacco of India Ltd. with Duncan's, new licenses under the Act and/or the Rules were duly granted to Duncan's.
5. The first impugned show cause notice dated April 9/21, 1986 was issued by the Collector of Central Excise, Guntur to 18 parties including Duncan's, NTC and their Directors. The notice consists of two parts. Part I covers detailed allegations but briefly they are regarding manipulation of the raw material accounts to facilitate the suppression of the production of the cigarettes, failure to account for fully the production of cigarettes recorded in machine production cards and suppression/non-accounting of production of cigarettes from out of unaccounted quantities of cut tobacco resulting from ripping operations of cigarettes and unused cut tobacco and consequential evasion of duty on alleged unaccounted production in the years 1983, 1984 and 1985. Part II similarly covers allegations but in brief they are regarding suppression of production of cigarettes from out of quantities of tobacco recorded in E.B. 3 of M/s. New Tobacco Company Ltd., Biccavole as dispatched or lost in storage from the factory but established as not actually dispatched or lost and consequential evasion of duty on quantities of cigarettes produced out of the aforesaid quantities of tobacco in 1984 and 1985. After detailing the material on the basis of which the show cause notice was issued, it is stated that it appears that the manufacturers have not accounted for the full production of cigarettes in the years 1983, 1984 and 1985 and total duty of Rs. 73,92,20,096.68 is liable to be paid by the parties to the show cause notice. The extended period of limitation under Section 11-A of the Act is invoked for the reasons recorded under Part I and Part II since the manufacturer and all other parties to the notice appear to have suppressed the production with intent to evade payment of duty in the manner detailed in Part I and Part II of the show cause notice. It is alleged that the manufacturers and all other parties to the notice have not maintained correctly the R.G.I. and E.B. 3 which amounts to contravention of Rules 53 and 226 of the Rules and by clearing the unaccounted for quantities of cigarettes without payment of duty and without proper gate passes. They are alleged to have contravened the provisions of Rule 9(1), 52-A(1), 53 and 226 of the Rules and thus are liable for payment for duty of Rs. 73,92,20,096.68 under Rule 9(2) of the Rules read with Section 11-A of the Act on the quantities referred to in Part I and Part II and penalty under Rules 9(2), 52-A(4), 210 and 226 of the Rules.
6. The impugned Notification No. 330/86 dated May 29, 1986 was issued in exercise of the powers conferred by clause (b) of Section 2 of the Act and Rule 4 of the Rules. The Central Board of Excise and Customs thereby appointed the Director (Audit) in the Directorate General, Inspection of Audit (Customs & Central Excise), New Delhi, as Central Excise Officer and invested him with the powers of Collector of Central Excise, to be exercised by him throughout the territory of India, for the purpose of investigation and adjudication of such cases, as may, from time to time, be assigned to him by the said Central Board of Excise and Customs. By the impugned order dated February 11, 1987, in exercise of the powers conferred under Notification No. 330/86, dated May, 29, 1986, the Central Board of Excise and Customs thereby assigned to the Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi the cases annexed to that order for the purpose of investigation and adjudication. The list included the cases relating to the said show cause notice dated April, 9/21, 1986.
7. Subsequently, the second impugned show cause notice dated March, 24, 1987 was issued by the Collector of Central Excise, Guntur, in continuation of the earlier show cause notice dated April 9/21, 1986. Certain additional material was collected on the basis of the intelligence gathered by the officers of the Directorate of Revenue Intelligence, Officers of the Directorate of Anti-Evasion and Central Excise Officers of Guntur, Hyderabad and other Collectorates in simultaneous search operations on August 12, 1986 at several places, connected with the production, storage, distribution and sale of the cigarettes manufactured by or on behalf of Duncan's and/or NTC and seizure of incriminating records. The petitioner was required also to show cause before the Director (Audit) in response to the subsequent show cause notice.
8. In the meanwhile, a complaint was filed on October 16, 1986 under Section 190 read with Section 200 of the Code of Criminal Procedure in the Court of Special Judge for Economic Offences, Hyderabad against 40 named accused alleging commission of offences under Section 9(1)(b), 9(1)(bb), 9(1)(bbb), 9(1)(c) and 9(1)(d) of the Act read with Section 120-B and Section 109 of the Indian Penal Code. The dates of commission of offences is on various dates between September 1, 1981 to November 30, 1985. Factual averments in the complaint are almost the same as are contained in the aforesaid show cause notice dated April 9/21, 1986 to bring out the offences committed by the accused. The detailed averments have been made as to which of the accused have committed the offences in suppressing the assessable value of the cigarettes by misdeclaration of the price lists and clearance documents and thereby evaded payment of duty to the extent specified therein or which of the accused have not fully accounted for the production and removing the unaccounted cigarettes without payment of duty in contravention of the statutory provisions and thereby evaded payment of duty or which of the accused have committed offences in transporting from place of production the cigarettes and concealing the same or which of the accused have committed offences by giving false value instead of the correct values of cigarettes as computed from the actual realisation for assessment purposes under Section 4 of the Act and by suppressing the actual production and account of the cigarettes and which of the accused have abetted in the commission of the aforesaid offences.
9. Duncan's filed the present writ petition on April 18, 1987 seeking a writ of certiorari or other appropriate writ, order or direction calling for the records of the case and for quashing the impugned show cause notice dated April 9/21, 1986 and the subsequent show cause notice dated March 23, 1987 as also the Notification No. 330/86, dated May 29, 1986 and the order dated March 2, 1987 assigning the cases relating to the said show cause notice to the Director (Audit), Customs and Central Excise, New Delhi. The writ petition was admitted after show cause notice and in the meanwhile the proceedings were stayed till the disposal of the writ petition.
10. The following main submissions have been advanced by Shri K. K. Venugopal and Shri Soli Sorabjee, the learned counsel for the petitioners :-
I. That the impugned Notification No. 330/86, dated May 29, 1986 appointing the Director (Audit) as Central Excise Officer and investing him with powers of Collector of Central Excise, to be exercised by him throughout the territory of India, for the purpose of investigation and adjudication of cases to be assigned to him is without any authority of law and thus ultra virus the provisions of Section 11-A of the Act.
II. That the order dated February 11, 1987 transferring the case of the petitioner to Director (Audit) is illegal as there is no provision in the Act or the Rules under which the proceedings can be transferred from one adjudicating authority to another.
III. That the actions on the part of the respondents in proceeding simultaneously with the show cause notice dated April 9/21, 1986 and the Criminal Complaint dated October 16, 1986 based on identical allegation of fact are patently vocative of Article 20(3) of the Constitution.
IV. That the scheme of arrangement under the Companies Act, 1956 between Duncan's and NTC sanctioned by the Calcutta High Court makes clear provisions for the discharge of liabilities of excise duty by NTC and the terms of the scheme have been accepted by the respondents with the result that there is no liability of Duncan's and/or its Directors.
V. That the scheme of the rewards evolved by the Government results in the proceedings against the petitioner being vitiated on the principle of departmental bias and pecuniary interest of Director (Audit) in the proceeding.
Vesting of powers under the Act on the Director (Audit)
11. Central Excise Officer has been defined in Section 2(b) of the Act as means any officer of the Central Excise Department, or any person (including an officer of the State Government invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) with any of the powers of a Central Excise Officer under this Act. Rule 4 of the Rules relates to the appointment of officers and it provides that the Central Board of Excise and Customs may appoint such persons as it thinks fit to be a Central Excise Officer, or to exercise all or any of the powers conferred by these Rules on such officer. Under Rule 2(ii), territorial jurisdiction has been conferred on the Collector of Central Excise, Guntur in respect of the petitioner. By the impugned Notification No. 330/86, dated May 29, 1986, the Central Board of Excise and Customs thereby appointed Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi as Central Excise Officer and invested him with the powers of Collector of Central Excise, to be exercised by him throughout the territory of India, for the purpose of investigation and adjudication of such cases, as may, from time to time, be assigned to him by the said Central Board of Excise and Customs. The first submission of Shri K. K. Venugopal, the learned counsel for the petitioners is that it is not permissible under the provisions of the Act or the Rules to appoint any person as Collector of Central Excise with all India jurisdiction by the Central Board of Excise and Customs and that the said Notification No. 330/86, dated May 29, 1986 is thus ultra vires.
12. The counsel invited our attention to the scheme contained in Section 11-A of the Act for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. Section 11A was inserted by Section 21 of the Amendment Act No. 25 of 1978 with effect from November 17, 1980. It is in substitution of Rule 10 of the Rules which was omitted with effect from November 17, 1980. Rules 10 and 10-A (operative prior to August 6, 1977) also provided for recovery of duties and charges short levied or erroneously refunded. The period of issue of show cause notice was only three months and it could be issued by the Assistant Collector, Central Excise. Rule 10 which was operative from August 6, 1977 to November 16, 1980 provided a period of six months and the show cause notice could be issued by the proper officer. It was also provided that in cases where any duty had not been levied or paid, or had been short levied or had not been paid by reason of fraud, collusion or any willful mis-statement or suppression of facts by such person or erroneously refunded etc. the period was five years instead of six months. Section 11-A was inserted by Amendment Act No. 25 of 1978 and came into force on the appointed date i.e. November 17, 1980. Further amendments were made in 1985. By Section 3 of the Amendment Act of 1985, the words 'as if' for the words 'Central Excise Officer' the words 'Collector of Central Excise' and 'were substituted in the proviso to Section 11-A after the words 'as if'. In sub-section (2) of Section 11-A for the words 'The Assistant Collector of Central Excise' the words 'The Assistant Collector for Central Excise or, as the case may be, the Collector of Central Excise' were substituted. Prior to the amendment of 1985, the initiation of the proceedings by issue of show cause notice could be by any Central Excise Officer but the determination had to be by the Assistant Collector of Central Excise.
13. The result of the amendment of the proviso to sub-section (1), according to the counsel, is that henceforth show cause notice in regard to duty of excise short levied or short paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any provisions of the Act or Rules with intent to evade payment of duty had to be issued in such a case and has to be determined by the Collector of Central Excise instead of Assistant Collector of Central Excise. This is reinforced by the fact that all proceedings pending as on December 27, 1985 with the Assistant Collector, Central Excise under proviso to sub-section (1) of Section 11-A of the Act, stood transferred to the Collector of Central Excise by virtue of Section 8 of the Amendment Act 79 of 1985. Reference is made to the objects and reasons of the amendment contained in Current Central Legislation, 1986 (Vol. 12) to contend that the amendment was made in the light of experience gained in the implementation of the Act. It is urged that the reason of amendment of the proviso to sub-section (1) of Section 11A is that a person of responsibility and experience of the rank of Collector of Central Excise having territorial jurisdiction should only issue show cause notice and determine whether any duty of excise has been short levied or short paid etc. by reason of fraud, collusion or any willful mis- statement or suppression of facts etc. The contention is that whenever powers are conferred under the Act on the designated officer, as Collector of Central Excise in Section 11-A, it cannot be invested on any other officer of the Central Excise Department.
14. Reference is then made to the definition of 'Collector' contained in Rule 2(ii) meaning in relation to 'Excisable goods' other than salt in the District of Guntur, the Collector of Central Excise, Guntur. Relying on 'T. B. Ibrahim v. Regional Transport Authority, : 4SCR290 and 'State of U. P. v. Babu Ram', : 1961CriLJ773 it is contended that the Rules are to read as part of the Act. The jurisdiction has been conferred on the Collector of Central Excise, Guntur both territorial as well as pecuniary and the Legislature has also identified an existing person and a named functionary to exercise the powers of adjudication and determination and it could be exercised by that repository alone. The jurisdiction of the Collector of Central Excise, Guntur in the case of the petitioner is non-negotiable, non- transferable and no one else could be invested. Under Rule 2(ii) the definition is made inclusive of an Additional Collector but that officer can exercise power statewise only or for any specified area therein, but not the whole of India otherwise the legislature could have used that whole of India instead of State. It is urged that by the impugned notification the respondents have defeated and nullified the legislative intent by investing powers in the Director (Audit).
15. Assuming that the Board has been conferred power to invest any person with the powers of the Central Excise Officer under the Act, the challenge is that this power is uncannalised, uncontrolled and unguided, and thus vocative of Article 14 of the Constitution. The power contained in Section 11A on the Collectors of Central Excises is a quasi judicial power which cannot ordinarily be delegated unless the law expressly or by necessary implication permits. If permissible, it has to be regulated by the guidelines contained in the statute. The counsel contends that the Court should read down Section 2(b) and confine it to powers such as under Sections 19, 21, 25 or 26(ii) other than adjudications under Section 11-A.
16. Another facet of the same submission is that Director (Audit) is already a Central Excise Officer and he could not be invested with the powers of the Central Excise Officer under Section 2(b) of the Act. Reference is made to the notification dated August 4, 1959 by which the appointment of Shri M. M. Bhatnagar was notified as Probationary Superintendent of Central Excise, Class I, in the Central Excise Service Class I, with effect from July 13, 1959 on the results of the combined competitive examination, held by the Union Public Service Commission in 1958. By the notification dated May 16, 1981, the President was pleased to appoint Shri M. M. Bhatnagar, an Officer in the Grade of Collector of Customs & Central Excise, Level II of the Indian Customs and Central Excise Service, Group A to officiate in the grade of Collector of Customs & Central Excise, Level I with effect from May 16, 1981. By the notification dated August 23, 1985 on transfer Shri M. M. Bhatnagar assumed charge of Officer on Special Duty (Central Excise), Bill in the Directorate General, Inspection of Audit (Customs & Central Excise), New Delhi in the forenoon of June 17, 1985. By the notification dated January 21, 1987, it was notified that Shri M. M. Bhatnagar, an officer of the grade of Collector of Customs & Central Excise, assumed charge of the post of Director of Audit (Customs and Central Excise), New Delhi with effect from December 9, 1987. The contention is that Shri Bhatnagar being already an officer of the Central Excise Department was covered with the first part of the definition contained in Section 2(b) and could not be any person, who can be invested with any of the powers of the Central Excise Officer under the Act.
17. In order to appreciate these contentions, we may go into history about the field organisation of the Central Excise Department. Till 1938, the administration of Central Excise duties was left in the hands of the Provincial Governments in their respective territories. At that time the Central Board of Revenue directly controlled only the customs administration of major ports through Collectors of Customs and of the minor ports, land customs frontiers and the levy on salt through the Salt Department. In 1983, the Central Board of Revenue assumed direct responsibility also for levy and collection of Central Excise duties to introduce uniformity in procedures, rules and regulations and to improve realisations. The Central Excise Department was thus built around the nucleolus of the Salt Department and named Central Excise and Salt Revenue Department. British India was divided in 1938 into three administrative units, Northern India was placed under a Commissioner with a Deputy Commissioner at Delhi and another in Calcutta; Bombay and Madras were placed under Collectors. Later, the jurisdiction of the Commissioner, Northern India, was bifurcated into North West India and North East India and they were placed in charge of Collectors with headquarters at Delhi and Calcutta respectively. The designation Commissioner in the Excise Department was thus extinguished and the designation 'Collector of Central Excise', as in the Customs Department was adopted for the head of each independent field organisation but in Madras and Bombay heads of departments continued to be designated 'Collectors of Salt Revenue' until 1944.
18. With the imposition of duty on tobacco in 1943 the work expanded considerably and posts of Additional Collectors were created in 1943 for the four Collectorates. In 1943, there were no less than 10 separate excise Acts (the excise on Kerosene being covered by a part of the Indian Finance Act, 1922) and 11 sets of statutory rules; and there were also 5 Acts relating to salt, the duty on which was by a wide margin the oldest of our taxes on indigenous commodities. It was felt that this agglomeration of statutes and regulations dealing with similar matters is neither convenient for the public nor conducive to well-organized administration. By L.A. Bill No. 40 of 1943 it was proposed to consolidate in a single enactment all the law relating to central duties of excise and to the tax on salt and to embody therein a Schedule, similar to that in the Indian Tariff Act, 1934, setting forth the rates of duty livable on each class of goods. The preamble of the Central Excises and Salt Act, 1944 provides that it was enacted to consolidate and amend laws relating to central duties of excise and salt. The enactments specified in Second Schedule read with Section 39 were repealed. Section 2(b) of the Act then defined the Central Excise Officer means any officer of the Central Excise Department, or any person invested by Central Board of Revenue with any of the powers of the Central Excise Officer under the Act. Section 2(b) does not impose, in our view, any territorial jurisdiction on the Central Excise Officer or any person invested with any of the powers of Central Excise Officer under the Act. The territorial jurisdiction is left to be decided by the Rules.
19. Under Section 37 of the Act, the Central Government has been empowered to make rules to carry into effect the purposes of the Act. The counsel is right in his submissions that Rules made under a statute has to be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act. Rules may, inter alia, provide for the assessment and collection of duties of excise, the authorities by whom functions under the Act are to be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable, and the recovery of duty not paid etc. When Central Excise Rules, 1944 were originally notified on February 28, 1944, the Collector was defined in Rule 2(ii) means -
(a) in the Province of Coorg, the Chief Officer in charge of revenue administration;
(b) in the Province of Sind, such officer as may be appointed by the Central Board of Revenue to perform the duties of a Collector under these Rules;
(c) in the Province of Bombay and in the Central Provinces and Berar, the Collector of Central Excise, Bombay;
(d) in the Province of Madras, the Collector of Central Excise, Madras;
(e) in the Provinces of Assam, Bengal and Orissa, the Collector of Central Excise, Calcutta;
(f) in the United Provinces and Bihar, the Collector of Central Excise, Allahabad;
(g) in the Provinces of the Punjab, North-West Frontier, Baluchistan, Delhi and Ajmer-Merwara, the Collector of Central Excise, Delhi;
and includes any officer specially authorised under Rule 4 or 5 to exercise throughout a province, or any specified area therein, all or any of the powers of the Collector under these rules.
The territories in whole of India were thus distributed between five Collectors of Central Excise under Clauses (c) to (g) and two other officers under Clauses (a) and (b). Definition of the Collector was extended in to include any officer specially authorised under Rule 4 or 5 to exercise throughout a province, or any specified area therein, all or any of the powers of a Collector under the Rules. From the very inception of the Rules, the intention of the Rule-making authority was that there could be more than one Collector of Central Excise for any territory. This definition of Collector has been amended from time to time in the Rules distributing the territorial jurisdiction between various Collectors of Central Excise. The definition is made inclusive now of Additional Collector and any officer specially authorised under Rule 4 or 5 to exercise throughout any State or any specified area therein all or any of the powers of the Collectors under the Rules. By virtue of the provisions contained in Section 12-A, a Central Excise Officer may exercise the powers and discharge the duties conferred or imposed under the Act or any other Central Excise Officer who is subordinate to him. Section 37 of the Act contains the powers of delegation and any power exercisable by the Collector of Central Excise under the Act may be exercisable also by a Deputy Collector or Assistant Collector empowered in this behalf by the Central Government. Thus, in our view, there is nothing in the Scheme of the Act that only one Collector was vested with the jurisdiction over a manufacturer or producer.
20. Rule 4 deals with the appointment of the officers. The Central Board of Excise and Customs may appoint such persons as it thinks fit to be Central Excise Officers. The Central Board of Excise and Customs may appoint such persons as it thinks fit to exercise all or any of the powers conferred by these rules, on such officers. Under Rule 5, unless the Central Government in any case otherwise directs, the Collector may authorise any officer subordinate to him to exercise throughout his jurisdiction, or in any specified area therein, all or any of the powers of a Collector under these Rules. Rules 6 provides that the Collector may perform all or any of the duties or exercises all or any of the powers assigned to an officer under the Rules. These provisions show that it is permissible to confer concurrent jurisdiction on two or more set of officers of the Central Excise Department in respect of an area or premises where excisable goods are manufactured. There is no express provision by which the Central Government is prohibited or the Central Excise Officers are constrained to exercise concurrent jurisdiction.
21. The recruitment to the Indian Customs, Central Excise Service Group A is made in accordance with the Rules framed in exercise of the powers conferred by proviso to Article 309 of the Constitution. The President has made the existing rules called the Indian Customs and Central Excise Service Group A Rules, 1987 but the method of recruitment is pari materia in the earlier Rules. Recruitment is made as a result of combined competitive examination consisting of preliminary examination and main examination conducted by the Union Public Service Commission for recruitment to the service. The recruitment to the service is also made by promotion in the manner provided in the said rules. On appointment of these officers, they became members of the Central Excise Department and by virtue of the definition contained in Section 2(d) read with Rule 4, they became Central Excise Officers.
22. Under the Allocation of Business Rules, 1961, the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi is under the Ministry of Finance, Department of Revenue. The Department of Revenue handles all matters relating to Central Board of Excise and Customs and Central Board of Direct Taxes. The Government of India in the Department of Revenue and Banking vide order dated September 22, 1976 set up a Directorate of Internal Audit for Customs and Central Excise Department and posts were sanctioned and Director of Inspection (Audit) to oversee the working of the internal audit organisation of the various customs houses and central excise collectorates was set up. It formed part of the Directorate of Inspection (Customs and Central Excise) including Directorate of Audit under the Department of Revenue as a separate department and not part of or a subordinate organisation of the Central Excise Department. There are four subordinate organisations detailed in the Allocation of Business Rules, 1961, namely, Income-tax Department, Customs Department, Central Excise Department and the Narcotics Department but they are separate and distinct from the Directorate general of Inspection and Audit (Customs & Central Excise). By the aforesaid notification dated January 21, 1987, Shri M. M. Bhatnagar assumed charge of the post of Director (Audit). Customs and Central Excise in the Directorate. The Director (Audit) is thus, in our view, not a Central Excise Officer.
23. The definition contained in Section 2(b) of the Act says in addition that Central Excise Officer means any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (54 of 1963) with any of the powers of the Central Excise Officer under this Act. By the impugned notification dated May 29, 1986 in exercise of the powers conferred by clause (b) of Section 2 of the Act, and Rule 4 of the Rules, the Central Board of Excise and Customs thereby appointed a Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi, as Central Excise Officer and invested him with the powers of Collector of Central Excise, to be exercised by him throughout the territory of India. The power, however, was restricted for the purposes of investigation and adjudication of such cases, as may, from time to time, be assigned to him by the said Central Board of Excise and Customs. Under the second part of the definition contained in Section 2(b) any person including an officer of the State Government, could be invested by the Central Board of Excise and Customs with any of the powers of a Central Excise Officer under the Act and this has exactly what has been done by the impugned notification dated May 29, 1986. It is not necessary in this case to determine whether 'any person' would include an existing officer of the Central Excise Department as, in fact, the Director (Audit) is not already an officer of the Central Excise Department. The Board has been conferred with the jurisdiction to invest a person with any of the powers of a Central Excise Officer under the Act. The Legislature has authorised the Board to confer on such person all or any one or more powers and that would necessarily include the power of a Collector exercisable under Section 11-A of the Act. There is no warrant to give a limited or a narrow meaning to the language employed by the legislature in the second part of Section 2(b) so as to restrict to the investing of powers under Sections 19, 21, 25 or 26 as is suggested and not Section 11-A. The investing of the powers means the totality of the powers, administrative, territorial and pecuniary. This interpretation would effectuate the power under Section 2(b).
24. Section 2(b) of the Act defines a Central Excise Officer to mean besides an officer of the Central Excise Officer, any person invested with any of the powers of a Central Excise Officer under the Act. Every provision of a statute has to be given full effect to. The Court cannot place a construction on a provision which would tend to make it redundant. On the contrary, the Court's duty is to give effect to all portions of a statute. One of the principles for construction is that a statute ought to be so construed that, if possible, no word shall be superfluous, void or insignificant. If we accept the construction of the counsel for the petitioners, that would have the effect of ignoring the second part of Section 2(b) of the Act. Such a construction is plainly not permissible.
25. This Court has to take into consideration the object for which and intention with which such a power was conferred. Similar powers have been in existence in various fiscal statutes starting from Sea Customs Act, 1878, Section 6. In 'Ram Kirpal v. State of Bihar, : 1970CriLJ875 the question arose because of the non-applicability of the Land Customs Act, 1924 in Santhal Parganas. Their Lordships indicated as to how because of the application of Section 6 of the Sea Customs Act, officers of the Land Customs Act were treated as Customs Officers having jurisdiction under Section 6 appointing Land Customs Officers to be officers of customs for their respective jurisdiction and to exercise the powers conferred and to perform the duties imposed on such officers by the Sea Customs Act. Section 6 of the Customs Act, 1962 now makes provision for entrustment of functions on any officer of the Central Government and the State Government. Section 5 of Foreign Exchange Regulation Act, 1947 as well as of 1973 similarly make provisions for entrustment of functions. Our attention has been invited to notifications issued from time to time, right from 1957 under Section 2(b) of the Act investing designated officers with all the powers of a Central Excise Officer. Particularly by notification dated August, 15, 1964, the Officer on Special Duty appointed as such by the President by the order of the Government of India in the Ministry of Finance, was invested with the powers of the Collector of Central Excise for the purpose of investigation and adjudication of such cases as may, from time to time, be assigned to him by the Board. It must be attributed to the legislature that it was aware of the provisions contained in Section 12-A of the Act (inserted with effect from December 27, 1985) permitting exercise of powers of a Central Excise Officer by a senior rank officer or the provisions contained in Section 37-A (inserted with effect from July 1, 1978) empowering delegation of powers on junior rank officers, yet it allowed the provisions in Section 2(b) to remain to cover the eventualities or the field left uncovered by Section 12-A and Section 37-A as a repository of power in the Central Board for investing in any person any of the powers of the Central Excise Officer under the Act. When the legislature has used words in a statute, a meaning has to be assigned to it.
26. Some arguments were addressed by Mr. Venugopal that the definition clause cannot be a substantive provision and it could not contemplate the conferment of power on any person. Reliance is placed on the scope of interpretation clause stated in 'Inland Revenue Commissioners v. Joiner', 1975(3) All. E.R. 1050 thus :
'.... If it states at greater length what an expression used in other provisions in the statute 'means', it is no more than a drafting device to promote economy of language. It is a direction to the reader : 'Wherever you see this shorter expression in the statute you must treat it as being shorthand for the longer one.'. Alternatively an interpretation clause may be used by the draftsman not to define the meaning of an expression appearing in the statute but to extend it beyond the ordinary meaning which it would otherwise bear. An indication that this may be its purpose is given if it purports to state what the expression 'includes' instead of what it 'means'; but the substitution of the one verb for the other is not conclusive of its being a direction to the reader : 'Wherever you see this shorter expression in the statute you may treat it as bearing either its ordinary meaning or this other meaning which it would not ordinarily bear.' Where the words used in the shorter expression are in themselves too imprecise to give a clear indication of what is included in it, an Explanationn of their meaning which is introduced by the verb 'includes' may be intended to do no more than state at greater length and with more precision what the shorter expression means.'
Reference was also made to Bennion on Statutory Interpretation. It is true that the purpose of a definition clause is to provide a key to the proper interpretation of the enactment and to shorten the language of the enacting part of the statute to avoid repetition. Ordinarily the scheme of the definition clause is only to define but a definition clause can, in our view, lay down substantive provision as in the instant case. When a word is defined to mean such and such, the definition is prima facie restrictive and exhaustive. But the definition in Section 2(b) gives an extended meaning of Central Excise Officer and the word is to be interpreted by its extended meaning. When the word 'means' are used it affords an Explanationn of the meaning which must inevitably be attached to those expressions. In this case it is dependent on investing. A meaning has to be attributed to each word used by the legislature in Section 2(b) and the language employed by legislature shows that a person could be invested with any of the powers of the Central Excise Officer under the Act, and he would be a Central Excise Officer. The investing of the powers on any person is, thereforee, clearly contemplated. Second part of Section 2(b) has to be treated as a substantive provision.
27. In 'I.T.C. Ltd. & another v. Union of India & others, : 1988(34)ELT473(Cal) , a challenge was made to the Notification No. 215/86-C.E. New Delhi dated March 27, 1986 as ultra virus the provisions of the Act and it could not confer any power on Shri N. K. Banerjee to exercise the powers of the Collector under proviso to sub- section (1) of Section 11-A of the Act. By the said notification, the Director of Anti-Evasion (Central Excise) was invested with the powers of a Collector to exercise throughout the territory of India. One of the arguments advanced was that under provisions of the Act, there was no scope for conferring any concurrent jurisdiction. It was held :-
'...... In my view when Central Board had been conferred with the jurisdiction to appoint an officer to exercise the powers conferred under the Act and/or the rules there under, can that power be limited and narrowed down as sought to be argued by Mr. Nariman in the instant case. It is firmly established principle that 'whatever may fairly be regarded as incidental to or consequent upon, those things which the legislature has authorised, and not (unless expressly prohibited) to be held, by judicial construction, to be ultra vires. [See Attorney General v. Great Eastern Railway (1880) 5 AC 473. Relying upon the principles laid down by the House of Lords in the aforesaid case in my view unless the Statute in question had expressly prohibited conferring such concurrent jurisdiction, the notification cannot be declared to be ultra vires, particularly in view of the fact that such a power, even assuming that it does not directly flown from Rule 4 of the said Rules should be held to be an incidental or consequent upon those things which the legislature have authorised upon the authorities particularly in view of the object of the Act. The jurisdiction of an officer appointed by the Central Board should not also be interfered with unless it could be shown that either it is prohibited under the law or is contrary to law. In the instant case certainly it cannot be said that the petitioner would be in a most disadvantageous position if notice were issued by 5 different Collectors than by one Collector in respect of all the areas and on the basis of a single show cause notice in respect of the self same matter, and in my view it would not cause any prejudice or injury to the petitioner and further such a power is, in my view, reasonable, and incidental to the exercise of the statutory powers expressly conferred upon the respondents. In my view the ultra virus doctrine could not be made applicable in the facts and circumstances of the case inasmuch as it is not intended to perpetrate any direct interference with the rights of individual without specific legal authority and is not intended to harass and cause prejudice to any party. Accordingly, I hold that the learned Single Judge and the learned Judges of the Division Bench of the Madras High Court in the case mentioned above had rightly decided that the Notification No. 215/86, dated 27th March, 1986 was legal and valid and as such I hold that the respondent No. 3 had jurisdiction to issue the impugned show cause notice. I am constrained to take this view apart from the decision of the Madras High Court and the observation by the House of Lords mentioned above but also because of the observation of Denning L.J. in Magor and St. Mellons RDC v. Newport Corporation reported in (1950) 2 All ER 1226 that 'We do not sit here to pull the language of Parliament and of Ministers to pieces and make noneense of it. That is an easy thing to do and it is a thing to which lawyers are too often prone. We sit here to find out the intention of Parliament and of Ministers and carry it out and we so this better by filling in the gaps and making sense of the enactment than by opening it up to destructive analysis.'
28. In Asia Tobacco Co. Ltd. v. Union of India and another : 1988(33)ELT279(Mad) , a similar question arose about the construction of Section 2(b) of the Act and Rule 4 of the Rules. A notification had been issued on March 27, 1986 by the Central Board of Excise and Customs in exercise of the powers conferred under Section 2(b) of the Act read with Rule 4 of the Central Excise Rules, 1944 by which some officers of the Directorate of Anti-evasion (Central Excise) had been invested with all the powers of officers of different ranks such as Collector, Deputy Collector, Assistant Collector, Superintendent and Inspector. The Director in the Directorate of Anti-evasion (Central Excise) is invested with the powers of the Collector of Central Excise. The learned Single Judge of the Madras High Court held that the Director of Anti-evasion (Central Excise), New Delhi had been properly invested with the powers of the Collector of Central Excise. The Division Bench upheld the decision of the learned Single Judge and observed :-
'........ This notification, in our view, has no infirmity at all; and having regard to the inclusive definition of the term 'Collector', there is nothing illegal in the powers of the Collector being invested in the Director. The Notification also invests the aforesaid Officers of the Directorate of Anti-evasion (Central Excise) with the powers to be exercised throughout the territory of India and thereforee is in conformity with Rule 2(ii). The powers having been expressly conferred by the Rules and the Act, there is no question any conflict between the powers vested by the rule itself in the Collector as defined and the power vested by exercise of the specific powers under the Act and the Rules.'
29. A Division Bench of this Court while dismissing C.W.P. 2918/87 in liming on October 12, 1987 found no infirmity in the impugned notification and expressed that the officer concerned could be conferred the powers of Collector of Central Excise to be exercised throughout in India in view of the clear provisions of Section 2, sub- clause (b) of the Central Excises and Salt Act, 1944. It may not have a binding force as a precedent yet the view of another Division Bench of this Court is the same. We, thereforee, hold that the impugned Notification No. 330/86, dated May 29, 1986 is intra virus the provisions of the Act.
Power of assigning cases to Director (Audit)
30. The next submission of Mr. K. K. Venugopal is that the power of the transfer has to be specifically provided for by statute. The respondents could not by the impugned order dated February 11, 1987 transfer the cases annexed to that order for the purposes of investigation and adjudication the Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise), New Delhi. According to him this power of transfer could be exercised only after hearing the petitioner, after recording of reasons in support of the transfer, after communication of the recorded reasons and only to the extent permitted by the statutory provisions. Reliance is placed on 'Dayaldas v. Income-tax Commissioner : 8ITR139(Bom) , 'Bidi Supply Co. v. Union of India', : 29ITR717(SC) , 'M/s. Pannala Binraj v. Union of India', : 1SCR233 and 'Ajantha Industries v. Central Board of Direct Taxes', : 102ITR281(SC) . The contention is that jurisdiction under Section 11-A of the Act has been conferred on the designated Collector, Central Excise at Guntur as the petitioner's factory is situate in his jurisdiction and the records are maintained there and there is no contemplation of transfer of pending cases in Section 11-A. Support is taken from Section 8 of the Amendment Act, 1985 which provides for the transfer of proceedings pending before the Assistant Collector to the Collector of Central Excise on the vesting of the vesting of the jurisdiction under the provisions of sub-section (1) of Section 11-A. The submission is that whenever the legislature intended that a pending proceeding should be transferred, a provision is made. Reference is also invited to Section 35-P of the Act relating to the transfer of certain pending proceedings. It is further contended that the power exercised by the Collector of Central Excise, Guntur is a quasi-judicial power which could not be transferred to the Director (Audit).
31. It is urged that the expression 'Collector' is defined with respect to different areas by Rule 2(ii) of the Rules. Rule 2(ii)(A) prescribes the Collector of Central Excise, Guntur to be Jurisdictional officer of Central Excise in so far as the Biccavole, Guntur (A.P.) factory of the petitioner is concerned. The Collector is exercising quasi-judicial power of investigation and adjudication. The submission is that quasi-judicial powers cannot be transferred in the absence of express provisions by necessary implication. Reliance is placed on 'B.M. Corpn. v. Dhondu A.I.R. 1965 S.C. 1986 and 'B. Rajagopala v. S.T.A. Tribunal', : 7SCR1 . The said Rule 2(ii) has been framed by the Central Government in exercise of the powers conferred upon it under Section 37(2)(ib) of the Act and after its due approval by the Parliament in accordance with the procedure prescribed under Section 38(2) of the Act. The Rules have also been notified in the Official Gazette. The grievance is that by the impugned notification dated May 29, 1986 and the order dated February, 11, 1987 the Collector of Central Excise, Guntur has been divested and/or denuded of the quasi-judicial powers conferred upon him by the statute by an executive order which the respondents have no right, authority or jurisdiction to do so.
32. Another submission of the counsel is that no guidelines whatsoever have been provided as to how and in what manner cases are to be chosen for being assigned to the Director (Audit). There is no rationale or basis provided for the selection of cases under the impugned notification dated May 29, 1986. Picking a case or picking a person to adjudicate a particular case of an assessed is argued as very anti thesis of judicial process as enjoined by law and negates the rule of law. The same virtually amounts to choosing one's judge and of per- determination. It is urged that the impugned order dated February 11, 1987 has serious civil consequences and as such in the absence of guidelines, the same is illegal and bad.
33. Further advancing these arguments, Mr. Soli J. Sorabjee contends that the show cause notice required to show cause to the Collector of Central Excise, Guntur. Reference is made to the copies of the correspondence between the petitioner and the Collector, Guntur and the ultimate notice of hearing. By making reference to Rules 2(1-A), 2(ii), 9(2), 9(b), 55, 52-A, 93 to 95-A and 174, the submission is that the Collector of Central Excise, Guntur was seized of the matter and there could not be transfer of the case in the absence of a statutory provision. In the alternative it is submitted that even if there is no right in the petitioner to be assessed by a particular officer, even then the impugned order dated February 11, 1987 is bad as the action is unsupported by law. Reliance is placed on 'Bidi Supply Co. v. Union of India', : 29ITR717(SC) , 'State of Madhya Pradesh v. Bharat Singh', : 2SCR454 and 'Satwant Singh v. A.P.O.', : 3SCR525 to contend that all executive/administrative actions which operate to the prejudice of any person must have an authority of law to support it.
34. The Central Board of Excise and Customs is constituted under the Central Board of Revenue Act, 1963 and we have held that it is vested with the power to appoint and invest under Section 2(b) read with Rule 4. It empowers the Board to appoint such persons as it thinks fit to be Central Excise Officers and to invest them with the powers under the Act and the Rules. In exercise of those powers, the Board has invested the Director (Audit) with the power of a Collector of Central Excise with territorial jurisdiction extended to all over India. Mr. Ramaswamy, the learned Addl. Solicitor General, has invited our attention to the averments made in the counter-affidavit as to the considerations of assigning the case between two competent Collectors. It is stated that the object of assigning the cases to the Director (Audit) is that since he is vested with All India jurisdiction, it will be convenient and expedient in public interest both for the petitioners as well as for the department to have the case adjudicated by him at one place as in the present case the petitioner's activities are spread over many other places than the State of Andhra Pradesh. There is no requirement of law that the exercise of administrative power has necessarily to be canalised or guided. In the context of modern conditions and the complexity of the situations, it is not possible for the legislature to envisage in detail every possible variety that presents itself for solution. A wide discretion is, thereforee, left for investing of powers and then assignment of cases. The Courts will scrutinise the exercise of power and if it is a colourable exercise of power of for extraneous considerations, then the exercise of power will be struck down. Mr. Ramaswamy further stated at the Bar that the Department undertakes to hold the hearings in adjudication proceedings at Guntur or at such other convenient place as the notices desire. This is recorded.
35. As we have held earlier, there is no territorial limitation laid in the statute and more than one officer is envisaged in the statute to have territorial jurisdiction over the land or premises of the producer of any excisable goods. If two or more Collectors are competent to adjudicate the cases of a manufacturer or producer, then the power inheres in the Board to assign a case to one of the competent authorities. There is an implied authority to assign a case to one for investigation and adjudication. There is no vested right in a manufacturer or producer to be assessed by a particular functionary. The Rules do not either expressly or by necessary implication apply the rules of audi alteram partem in assignment of cases to one out of two competent authorities. The impugned order dated February 11, 1987 only assigns to the Director (Audit) the cases annexed to that order for the purpose of investigation and adjudication. It is merely a ministerial act of assigning between two competent jurisdictions. It is purely an administrative function by the Board. The principles of natural justice have been reiterated in 'S. R. Dass v. Union of India', : 1SCR527 in these words :
'In the instant cases statutory Regulations do not expressly or by implication apply the rule of audi alteram partem in making the selection. On the other hand the scheme contained under the regulations exclude the applicability of the aforesaid rule by implication. Select list is prepared each year which ordinarily continues to be effective for a year or till the fresh select list is prepared. If during the process of selection a senior officer is proposed to be superseded by virtue of not being included in the select list, and if opportunity is afforded to him to make representation and only thereafter the list is finalised, the process would be cumbersome and time consuming. In this process it will be difficult for the committee to prepare and finalise the select list within a reasonable period of time and the very purpose of preparing the select list would be defeated. Scheme of the Regulations thereforee clearly warrants exclusion of principle of audi alteram partem. No vested legal right of a member of the State Civil Service who after being considered is not included in the select list, is adversely affected. Non-inclusion in the select list does not take away any right of a member of the State Civil Service that may have accrued to him as a Government servant, thereforee no opportunity is necessary to be afforded to him for making representation against the proposed supersession.'
The statutory rules do not compel a notice on assignment of cases. It appears from the record that the assignment of the cases to the Director (Audit) was motivated with the purpose of centralising the various cases of the petitioners scattered over a number of Collectorates of Central Excise because of the petitioner's business being spread over many States. The jurisdiction had Inter-collectorate ramifications. It was, thereforee, for administrative convenience to assign particular cases to an authority having all India jurisdiction. It did not take away the normal jurisdiction of the Collector, Guntur who still retains the power under the Act and the Rules to investigate new cases coming up from within the jurisdiction. He continues to have an account of the petitioners as the land or premises where the excisable goods are being produced falls within his jurisdiction. It is because of this that the Collector, Guntur has competency to issue the supplementary show cause notice.
36. It is true that a judicial power cannot ordinarily be delegated unless the law expressly or by clear implication permits it. Section 37A of the Act empowers the Central Government to direct by a notification, inter alia, that any power exercisable by a Collector of Central Excise under the Act may be exercisable by a Deputy Collector etc.
37. Even in the case of 'B.M. Corporation' (supra), it was observed on the construction of the amendment of Section 68 of the B.M. Corporation Act that 'by inclusion of delegation of the functions of the Commissioner under Section 105B to 105E does indicate the intention that the judicial or quasi-judicial powers contained in Chapter VI-A were expressly intended to be delegated.' The words in the delegation order was subject to 'control and revision' and this was construed as delegation administrative functions only. When a power is delegated, then necessarily the functions are required to be performed by the Collector of Central Excise, including investigation and adjudication. There has to be distribution, assignment or even transfer of cases. For the same reasons, when powers are invested in a person in exercise of powers under Section 2(b) of the Act, he becomes the Collector of Central Excise for the purposes of investigation and adjudication. A functionary is created by the exercise of statutory powers and he has to be assigned cases by transfer of some pending cases.
38. There is a specific provision contained in Section 64 of the Income-tax Act, 1922 for being assessed by the Income-tax Officer locally in the area in place of business or residence of the assessed. The Hon'ble Judges treated the provisions of Section 64 more as a question of right as a matter of convenience. The cases relied upon by Mr. Venugopal construed the provision of Section 64 of the amendments made from time to time or Section 127 of the Act of 1961 or amendment to it by Act 27 of 1967. Even after the amendment by Act 40 of 1940 in Section 64, the Supreme Court in Bidi Supply's case (supra) upheld the power of transfer but observed that the authority must apply his mind to the necessity and desirability of transfer. It was ruled :-
'In our judgment such an omnibus wholesale order of transfer is not contemplated by the sub-section. It is implicit in the sub-section that the Commissioner of Income-tax or the Central Board of Revenue, as the case may be, should before making an order of transfer of any case apply his or its mind to the necessity or desirability of the transfer of that particular case.
The fact that it is necessary or desirable to transfer a case of assessment of a particular assessed for any particular year does not necessarily indicate that it is equally necessary or desirable to transfer another assessment case of that assessed for any other assessment year. We are accordingly of the opinion that the impugned order of transfer, which was expressed in general terms without any reference to any particular case and without any limitation as to time, was beyond the competence of the Central Board of Revenue. We did not understand the learned Attorney-General to contend that such was not the correct interpretation of the sub-section.'
39. The cases relied upon by Mr. Soli Sorabjee only lay down that all executive action which operates to the prejudice of any person must have the authority of law. There is no right under the Act or the Rules to be assessed by any particular Central Excise Officer. It has not been shown as to how the order of assigning the case to one competent officer has prejudicially affected the petitioner. Any inconvenience or a remote possibility of prejudice is taken care of by the undertaking on behalf of Director (Audit) to hold the sittings and the proceedings at any place convenient to the noticees. We are thereforee, of the view that there is no illegality in the impugned order dated February 11, 1987 assigning the petitioner's case to Director (Audit) for expeditious disposal of such cases.
Testimonial compulsion in adjudication proceedings
40. The most vehement contention of Mr. Soli Sorabjee is that the criminal complaint dated October 16, 1986 is on the basis of the very same allegations which are the subject matter of the show cause notices dated March 5, 1986 and April 9/21, 1986. The grievance is that the action on the part of the respondents in proceeding simultaneously with the show cause notices dated March 5, 1986 and April 9/21, 1986 and the criminal complaint dated October 16, 1986 is patently discriminatory and vocative of Article 20(3) of the Constitution of India. It is urged that the petitioners are entitled to keep their mouth shut if the answer sought has a reasonable prospect of exposing them to guilt in some other accusation actual or imminent; they are entitled not to disclose their defense which they may take in the criminal prosecution and any disclosure made in the adjudication proceedings at this stage would enable the prosecution to shape its prosecution case. This would afford an unfair advantage of knowing the case of the petitioners and the evidence in support of it and in that sense any testimony of the petitioners in adjudication proceedings would be prejudicial to the petitioners in the criminal prosecution. Our attention is invited to the provisions contained in Section 9-D relating to the relevancy of the statements in adjudication proceedings in the Criminal Court. Reference is made to the changes affected by Amendment Act 36 of 1973 by introduction of Chapter VI-B. Section 36A-A provides that any document produced by any person under the Act can be tendered by the prosecution as evidence against him and the Court is entitled to presume that the contents of the documents are correct and to admit the documents in evidence. The submission is that there is a direct relationship between adjudicatory proceedings and the criminal proceedings and thus action of the respondents to proceed with the criminal prosecution and adjudicatory proceedings simultaneously is vocative of Article 20(3) of the Constitution of India.
41. Reliance is placed on 'Smt. Nandini Satpathy v. P. L. Dani and another', : 1978CriLJ968 wherein it was held :-
'We have explained elaborately and summed up, in substance, what is self-incrimination or tendency to expose oneself to a criminal charge. It is less than 'relevant' and more than 'confessional'. Irrelevance is impermissible but relevance is licit but when relevant questions are loaded with guilty inference in the event of an answer being supplied, the tendency to incriminate springs into existence. We hold further that the accused person cannot be forced to answer questions merely because the answers thereto are not implicative when viewed in isolation and confined to that particular case. He is entitled to keep his mouth shut if the answer sought has a reasonable prospect of exposing him to guilt in some other accusation actual or imminent, even though the investigation underway is not with reference to that. We have already explained that in determining the incriminatory character of an answer the accused is entitled to consider - and the Court while adjudging will take note of - the setting, the totality of circumstances, the equation, personal and social, which have a bearing on making an answer substantially innocent but ineffect guilty in import. However, fanciful claims, unreasonable apprehensions and vague possibilities cannot be the hiding ground for an accused person. He is bound to answer where there is no clear tendency to criminate.'
42. It is urged that by constraining the petitioners to answer the show cause notice and to defend themselves, the respondents are, in fact, and in the reality compelling the petitioners to give testimony in the adjudicatory proceedings against themselves in respect of the very same charges which are the subject matter of the criminal complaint. This action on the part of the respondents of adopting two simultaneous proceedings is argued as fraught with grave prejudice to the petitioner's defense in the criminal trial. Section 36A-A permits the user of self-exculpatory statement made by a co-notice in the adjudicatory proceedings against the co-accused in the criminal proceedings. It is open to the criminal court, irrespective of the fact whether the prosecution tenders the documents produced or statement made in adjudicatory proceedings, to call for the documents tendered in the adjudicatory proceedings including the statement of persons in the present management of the NTC who are inimical to the petitioners and to rely upon in the criminal complaint. It is submitted that this is destructive of criminal jurisprudence and is unfair and unreasonable. It is urged that the continuance of adjudicatory proceedings is bound to have extremely prejudicial effect on the defense of the petitioners resulting in the unfair trial Reliance is placed on 'Jerome D'Silva v. The Regional Transport Authority, South Kanara and another', : AIR1952Mad853 and 'R. Gnanavelan and another v. State of Tamil Nadu and others', : AIR1985Mad69 to contend that it is desirable that adjudication proceedings should await the decision of the criminal court and this procedure would avoid the possibility of two departments of the Government proceeding on contradictory lines to the annoyance and hardship of the citizen.
43. Counsel contends that certain rights have been enshrined in our Constitution as fundamental and, thereforee, while considering the nature and contents of those rights the Court must not be rigid in interpreting the language of the Constitution. The Court should interpret the Constitution in the manner which would enable the citizen to enjoy the rights created by it in the fullest measure. The conclusion drawn is that the practical result of the act of the respondents in simultaneously pursuing the adjudication proceedings and criminal prosecution is denial of the right conferred by Article 20(3) of the Constitution.
44. On the other hand, the submission of Mr. Ramaswami, Additional Solicitor General is that in an enquiry or an investigation under the Act and the Rules, the person against whom there is prima facie evidence of violation of law, is given an opportunity to show cause as to why action should not be taken against him for contravention of the provisions of law and as to way penalty should not be imposed as provided in the statutes concerned. Affording of such opportunities by way of show cause notice do not amount to compulsion as is understood within the meaning of that expression used in Article 20(3), which provides, 'No person accused of an offence shall be compelled to be a witness against himself'. The submission is that both the elements of compulsion and that the person being compelled is an accused of an offence, have to be satisfied and that is lacking in the case of the petitioners. Counsel further submits that it is not the case of the petitioners that the adjudication proceedings and the criminal prosecution have been started mala fide or to pressurise the petitioners. Mr. Ramaswami categorically stated at the Bar that the respondents will not use in the criminal trial any of the statements made by the petitioners in the adjudication proceedings. This is hereby recorded.
45. The proceedings for the recovery of duties and imposition of penalties taken under fiscal statutes are distinct, in our view, from the prosecutions in pursuance of criminal complaints. The two proceedings are different and independent. Simultaneous proceedings before the adjudicating authorities and also before a criminal Court for prosecution is not double jeopardy. A person claiming immunity given by Article 20(3) of the Constitution must be accused of an offence in proceedings before a Court of law or a judicial Tribunal and then he must be compelled to be a witness against himself. As Article 20(3) says that no person accused of any offence shall be compelled to be a witness against himself, the person who claims privilege under Article 20(3) must be a person accused of an offence. It is, thereforee, not correct to urge that by constraining the petitioners to answer the show cause notice and to defend themselves in the adjudication proceeding, the respondents are violating the right of any accused. In 'M. P. Sharma and others v. Satish Chandra, District Magistrate, Delhi and others', : 1978(2)ELT287(SC) , it was observed that there is no inherent reason to construe the ambit of this fundamental right as comprising a very wide range. Nor would it be legitimate to confine it to the barely literal meaning of the words used, since it is a recognised doctrine that when appropriate, a constitutional provision has to be liberally construed, so as to advance the intendment thereof and to prevent its circumvention. Analysing the terms in which this right has been declared in our Constitution, it was ruled that it consists of the following components :-
(1) It is a right pertaining to a person 'accused of an offence';
(2) It is a protection against 'compulsion to be a witness'; and
(3) It is a protection against such compulsion resulting in his giving evidence 'against himself'.
46. It would thus be seen, that immunity granted by Article 20(3) of the Constitution does not extend to adjudication proceedings. The answers given by the petitioners to the show cause notice are evidence and documents tendered in the adjudication proceedings might tend to subject them to criminal prosecution at a future date but this will not attract the protection of Article 20(3) of the Constitution. In 'State v. Devsi Dosa', A.I.R. 1960 Bom 443, it was held that in order that the protection of Article 20(3) of the Constitution should be available to a person, he must be accused of an offence, which would mean that an information is laid against him before an officer or a Court entitled to take cognizance of the offence and proceed upon the information to investigate into it. Merely because the evidence might disclose some crime and it might form the subject matter of future prosecution, would not enable the person, who is asked to furnish evidence to claim protection of Article 20, sub-clause (3) in any proceedings other than where he is accused of any offence. To enlarge the scope of the Article so as to make it applicable to proceedings, whether civil or administrative, would encourage dishonesty and would afford a comfortable nest to criminals.
47. The contention raised by Mr. Soli Sorabjee to the construction of Article 20(3) is, in our view, concluded against him. In 'Tukaram G. Gaokar v. R. N. Shukla and others', : 1968CriLJ1234 , a question arose whether a person accused of an offence is compelled to appear as a witness in penalty proceedings started against him under Sections 111 and 112 Sea Customs Act so as to as to attract the protection of Article 29(3) of the Constitution. It was ruled :-
'But it is not possible at this stage to say that he is compelled to be a witness against himself. There is no compulsion on him to enter the witness box. He may, if he chooses, not appear as a witness in the proceedings under Sections 111 and 112. The necessity to enter the witness box for substantiating his defense is not such a compulsion as would attract the protection of Article 20(3)'.
In 'Smt. Nandini Satpathy' (supra), their Lordships of the Supreme Court were concerned with the examination of the accused during investigation and it is in those proceedings the question was of compelled testimony in violation of Article 20(3) of the Constitution. It was felt there that the ban on self-accusation and the right to silence, while one investigation or trial is under way, goes beyond that case and protects the accused in regard to other offences pending or imminent, which may deter him from voluntary disclosure of criminatory matter. It is in those circumstances that their Lordships held that the accused person cannot be forced to answer question merely because the answers thereto are not implicative when viewed in isolation and confined to that particular case. He is entitled to keep his mouth shut if the answer sought has a reasonable prospect of exposing him to guilt in some other accusation actual or imminent, even though the investigation under way is not with reference to that. Reference thereto is that accused cannot be compelled to be a witness against himself. If by some other law, civil or administrative, he is compelled to answer questions and the possibility of that statement being used in criminal proceedings is there, then there is no violation of Article 20(3) of the Constitution. In this case because of the statement of the Additional Solicitor General that any statement made by the petitioners in adjudication proceedings will not be used in criminal prosecution, the principles of fair play have been respected.
Scheme of arrangement under the Companies Act, 1956
48. An application under Sections 391(2) and 394 of the Companies Act, 1956, being Company Petition No. 280 of 1984 in company application No. 75/84 was filed in the High Court at Calcutta. A scheme of arrangement was entered into between Duncan's and NTC. A notice was issued to the Central Government in compliance with the provisions of Section 394-A of the Companies Act, 1956. Shri P. Kumar, Advocate for the Company Law Board appeared before the Company Judge. The scheme of arrangement was sanctioned by the Calcutta High Court on July 31, 1984. The orders of the Calcutta High Court were filed with the Registrar of Companies on August 20, 1984. One of the terms of the scheme of arrangement is that all the liabilities and duties of Duncan's relating to its tobacco division be transferred with effect from the date of transfer (April 1, 1984) without further act or deed to NTC and accordingly the same shall pursuant to Section 394(2) of the Companies Act, 1956 be transferred to and become the liabilities and duties of the said transferee company. Reference is invited by the counsel for the petitioners to the provisions contained in Sections 390, 391, 392, 394 and 394-A of the Companies Act, 1956 and Rules 69 to 87 of the Company's Court Rules laying down the procedure for sanction of the compromise. Reliance is placed on a decision reported as 'Hargopal v. People's Bank of Northern India Ltd., Lahore', A.I.R. 1934 Lah 515 to contend that the judgment of the Company Court sanctioning a scheme of arrangement is judgment in rem and is binding on everybody including the Government to whom notice under Section 394-A had been issued. Reference is then made to the impugned show cause notice dated April 9/21, 1986 and the supplementary show cause notice dated March 23, 1987. Reliance is placed on a decision of the Supreme Court in the case of 'S. K. Gupta and another v. K. P. Jain and another', (1979) 49 Com Cas 342 and another decision of the Supreme Court in the case of 'M/s. J. K. (Bombay) Pvt. Ltd. v. M/s. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. and others', : 2SCR866 to contend that the scheme of arrangement under Sections 391 to 394 has statutory force and has statutory sanction and, thereforee, is binding on everyone. Reliance is placed is placed on 'Seksaria Cotton Mills v. A. E. Naik A.I.R. 1967 Bom 31 to contend that statutory liabilities are also transferable under the scheme of arrangement. The submission is that according to the scheme of arrangement between Duncan's and NTC and their shareholders, the Calcutta High Court ordered that all the liabilities and duties of Duncan's relating to its Tobacco Division be transferred from April 1, 1984 to NTC and that all proceedings/suits etc. then pending by or against the transferor company in respect of the tobacco division will be continued by or against NTC. After the sanctioning of the said scheme of arrangement by the Calcutta High Court, a communication was addressed for transfer of balance relating to the Duncan's to NTC as a result of the transfer of the tobacco division of Duncan's with all its assets and liabilities including those relating to Central Excise duty to NTC. The balance relating to the Duncan's left at the time of handing over the of management to NTC was verified and the required particulars were sent to the Pay and Accounts Officer for necessary transfer to new P.L.A. of NTC. The Collector of Central Excise vide order dated April 3, 1986 accorded permission for transfer of P.L.A. balance lying in the Duncan's P.L.A. to NTC as detailed in the letter of the same date. In view of this admitted position that NTC is successor of Duncan's and the facts are not in dispute, this Court should determine, urges the counsel, the question of jurisdiction at this stage. Reliance is placed in support of this proposition on the decisions of the Supreme Court in 'Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta and another', : 41ITR191(SC) , 'M/s. East India Commercial Co. Ltd., Calcutta and another v. 'Collector of Customs, Calcutta', : 1983(13)ELT1342(SC) , 'Bengal Immunity Co. Ltd. v. State of Bihar and others', : 2SCR603 and a decision of this Court in the case of 'J. K. Synthetics Ltd. v. Collector of Central Excise, Delhi : 1985(21)ELT410(Del) .
49. On the other hand, the contention of Mr. Ramaswamy, the Additional Solicitor General is that show cause notice has been issued to Duncan's as well as NTC as they are both liable for payment of the excise duty besides the contravention of the provisions of the Act and the Rules. Reference is invited to the facts pleaded in the impugned show cause notice dated April 9/21, 1986 and the supplementary notice dated March 23, 1987 and to the material collected by the authorities after the preliminary investigation. It is urged that the main purpose of the show cause notice is to afford opportunities to the notices to explain their cases in respect of the charges framed to enable Director (Audit) to come to a conclusion in the adjudication proceedings as to who is liable for the evasion of the excise duty or who is responsible for the offences. The submission is that a criminal liability is not transferred in law to a successor and it remains the liability of those who committed the offence. The evasion of duty and commission of offences took place, according to the show cause notices, during the period from January, 1983 to November, 1985, for which period or a part of the period both Duncan's and NTC are liable. Our attention is invited to the stand taken by the NTC in the answer dated July 14, 1986 that Duncan's are liable to answer the charge, despite the scheme of arrangement. The counsel contends that the scope and effect of the scheme of arrangement would be construed by the adjudicating authority as to what has been transferred as a result of the vesting order of the Calcutta High Court. If certain rights or liabilities are incapable of transfer in law, then there would be no vesting. The counsel distinguished the cases cited by the opposing counsel and concludes that this Court should not determine at this stage the effect of the scheme of arrangement.
50. In our view, it is not proper to go in detail at this stage into these contentions raised by learned counsel for the parties or to express any considered opinion on it. The show cause notices have been issued regarding evasion of duty and commission of offences during the period January 1, 1983 to November, 1985. According to the show cause notice, both Duncan's and NTC and their directors are answerable as far as the contraventions of the provisions of the Excise Act are concerned. We are not concerned in this case with the case of the Directors whose case will be dealt with separately. Duncan's continued to be the holding company for the NTC even after April 1, 1984 as they retained 100% shares of NTC. What was held earlier by Duncan's as tobacco division was still held with effect from April 1, 1984 by them under a fiction of law by transferring the assets to a newly constituted company, though 100% shares were owned by Duncan's, thus continuing to be the holding company of NTC appointing their entire Board of Directors. According to the allegations in the show cause notice, Duncan's is liable for the entire period before or after April 1, 1984 whether such liability existed on April 1, 1984 or came to light upon investigation later after April 1, 1984. Under Section 11-A where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion or willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the Rules with intent to evade payment of duty by such person or his agent, then the proceedings can be initiated by issue of show cause notice. The notice is required to be served on the person chargeable with duty. Under Section 3 of the Act, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. The duty is levied on the manufacturer or producer. Under Rule 178 of the Rules, licenses are granted in favor of named persons for the conduct of the business of the manufacture or production of excisable goods. Where a licensee transfers his business to another person, the transferee has to obtain a fresh license under these rules. Rule 7 of the Rules provides that every person who produces, cures or manufactures any excisable goods shall pay the duty or duties livable on such goods. Under Rule 49 of the Rules the duty chargeable is on removal of the goods, from the factory premises or from an approved place of storage. A reading of the above provisions shows that liability to pay excise duty is on the person who produces or manufactures any excisable goods and this is a mixed question of fact and law. The show cause notices have been issued to all the parties who may be liable for payment of the excise duty or the penalties.
51. The Calcutta High Court did, prima facie, order that all liabilities and duties of Duncan's relating to tobacco division be transferred from April 1, 1984 to NTC and accordingly the same will be liabilities of NTC. It is also ordered that all proceedings then pending by or against the tobacco division would be continued by or against NTC. Despite the scheme of the arrangement, the stand taken by the NTC in the answer dated July 14, 1986 to the show cause notice is that Duncan's are liable to answer the charge that may be leveled after April 1, 1984 even relating for the period prior to April 1, 1984. The contention is that NTC are not expected to reply to the charges or be responsible for any commission/omission done by the previous company; that the NTC are not liable to answer any charge prior to April 1, 1984 but they may be held liable to pay excise duty if it is proved to be so and that if there be any commission/omission prior to April 1, 1984, then the penalty/prosecution is to be faced by Duncan's though the liability if accrued out of the decision in the case may have to be met by NTC but the latter contention is also doubtful.
52. Whether both the companies or the Directors of both the companies, namely, Duncan's and NTC or which of them are wholly or partly responsible for :-
(i) removing fully packed excisable cigarettes from the places of production in a manner otherwise than provided and thus illicitly cleared them without payment of Central Excise Duty thereon;
(ii) manipulating, duplicating accounts;
(iii) by maintaining machine production cards with incomplete essential particulars;
(iv) by not accounting for fully the production of cigarettes recorded in machine cards;
(v) by not accounting for fully the cut tobacco resulting in ripping operations of cigarettes and also unused tobacco and the production of cigarettes there from;
(vi) falsely recording dispatches and sales of tobacco but actually utilising the same for manufacture of cigarettes;
(vii) falsely recording storage losses of tobacco and utilising the same for manufacture of cigarettes; and
(viii) falsely recording tobacco as destroyed but utilising the same for the manufacture of cigarettes;
are the very questions to be considered and decided in the adjudication proceedings in pursuance of composite notices. The allegations are that huge evasion of excise duty took place with the specific directions of the petitioner's company given by the Chairman and top executive and on prima facie material annexed to the show cause notice. These questions require investigation of facts. If there is any liability for penalties, then, prima facie, that cannot be transferred in law to a successor. It remains the liability of those who committed the offence as a producer or manufacturer. The validity or propriety of the orders imposing penalties and fine by the Director (Audit) may have to be considered. They have been left in the Act to be determined by the appellate and the revisional authorities. We, thereforee, do not consider it an appropriate case to determine at this stage the question as to the legal effect of the scheme of arrangement or to the liability of Duncan's or NTC on the above considerations.
53. The Government of India reviewed the existing policy, procedures and orders in respect of grant of rewards to informers and Government servants in case of seizure made, infringement or evasion of duty etc. detected under the provisions of the Customs Act, 1962, the Central Excises and Salt Act, 1944, the Gold (Control) Act, 1968 and the Foreign Exchange Regulation Act, 1973. As a result of the review, revised guidelines were laid down in the memorandum dated March 30, 1985 issued by Ministry of Finance, Government of India. Under para 3.3.1 in cases of detection and evasion of Central Excise duty, concealment or suppression of production, surreptitious removal of dutiable goods etc., any informer or Government servant is eligible for reward up to 20% of the duty, fine and penalty levied/imposed and realised provided the amount does not exceed 20% of the market value of the goods involved. Guidelines have been laid down for the grant of ex-gratia payment, the stage of payment of reward and the payment of final award. Ordinarily, informers and Government servants, up to the level of Group 'A' Superintendent/Assistant Collector of Customs/Central Excise/Assistant Director, are eligible for reward depending on the contribution made by them as a team as well as individual with regard to the collection of intelligence, surveillance, effecting of seizure etc. Due credit is to be given to the staff employed on investigation and/or prosecution resulting in conviction of persons involved other than the carriers of contraband goods etc. Group 'A' officers above the level of Assistant Collector/Assistant Director are not eligible for reward on the basis of value of the seizure etc. However, in appropriate cases, Government may consider in consultation with GCA/DGRI/Director, Anti-evasion, the grant of lumpsum payment/advance increments and/or recognition in any other manner of the services rendered by them for which purpose the Heads of Departments have to forward their recommendation to the aforementioned officers with a copy to the Ministry.
54. Some amendments were made in the scheme and notified by memorandum dated September 9, 1985. A decision had been taken for setting up of Customs Welfare Funds, Performance Award Fund and Customs Special Fund for acquisition of anti-smuggling equipments etc., the constitution of the governing body for the centralised administration of the funds as also for the coverage of funds as detailed in para 7 read with para 9 of the scheme. The mode of financing of these funds is by transfer is 10% of the sale proceeds of confiscated goods credited to the Government and Customs excise duty, fine, penalties in offence cases realised and sustained in appeal/revision etc. during the financial year 1985-86 onwards as verified and confirmed by the Chef Comptroller of Accounts, Central Board of Excise and Customs and Financial Advisor to the Ministry of Finance. The distribution of the credits amongst three funds is 1% to the Customs Welfare Fund, 4% to the Performance Award Fund and 5% to the Special Fund for acquisition of anti- smuggling equipments. As regards the coverage of the fund, it has been decided that it would cover all officers and staff working in the Central Board of Excise and Customs, its attached and subordinate offices and would include officers/staff of CBEC working on deputation in various ministries/departments of the Government. The Office of the Collector of Central Excise, Guntur sanctioned rewards in the Central Excise cases in the order dated April 10, 1986. An amount of Rs. 50,800/- was disbursed as awards to several officers mentioned therein. A further reward of Rs. 3,84,500/- was sanctioned towards additional advance awards to named officers on December 8, 1986/January 1, 1987.
55. According to Mr. Venugopal, the learned counsel for the petitioners that there was a distribution of advance award on the basis of the show cause notice and further payments were made as a result of supplementary show cause notice. The rewards received by the Central Excise Officers and to be paid subsequently are dependent upon the extent of the alleged evasion of duty purportedly detected by them and ultimately adjudicated. If the compensation that a Government servant was to receive for discharging his duties or exercising his powers as a Government servant were not a fixed salary and allowances, but were also to depend upon the total amount of alleged evasion of duty purportedly detected by him, then in that case, urges the counsel, the detachment, objectivity and fairness which has to be brought to bear upon the discharge of the official duties would not be present. Such a scheme of reward would result, according to the counsel, in grave and serious malpractices being resorted to. As a section of the Central Excise Department concerned functions as a whole, the presence of the reward scheme injects bias and vitiates the adjudication proceedings. There is every possibility of marked departmental bias affecting adjudication proceedings as a result of levy of additional duties and penalties and that would automatically ensure to the benefit of the subordinates of the adjudicating authority. Counsel contends that there would be constraints in adjudication as the adjudicating authority would be keen to uphold levy of duty and penalty to ensure loyalty and popularity amongst his staff as a result of the distribution of the amount of the reward. The further submission is that proceedings initiated against the petitioners are vitiated on the principle of departmental bias as well as real likelihood of bias. The test of bias as formulated by the Courts boils down to reasonable suspicion and the proof of actual bias is not necessary. Reliance is placed on 'Ranjit Thakur v. Union of India', : 1988CriLJ158 wherein it was held that the test of real likelihood of bias is whether a reasonable person, in possession of relevant information, would have thought that the bias was likely and whether the authority concerned was likely to be disposed to decide the matter only in a particular way. In 'Lingala Vijay Kumar and others v. The Public Prosecutor, Andhra Pradesh, Hyderabad', A.I.R. 1978 S.C. 1985, cash awards were distributed to the prosecution witnesses when criminal case was pending. The Supreme Court frowned upon the award and called it obnoxious. The grant of reward in the cases of the petitioners would make it difficult to arrive at the truth without a prejudiced mind. Relying on the case of 'Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon and others 1968 (3) All. E.R. 304, it is contended that the Courts look at the impression of the other people and how the attention of the right-minded person will be focussed on this scheme of reward. There is a real likelihood of bias, concludes the counsel, in the adjudication proceedings.
56. The next submission is that the proceedings are vitiated as the scheme of rewards would inevitably result in the pecuniary interest of the departmental officers including the Director (Audit). Criticism is leveled to para 7 read with para 9 of the scheme. The inference sought to be drawn from the substance of the scheme is that the adjudicating authority has a direct pecuniary interest as a beneficiary and thus in upholding the levy of duty and penalty in pursuance to the impugned show cause notice. Reliance is placed on 'Manak Lal v. Dr. Prem Chand', : 1SCR575 , wherein it was held :-
'In dealing with cases of bias attributed to members constituting tribunals, it is necessary to make a distinction between pecuniary interest and prejudice so attributed. It is obvious that pecuniary interest however small it may be in a subject matter of the proceedings, would wholly disqualify a member from acting as a Judge.'
Our attention is invited to (1976) 72 ALR 3 Annotation, discussing the topic of pecuniary interest as disqualifying a Judge :
'Due process of law, as guaranteed by the Fourteenth Amendment to the Constitution of the United States and by similar state constitutional provisions, requires that a litigant be afforded a trial by an impartial tribunal. Impartiality lacking where a member of the tribunal has a pecuniary interest in the outcome of the proceeding. The early common-law maxim that no man can be a judge of his own case, which is an expression of this principle, was recorded by Lord Coke as declaratory a right so firm as to avoid an act of Parliament tending to contravene it.
However, despite the antiquity of the elementary proposition that a judge should not have a financial interest in the outcome of a case before him, only in relatively recent times has it been suggested that the practice followed in a substantial number of jurisdictions of compensating minor judicial officers by fees payable by the litigants and which depended in some manner on the decisions reached is of questionable constitutionally. Following a landmark decision of the United States Supreme Court, it is generally recognised that due process of law requires the disqualification of a judge, justice of the peace, or similar judicial officer who has pecuniary interest in fines, forfeitures, or fees payable by litigants before him. Disqualification for pecuniary interest in fines, forfeitures, or fees payable by litigants before him. Disqualification for pecuniary interest in fines, forfeitures, or fees payable by litigants has also been based on other grounds, including public policy, statues governing disqualification of judges, and constitutional provisions against the sale of justice.'
The submission is that to permit adjudicatory officers to have a financial stake in the out come however small would amount to sale of justice and due process of law requires in validation of such adjudications.
57. Mr. Ramaswamy, the learned Additional Solicitor General of India, on the other hand, contends that the scheme of award is as old as of 1948 and a general order was issued by President directing grant of such awards in the Central Excise seizure cases. Thereafter various instructions from time to time have been issued providing guidelines in connections with the grant of such rewards. The maximum reward payable according to the circular dated March 30, 1985, is 20% of the estimated market value of the goods seized, or 20% of the duty/fine, duty levied, imposed and realised provided the amount does not exceed 20% of the market value. The payment is to be made only after the Authority competent to sanction reward is satisfied that there is a reasonable chance of confiscability/infringement/evasion, as the case may be, being established in adjudication proceedings and sustained in appeal. Reference is made to the detailed guidelines and the high power Committee who has to examine each case of award, appointed by Government headed by Government servants. There is due verification of facts of several cases and there is no possibility of any abuse. Counsel contends that the object of the scheme is to encourage officers to make earnest efforts to detect contravention of law. The scheme has been envisaged to encourage and alert officers of proven ability and honesty in order to boost the morale of these officers in their preventive activities against tax evasion and by this practice the tendency of accepting bribes is checked and corruption eliminated. It is further stated that businessmen in order to save huge amounts of duty always make serious attempts to grease the palm of officers involved in detecting their violation of law.
58. Our attention is invited to three illustrative cases from the United States as to when officers acting in a judicial or quasi- judicial capacity are disqualified by their interest in the controversy to be decided. They are Ed Tumey v. States of Ohio', 71 Law. Ed. 749, 'M. J. Dugan v. State of Ohio', 72 Law. Ed. 784 and 'Clearance Ward v. Village of Monroeville, Ohio', 34 Law. Ed. 267 of the United States Supreme Court Reports. In Tumey's case, (supra) the view taken was that the accused was subjected to the judgment of a Court, the Judge of which has a direct and substantial pecuniary interest in reaching a conclusion against him as he was subjected to trial before a Mayor the sole source of whose costs will be the fine imposed upon accused. There was a possibility of the Mayor receiving $ 12 as costs for conviction of one accused of violating the liquor law and whose emoluments from such source amount to about $ 100 per month, in addition to his salary. This was construed as a material pecuniary interest of the Judge. In Dugan's case, (supra) the view taken was that a Mayor of a city having a commission form of Government in which his duties are merely judicial, and who receives a stated salary, is not disqualified to decide prosecutions for violation of the liquor laws in the municipality, although his salary is paid out of the fund to which the fines imposed by him contribute. It was observed that there is no reason to infer on any showing that failure to convict in any case or cases would deprive him or affect his fixed compensation. The principles announced in Tumey's case (supra) were expressed as not covering Dugan's case (supra). M. G. Dugan's case was considered in Clearance Ward's case (supra). It was observed that the Mayor's relation to the finances and financial policy to the city was too remote to warrant a presumption of bias toward conviction in prosecutions before him as Judge. It was, however, felt that the test of whether trial before an executive officer violates due process of law is whether the officer's situation is such as to offer a possible temptation to the average man as Judge to forget the burden of proof required to convict the defendant or to lead him not to hold the balance nice, clear and true between the State and the accused.
59. Reliance is placed on 'S. Parthasarathi v. State of Andhra Pradesh', : (1973)IILLJ473SC wherein it was held :-
'The tests of 'real likelihood' and 'reasonable suspicion' are really inconsistent with each other. We think that the reviewing authority must make a determination on the basis of the whole evidence before it, whether a reasonable man would in the circumstances infer that there is real likelihood of bias. The Court must look at the impression which other people have. This follows from the principle that justice must not only be done but seen to be done. If right minded persons would think that there is real likelihood of bias on the part of an inquiring officer, he must not conduct the enquiry; nevertheless, there must be a real likelihood of bias. Surmise and conjecture would not be enough. There must exist circumstances from which reasonable men would think it probable or likely that the inquiring officer will be prejudiced against the delinquent. The Court will not inquire whether he was really prejudiced. If a reasonable man would think on the basis of the existing circumstances that he is likely to be prejudiced, that is sufficient to quash the decision [See per Lord Denning, H.R. in Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon and Others, etc.] We should not, however, be understood to deny that the Court might with greater propriety apply the 'reasonable suspicion' test in criminal or in proceedings analogous to criminal proceedings.'
60. Reference is invited to a passage from Garner's Administrative Law, 6th Edition at page 140 :
'To begin with we may say that if a statute chooses to confer a power on a person who, or a body which, is inevitably 'interested' in the outcome of his or its own decision, then that inevitable interest cannot form the basis of a successful challenge. Thus, in Wilkinson v. Barking Corpn., the Local Government (Superannuation) Acts provided that questions as to the entitlement of an employee of a local authority to a superannuation allowance were to be determined initially by the local authority, and then on appeal by the Minister of Health. An action was brought asking for a declaration that decisions of the local authority and the Minister were void on the ground that they had acted as judges in their own cause, since both were required under the statute to make contributions to the superannuation fund out of which any allowance would be payable. The Court of Appeal held that since the statute had provided for this method of adjudication it was powerless to intervene.'
61. The challenge to the 'reward scheme' can be split up into two contentions. The first is whether there is any possibility of mass departmental bias affecting adjudication proceedings as a result of levy of additional duties and penalties for the benefits of the subordinates of the adjudicating authority. According to para 7.1 of the Scheme, ordinarily, informers and Government servants up to the level of Group 'A' Superintendent/Assistant Collector of Customs/Central Excise/Assistant Directors are eligible for reward depending on the contribution made by them as a team as well as individually with regard to collection of intelligence, surveillance, effecting of seizure etc. This essentially refers to the staff employed on the investigation in pursuance of which the impugned show cause notices have been issued. The argument of ensuring the popularity, obedience or loyalty of the staff may have some relevance if the adjudicating authority is the Collector of Central Excise at Guntur under whom the staff has been employed. The authority to investigate and to adjudicate the case of the petitioners is the Director (Audit) in the Directorate General of Inspection and Audit (Customs & Central Excise) at New Delhi. It is too much of a conjecture and surmise which in law would not be enough, to opine that the Director (Audit) would uphold the levy of duty and penalty with an end view of distribution to the staff employed at Guntur. A strong probability is required for disqualification when an institutional bias is alleged. The petitioners are unable to show that the interest of the Director (Audit) is substantial so as to make it highly probable that the Director (Audit) has a real bias. A mere possibility of bias is not enough to disqualify the Director (Audit). In 'Reg v. Hendsley (1881) 8 QBD 383, it was held :-
'In order to disqualify the justice it must be established that he has such a substantial interest in the result of the hearing as to make it likely that he has a real bias in the matter.'
The same test was applied by the Queen's Bench Division in 'Reg v. Burton and another', (1897) 2 QBD 468.
62. We are faced with the perennial difficulty of the application of the law to the facts of this case. The principle is well established that the test of likelihood of bias which has been applied in a number of cases is based on the reasonable apprehension of a reasonable man fully cognizant of the facts. But the hurdle in the way of the petitioners is that, in our view, their case does not fall within the ambit of these principles. We do not find the existence of the circumstances that the Director (Audit) is likely to be prejudiced against the petitioners. He cannot be reasonably suspected of having a departmental bias. If at all there may be a rare possibility of being influenced, but that is not sufficient to disqualify.
63. The case of Lingala Vijaykumar and others (supra) relied upon by Shri Venugopal relating to the cash awards being distributed to the prosecution witnesses when criminal case was pending, was considered by the Supreme Court in 'Laxmi Raj Shetty & another v. State of Tamil Nadu', : 1988CriLJ1783 it was observed :-
'It is not a phenomenon unknown in the world today for the Government to offer cash rewards to citizens for their act of courage and bravery by coming forward with vital information which results in the ultimate detection of the offender. In such cases there is no question of impairing the testimonial fidelity of such person as a competent witness. Learned counsel however drew our attention to the observations of the Court. Lingala Vijaykumar & ors. v. Public Prosecutor, Andhra Pradesh : 1978CriLJ1527 where this Court viewed with concern the practice of offering cash rewards to prosecution witnesses when the case was sub-judice. We may say at once that the Court in that case did not discard the testimony of the prosecution witnesses on that account. All it did in that case was to endorse the expression of opinion of the learned Sessions Judge that such rewards for bravery may be euphemistic officials towards but are apt to be construed by the accused as purchase price for testimonial fidelity and the Government ought not to prejudge the case and award any case reward to a citizen for his exemplary civil sense since he may figure as a material witness......'
64. As the Government Counsel has stated that the scheme has been envisaged to encourage and allow the officers of proven ability and honesty in order to boost the morale of those officers in their preventive activities against tax evasion and by this practice the tendency of accepting bribes is checked and corruption eliminated, we would not interfere with the scheme unless there is a strong probability of any institutional bias so as to affect adjudication.
65. The case of Ranjit Thakur (supra) relied upon by the counsel for the petitioners proceeds on the basis of the non-compliance of the mandate of Section 130 of the Army Act, 1950. It requires that at all trials by General, District or Summary Court Martial, as soon as the Court assembles, the names of the Presiding Officer and members are required to be read over to the accused, who has to be then asked whether he objects to be tried by any officer sitting at the Court Martial. In that case the proceedings did not indicate that the accused was asked whether he objects to be tried by any officer sitting at the Court Martial and this was basic infirmity in the proceedings and militates against and detracts from the concept of fair trial. The accused had sent number of representations complaining against ill-treatment at the hand of that particular officer directly to the higher authorities and thus there was real likelihood of bias in that officer constituting the Tribunal. It is in these circumstances that their Lordships held that the participation of that particular officer in the Court Martial rendered the proceedings quorum non juris.
66. The second contention is whether the pecuniary interest, however small it may be in a subject matter of the proceedings, would wholly disqualify a member from acting as a Judge. Para 7.2 of the Reward Scheme says that Group 'A' officers above the level of Assistant Collector, Assistant Director will not be eligible for reward on the basis of value of seizure etc. It, however, provides the grant of lumpsum payment/advance increment and/or recognition in any other manner of the services rendered by them for which purpose the Heads of Department should forward their recommendations to the officers with a copy to the Ministry. Mr. Ramaswamy had made a statement at the Bar that no case has ever been recommended for grant of lumpsum payment in favor of any adjudicating authority and that is not the purpose of the scheme. There is thus no direct pecuniary interest of the Director (Audit). The real grievance of the petitioners is to the setting up of Welfare Fund out of the three funds. One per cent of the estimated costs of the market value of the goods involved has to be credited to the Welfare Fund. The Welfare Fund covers all officers and staff working in the Central Board of Excise and Customs, its attached and subordinate offices and includes officers/staff of the CBEC working on deputation in various Ministries. The Welfare Fund has been established for promotion of staff welfare, recreation and other outdoor activities and to provide for contingencies stated in the Rules governing the administration of the Welfare Fund. The Court has to see whether such an indirect pecuniary interest can operate, whether consciously or unconsciously, to the prejudice of the petitioners. The Director (Audit) is functioning as an adjudicating authority who is to determine the proceedings objectively. The exercise of discretionary power plays a very negligible and insignificant role in the adjudication proceedings. Merely because there is a remote possibility of the Director (Audit) or his family member participating in any of the schemes of the Welfare Fund, the adjudication would be influenced by those considerations. It is purely depending upon a speculative chance that situations may exist or created subsequently under which the Director (Audit) or his family members could avail of benefits. It may be that such a contingency may not arise at all or in all probability it may not happen. There is thus neither any direct pecuniary interest nor certain. Viewed from the angle of the totality of the schemes under the Welfare Fund and the number of persons eligible for participation or assistance out of the Welfare Fund, the monetary interest of one individual, even if certain, is so insignificant or trifle that it cannot be termed as a pecuniary interest of any value. Being so remote, it is incapable of effecting the judgment of the adjudicating authority.
67. We are fortified in our view by the decision of the Calcutta High Court in I.T.C. Ltd. (supra) wherein it was held :-
'.... Secondly, ordinarily an authority is disqualified from adjudicating whenever circumstances points to a real likelihood that he will have a bias, by which is meant an operative prejudice whether conscious or unconscious in relation to a party or issue before him. In this particular case the proceeding has been undertaken and initiated by a very high officer of the Central Government. It is also well known principles firmly established by several decisions of the Supreme Court that when power is conferred upon a very high official the possibility of misuse of that power is less than the power conferred upon an ordinary official and in my view the same principle shall apply in case of bias. In the instant case the said Shri Bajpai has to exercise his power which is not at all a discretionary power but he has to give his decision objectively on the basis of materials and documents on record and on the basis of submissions and/or representations made by the parties before the said Authority. Standards applicable to the principle of bias, in my view in case of exercise of discretionary power is quite different from a case where a statutory authority had to give his decision objectively on the basis of the evidence and materials on record, which has to be given after hearing the aforesaid parties. In such case a decision is given objectively and subject to scrutiny by the Appellate and/or Revisional authorities. The degree of substantial prejudice in both the cases is not same. When in a case like this, a party complains before the Court that certain officer is biased, the Court will not adopt same standard as in the case of exercise of discretionary power by an authority whose decision is more or less subjective. In the case of discretionary power, the substantial risk or prejudice of a party appearing before that authority is very high than a case like this, where a top ranking officer of the Central Government has to exercise his power on the basis of a show cause notice issued, he has to confine the order on the basis of the materials and documents and records and on the basis of the representations and objections that may be made before the said authority. In my view the Court's approach to the principles of bias in case of decision given subjectively and decision given objectively should be different as conceptually the principles of bias cannot be uniform in both the cases. In case of subjective decisions bias plays a very important role but in case of objective decisions like this, bias plays a very negligible and insignificant role. Accordingly, on the basis of the above principles and materials on record I am unable to hold that the proceeding in this case will be vitiated on the ground of bias and/or interest in case the same is allowed to be conducted by the respondent No. 3. Further on the basis of some remote or purely speculative allegations before this Court I am unable to hold that the said reward rule has created any interest or likely to create any interest for which the concept of departmental bias or institutional bias could be invoked in the instant case...'
68. Apart from it, all the adjudicating authorities are so called beneficiaries or eligible for the benefits under the Welfare Fund. That means that there can never be any adjudication against the petitioners by any authority. In these cases, the doctrine of necessity has to be invoked. In 'J. Mohapatra and Co. and another v. State of Orissa and another', : 1SCR322 it was held :-
'There is, however, an exception to the above rule that no man shall be a judge in his own cause, namely, the doctrine of necessity. An adjudicator, who is subject to disqualification on the ground of bias or interest in the matter which he has to decide, may be required to adjudicate if there is no other person who is competent or authorised to adjudicate or if a quorum cannot be formed without him or if no other competent tribunal can be constituted. In such cases the principle of natural justice would have to give way to necessity for otherwise there would be no means of deciding the matter and the machinery of justice or administration would break down. Thus, in The Judges v. Attorney-General for Saskatchewan, the Judges of the Court of Appeal were held competent to decide the question whether Judges of the Court of Appeal, of the Court of King's Bench and of the District Courts of the Province of Saskatchewan were subject to taxation under the Income-tax Act, 1932, of Saskatchewan on the ground that they were bound to act ex-necessitate. The doctrines of necessity applies not only to judicial matters but also to quasi-judicial and administrative matters...'
The Director (Audit) is thus bound to hear and adjudicate the case of the petitioners act ex-necessitate - a region where the principle of natural justice in any case has to yield.
69. In all fairness to Mr. Venugopal, he did not pursue the arguments on merits of the allegations contained in the impugned show cause notices, when told that the disputed questions of fact have first to be investigated, gone into and determined by the authorities under the Act.
70. In the result, the writ petition fails and is dismissed with no order as to costs.