Civil Appeal No 754 of 1988
From the Judgment and order dated 3181987 of the Allahabad High Court in WP No 7899 of 1986 Raja Ram Aggarwal VK Pandita EC Aggarwala and Atul Sharma for the Appellants
SC Misra and PK Chakraborty for the Respondents
Manoj Swarup and Ms Lalita Kohli for the Interveners
The Judgment of the Court was delivered by DUTT J
As elaborate submissions have been made by both the parties at the preliminary hearing of the special leave petition we proceed to dispose of the points involved in the case on merits after granting special leave
The appeal is directed against the judgment of the Allahabad High Court striking down rule 5 C of the Cantonment Funds Servants Rules 1937 hereinafter referred to as the Rules  as ultra vires the provisions of the Cantonment A rt 1924 and also quashing the impugned order of transfer dated October 27 1986 passed by the GOC in Chief Central Command
66 The respondent Dr Subhas Chandra Yadav was appointed a Sub Charge Cantonment General Hospital Lucknow by the Cantonment Board by the appointment letter dated 2341969
He was confirmed in that post on 1121969 by an order issued by the Cantonment Board
The conditions of service of the employees of the Cantonment Board which is a statutory body are governed by the provisions of the Rules
At the time of the appointment of the respondent his services were not transferable as per the provisions of the Rules then prevailing
His appointment letter also did not include any condition for transfer from one Board to another
By a notification dated 16121972 the Rules were amended and a new rule being rule 5 C was added to the Rules
Rule S C reads as follows R5 C 1 The service of a servant shall be transferable from one post in one Board to another post in another Board
Provided that a The transferor and transferee Boards are situated within the same State and b The posts in both the Boards are similar and carry the same scales of pay
2 Subject to such general directions as the Central Government may issue from time to time the officer Commanding in Chief the Command or such other authority as may be authorised by the Central Government in this behalf shall be the competent authority to transfer a servant under this rule
3 A servant on transfer under sub rule I from one Board to another may for the purpose of determination of seniority and eligibility for promotion opt i to be governed by the conditions applicable in this behalf to the servants of the Board from which he has been transferred hereinafter referred to as the transferor Board or 67 ii to be governed by the conditions applicable in this behalf to the servants of the Board to which he has been transferred hereinafter referred to as the transferee Board Provided that where a servant does not opt under this rule within thirty days from the date of assumption of charge in the transferee Board he shall for purposes of promotion and seniority be governed by the conditions application in this behalf to the servants of the transferor Board 
4 Save as provided in sub rule 3 the terms and conditions of service of a servant transferred under this rule shall be deemed to be these applicable to the servants of the transferee Board
5 Where the servant opts under clause ii of subrule 3 the service put in by him under the transferor Board before his transfer shall be deemed to be service under the transferee Board
 For the first time rule 5 C provided for the transfer of the services of the employees of the Cantonment Boards from one post in one Board to another post in another Board within the same State
The GOC in Chief Central Command by his order dated October 27 1986 transferred the respondent from the Cantonment General Hospital Lucknow to the Cantonment General Hospital Varanasi in place of one Dr Bansal who was also transferred by the same order to the Cantonment General Hospital Bareilly
Being aggrieved by the said order of transfer passed under rule 5 C of the Rules the respondent filed a writ petition in the Allahabad High Court challenging the validity of the order of transfer on the ground that rule 5 C was ultra vires the provisions of the Cantonment Act and as such void
As has been stated already the High Court has struck down rule 5 C holding inter alia that the services of the employees of the Cantonment Board are neither centralised nor is there a common State level service and that the impugned rule 5 C having provided for the transfer of the employees of one Board to another Board by the GOC in Chief Central Command is beyond the rule making power 68 of the Central Government as contained in clause c of sub section 2 of section 280 of the Cantonment Act as it stood before it was amended
Hence this appeal
Section 280 of the Cantonment Act confers power on the Central Government to make rules
The relevant portion of section 280 of the Cantonment Act is as follows section 280
POWER To MAKE RULES The Central Government may after previous publication make rules to carry out the purposes and objects of this Act
2 In particular and without prejudice to the generality of the foregoing power such rules may provide for all or any of the following matters namely a        b       bb       c the tenure of office salaries and allowances provident funds pensions gratuities leave of absence and other conditions of service of servants of Boards Clause c of sub section 2 of section 280 was substituted by the amendment of the Cantonment Act by Act XV of 1983
Before such amendment in 1983 clause c was as follows c
the appointment control supervision suspension removal dismissal and punishment of servants of Boards It is apparent that before the amendment clause c did not confer on the Central Government power to frame rules regarding conditions of service which necessarily include transfer of the employees of the Boards
Rule 5 C which was inserted in the Rules by a notification dated November 23 1972 providing for the transfer of the employees of the Cantonment Boards is on the face of it contrary to the rule making power of the Central Government as it stood before the amendment of the Act in 1983
69 It is however contended by Mr Raja Ram Aggarwal learned Counsel appearing on behalf of the appellants that after the amendment of clause c of sub section 2 of section 280 of the Cantonment Act conferring on the Central Government the power to lay down the conditions of service of the employees of the Boards which include the power to make rules for transfer rule 5 C is valid being quite in conformity with the provisions of the rule making power under section 2802c of the Cantonment Act
We are unable to accept the contention
When rule 5 C was inserted into the Rules it was void as being contrary to and in excess of the rule making power of the Central Government as contained in the unamended clause c of sub section 2 of section 280 of the Cantonment Act
It does not become valid merely because of the amendment of clause c inter alia conferring power on the Central Government to frame rules relating to conditions of service
Our attention has been drawn to the provision of sub section 2 of section 281 of the Cantonment Act which provides that all rules made under the Act shall be published in the official Gazette and in such other manner if any as the Central Government may direct and on such publication shall have effect as if enacted in the Act
It is urged on behalf of the appellants that in view of sub section 2 of section 281 rule 5 C became a part of the statute and accordingly the question of its being contrary to the provisions of the Cantonment Act does not at all arise
This contention is unsound
It is well settled that rules framed under the provisions of a statute form part of the statute
In other words rules have statutory force
But before a rule can have the effect of a statutory provision two conditions must be fulfilled namely 1 it must conform to the provisions of the statute under which it is framed and 2 it must also come within the scope and purview of the rule making power of the authority framing the rule
If either of these two conditions is not fulfilled the rule so framed would be void
The position remains the same even though sub section 2 of section 281 of the Act has specifically provided that after the rules are framed and published they shall have effect as if enacted in the Act
In other words in spite of the provision of sub section 2 of section 281 any rule framed under the Cantonment Act has to fulfil the two conditions mentioned above for their validity
The observation of this Court in Jestamani vs Scindia Steam Navigation Company   70 relied upon by Mr Aggarwal that a contract of service may be transferred by a statutory provision does not at all help the appellants
There can be no doubt that a contract of service may be transferred by statutory provisions but before a rule framed under a statute is regarded a statutory provision or a part of the statute it must fulfil the above two conditions
Rule 5 C was framed by the Central Government in excess of its rule making power as contained in clause c of sub section 2 of section 280 of the Cantonment Act before its amendment by the substitution of clause c it is therefore void
It is not disputed that the Cantonment Boards are statutory and autonomous bodies controlled entirely by the Cantonment Act
Each Cantonment Board is an independent body functioning within its limited jurisdiction
The Board is the appointing authority of its employees
The service under the Cantonment Board is not a centralised service nor is it a service at the State level
There is much force in the contention of the respondent that as service under the Cantonment Board is not a centralised service or a service at the State level the transfer of an employee from one Cantonment Board to another would mean the termination of appointment of the employee in the Cantonment Board from which he is transferred and a fresh appointment in the Board where he is so transferred
The GOC in Chief Central Command is not the appointing authority of the respondent or the employees of the Cantonment Board and so transfer of the respondent by the GOC in Chief is not permissible
In any event one autonomous body cannot transfer its employee to another autonomous body even within the same State unless the services of the employees of these two bodies are under a centralised or a State level service
In this connection we may refer to a decision of this Court in Om Prakash Rana vs Swarup Singh Tomar  Pathak J as His Lordship then was speaking for the Court observed as follows As is clear by now the fundamental basis of the contention that the power of transfer under the Education Act and its Regulations continues in force even after the enactment of the Services Commission Act rests on the assumption that the power of appointment does not include the power of transfer
In our opinion the assumption is unsustainable
The scheme under the Education Act envisages the appointment of a Principal in relation to a specific college
The appointment is in relation to that college and to 71 no other Moreover different colleges may be owned by different bodies or organisations so that each Principal serves a different employer
Therefore on filling the office of a Principal to a college a new contract of employment with a particular employer comes into existence
There is no State level service to which Principals are appointed
Had that been so it would have been possible to say that when a Principal is transferred from one college to another no fresh appointment is involved
But when a Principal is appointed in respect of a particular college and is thereafter transferred as a Principal of another college it can hardly be doubted that a new appointment comes into existence
Although the process of transfer may be governed by considerations and move through a machinery different from the considerations governing the appointment of a person ab initio as Principal the nature of the transaction is the same namely that of appointment and that is so whether the appointment be through direct recruitment through promotion from the teaching staff of the same institution or by transfer from another institution
 The observation extracted above clearly supports the contention made on behalf of the respondent that the employees of one Cantonment Board cannot be transferred to another Cantonment Board inasmuch as the service under the Cantonment Board is not a centralised service or a service at the State level
Mr Aggarwal however submits that the respondent would not be in the least prejudiced by the transfer in as much as full safeguard has been provided for in rule 5 C
The question whether the interest of the transferee has been protected or full safeguard has been provided for by rule 5 C is quite irrelevant if it is invalid and void
Moreover the provisions of rule 5 C are clumsy and lack clarity and a transfer may affect the transferee prejudicially
It is not necessary for us to discuss how the provisions of rule 5 C may be prejudicial to the interest of an employee transferred to another Cantonment Board within the State for we are of the view that rule 5 C is ultra vires the provision of the rule making power of the Central Government under the Cantonment Act
The question however is whether the Central Government is entitled to frame rules for transfer of the employees of the Cantonment Boards under the substituted clause c of sub section 2 of 72 section 280 of the Cantonment Act
It is true that under clause c as it now stands the Central Government can frame rules pertaining to conditions of service of the Cantonment Board employees
But in our opinion even in spite of substituted clause c the Central Government will not be entitled to frame rules for transfer of an employee from one Cantonment Board to another within the State for the reasons stated already namely 1 the Cantonment Boards are autonomous bodies 2 the service under the Cantonment Board is neither a centralised service nor is it a service at the State level and 3 any such transfer of an employee will mean termination of service of the employee in the Cantonment Board from where he is transferred and a fresh appointment by the Cantonment Board which he joins on such transfer
So long as the Cantonment Board service is not made a centralised service or at least a State level service there can be no transfer from one Cantonment Board to another Cantonment Board within the same State
The Central Government has better consider the question of making the Cantonment Board service a centralised service so as to enable one Cantonment Board to transfer its employees to another Cantonment Board
As has been held by the High Court the Central Government has power to frame rules about the transfer of the servants of the Board in exercise of its powers under clause c of sub section 2 of section 280 of the Act within the region in respect of which it has jurisdiction
For example the respondent could be transferred from one hospital of the Cantonment Board Lucknow to another hospital under the same Board
But that apart the Cantonment Act does not authorise the Central Government to frame rules for transfer from one Cantonment Board to another
The High Court was therefore quite justified in striking down rule 5 C of the Rules and in quashing the impugned order of transfer of the respondent
For the reasons aforesaid the judgment of the High Court is affirmed and this Appeal is dismissed
There will however be no order as to costs
NVK Appeal dismissed


Summary:
 The appellant No 1 JK Cotton Spinning and Weaving Mills Limited has a composite mill wherein it manufactures fabrics of different types for which yarn is obtained at an intermediate stage and the yarn is processed in an integrated process in the said composite mill for weaving the same into fabrics
The Central Board of Excise issued a Circular dated September 24 1980 purporting to interpret the rules 9 and 49 of the Central Excise Rules 1944 the Rules and directing the subordinate excise authorities to levy and collect excise duty in accordance therewith
The Board further directed vide the said Circular that the use of the goods in the manufacture of another commodity even within the place premises specified in this behalf by the Central Excise officers in terms of the powers conferred under rule 9 of the Rules would attract duty
As the implementation of the Circular worked to the prejudice of the appellants they filed a writ petition in the High Court challenging the validity of the Circular
During the pendency of the said writ petition the Central Government issued a Notification dated February 20 1982 amending the rules 9 and 49 of the Rules with section 51 of the Finance Act 1982 providing that the amendments in the rules 9 and 49 shall be deemed to have and to have always had the effect with retrospective effect from the date on which the Rules came into force ie February 28 1944
Upon the amendments of the rules 9 and 49 with retrospective effect of the amendments the appellants amended their writ petition above said to challenge the constitutional validity of Section 51 of the Finance Act abovementioned and the amendments to the rules 9 and 49
701 The High Court allowed the writ petition in part
It held i that section 51 and the rules 9 and 49 as amended were valid ii the retrospective effect allowed by section 51 would be subject to the provisions of sections 11A and 11B of the the Act iii the yarn produced at an intermediate stage in the mill of the appellants and subjected to the integrated process of weaving into fabrics would be liable to payment of excise duty in view of the amended provisions of the rules 9 and 49 but the sized yarn actually put into the integrated process would not again attract excise duty
The appellants then filed this appeal Civil Appeal No 297 of 1983 before this Court by certificate
Dismissing the Appeal the Court  HELD The decisions of various High Courts cited deal with the rules 9 and 49 of the Central Excise Rules 1944 as they stood before they were amended by the Government Notification dated February 20 1982
In this case what is involved is the interpretation of the said two rules after their amendment and the constitutional validity of the rules as amended
The amendments to the rules 9 and 49 are quite legal and valid
Section 51 of the Finance Act 1982 giving retrospective effect to the said amendments is also legal and valid
The apprehension of the appellants that the amendments to rules 9 and 49 having been made retrospective from the date the rules were framed that is February 28 1944 the appellants may be called upon to pay enormous amounts of duty in respect of the intermediate goods which have come into existence and again consumed in the integrated process of manufacture of another commodity is not right
In view of section 11A of the Finance Act there is no cause for such an apprehension
Under Section 11A1 the excise authorities cannot recover duties not levied or not paid or short levied or short paid or erroneously refunded beyond the period of six months the proviso to section 11A not being applicable in the present case
Thus though section 51 has given retrospective effect to the amendments of rules 9 and 49 it must be subject to the provision of section 11A of the Act
Section 51 does not contain any non obstante clause nor does it refer to the provision of section 11A and it is difficult to hold that section 51 overrides the provision of section 11A 712F H 714D F The appellants are liable to pay excise duty on the yarn obtained at an intermediate stage and thereafter further processed in an integrated process for weaving the same into fabrics
Although it has been alleged that the yarn is obtained at an intermediate stage of an 702 integrated process of manufacture of fabrics it appears to be not so
After the yarn is produced it is sized and thereafter subjected to a process of weaving the same into fabrics
As the Court has held that the commodity which is obtained at an intermediate stage of an integrated process of manufacture of another commodity is liable to the payment of excise duty the yarn that is produced by the appellants is also liable to payment of excise duty
720G H 721A B The High Court has rightly held that the appellants are not liable to pay excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics
No distinction can be made between unsized yarn and sized yarn for the unsized yarn when converted into sized yarn does not lose its character as yarn
The judgment of the High Court affirmed
721B C In view of the decision of the Court in the Civil Appeal No 297 of 1983 the Civil Appeals Nos 2658 and 4168 of 1983 also dismissed
721D The Province of Madras vs Boddu Paidanna and Sons AIR  Caltex oil Refining India Ltd vs Union of India  Ors  Delhi Cloth and General Mills Co Ltd vs Joint Secretary Government of India  Modi Carpets Ltd vs Union of India  Synthetics and Chemicals Ltd Bombay vs Government of India  Devi Dayal Electronics and Wires Ltd vs Union of India 1982 ELT 33 Oudh Sugar Mills Ltd vs Union of India 1980 ELT 327 Oudh Sugar Mills Ltd vs Union of India 1982 ELT 927 Maneklal Harilal Spg  Mfg Co Ltd vs Union of India  Nirlon Synthetic Fibres  Chemicals Ltd vs Shri RK Audim Assistant Collector  Ors
In Misc
491 of 1964 unreported judgment of Bombay High Court dated April 30 1970 Jawaharmal vs State of Rajasthan  Ors   Rai Ramkrishna and Ors
vs State of Bihar   KP Verghese vs The Income Tax officer Ernakulam  and Senior Electric Inspector and Ors
vs Laxmi Narayan Chopra   referred to