SCA/460/1999 1/11 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 460 of 1999 For Approval and Signature: HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= = GUJARAT RAJYA KHADI & UNN VIKAS MANDAL - Petitioner(s) Versus STATE OF GUJARAT & 1 - Respondent(s) ========================================= Appearance : MR RN SHAH for Petitioner MS NISHA PARIKH, AGP for Respondent : 1, MR PREMAL R JOSHI for Respondent : 2, ========================================= = CORAM : HONOURABLE MS.JUSTICE H.N.DEVANI Date : 23/12/2008 ORAL JUDGMENT 1. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner – Gujarat Rajya Khadi SCA/460/1999 2/11 JUDGMENT & Unn Vikas Mandal has challenged the orders dated 7th September 1996, 12th February 1997, 7th May 1997 and 14th July 1998 passed by the respondent No.2 – Gujarat Rajya Khadi Gram Udyog Board (Khadi Board), whereby the petitioner has been directed to return the amount of rebate paid to it for the year 1991-92 to 1993-94. 2. The facts stated briefly are that with a view to promote the sale of Khadi as well as to provide employment to those craftsmen engaged in the production of Khadi related products, the respondent No.2 Khadi Board had issued circulars from time to time for granting rebate on the sale of Khadi and Khadi related items. The petitioner society purchased khadi poly cloth from one Jay Vishwakarma Khadi Udyog Kendra, Dhansura, a depot recognised by the Khadi Board and supplied the same to the Ahmedabad Municipal Corporation (hereinafter referred to as “the Corporation”) for preparing uniforms for its employees as well as for the employees working in the hospitals run by the Corporation. According to the petitioner society, it was only after ascertaining that the centre from which the poly cloth was purchased was a duly recognised centre that the petitioner had entered into a contract for supply of poly cloth material to the Corporation and that under the said contract the petitioner society was required to pass over the benefit of rebate of 20% + 15% which it would receive from the Khadi Board/Commissioner under the Scheme as per the regulations issued by the Board from time to time. 3. In connection with the goods supplied by the petitioner SCA/460/1999 3/11 JUDGMENT society to the Corporation for the period between 1991- 92 and 1993-94, the Chief Auditor of the respondent No.2 – Khadi Board issued a show cause notice dated 7th September 1996 calling upon the petitioner to show cause as to why the amount of rebate given on poly cloth for the said period should not be recovered from the petitioner society as Jay Vishwakarma Khadi Gruh Udhyog, Dhansura, from which the petitioner had purchased the said poly cloth, was not a manufacturer thereof. 4. Pursuant to the aforesaid show cause notice, the petitioner society informed the Chief Auditor of the Khadi Board that the institution from which they had purchased the poly cloth was recognized by the Board and accordingly, the petitioner had purchased the poly cloth in accordance with the Rules. By a communication dated 19th February 1997, the petitioner society was informed that the Board had decided to recover Rs.9,17,084=81 towards the rebate given to it for supply of poly cloth to the Corporation. Vide communication dated 7th May 1997, the petitioner was directed to return the amount of Rs.9,17,084=81 within a period of fifteen days, failing which the Board would be required to take steps for recovery thereof. Subsequently, the petitioner had claimed rebate of Rs.1,93,267=00 for the period October 1994 to March 1996, however, vide the impugned communication dated 14th July 1998, the said amount was credited towards the recovery of the rebate and credited in the loan account of the petitioner society with the respondent No.2 - Khadi Board. Being aggrieved by the SCA/460/1999 4/11 JUDGMENT aforesaid action of the respondent No.2 – Khadi Board of seeking to recover the amount of rebate paid to the petitioner society for the period 1991-92 to 1993-94, the petitioner has approached this Court by way of present petition. 5. Heard Mr.R.N.Shah, learned advocate for the petitioner, Mr.Premal Joshi, learned advocate for the respondent No.2 - Gujarat Rajya Khadi Gram Udyog Board and Ms.Nisha Parikh, learned Assistant Government Pleader for the respondent No.1 – State of Gujarat. 6. Mr.R.N.Shah, learned advocate for the petitioner has drawn the attention of the Court to the communication dated 1st January 1991 issued by the respondent No.2 – Khadi Board to the Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura, wherein it is stated that the said institution has been granted recognition for sale of the articles enumerated thereunder. Item No.19 is khadi as well as polyvastra. Attention is also invited to the certificate dated 3rd August 1993 whereby the respondent No.2 – Khadi Board has certified that Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura has been classified as an “A” Category Khadi Gruh Sales Depot from the year 1986-87 and is recognized for sale of articles of Khadi Gram Udyog. It is submitted that the petitioner society had duly verified that Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura was a Sales Depot recognized by the respondent No.2 – Khadi Board and that, it was authorized to sell khadi as well as polyvastra. That after duly ascertaining the aforesaid facts, the petitioner SCA/460/1999 5/11 JUDGMENT society had purchased poly cloth from the said society and sold the same to the Corporation. That, under the contract for sale with the Corporation, the petitioner society was required to pass on the benefit of the rebate given to it by the respondent No.2 – Khadi Board to the Corporation. It is submitted that the petitioner had not retained any benefit obtained under the rebate granted by the respondent No.2 – Khadi Board. It is argued that after a considerable delay of time, the Board has sought to recover the amount paid to the petitioner society towards rebate for the polyvastra supplied by it to the Corporation. It is pointed out that there is nothing in the policy of the Board to indicate that poly cloth should be purchased only from a society which manufacturers poly cloth, to submit that the respondent No.2 – Khadi Board is, therefore, not justified in seeking to recover the amount of rebate on the ground that the institution from which the poly cloth was purchased, was not a manufacturer thereof. It is, accordingly, submitted that the impugned orders/communications, being without any legal basis or authority of law, are required to be quashed and set aside. 7. On the other hand, Mr.Premal Joshi, learned advocate for the respondent No.2 – Khadi Board has submitted that it was the policy of the Board that wholesale purchase of polyvastra can be made only from an institute which was manufacturing the same. That the petitioner society has purchased poly cloth material from a society which was not a manufacturer thereof and as such, is not entitled to rebate towards the poly cloth purchased from the said SCA/460/1999 6/11 JUDGMENT institution. Attention is also drawn to the averments made in the affidavit in reply filed on behalf of respondent Board, to submit that the respondent Board supplies the Amber Charkha and Looms for production of clothes and similarly for production of polyvastra, sliver is also permitted to be supplied to such institution. That no such demand has ever been made by Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura from the Khadi Board, nor has the Board supplied such machineries and material to the said institution and therefore, the say of the petitioner that it had purchased the poly vastra from Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura cannot be accepted, and that the same might have been purchased from some other institution and with a view to obtain financial benefit, the petitioner may have raised a demand for rebate on sales. It is submitted that the administrators of the petitioner's society are aware of the procedure of working of the respondent Board and could have avoided such a controversy by inquiring from the office of the Board prior to the purchase of polyvastra from an institution which is not recognized or authorized for production of polyvastra. It is submitted that it is the policy of the Board to allow rebate only to sale centres run by the Khadi Board and Village Industries Commission, the Khadi and Village Industries Boards and also at the sale centres run by the registered institutions, which are engaged in production of Khadi/Polyvastra, and that, no rebate claim can be entertained from other sale counters/centres. It is submitted that in the circumstances, Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura not being engaged in the production of SCA/460/1999 7/11 JUDGMENT khadi/polyvastra, the petitioner society was not entitled to any rebate on the goods purchased from the said institution and as such, the action of the Board is just, legal and proper and does not call for any intervention at the hands of this Court. 8. Ms.Nisha Parikh, learned Assistant Government Pleader has adopted the stand taken by the respondent No.2 – Khadi Board. 9. During the course of hearing of the petition, the Court had called upon the learned advocate for the respondent No.2 – Khadi Board, to produce the policy for grant of rebate, pursuant to which, the learned advocate has placed on record various circulars issued by the respondent No.2 – Khadi Board from time to time. 10.From the facts stated hereinabove as well as from the contentions advanced by the learned advocates for the parties, admittedly, Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura is an institution recognized for the purpose of sale of khadi as well as polyvastra, as is indicated from the communication dated 1st January 1991 issued by the Khadi Board to the said institution granting recognition to the said institution for sale of the articles enumerated therein. The certificate dated 3rd August 1993 issued by the Khadi Board in favour of the Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura makes it apparent that the said institution has been classified as “A” category Khadi Gram Udhyog Sales Depot and is permitted to sell the goods produced by itself as well as SCA/460/1999 8/11 JUDGMENT purchased from institutes – societies recognized by Khadi Board. 11.A perusal of the circulars placed on record by the learned advocate for the Board, nowhere indicates that a society would be entitled to rebate only if the goods supplied by it are purchased from an institute which is engaged in the production of Khadi – Polyvastra. 12.The learned advocate has also placed on record a circular regarding the rebate policy for the year 2007-08 wherein it is specifically stated that the rebate shall be allowed only at sale centres run by the Khadi and Village Industries Commission, Village Industries Commission, the Khadi and Village Industries Boards and also at the sale centres run by the registered institutions, which are engaged in production of Khadi/Polyvastra, and that, no rebate claim shall be entertained from other sale counters/centres. The policies for the earlier years do not contain any such prohibition as regards the rebate claims from other sale counters/centres. 13.It is in the background of the aforesaid facts that the merits of the present petition have to be examined. As can be seen from the impugned communications / orders made by the respondent No.2 – Khadi Board, the Board has sought to recover the amount given towards rebate to the petitioner society for the years 1991-92 to 1993- 94, mainly on the ground that the Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura was not engaged in production of polyvastra. A perusal of the various SCA/460/1999 9/11 JUDGMENT circulars issued by the Board from time to time, clearly shows that at the relevant time, there was no such policy of the Board that Khadi/Polyvastra should be purchased only from an institute engaged in the production thereof, for the purpose of availing benefit of rebate under the policy of the Board. It is the specific case of the petitioner, that it had ascertained that Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura was recognized by the Khadi Board for the purpose of sale of Khadi as well as Polyvastra, and that, it was also granted a certificate for sale of recognized khadi articles. It is not the case of the Khadi Board that Jay Vishwakarma Khadi Gruh Udyog Kendra, Dhansura was not a recognized institution as indicated by the communication dated 1st January 1991 or that it was not recognized for the purpose of sale of Khadi Gram Udhyog articles. In these circumstances, the grievance voiced by the petitioner society that they were bonafide purchasers without knowledge while making purchases of Khadi Polyvastra from Jay Vishwakarma Khadi Gruh Udyog Kendra, appears to be justified. When the very policy laid down by the respondent No.2 Khadi Board nowhere indicates that, for the purpose of availing the benefit of rebate, the concerned society has to purchase recognized khadi articles only from an institution engaged in the production thereof, the respondent No.2 – Khadi Board does not appear to be justified in seeking to recover the amount paid to the petitioner society towards rebate for the sale of polyvastra made by it to the Ahmedabad Municipal Corporation. Besides, it is the specific case of the petitioner that it has not retained the benefit of the SCA/460/1999 10/11 JUDGMENT rebate and has passed on the same to the Ahmedabad Municipal Corporation. 14.In these circumstances, this Court is of the view that the respondent No.2 – Khadi Board is not justified in seeking to recover the amount paid towards rebate to the petitioner society for the year 1990-91 to 1992-93 as the respondent No.2 – Khadi Board is not in a position to indicate any such policy whereby the petitioner society was entitled to grant of rebate only in case it purchased the goods from an institution engaged in the production of polyvastra. In the circumstances, the impugned communications/orders dated 7th September 1996, 12th February 1997, 7th May 1997 and 14th July 1998 passed by the respondent No.2 – Gujarat Rajya Khadi Gram Udyog Board (Khadi Board), cannot be sustained and deserve to be quashed and set aside. 15.For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned communications / orders dated 7th September 1996, 12th February 1997, 7th May 1997 and 14th July 1998 passed by the respondent No.2 – Gujarat Rajya Khadi Gram Udyog Board (Khadi Board), are hereby quashed and set aside. In view of the fact that the order dated 14th July 1998 is quashed and set aside, it goes without saying that the petitioner Society shall be entitled to the consequential relief. Rule is made absolute accordingly. [HARSHA DEVANI, J.] SCA/460/1999 11/11 JUDGMENT parmar*