ivil Appeal No 1102 of 1990
From the Judgment and Order dated 7101988 of the Patna High Court in CWJC No 2075 of 1988
AK Sen KD prasad J Krishna and Mrs Naresh Bakshi for the Appellant
SK Sinha and US Prasad for the Respondents
The Judgment of the Court was delivered by K JAGANNATHA SHETTY J
Special Leave is granted
This appeal from an order of the Patna High Court raises an important question as to the scope of section 33 B of the  The Act 
The facts can be quite shortly stated The appellant company is mainly engaged in construction of coal washeries on contract basis in different collieries and also doing allied and incidental work
Shivaji Prasad Sinha respondent No 4 was a Senior Supervisor in the company s establishment at Dhanbad
It is said that he was caught red handed when carrying 55 pieces of electromagnetic clutch plates kept concealed in the tool box of his scooter
The management held domestic enquiry into the incident and found him guilty of committing theft
He was accordingly dismissed from service
The dispute arising therefrom was referred under Section 101c of the Act to Labour Court Dhanbad for adjudication
The Labour Court registered the case as refer ence case No 4 of 1988 and issued notice to the parties
The parties entered appearance and filed their respective pleadings
When the matter was thus pending consideration the respondent seems to have written to the Government stating that it would be difficult for him to attend the Labour Court Dhanbad since he has been residing at Hajipur and it would be convenient for him if the case is trans ferred to Labour Court Patna
That application was made without intimation to the management
The Government howev er has acceded to the request of the respondent and without opportunity to 294 the management transferred the case to Labour Court Patna
The Notification issued in that regard reads as follows NOTIFICATION Patna dated 8th August 1988 SO
In exercise of powers conferred by sub section 1 of Section 33 B of the 14 of 1947 the Governor of Bihar after careful consideration of the application of the petitioner Shri Shivajee Prasad Sinha wherein he has prayed for the transfer of adjudication proceedings to Patna keeping in view to the difficulties expressed by him to attend the labour court Dhanbad regu larly due to his residence at Hajipur is pleased to withdraw the proceeding shown in Annexure A  pending before Labour Court Dhanbad and transfer the said proceeding to the Labour Court Patna for speedy disposal from the stage at which the case is transferred
 The management moved the High Court by way of writ petition under Article 226 of the Constitution to have the Notification quashed
The High Court did not agree and summarily dismissed the writ petition with an observation Since no prejudice is being caused to the petitioner and no allegation of mala fide has been made against the presiding officer Patna we are not inclined to interfere with the order under challenge
This application is dismissed The management in the appeal challenges the Government notification withdrawing and transferring the pending case from the Labour Court Dhanbad to Labour Court Patna
Since the impugned notification has been issued under Section 33 B of the Act we may for immediate reference set out that Section
Omitting immaterial words it is in these terms 33B Power to transfer certain proceedings 1 The appropriate Government may by order in writing and for reasons to be stated therein withdraw any proceeding under this Act pending before a Labour Court 295 Tribunal or National Tribunal and transfer the same to another Labour Court Tribunal or National Tribunal as the case may be for the disposal of the proceeding and the Labour Court Tribunal or National Tribunal to which the proceeding is so transferred may subject to special direc tions in the order of transfer proceed either de novo or from the stage at which it was so transferred The Section 33 B provides power to the appropriate Government to withdraw any proceedings pending before a labour court or Tribunal and transfer it for disposal to another labour court or Tribunal
It could be exercised suo motu or on representations of the parties
The expression may  in sub section 1 of Section 33 B only makes it discretionary in so far as the appropriate Government taking a decision as to whether the power conferred thereunder has to be exercised or not
But when once a decision is taken to transfer a pending case then the requirement of giving reasons becomes mandatory
The authority is under legal obligation to record reasons in support of its decision
Reasons would be life of the decision
Failure to give reasons or giving reasons not germane would be fatal to the decision
In Associated Electrical Industries P Ltd vs Its Workmen 1961 II LLJ 122 130 the Government withdrew and transferred a reference from one tribunal to another tribu nal merely stating that expediency required the withdrawal and transfer
The validity of the order of withdrawal and transfer was challenged inter alia on the ground that no reasons were stated for passing the order
Gajendragadkar J as he then was speaking for this Court observed that the requirement about the statement of reasons to be record ed must be complied with both in substance and in letter
To say that it is expedient to withdraw a case from one tribu nal and transfer it to another does not amount to giving reasons as required by the Section
In the instant case the key question for consideration is whether the Government before accepting the representa tion of the workman and transferring the case from the labour court Dhanbad to labour court Patna should have given an opportunity to the management The validity of the reasons given by the Government for transferring the case is another question to be considered
We will presently consider the question but before doing so a brief survey of some of the High Courts decisions bearing on this aspect may be usefully made
The Punjab High Court in Workman of Punjab 296 Worsted Spinning Mills Chheharta vs State of Punjab  Ors 1965 II LLJ 2 18 has expressed the view that the power to transfer pending case under section 33 B is not a mere administrative but quasi judicial power and the appropriate Government cannot transfer a case on the basis of allega tions of one party without giving reasonable opportunity to other party to represent its point of view
This was also the view recognised by the Madras High Court in Management of Sri Rani Lakshmi Ginning and Weaving Mills Ltd vs State of Madras at 167
It was explained by the Madras High Court that the reasons given by a party who moved for transfer may not be valid or relevant or may not be true at all
Whether such reasons in fact exist and whether those reasons have any relevance for a transfer could be tested only if the other party has notice of the same
The High Courts of Calcutta Andhra Pradesh and Allaha bad have however taken contrary view
In Jay Engineering Works Ltd vs Fourth Industrial Tribunal Calcutta 1977 Lab 1C 1739 at 1750 the Calcutta High Court has observed that it would be difficult to appreciate how under such circumstances the Government could be called upon to give a notice to the parties before making an order under section 33 B There could be no principle involved in giving such a notice
Nobody s rights could possibly have been effected in taking such action and there is no question of observing the principles natural justice
The Andhra Pradesh High Court in Muthe Steels India Ltd vs Labour Court Hyderabad 1979 Lab IC 325 at 329 has adopted a similar line of reasoning
It was emphasized that Section 33 B in terms does not con template any notice being given before a transfer is made of any proceeding from one Labour Court to another
There is no right to any party to have any question decided by a partic ular court
An arbitrary exercise of power of transfer is adequately safeguarded by the statutory requirement to record reasons for such transfer
The Allahabad High Court in Pioneer Ltd vs Labour Court Gorakhpur 1983 Lab IC 335338 has also expressed similar views
After the leading English case of Ridge vs BaldwinI  and an equally important case of this Court in AK Kraipak  Ors
vs Union of India there was a turning point in the development of doctrine of natural justice as applicable to administrative bodies
Both the authorities laid down that for application of rules of natural justice the classification of functions as judi cial  or administrative  is not necessary
Lord Reid in Ridge case explained that the duty to act judicially may arise from the very nature of the 297 function intended to be performed and it need not be shown to be super added 
Hegde J in Kraipak case said that under our Constitution the rule of law pervades over the entire field of administration
Every organ of the State under our Constitution is regulated and controlled by the rule of law
The concept of rule of law would lose its vitality if the instrumentalities of the State are not charged with the duty of discharging their functions in a fair and just manner
The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously
The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate if not ensure a just and fair decision
What is thus important in the modern administration is the fairness of procedure with elimination of element of arbitrariness
The State functionaries must act fairly and reasonably
That is however not the same thing to state that they must act judicially or quasijudicially
In Keshav Mills Co Ltd vs Union of India  Mukherjea J said at 30 The administrative authority concerned should act fairly impartially and reasonably
Where administrative officers are concerned the duty is not so much to act judicially as to act fairly The procedural standards which are implied by the duty to act fairly has been explained by Lord Pearson in Pearl berg vs Varty 547 A tribunal to whom judicial or quasi judicial functions are entrusted is held to be required to apply those principles ie the rules of natural justice in performing those functions unless there is a provision to the contrary
But where some person or body is entrusted by Parliament with administrative or executive functions there is no presump tion that compliance with the principles of natural justice is required although as Parliament is not to be presumed to act unfairly  the courts may be able in suitable cases perhaps always to imply an obligation to act with fair ness
 In Mohinder Singh Gill vs Chief Election Commissioner  at 434 Krishna Iyer J commented that natural justice though 298 varying is the soul of the rule as fair play in action
It extends to both the fields of judicial and administrative
The administrative power in a democratic set up is not allergic to fairness in action and discretionary executive justice cannot degenerate into unilateral injustice
Good administration demands fair play in action and this simple desideratum is the fount of natural justice
Fairness is flexible and it is intended for improving the quality of government by injecting fairplay into its wheels
In Maneka Gandhi vs Union of India 1978 2 SCR 621 Bhagwati J expressed similar thought that audio alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power
In Swadeshi Cotton Mills vs Union of India Sarkaria J speaking for himself and Desai J said that irrespective of whether the power conferred on a statu tory body or tribunal is administrative or quasi judicial a duty to act fairly that is in consonance with the funda mental principles of substantive justice is generally im plied
The presumption is that in a democratic polity wedded to the rule of law the State or the Legislature does not intend that in the exercise of their statutory powers its functionaries should act unfairly or unjustly
In the same case Chinnappa Reddy J added at 2 12 that the princi ples of natural justice are now considered so fundamental as to be implicit in the concept of ordered liberty 
They are therefore implicit in every decision making function call it judicial quasi judicial or administrative
The learned Judge went on to state that where the statute is silent about the observance of the principles of natural justice such statutory silence is taken to imply compliance with the principles of natural justice
The implication of natural justice being presumptive it should be followed by the authorities unless it is excluded by express words of statute or by necessary implication
Citations could be multiplied since there is fairly abundant case law has come into existence See for example Royappa vs State of Tamil Nadu  and Union of India vs Tulsi Ram 1985 Supp 2 SCR 13 1
More recently in a significant judgment in Charan Lal Sahu  Ors
vs Union of India JT learned Chief Justice Sabyasachi Mukharji has referred to almost all the authori ties of this Court on this aspect and emphasized that the principles of natural justice are fundamental in the consti tutional set up of this country
No man or no man s right should be affected without an 299 opportunity to ventilate his views
The justice is a psycho logical yearning in which men seek acceptance of their view point by having an opportunity before the forum or the authority enjoined or obliged to take a decision affecting their right
It may be noted that the terms fairness of procedure  fair play in action  duty to act fairly  are perhaps used as alternatives to natural justice without drawing any distinction
But Prof Paul Jackson points out that Such phrases may sometimes be used to refer not to the obligation to observe the principles of natural justice but on the
contrary to refer to a standard of behaviour which in creasingly the courts require to be followed even in cir cumstances where the duty to observe natural justice is inapplicable Natural Justice by Paul Jackson 2nd ed
p 11
We share the view expressed by Professor Jackson
Fair ness in our opinion is a fundamental principle of good administration
It is a rule to ensure the vast power in the modern state is not abused but properly exercised
The State power is used for proper and not for improper purposes
The authority is not misguided by extraneous or irrelevant consideration
Fairness is also a principle to ensure that statutory authority arrives at a just decision either in promoting the interest or affecting the rights of persons
To use the time hallowed phrase that justice should not only be done but be seen to be done is the essence of fairness equally applicable to administrative authorities
Fairness is thus a prime test for proper and good adminis tration
It has no set form or procedure
It depends upon the facts of each case
As Lord Pearson said in Pearlberg vs Varty at 547 fairness does not necessarily require a plurality of hearings or representations and counter repre sentations
Indeed it cannot have too much elaboration of procedure since wheels of administration must move quickly
A case with a not dissimilar problem was in Pannalal Binjraj and Anr
vs Union of India There the Commissioner of Income Tax by the power vested under section 57A of Income Tax Act 1922 transferred an asses see s case from one Income Tax Officer to another without hearing the assessee
Section 57A of the Income Tax Act 1922 provided The Commissioner of Income Tax may transfer any case from one Income Tax Officer subordinate to him to another and the Central Board of Revenue may transfer any case from any one Income Tax Officer to another
Such 300 transfer may be made at any stage of the proceedings and shall not render necessary the re issue of any notice al ready issued by the Income tax Officer from whom the case is transferred
 This Section did not provide for affording an opportuni ty to the assessee before transferring his case from one Income Tax Officer to another
The assessee challenged the constitutional validity of the Section
This Court upheld its validity on the ground that it is a provision for admin istrative convenience
NH Bhagwati J speaking for this Court however remarked at 589    it would be prudent if the principles of natural justice are followed where circumstances permit before any order of transfer under section 57A of the Act is made by the Commissioner of Income Tax or the Central Board of Revenue as the case may be and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the question and the reasons of the order are reduced however briefly to writing 
There is no presumption against the bona fide or the honesty of an assessee and normally the income tax authorities would not be justified in refusing to an assessee a reasonable oppor tunity of representing his views when any order to the prejudice of the normal procedure laid down in section 641 and 2 of the Act is sought to be made against him be it a transfer from one Income Tax Officer within the State to an Income Tax Officer without it except of course where the very object of the transfer would be frustrated if notice was given to the party affected
 Section 57A was replaced by Section 127 of the Income Tax Act 1961 which now makes it obligatory to record reasons in making the order of transfer after affording a reasonable opportunity of being heard to the assessee in the matter
In Ajantha Industries vs Central Board of Taxes  this Court considered the validity of a transfer order passed under Section 127 and it was held that merely recording of reasons on the file was not sufficient
It was essential to give reasons to the affected party
The order of transfer in that case was quashed for not communi cating reasons to the assessee
In the present case the State has withdrawn the pending refe 301 rence from the Labour Court Dhanbad and transferred it to another Labour Court at the distant District of Patna on the representation of the workman without getting it veri fied from the management
The State in fairness ought to have got it verified by giving an opportunity to the manage ment which is a party to the pending reference
Denial of that opportunity is a fatal flaw to the decision of the Government
The management need not establish particular prejudice for want of such opportunity
In SL Kapoor vs Jagrnohan  at 765 Chinnappa Reddy J after referring to the observation of Donaldson J in Altco Ltd vs Suth erland said that the concept that justice must not only be done but be seen to be done is basic to our system and it is concerned not with a case of actual injustice but with the appearance of injustice or possible injustice
It was emphasized that the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed
The non observance of natural justice is itself prejudice to any man and proof of prejudice independ ently of proof of denial of natural justice is unnecessary
This takes us to the reasons given by the Government in support of the order of transfer
The Government has stated that the workman is having his residence at Hajipur and it would be therefore inconvenient for him to attend the labour court regularly at Dhanbad
However most of the factors do not point that way
The workman and his family members seem to be still residing in colony quarter at Dhanbad Annexure C
His two sons are studying in De Nobili School at Mugma which is a nearby village
Reference may be made to a letter dated September 8 1988 Annexure D of the Headmaster of the School in which the children of the work man are studying
Reference may also be made to a letter Annexure E from the Assistant Electrical Engineer in proof of the electricity supplied to the quarter occupied by the workman at Dhanbad
As against these material the workman has not produced any proof in support of his allegation that he has been residing in a village home near Patna
In fact in the counteraffidavit he has not denied the documents annexed to the Special Leave Petition and not seriously disputed the factum of his residence in the colony quarter at Dhanbad
Even the alleged recommendation of the Ward Commissioner referred in his counter affidavit has not been produced
We have therefore no hesitation in holding that the Government was misled by the representation of the workman 302 In the result we allow the appeal and quash the notifi cation dated August 8 1988 by which the Government of Bihar transferred the case from the Labour Court Dhanbad to the Labour Court Patna
The Labour Court Dhanbad shall now proceed to dispose of the matter as expeditiously as possi ble
In the circumstances of the case we make no order as to costs
PS S Appeal allowed


Summary:
The appellant who was engaged in the manufacture of paper and paper boards which were assessable under Tariff Item No 17 of the First Schedule to the 
engaged several dealers referred to as Indentors with a view to promote its sales
In the fixation of the normal price of these items under section 4 of the Act for the purpose of levy of excise duty the appellant claimed deduction on account of service charge discount  paid to the Indentors in addition to the trade discount  paid to the purchasers
Having failed before the assessing authority and the Central Excise and Gold Control Appellate Tribunal in respect of the deduction claimed on account of service charge discount  the appellant appealed to this court
It was contended on behalf of the appellant that al though in some of the sales the discount allowed to the Indentors might have been described as service charges discount  that name could not govern the real nature of the transaction and the discount was really a trade discount 
It was further contended that in several cases the indentors were really the purchasers themselves and hence the normal trade discount paid to them should have been allowed as a deduction
Dismissing the appeal this Court HELD 1 The trade discount was discount paid to the purchaser in accordance with the normal practice of the trade
In the determination of the normal price for the purposes of levy of excise duty it is only a normal trade discount which is paid to the purchaser which can be allowed as a deduction and commission paid to selling agents for services rendered by them as agents cannot be regarded as a 321 trade discount qualifying for deduction
323B C Union of India  Ors
vs Bombay Tyres International Pvt Ltd 1984 17 ELT 329 SC and Coromandel Ferti lizers Limited vs Union of India  Ors 1984 17 ELT 607 SC referred to 2 If in any case the purchaser named in the invoice 18 the same as the Indentor normal trade discount given to the Indentor will be allowed as a deduction in the determi nation of the normal price for the levy of the excise duty subject to other relevant considerations
324B C