TMI Blog1988 (8) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... dhra Pradesh. With effect from March 1, 1977 it merged with M/s. Duncans Agro Industries Limited, the petitioner herein (for short called Duncans), 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, Duncans 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 (hereinafter called NTC) was incorporated in January, 1984. NTC became in March, 1984 a subsidiary of Duncans. Under another scheme of arrangement under the provisions of Sections 391 to 394 of the Companies Act, 1956 entered into between Duncans 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 Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttes 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.1 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 exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 provisioins 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.Duncans filed the present writ petition on April 18, 1987 see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wilful 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 11-A is that a person of responsibility and experience of the rank of Collector o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 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-organised 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 leviable 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 inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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, A.I.R. 1970 S.C. 951 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 explanation 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 tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction, to be ultra vires. [See Attorney General v. Great Eastern Railway (1880) 5 AC 473 at 478]. 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 interferred 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 petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 therefore is in conformity with Rule 2(ii). The powers having been expressly conferred by the Rules and the Act, there is no question of 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 limine 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 1486 and "S. Rajagopala v. S.T.A. Tribunal", A.I.R. 1964 S.C. 1573. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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 modem 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, therefore, 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 or for extraneous considerations, then the exercise of power will be struck down. Mr. Ramaswamy further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore 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, therefore, 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee for any particular year does not necessarily indicate that it is equally necessary or desirable to transfer another assessment case of that asses-see 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. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 violative of Article 20(3) of the Constitution of India. 41.Reliance is placed on "Smt. Nandini Satpathy v. P.L. Dani and another", A.I.R. 1978 S.C. 1025 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 imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry lines to the annoyance and hardship of the citizen. 43.Counsel contends that certain rights have been enshrined in our Constitution as fundamental and, therefore, 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 why penalty should not be imposed as provided in the statutes concerned. Affording of such opportunities by way of show cause notice do not amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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 Bombay 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive, 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 Duncans 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 lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts assets and liabilities including those relating to Central Excise duty to NTC. The balance relating to the Duncans 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 Duncans 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", A.I.R. 1961 S.C. 372, "M/s. East India Commercial Co. Ltd., Calcutta and another v. "Collector of Customs, Calcutta", 1983 E.L.T. 1342 = A.I.R 1962 S.C. 1893, "Bengal Immunity Co. Ltd. v. State of Bihar and others", A.I.R. 1955 S.C. 661 and a decision of this Court in the case of "J.K. Synthetics Ltd. v. Collector of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Duncans 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 Duncans 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 Duncans, thus continuing to be the holding company of NTC appointing their entire Board of Directors. According to the allegations in the show cause notice, Duncans 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 wilful 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 init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o doubtful. 52.Whether both the companies or the Directors of both the companies, namely, Duncans 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 therefrom; (vi) falsely recording despatches 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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", 1987 (4) S.C.C. 611 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. 1485, cash awards were distributed to the prosec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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 depend in some manner on the decisions reached is of questionable constitutionality. 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 a 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, statutes 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 outcome however small would amount to sale of justice and due process of law requires invalidation 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Clarence 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upto 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in "Laxmi Raj Shetty another v. State of Tamil Nadu", JT 1988 (2) S.C. 180 at page 193 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 this Court. Lingala Vijaykumar ors. v. Public Prosecutor, Andhra Pradesh (1979) 1 SCR 2 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 propsecution 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 officialism 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 cash reward t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no case has ever been recommended for grant of lumpsum payment in favour 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 play ..... X X X X Extracts X X X X X X X X Extracts X X X X
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