Civil Appeal No655 of 1986
From the Judgment and Order dated 2341984 of the Delhi High Court in Letters Patent Appeal No25 of 1984
MKRamamurthy Ms section Pappuh BPSingh Rishi Kesh Raj Birbal Sanjeev Sabharwal BRSabharwal and MM Kashyap for the appearing parties
SSHarlakha appeared in person
SSOnkarmal appeared in person for the Intervener
The Judgment of the Court was Delivered by K Ramaswamy J
In this appeal by special leave by way of additional grounds with leave the appellant impugnes Rule 5 of the Orissa Insurance Co operative Society Ltd Service Rules for short the Rules as unconstitutional and void offending Article 14 of the Constitution of India
The material facts relevant to the point are that while the appellant was working as Divisional Manager at Delhi the general insurance business was nationalised and its management was taken over by the Central Government under General Insurance Emergency Provisions Ordinance 1971 replaced by Act 57 of 1972 for short the Act and vested in the custodian of the New India Assurance Co Ltd the management of Orissa Insurance Co operative Society Ltd
By operation of s7 of the Act the services of the appellant and others stood transferred and vested with the custodian
Under the Act the Board of Directors was empowered to terminate the service of the officeremployee of the insurer
The appellant was kept under suspension from August 91973 pending investigation into the embezzlement Explanation was called for on October 16 1973
in response thereto the appellant submitted his reply on december 7 1974
While dropping the 223 proceeding the appellant was served with termination order dated April 171975 issued by the respondent
The appellant challenged it in a writ petition in Delhi High Court which was dismissed by a learned Single Judge on November 11 1983 and was confirmed by the Division Bench in Letter Patent Appeal No3511984 dated April 23 1984
Section 7 of the Act provides that every whole time officer or other employee of an existing insurer employed in connection with his General Insurance business immediately before the appointed day shall become an officeremployee of the Indian Insurance Co in which the undertaking of the insurer to which the service of the officer relates has vested and would hold his office on the same terms and conditions and with the same rights to pension gratuity and other matters as would have been admissible to him if there had been no such vesting and shall continue to do so unless and until his appointment is terminated
Section 161 in Chapter V provides that if the Central Govt
is of the opinion that for the more efficient carrying on of General Insurance business it is necessary to do so it may by notification frame one or more schemes providing for all or any of the following matter e the rationalisation or revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary
Pursuant thereto the central Govt
framed the New India Assurance Co Ltd Merger Scheme 1973 with effect from December 31 1973
Thereunder by Rule 3 the undertaking was transferred to the respondent under Rule 5 the existing whole time officer etc
became the officer of the transferee company New Indian Assurance Co Ltd and could hold his office on the same terms and conditions as would have been admissible to him if there had been no such transfer as referred to in paragraph 3
He shall continue to remain an officer unless and until his employment in the transferee company is terminated or the terms and conditions are duly altered by any other scheme framed under the Act
By notification dated April 29 1976 the Central Govt
also framed the scheme called the General Insurance Rationalisation of pay scales and other Conditions of Service of Development Step Scheme 1976 which came into force on May 1 1976 the details of which are not material for the reason that service of the appellant was terminated  in terms of the existing rule 5 of the Rules
Suffice to state that pursuant to the nationalisation under the Act and Scheme the appellant became the officer of the respondent
Rule 5 read thus Termination of Service 224 An employee whether permanent or temporary shall not leave or discontinue his service in the Society without first giving 30 days notice in writing of his intention to do so to the Principal Officer Failure to do so will entail forfeiture of the pay of the month
In the event of the Society not having any further need of any employee s service whether permanent or temporary which shall be decided by the Board the Principal Officer shall give 30 days  notice in writing for termination of his service or in lieu thereof pay such employee a sum equivalent to his one month pay including allowance upto the termination of the period of notice by way of compensation provided that nothing in these rules shall affect the rights of the society to dismiss an employee under Rule 8 for misconduct etc
without any notice or salary in lieu of notice in the manner prescribed in these rules
An employee shall ordinarily retire from the Society s services on completion of his 55th year unless the Board reserves to continue him in office of such period as may be determined from time to time
 It is thus manifest that an employee whether permanent or temporary has an option to leave or discontinue by giving 30 days  notice in writing of his intention to do so
His failure thereof shall entail forfeiture of the pay of the month
The employee ordinarily would be superannuated on completion of his 55th year unless the Board continues him for an extended period as may be determined from time to time
Equally in the event of the Society not having any further need of the employee s service whether permanent or temporary which should be decided by the Board the Principal Officer shall give 30 days  notice in writing for termination of his service or in lieu thereof pay one month s salary including allowances upto the period of termination
The respondent also has the right to dismiss an employee under Rule 8 for misconduct in the manner prescribed in the Rules
Admittedly though action was initiated against the appellant for the charges of embezzlement etc
which are misconduct the charges were dropped
Taking aid of Rule 5 and without conducting an enquiry or giving an opportunity the appellant s service was terminated by tendering one month s salary in lieu of notice and also a direction to pay all the allowances upto that date including the period of his suspension
It is not necessary to go into the grounds taken in the High Court assailing the invalidity of the termination order as they are not pressed before us
Sri Ramamurthy the learned Senior counsel for the appellant placing reliance on the ratio of the majority view in DTC vs DTC Mazdoor Congress  Ors 225 Judgment today contended that Rule 5 is ultra vires of Article 14 of the Constitution
Shyamala Pappu the learned Senior counsel for the respondent contended that unlike Rule 9 in DTC s case Rule 5 provides guidelines
The Board of Directors have to take a decision whether the need to continue the employee s service subsists which would be based on the relevant material
Thereby there would be objective consideration before taking a decision not only regarding the need to continue the post but also the services of the officer or the employee
Though the rule does not provide for prior notice post decisional opportunity would be read into the rule
If so read the rule is not ultra vires Article 14
In our view the ratio in DTC s case has no application
Rule 9 of the rules of Delhi Transport Corporation Service Regulation gives naked power to terminate the services of a permanent employee by giving one month s notice or pay in lieu thereof
It was not the contention therein that the rule was capable of two constructions
It is settled law that there is a presumption of constitutionality of the rule
The court ought not to interpret the statutory provisions unless compelled by their language in such a manner as would involve its unconstitutionality Since the legislature of the rule making authority is presumed to enact a law which does not contravene or violate the constitutional provisions
Therefore there is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the constitution
If the provisions of law or the rule is construed in such a way as would make it consistent with the constitution and another interpretation would render the provision or the rule unconstitutional the court would lean in favour of the former construction
In view of this settled legal position the question emerges whether the language in Rule 5 would be capable to be construed consistent with the fundamental rights in Part III
As stated earlier the phrase in the event of the Society not having any further need of any employee s service whether permanent or temporary which shall be decided by the Board is susceptible of two interpretations
The one interpretation put up by Sri Ramamurty is that the Board may unilaterally and arbitrarily decide that there is no need for the services of a particular employee in given facts and circumstances though the post which the employee is occupying may continue and would be put to an end by giving one month s notice or pay in lieu thereof
In that event the rule per se is arbitrary offending Article 14
The other view capable to be construed from the language employed would be that the Board of Management may form an objective opinion on the basis of the material that the post which the officer or the employee is occupying no longer is in need
Thereby the post would be abolished
This would be a policy decision depending on the exigencies
In consequences the service of the employee also would become 226 redundant or surplus
In that event his service would no longer be needed
The officer or employee may be permanent or temporary but the absence of the need for the continuance of the post would necessitate to terminate the service of an employee or officer
It must not be a pretext or a rouse to get rid of the service of an inconvenient officer or of an employee
If that be so
it would become colourable exercise of power and would be liable to be quashed as offending Article 14
Once the Board reaches a decision to abolish the post in consequence the service of the officer employee occupying couched in Rule 5 also is capable of that interpretation
In that light we are of the opinion that Rule 5 does not become arbitrary
unreasonable or void offending Article 14
Accordingly we hold that the rule is valid
But from the facts it is clear that the Board of Management did not abolish the post but put an end to the service of the appellant
Obviously due to loss of confidence as his honesty and integrity became suspicious and his continuance in service was felt inexpedient and not in the interest of the business of the respondents
But Rule 8 was available for taking action for misconduct but was not availed
Therefore the impugned order terminating the services of the appellant is illegal
What would be the consequence Normally the appellant is entitled to reinstatement but in our view the ends of justice would be met by directing the respondent to pay him Rs 100000 as compensation instead of reinstatement and further continuance in service
The compensation awarded would be staggered between the year 1973 till date for the purpose of income tax and given the appropriate relief
In this view it is not necessary to deal with other contentions or decisions cited across the bar
Before parting with the case it is necessary to mention that march of service jurisprudence necessitates the respondent to recast the rules in tune with the constitution and the law
The appeal is allowed but without cost
The intervention application filed by Sri SS Onkarmal Harlalka is dismissed
SB Appeal allowed


Summary:
The appellant a public limited company was manufacturing Rosin Turpentine and Rosin Derivatives and was carrying on business at Bari Brahmana and Jammu Tawi
On 2011981 the Assessing Authority assessed the appellant company under the  for the year ending 30680
On 2221981 an assessment order under section 10 of the Act was made
A penalty order was also made
The appellants challenged the order of the Assessing Authority before the High Court filing Writ Petition No 87 of 1987 contending that they were exempt from payment of sales tax under the and the Jammu  Kashmir General Sales Tax Act 1962 on the finished goods produced by them for a period of five years commencing from 8th November 1979 in terms of the Government Orders No 159 Ind
dated 2631971 as amended by Government Order No 414 Ind
dated 25th August 1971 read with Section 82A of the  that the Government represented and announced a package of incentives for large and medium scale industries grant of exemption from sales tax both on the raw materials purchased by the industries and the sale of their finished products and that the Government was estopped from charging sales tax
The High Court dismissed the Writ Petition holding that the two Government Orders were only declarations of an intention to exempt 181 from payment of sales tax and that they were not exemption notifications under section 5 of the General Sales Tax Act and that the appellants failed to prove the factual foundation for invoking the principle of promissory estoppel
Against the High Court s decision by special leave CA No 2309 of 1989 was filed by the appellant company
CA No 2310 of 1989 The appellant company had filed a miscellaneous petition after the judgement in the WPNo 87 of 1987 the writ petition of the High Court against which CANo 2309 of 1989 was filed for permission to file reply affidavit on the ground of that the documents produced at the time of hearing needed explanation
The High Court dismissed the Misc
Petition as it was belated and the judgement in the writ petition was delivered relying on the materials placed on record
CCNo
3148 50 of 1989 The appellant partnership firm was manufacturing Vanaspati Ghee
It was assessed for the period from 291981 till 3091981 under the Jammu  Kashmir General Sales Tax Act
The appellants moved the High Court in a writ petition WPNo 52 of 1982 to quash the assessment order contending that the Government order 159 Ind
dated 2631971 as amended by Government Order 414 Ind
dated 2581971 exempted the sales of the finished product of Vanaspati Ghee from sales tax and that the Government was estopped from collecting tax
When the Writ Petition WPNo 52 of 1982 was pending an assessment order was made on 14111984 for the assessment year ending 30th September 1982 including the period 2nd September to 30th September 1981 which was questioned in WPNo 52 of 1982
The assessment order dated 14111984 was challenged by the assessees appellants in the writ Petition No 822 of 1984
During the pendency of the writ petitions certain other Government Orders were passed and certain assessment orders for the subse 182 quent periods were passed and those were questioned in the Writ Petition No 711 of 1987
The assessees contended that Government Order No 159 Ind dated 2631971 and Government Order 414 Ind
dated 2581971 were exemption orders referable to section 5 of the Jammu  Kashmir General Sales Tax Act
The respondents contended that the said Government orders were not exemption orders section 5 of the General Sales Tax Act and that there was not factual foundation for the plea of promissory estoppel
The High Court dismissed all the three writ petitions by a common order against which Civil Appeals 3148 50 of 1989 were filed
CANo 3151 of 1989  The appellant assessee filed a writ petition praying to quash certain notices issued under section 14 of the and for a declaration that the Vanaspati Ghee manufactured by them was exempt from payment of tax upto January 1992 ie for a period of 10 years from the date from which they started their commercial production as per the Government Order 159 Ind
dated 2631971 and Government Order No 414 Ind
dated 25th August 1971 as orders exempting their goods from sales tax under Section 5 of the Jammu  Kashmir General Sales Tax Act
The Writ Petition was also dismissed against which CANo 3151 of 1989 was filed by special leave
The assessee contended that the exemption from payment of tax was extended from 5 years to 10 years and the Government was bound to give the exemption for 10 years on the ground of promissory estoppel that SRO 448 which superseded the exemption granted under the Govt
Orders was ultra vires and that the SRO 448 had no effect of superseding exemption granted under the GO 159 and 414 and that the exemption for 5 years granted under the Government Orders could not be withdrawn on the ground that SRO 8082 was prospective in operation and also on the ground of promissory estoppel
The State contended that even if the sale of a particular commod 183 ity was exempted from payment of tax under the local Act the dealer selling the same in inter state trade or commerce would be liable to pay Central Sales Tax under the provisions of Section 61A of the  that if Section 61A of the was applicable to a particular transaction of sale Section 82 A of the General Sales Tax Act would not be applicable to that transaction that the conditions that the industry should have been set up and commissioned subsequent to the Government Orders 159 and 414 and the commodity sold in order to claim the exemption under the Government Orders should be those manufactured by that industry were the conditions or specified circumstances within the meaning of the Explanation and therefore the appellants in CANos
2309 231089 were not entitled to any exemption under Section 82 A of the  that the Government Orders were superseded by SRO 8082 and Vanaspati Ghee was made liable to tax at the rate of 8 per cent that the goods manufactured by the appellants in CANos
2309 231089 were also made taxable as falling under the residuary item at the rate of 8 per cent that in the assessment order relating to Assessment Year 1981 82 for the period from 191981 to 3081982 in the case of appellants in CA Nos
3148 3150 of 1989 there was a finding that the assesses collected sales tax in respect of their sales turnover for which the exemption was now claimed and that under Section 8 B of the JK General Sales Tax Act the said amount was refundable to the Government
As the questions arose in these appeals were common appeals were heard together and allowing the appeals of the assessees by a common judgment this court HELD 1
If power to do an act or act or pass an order can be traced to an enabling statutory provision then often if that provisions is not specifically referred to the act or order shall be deemed to have been done or made under the enabling provision
194D 21 Normally in the case of grant of tax exemption as an incentive to industry the exemption orders have generally taken the form of Government Order rather than a notification
But in the case of other exemptions though they are also under section 5 of the local Act JK General Sales Tax Act 1962 they have taken the form of notification
194G H 22 The pattern followed in Jammu  Kashmir is that in respect 184 of exemptions from payment of taxes following Cabinet decision on Policy matters and incentive they have taken the form of a Government order
194H 195A 23 The Jammu  Kashmir General Sales Tax Act 1962 itself makes a distinction requiring a notification to be made for certain purposes and the making of a Government order in respect of certain other purposes
Since there is no form prescribed in this behalf if the particular order in effect is an exemption order whether it takes the form of an order or notification makes no difference
194F G 24 From the publicity given to the Government Orders 159 and 414 by the Government while inviting entrepreneurs to establish industries in Jammu  Kashmir and certain other communications to the parties it is be understood that the Government orders 159 and 414 were treated as exemption orders satisfy all the requirements of the provisions of section 5 of the local Act
195B C 194E 25 Even as an order of exemption the appellant will have to show that he had set up the industry in conformity with the intent of 1971 order and entitled in terms thereof to the exemption in respect of the goods manufactured by him
But that is not to say that after he establishes those facts the Government will have to make a separate order of exemption in relation to him
201C D 26 There is no prescribed form for granting exemption under section 5 of the Jammu  Kashmir General Sales Tax Act
There is also no prohibition against reference to any other matter or matters in exemption orders under section 5 of the General Sales Tax Act
If the incentives related also to other benefits or rights merely because they are included in the same Government Order does not make it any the less an exemption order so far as the exemption related to payment of sales tax
202C D 27 The High Court was in error in thinking that the exemption order should be specific in favour of the appellant
The exemption as can be seen from the provisions of section 5 of the Jammu  Kashmir General Sales Tax Act could be in respect of any class of dealers or any goods or class or description of goods
There could be an exemption to an individual also but the power of exemption is not restricted to such cases alone
It may refer to transactions of sale of a particular type of goods or class or description of goods or in respect of any class of 185 dealers or a combination of both
201B 31 Will be granted exemption  has the same meaning as will be exempted  and does not in any way show that it requires a further follow up action
201G H 32 The exemption is with reference to an industry which is to be established subsequent to the Government order
Therefore in that sense both expressions mean the same
202A 4
The notification issued on the 3rd of June 1971 in SRO 214 under section 23 of the Jammu  Kashmir Urban Immovable Property Tax Act 1962 amending the Immovable Property Tax Rules 1962 by inserting Rules 20 A was subsequent to GO 159 Ind dated 2631971
It was published on 2531971 in the Government Gazette under section 231 for information of all persons likely to be affected thereby and any objection or suggestion which may be received in the Finance Department from any person with respect to the said draft before the said date will be considered by the Government
It is by reason of the fact that this draft rule has been published calling for objection the GO 159 Ind itself stated that the grant of immovable property tax exemption would be available as admissible under the Urban Immovable Property Taxation Rules
Thus on the day when the Government Order was made there was already the draft amendment rules and therefore it could not be stated that the amendment was a follow up action in pursuance of the Government order
The Government order refers to the draft and says as per the amendment they will be entitled to the exemption
202E 203B 51 The only reference to 10 years was in the Finance Minister s speech and in the Brochure dated September 1978
The Brochure only lists the concession and incentives available generally
It does not refer to any Government decision or Cabinet decision or any order of the Government
203G H 52 The Finance Minister s statement made in March 1978 only refers to a proposal to continue the grant of exemption from payment of sales tax for a period of 10 years
This statement also is not unambiguous
It may mean that the benefits under the Government Orders 159 and 414 may be continued for another 10 years without withdrawing the same
This is merely a budget proposal which could 186 give rise to no right to the appellants
As no decision order or notifications is produced extending the period of exemption in relation to sales tax it is not possible to consider the claim of the appellants for exemption for 10 years on the ground of promissory estoppel
204 B C 61 The SRO No 195 dated 3131978 did not and could not supersede the exemption granted under the Government orders 159 414
205D 62 When it stated in the amending notification SRO 448 dated 22nd October 1982 that vanaspati and edible oils are taxable at the point specified therein it only means that those vanaspati and edible oils which are not exempted are taxable at the points specified in the Schedule
The Government order gave exemption only for five years from the date of commencement of the industry and those industries who had been manufacturing for more than that period and also those industries who were not entitled to the benefit of the said Government order would be liable to pay sales tax on the vanaspati manufactured by them and the said goods were liable to tax at the point specified in the Schedule
205F G 71 In the scheme of levy of single point taxation the Government could fix any point in the series of sales for the Government have fixed the sale by the dealer that if the second sale as the taxable point no exception can be taken
In that sense no question of vires on the ground of lack of power would arise
205H 206A 72 Under section 41 of Jammu  Kashmir General Sales Tax Act the goods are taxable only once that is it could be taxed only at one point of sale
The government orders 159 and 414 are exemption orders and exempt the sale by appellants of their manufactured products
The exemption would not arise unless the goods are taxable at the point of their sale
Thus the effect of exempting their sale is that the said goods manufactured by them could not be taxed at the second or subsequent sales also as that would offend section 41 which provides for single point levy
In cases where there are no exemption orders and the State fixed the second or subsequnt sale as point of taxation the first or prior or subsequent sales are not exempted sales but are not taxable sales
Therefore SRO 448 fixing he sale of vanaspati ghee by a dealer would not be applicable to vanaspati ghee manufactured by the appellants which are exempt under the Government orders
206B D 187 73 The goods manufactured by the Appellants are exempt under Government Orders 159 and 414 and that exemption covers entire series of sales of that very goods
206D 81 Under section 61 of the every dealer who sells goods in the course or inter state trade or commerce shall be liable to pay tax under that Act
A sale of goods shall be deemed to take place in the course of inter state trade or commerce if the sale occasions the movement of goods from one state to another or if effected by a transfer of documents of title to the goods during their movement from one State to another
207D E 82 In view of the provisions of Section 15 the State Law can impose tax on sale of declared goods only at a rate not exceeding four per cent of the sale price and such tax also shall not be levied at more than one stage
If the tax has been levied under the State Law on declared goods and such goods are sold in the course of inter state trade and tax has been paid under the Central Sales Tax the Law levied under the State law shall be reimbursed to the person making such sale in the course of inter state trade
208C E 83 Section 82 A of the does not have any over riding effect on the scheme of taxation relating to inter State sale of declared goods
There is also scope for the applicability of section 61 A of the when the inter state sale takes place when the goods are in transit and is effected by transfer of documents of title to the goods during their movement from one State to another
209B C 84 Only certain cases which would have been covered by section 61 A of the have been carved out for the purpose of exemption subject to the applicability of section 82 A of the 
Section 61 A of the has not become otiose by reason of inclusion of that section in the non obstante clause in section 82 A
Both provisions therefore operate and they should not be read so as to nullify the effect of one another
209C E 9
The facts which the dealer had to prove to get the benefit of the Government orders are intended only to identify the dealer and the goods in respect of which the exemption is sought and they are not conditions or specifications of circumstances relating to the turnover sought 188 to be exempted from payment of tax within the meaning of those provisions
The specified circumstances and the specified conditions referred to in the explanation should relate to the transaction of sale of the commodity and not identification of the dealer or the commodity in respect of which the exemption is claimed
The conditions relating to identity of the goods and the dealer are always there in every exemption and that cannot be put as a condition of sale
210D F 101
SRO 8082 was prospective in operation
The Government seems to have been following as a pattern that is in the case of incentives to industries the exemption orders had taken the form of a Government order
Government orders 159 and 414 were also in pursuance of a Cabinet decision
SRO 8082 though a Government notification under the Business Rules it is issued by the Ministry concerned
In the circumstances there is also a serious doubt whether the said incentives could have been superseded by the SRO 8082
213H 214B 102
In the case of a grant of exemption without specifying any period for which the exemption is available the Government could withdraw the same at any time
The appellants acting on the representations of the Government had set up their industries
Therefore they are entitled to claim the benefit of the exemption for the entire period of five years calculated as per the terms of the Government orders even if it were to be held that SRO 8082 superseded the earlier exemption orders
216D E 216G 217A 11
Since the assessment orders were regular assessment orders on the ground that their sales are taxable sales the question of applicability of Section 8B of the local Act does not arise
That question arises in view of the finding that their sales turnover are exempt but still under section 8B of the Local Act they are liable to refund any money collected by way of tax
217G H Pournami Oil Mills  Ors
vs State of Kerala  Anr
 1986 Supp
SCC 728 Bakul Oil Industries  Anr
vs State of Gujrat  Anr
   Assistant Commissioner of Commercial Taxes Asstt Dharwar  Ors
vs Dharmendra Trading Company and Ors   Indian Aluminium Cables Ltd  Anr
vs State of Haryana 38 STC 108 Industrial Cables India Ltd vs Assessing Authority 1986 Supp
SCC 695 International Cotton Corporation P Ltd vs Commercial Tax Officer  Ors 35 STC 1 referred to 189