1. This writ petition filed under Article 226 of the Constitution of India is for the issue of a writ of certiorari or any other appropriate order calling for the records relating to the orders of respondents 1 to 3, bearing F. No. 196/19/76-CX V, Government of India, Department of Revenue and Banking dated 11-3-1977, No. 14 of 1976 dated 24-1-1976 and C. No7 V/38/15/2/74 CX Adj II dated 29-8-1974, respectively and quashing the same.
2. The petitioner, K. Balan, is the proprietor of a match factory situate at Salapalayam, Pollachi Taluk, and he manufactures matches on cottage industry basis, after obtaining the necessary licence from the Central Excise department. On 5-9-1973, at about 2.30 p.m. the Superintendent of Central Excise, Divisional Preventive Branch, raided the factory. During the raid, it was alleged that 34 gross boxes of matches were in excess of the stock with reference to the stock register, that a man running away from the factory with 15 kgs. of pottas-sium chlorate was stopped and the material was recovered from the man who is alleged to be an employee of the petitioner, that the raiding party went into the tiled house situated in front of the factory and found a man hiding two account books alleged to have been maintained by the petitioner and they were seized and based on these materials, a show cause notice dated 11-2-1974, was issued by the Assistant Collector of Central Excise, Coimbatore II division to the petitioner. The petitioner submitted his explanation dated 21-2-1974. This was followed by an enquiry by the Collector of Central Excise. In the enquiry, some witnesses were examined on the side of the department. The Collector of Central Excise passed an order holding that the petitioner had violated Rules 9(1) and 55-A of the Central Excise Rules, 1944, since there was excess of stock of 34 gross boxes of matches and that as per the two account books seized from the man in the tiled house situate in front of the factory, it was found that the petitioner had sold 12,145 gross boxes of matches without paying the excess duty thereon to the extent of Rs. 45,545.07. The Collector, the third respondent directed the petitioner to pay that amount together with a penalty of Rs. 2,000 under Rule 9(2) of the said rules. The appeal preferred by the petitioner to the Central Board of Excise, the second respondent was dismissed on 24-1-1976. The revision petition filed on 8-2-1976 before the Central Government, the first respondent was dismissed by an order dated 11-3-1977. This writ petition has been filed for quashing these orders.
3. In the affidavit filed in support of the petition, it is alleged that no mahazars were prepared for the recovery of pottassium chlorate, and the account books and, therefore, there is violation of the statutory provisions relating to the seizures. After the charges were framed against the petitioner, the petitioner requested that summons might be issued to all the persons from whom the statements were said to have been recorded by the department and they may be examined so that the petitioner will have an opportunity to cross-examine them during the personal hearing. Though the petitioner was informed that summons were issued to all the witnesses and persons concerned in this case, only four persons and the Superintendent were examined and they were cross-examined by the petitioner. The important witnesses Sethuraman, Peter, Thirumurthi, Sundarakumar, Kaliapapa Gounder, Subbiah, Mylsami and others were not examined to prove the alleged recovery and ownership of the two account books and pottassium chlorate. Sethuraman cited by the department as a witness, who is alleged to have written the account books, is a dismissed employee of the petitioner and he had sufficient motive to make a statement against the interest of the petitioner, Sundarakumar, whose statement also is relied upon to connect the account books with the petitioner, had not been examined to enable the petitioner to cross-examine him. Thus the evidence and the materials relied upon by the department for connecting the petitioner with the accounts are not sufficient to prove the case against the petitioner. Without considering all these things, the Collector, the third respondent, passed the impugned order dated 29-8-1974. The Central Board of Excise dismissed the appeal without properly considering the merits and legality of the evidence relied upon in this case. The Government of India has dismissed the revision petition on untenable grounds. The writ petition has, therefore, been filed for quashing the orders.
4. In the affidavit of the Assistant Collector of Central Excise, Legal, Madras, filed in this writ petition, it has been contended that a personal hearing was given to the petitioner and his counsel cross examined the witnesses who turned up at the personal hearing. Taking into consideration the statements recorded at the time of seizure and the evidence recorded at the enquiry, the Collector by his order dated 29-8-1974, imposed a penalty of Rs. 2,000, and the duty on 12,145 gross boxes of matches removed from the factory without payment of duty. There was no error in the order of the Collector. Summons were issued to all the witnesses referred to in paragraph 5 of the affidavit, for attending the personal hearing, but they did not turn up for the enquiry. If the petitioner was really interested, he could have arranged to produce them as his own witnesses. The department examined the account books and found them to relate to the petitioner. The Collector relied upon the admissions and the statements and passed the order. The petitioner did not ask for any personal hearing before the Central Board of Excise or the Government of India. There was, therefore, no violation of the principles of natural justice.
5. Three points were urged before me by the learned counsel for the petitioner. They are (1) that the mahazars for the alleged recovery of 34 gross boxes of matches and pottassium chlorate and account books were not prepared and, therefore, there was violation of the statutory requirements, (2) that the accounts have not been proved to relate to the petitioner by any legal evidence and the Collector erred in relying on the statement of Sethuraman and Sundarakumar said to have been recorded behind the back of the petitioner without calling them as witnesses to speak about the same during the enquiry and giving an opportunity to the petitioners to cross-examine them; and (3) that the order of the Government of India passed on the revision petition does not contain reasons and could not, therefore, be sustained. It is unnecessary to go into the question of the alleged violation of the statutory principles in respect of the seizures said to have been made during the raid, having regard to the fact that the seizures of 34 gross boxes of matches and pottasium chlorate, which are stated to have been returned to the petitioner to be brought into the account and the two account books have not been disputed. It is only contended that the account books said to relate to the petitioner's transactions have not been proved by any legal evidence in the quasi-judicial enquiry to relate to the petitioner. The Collector of Central Excise has admitted in his order that the petitioner has all along stoutly denied having had anything to do with the accounts seized from the open tiled house located opposite to the match factory at about 3.40 p.m. on 5-9-1973, in the absence of the petitioner. But the petitioner's brother Sundarakumar, who was virtually managing the affairs of the factory, was present and the two accounts were found on examination by the officers to to pertain to Preetha Match factory of the petitioner as they bore the following rubber stamp R.C. No. 283207 Preetha Match Works, S.F. No. 22/C Solapalyam village, Pollachi taluk. The Collector has also stated the Sundarakumar has admitted both at the time of the siezure and in the voluntary statement recorded on 5-9-1973, that the account books seized belong to their factory, that the petitioner contended that he was not bound by the statement of his brother that the account books related to the petitioner and that the petitioner insisted that Sethuraman and Sundarakumar and others should be made available for cross-examination and he himself could have produced them as defence witnesses, having regard to the fact that summons taken out by the department could not be served on those persons for want of their latest addresses. Thus the Collector has relied upon the statements of Sethuraman, the statements said to have been made by Sundarakumar, the brother of the petitioner both at the time'of the seizure and later in the voluntary statement on 5-9-1973, and the rubber stamp found on the account books and held that the accounts related to the petitioner. In the present case, a penalty of Rs. 2,000 has been levied in addition to the demand for the excise duty for Rs. 45,543.07 by the impugned order of the Collector which has been confirmed by the Central Board of Excise and the Government of India in the appeal and revision respectively.
5. Govindan Nair, C.J., speaking for the Bench in which I too was a member, in Union of India v. Marcel Nevens, Madras, 91 LW 164 has observed thus-
'Mr. Govind Swaminathan on behalf of the appellants in this batch of cases, we think, rightly contended that the material available was only the correspondence or documents exchanged between the agents-counsel was appearing for Messr Simson and Meconochy Ltd. and their principals, or the pencil notings, said to have been made by the said agents in the originals of these contracts and that this by no stretch of imagination can reveal that there was any understanding or agreement between the principals Bavington and Sons Ltd. and the German firm Zentral Kommers. It is not enough if there was material to make a guess that there could possibly have been a similar agreement between Messrs Bavington and Sons Ltd. and the German firm but, there must be some tangible proof. Speculations certainly should be avoided, particularly when orders of confiscation and imposition of penalty are to be made. The provision is of a penal nature. The degree of proof that is required for the penalty to be imposed is that which is required in a criminal case would expect some material on the basis of which a reasonable conclusion is possible. In fact, the conclusion must not only be a possible conclusion but must be the only conclusion that could be reached on the material before the authorities. There was no such material at all before the Collector of Customs. In view of this, though Palaniswami J.'s judgment did not deal with the case of agents, we think the conclusion reached by the learned Judge must apply to the agents as well, since there is nothing to indicate that the contracts were not with the German firm as stated in the contract for which payments were arranged by the German firm in rupees'.
6. In an unreported decision of the Supreme Court in CA 1430 to 1442 of 1966, it has been observed in the judgment dated 2-4-1968, thus-
'It is clear from the order dated 24-2-1959, that the Collector based it on the grounds of (1) that Section 178A applied and on the failure of Gianchand to establish that the gold seized from him, his wife and Raghunath was not smuggled gold, the gold was smuggled gold; (2) the confession made by Kewal Krishnan and concurred by Hansraj and Jawahar, established that the gold was illicitly imported and was, therefore, liable to confiscation; and (3) that Gianchand and others were concerned in such importation and were, therefore, liable to personal penalty. In view, however, of the decision in Gianchand v. Union of India, 1961 1 S.C.R. 364 it is now beyond any controversy that S. 178A would not apply in the present cases. The Collector, therefore, could not invoke any assistance from that section and the burden of proof that the gold was smuggled gold lay on the Customs. Obviously, the only evidence before the Collector was as regards the raid on Gianchand's house, the seizure of the gold and the confession of Kewal Krishnan. As held in the judgment in C.A. 195' of 1972, delivered just now, the evidence as to raid and seizure cannot by itself establish that the gold was smuggled gold, nor does it establish that either Gianchand or Nirmal Devi or Raghunath as concerned in its imporation . .In the enquiry against them, neither Kewal Krishnan nor any of the other two was examined as a witness. It also does not appear that a copy of it was supplied to Gianchand or Raghunath or Nirmal Devi, nor were they told that it would be used against them. It is manifest, therefore, that no opportunity was given to them to controvert the veracity of that statement. As an admission, it would bind only the maker of it and those who confirmed or ratified it, but it would certainly not be binding on Gianchand, Nirmal Devi and Raghunath and could not, therefore, be used as evidence against them'.
7. In the light of these two decisions, the learned counsel for the petitioner submitted that the Collector of Central Excise was not justified in acting upon the statements of Sundarakumar and Sethuraman said to have been recorded behind the back of the petitioner without making them available for cross-examination by the petitioner in spite of the petitioner's denial of his connection with the account books and his request that these witnesses must be made available for his cross-examination. It is also submitted that no inference could be drawn from the rubber stamp found on the account books that they related to the petitioner. On the other hand, the learned counsel for the respondents relied upon the decision in Manindranath v. Collector, Central Excise, 1977 TLR 1754, while conceding that the enquiry before the Collector is a quasi judicial enquiry, and submitted it is open to the Collector to act upon the statements of Sethuraman and Sundarakumar. The learned Judges have also observed in that decision thus-
'Before us, it was firstly, contended that the order of adjudication passed by the Collector was violative of the principles of natural justice as the petitioner appellant did not have reasonable opportunity before the order of adjudication was passed. In support of this contention it was urged on behalf of the appellant that several documents referred to in para 29 of the petition were not given copies of and the appellant did not have opportunity properly thereby to show cause. From the averments made in the affidavit in opposition, it appears that all relevant documents were given inspection to the petitioner appellant. Furthermore, the gist of the enquiry officer's report and the statements of warehouse owners of the growing areas mentioned in the show cause notice, the abstract of A.R. 1 forms were all indicated in the show cause notice itself. In the light of the allegations made in the show cause notice and the documents as indicated in the affidavit in oppositions which were stated to have been given inspection, we are unable to accept the position that the petitioner appellant did not have reasonable opportunity of inspecting all relevant or material documents in order to have proper opportunity to show cause.
It was next contended that the petitioner appellant did not have reasonable opportunity because he was denied the opportunity to cross- examine the makers of the statement of the trade opinions. In support of this contention, reliance was placed on the allegations made in paragraph 33 of the petition as also in the statements as appearing from the order of adjudication of the Collector in which he has referred to the said opinion. The right to cross-examine is not necessarily a part of reasonable opportunity. Whether in a particular case, a particular party should have the right to cross-examine or not depends upon the facts and circumstances of the case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such. He must, however, afford such opportunity as would ensure to the party concerned proper opportunity to defend himself. It is well known that in these matters the Revenue or Excise authorities are entitled to make their indepedent enquiries and to rely upon such enquiries provided the result of such enquiries are communicated to the person concerned against whom such enquiry is sought to be relied on and he is given an opportunity to rebut or contradict any evidence adduced by such enquiry. In this case such procedure was followed. The gist of the enquiry and the gist of the opinion of the traders and wholesale dealers on whose opinion the Collector has relied on in his adjudication order were informed to the petitioner appellant in the show cause notice itself. Furthermore, it appears from the affidavit in opposition that the appellant did not ask for cross examining any witness save and except that at the personal hearing on 14th June, 1962, the learned advocate appearing for the petitioner asked for an opportunity to cross-examine the particular trader from whom sample of tobacco leaves with portion of butts and stalks attached to them and recieved by him from the petitioner, was found. Even if the appellant's advocate had asked for such opportunity, in the background of the facts and circumstances of the case, we do not think that the mere fact that the appellant was not given an opportunity to cross-examine the maker of that opinion would be violative of the principles of natural justice.'
8. The circumstance appearing in that case do not appear to be similar to the facts of the present case. The person proceeded against in that case did not ask for cross-examination of any witness except only one trader from whom samples tobacco leaves received by him from the petitioner was found or recovered, whereas in the present case, the petitioner specifically requested the Collector of Central Excise to summon the other witnesses including Sathuraman and Sundarakumar, whose statements received behind the back of the petitioner have been relied upon by the Collector and they have not been made available to the petitioner for being cross-examined by the petitioner. But in the view that I am going to take on the other question, namely, whether the impugned order of the Government of India in laconic and does not contain reasons and therefore, could not be sustained, it is not necessary for me to express any opinion on the question whether the Collector was or was not justified in acting upon the statements of Sethuraman and Sundarakumar who were not made available for cross-examination by the petitioner in spite of the specific request for the same. It is for the Government of India to consider that question and see how far the charge has been proved satisfactorily against the petitioner.
9. The learned counsel for the petitioner relied upon the decision of the Supreme Court in Travancore Rayons v. Union of India, : 1978(2)ELT378(SC) , in support of his contention that the impugned order of the Government of India does not contain reasons and, therefore, it is not a speaking order and that it could not be sustained and has to be set aside. That impugned order reads thus -
'The Government of India have considered the facts of the case and the points raised by the appellant in his revision application. The Government fully endorse the Board's findings that the private account books referred to belonged to the applicant's factory and he had disposed of 12145 gross of match boxes as revealed from these books without payment of duty. The revision application is without any merits and is hereby rejected.'
The Supreme Court has observed in the decision now referred to thus-
'The order does not disclose the name or designation of the authority of the Government of India who considered 'the points made by the applicants'and |t is impossible to say whether the officer was familiar with the subject matter so that he could decide the dispute without elucidation and merely on a perusal of the papers. The form in which the order was communicated is apparently a printed form. There is a bare assertion by the Joint Secretary to the Government of India in his communication that the Government of India had 'carefully considered the points made by the applicants', there is no evidence as to who considered the 'points' and what was considered. The Central Government is by Section 36 invested with the judicial power of the State. Orders involving important disputes are brought before the Government. The orders made by the Central Government are subject to appeal to this court under Article 136 of the Constitution. It would be impossible for this court exercising jurisdiction under Article 136, to decide the dispute without a speaking order of the authority, setting out the nature of the dispute, the arguments in support thereof raised by the aggrieved party and reasonably disclosing that the matter received due consideration by the authority competent to decide the dispute. Exercise of the right to appeal to this court would be futile, if the authority chooses not to disclose the reasons in support of the decision reached by it. A party who approaches the Government in exercise of a statutory right, for adjudication of a dispute is entitled to know at least the official designation of the person who has considered by him, and the reasons for recording a decision against him. To enable the High Court or this court to exercise its constitutional powers, not only the decision, but an adequate disclosure of materials justifying an inference that there has been a judicial consideration of the dispute by an authority competent in that behalf in the light of the claim made by the aggrieved party, is necessary. If the Officer acting on behalf of the Government chooses to give no reasons, the right of appeal will be devoid of any substance . .The conception of exercise of revisional jurisdiction and the manner of disposal provided in Rule 55 of the Rules are indicative of the scope and nature of the Government's jurisdiction. If Tribunals can make orders without giving reasons, the said power in the hands of unscrupulous or dishonest officers may turn out to be a weapon for abuse of power. But if reasons for an order are given, it will be an effective restraint on such abuse, as the order, if it discloses extraneous or irrelevant considerations, will be subject to judicial scrutiny and correction. A speaking order will at its best be a reasonable and at its worst be at least a plausible one. The public should not be deprived of this only safeguard . . . . In a later judgment of Bhagat Raja v. Union of India, AIR 1974 S.C. 1606, the constitution Bench of this court in effect overruled the judgment of the majority in Madhya Pradesh Industries Ltd.'s. case. The court held that the decisions of Tribunals in India are subject to the supervisory powers of the High Court under Article 227 of the Constitution and of appellate powers of this court under Article 136. The High Court and this court would be placed under a great disadvantage if no reasons are given and the revision is dismissed by the use of the single word 'rejected' or 'dismissed'. The Court in that case held that the order of the Central Government in appeal, did not set out any reasons of its own and on that account set aside that order. In our view, the majority judgment of this court in Madhya Pradesh Industries Ltd. case has been over-ruled by this court in Bhagat Raja's case : 3SCR302 . . In this case, the communication from tne Central Government gave no reasons in support of the order; the appellable company is merely intimated thereby that the Government of India did not see any reasons to interfere 'with the order in appeal'. The communication does not disclose the 'point' which were considered, and the reasons for rejecting them. This is a totally unsatisfactory method of disposal of a case in exercise of the judicial power vested in The Central Government. Necessity to give sufficient reasons which disclose proper appreciation of the problem to be solved, and the mental process by which the conclusion is reached in cases where a non-judicial authority exercises judicial functions, is obvious. When judicial power is exercised by an authority normally performing executive or administrative functions, this court would require to be satisfied that the decision has been reached after due consideration of the merits of the dispute, uninfluenced by extraneous considerations of policy or expediency. The Court insists upon disclosure of reasons in support of the order on two grounds; one, that the party aggrieved in a proceeding before the High Court or this court has the opportunity to demonstrate that the reasons which persuaded the authority to reject this case were erroneous; the other, that the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power'.
10. With these observations, their Lordships of the Supreme Court allowed the appeal and set aside the order of the Central Government and remanded the matter to the Central Government with the direction to dispose of the same according to law. In Siemens Engg. and Mfg. Co. v. Union of India, : AIR1976SC1785 , their Lordships of the Supreme Court have observed that it is now settled law that where an authority makes an order in exercise of a quasi judicial function, it must record its reasons in support of the order it makes and it has been laid down by a long line of decisions of the Supreme Court ending with N.N. Desai v. Testeels Ltd., C. A. 245 of 1970 decided on 17-12-1975, that every quasi judicial order must be supported by reasons. The Supreme Court has thus laid down in a series of decisions that the Government exercising quasi judicial function must give reasons in support of the orders passed by them in appeals or revisions. The impugned order of the first respondent, Government of India, does not contain any reasons whatsoever for endorsing the Board's findings that the accounts referred to belonged to the applicant's factory and that the revision petition was without any merit and was, therefore, rejected. The order could not, therefore, be sustained. The writ petition is accordingly allowed with costs. Advocate's fee Rs. 250. The order of the first respondent is set aside and the revision petition is remanded to the Government of India for fresh consideration in the light of the decisions referred to in this judgment and other relevant factors.