SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 1/51 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. S.B. CIVIL WRIT PETITION NO.79/2006 Rajasthan State Mines and Minerals Ltd. versus 1. The Union of India through the Secretary, Ministry of Railway, North Western Railway, Jaisalmer. 2. The Chief Goods Superintendent, North Western Railway, Jaisalmer. 3. The Chief Goods Superintendent, South Eastern Railway, Bhilai, Chhattisgarh. 4. The Chief Goods Superintendent, South Eastern Railway, Rourkela, Orissa. 5. The Chief Goods Superintendent, Eastern Railway, Durgapur, West Bengal. 6. The Chief Goods Superintendent, South Eastern Railway, Bokaro, Jharkhand. 7. Steel Authority of India Ltd., New Delhi. PRESENT HON'BLE Dr.JUSTICE VINEET KOTHARI Mr.M.R.Singhvi, for the petitioner. Mr.J.P.Joshi, } Mr.Kamal Dave }for respondents SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 2/51 REPORTABLE DATE OF JUDGMENT : 7.5.2008 JUDGMENT 1. This writ petition has been filed by the Rajasthan State Mines and Mineral Limited, a Government of Rajasthan Enterprises, RSMM, for short, against the Railway Administration challenging the vires of Railways (Punitive Charges for Over-riding of Wagons) Rules, 2004 framed under the provisions of Section 73 of the Railways Act, 1989 and framed in supersession of earlier Rules of 1990 prevailing in this regard. 2. The petitioner had initially laid a challenge to the provisions of Section 73 of the Railways Act, 1989 also, but that challenge was given up before the Division Bench of this Court on 26.9.1997 and challenge was restricted to the validity of aforesaid Rules of 2004 and thus, the matter was remanded to the Single Judge. However, prior to that, on 6.12.2006, the Division Bench had passed the following interim order in the matter : SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 3/51 HON'BLE MR. JUSTICE RAJESH BALIA HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS Mr. M.R. Singhvi, for the appellant. Mr. Kamal Dave } Mr. J.P. Joshi } for the respondents. Learned counsel for the respondents wants time to file reply to the writ petition. Four weeks' time is allowed as prayed. Meanwhile the respondent – Railways, if were to raise any demand by way of penal rate of freight after accepting goods from the petitioner for carriage at destination or mid way, the same may not be enforced against the petitioner or his consignee until further orders. However, the same shall be intimated to the petitioner and on receipt of intimation, the petitioner shall furnish adequate security for its payment, in case writ petition fails, to the satisfaction of the DRM, North- Western Railway, Jodhpur. Meanwhile, the pleading may be completed before next date. Put up on 22.1.2007 along with SAW No.867/2006 as prayed. (Gopal Krishan Vyas)J. (Rajesh Balia)J.” 3. That while sending the matter to Single Judge, the Division Bench passed the following order on 26.9.2007: HON'BLE MR. JUSTICE P.B. MAJMUDAR HON'BLE MR. JUSTICE DEO NARAYAN THANVI Mr. M.R. Singhvi, for the petitioner. SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 4/51 Learned counsel Mr.M.R.Singhvi appearing on behalf of the petitioner submitted that the petitioner is giving up the challenge regarding constitutional validity of Section 73 of Railways Act, 1989. He has submitted that the petitioner is now challenging only the validity of concerned Rules of 2004, therefore, the matter is required to be decided by the learned Single Judge as challenge to validity of Section 73 is giving up. Learned counsel Mr. M.R.Singhvi submitted that mistake in the prayer clause, instead of mentioning Section 73, Section 78 has been mentioned. Considering the said aspect of the matter, the Registry is directed to list the matter before the learned Single Judge taking up such matters. (Deo Narayan Thanvi)J. (P.B. Majmudar)J.” 3. The petitioner – company is engaged in mining activities and marketing of excavated minerals and one of its mining operations are located in Jaisalmer within the State of Rajasthan where limestone is excavated which is called Low Silica High Graded Limestone. It is used by the Steel producing companies like Steel Authority of India situated at Durgapur, Bihar. For transportation of such limestone from Jaisalmer to Durgapur, on the request of the petitioner company, the Railway Administration provides railway wagons to the petitioner – company in the form of Rake and such train loads loaded with lime stone are transported by the Railways from Jaisalmer to Durgapur, SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 5/51 Bihar. The system of weighing goods at Jaisalmer is volumetric system, under which wagons are supposed to be filled up upto the marked lines in wagons, upon which the Railway receipts are issued to the petitioner – company. Since there is no weigh bridge at Jaisalmer itself, but such weigh bridges are installed at Merta Road, which is enroute from Jaisalmer to Durgapur within the State of Rajathan. There weight load of each of the wagons is ascertained and computerised print out of such weight load is available and on the basis of such computerised print out, excess weight or load is determined by the Railway Authorities and such excess weight print- outs are sent with consignment to the destination where on the basis of excess weight load under the aforesaid Punitive Charges Rules of 2004, punitive charges are recovered from the consignee of the goods which in turn is deducted from the bill amount of the petitioner – Company and thus, the petitioner company has to bear such excess load punitive charges. 4. The grievance of the petitioner – company in the present case is about such punitive charges and illustratively the petitioner – company has produced a schedule with the writ petition which SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 6/51 indicates that for the period October, 2004 to June, 2005, punitive charges to the extent of 3.90 crores was realized from the consignee of the petitioner – company by the respondent – Railway Administration. 5. Unfurling his arguments, Mr. M.R. Singhvi raised following contentions before this Court: a) The penalty or punitive charges which are levied under the aforesaid Rules of 1990 or 2004 prevailing during the relevant time which Rules have been amended and substituted almost every year and Rules of 2005, 2006 and 2007 have come into force later on, all such Rules having been framed in accordance with Section 73 and under the powers conferred on the Central Government under Section 87 of the Act are ultra vires because no guidelines have been provided in the relevant provisions of Section 73 and quantum of penalty, according to the learned counsel for the petitioner, is extremely excessive, arbitrary and confiscatory. He pointed out that under the Rules of 2004, if excess load is over one ton, the penalty, was six SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 7/51 times of fare applicable to the highest class of goods. The said six times was reduced to 3 times in the Rules of 2007. The goods are classified in different categories by the Railways, which classification has been placed on record as Annex.4 and limestone falls under Class 140 (page 84 of the paper-book), whereas the commodities like acids and alcohols fall under Class 240 (page 77 of the paper book). Of course different fares are applicable to different kind of commodities and the aforesaid punitive charges are computed for maximum fare applicable to highest class as aforesaid. (b) While such goods are loaded at Jaisalmer, the goods are filled up to the line marking given in the wagons and the Railway receipts are issued to the petitioner – company and since such Railway receipts bears the endorsement “sender's weight accepted”, according to the learned counsel for the petitioner, the Railway Administration cannot later on say that there is any excess weight. Further he submitted that when the goods are weighed on the weigh-bridge at Merta Road, the petitioner – company is neither given any notice nor any SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 8/51 representative of the petitioner – company is available there and therefore, exparte weighment on weigh-bridge cannot be made basis for levying of punitive charges by the Railway Administration. In other words, the process of levy of punitive charges is in breach of principles of natural justice, according to the learned counsel for the petitioner. (c) According to the petitioner, since the entire train load is made available to the petitioner – company, unless Railway Administration makes out a case that total rake load or train load has exceeded, which according to the petitioner is 3600 metric tonnes, the Railway Administration cannot levy any penalty. (d) The learned counsel for the petitioner also urged that since overloading if any found at Merta Road, the Railway Administration is free to offload such excess load, which it does some times, actually no excess load is carried by the Railway Administration upto the destination point at Durgapur, Bihar and therefore, levy of penalty for fare SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 9/51 applicable to the highest class of goods for entire distance is illegal because excess load is not even carried upto the destination point. Added to this, the learned counsel submitted that Section 73 proviso permits only imposition of cost of such unloading and any charge for the detention of any wagon on this account, only such unloading charges and detention charges can be charged from the petitioner and no other punitive charges can be levied. (e) It was also argued from the side of the petitioner that Section 73 uses the words “may” in substantive part of Section 73 and thus, the Railway Administration “may” recover such charges by way of penalty at such rates as may be prescribed, but by the Rules of 1990 and 2004 in this regard, no discretion is left to the Authorities of the Railway Administration and such penalty is invariably and mandatorily recovered from the consignee of the goods without even any adjudication process or affording an opportunity of hearing to the consignee or consignor and thus, the discretion vested in the authorities by Section 73 of the Act whether to impose penalty or not to SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 10/51 impose penalty is rendered meaningless by the Rules framed under a delegated legislation by the Central Government. (f) It was also argued that Section 78 of the Act gives power to the Railway Administration to re-measure or re-weigh or re- classify any consignment before delivery of consignment, the Railway Administration could not re-weigh the goods in the present case, but could only re-measure such goods because goods are loaded at the forwarding station at Jaisalmer under volumetric system by filling up wagons upto the marked lines for limestone and since three different words have been deliberately used by the legislature, i.e. re-measure, re-weigh or re-classify, such words have to be read in sequence and what was done at the original forwarding station could only be done en-route the transit and not vice versa. (g) On the issue of availability of alternative remedy by way of raising dispute by way of a complaint under Section 36 and 37 of the Act before the Railway Rates Tribunal, the learned counsel for the petitioner submitted that Railway Rates SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 11/51 Tribunal had no jurisdiction to deal with the issue raised in the present writ petition including question of vires of Rules of 1990 or 2004 and therefore, such remedy was inefficacious in the present case. (h) Referring to Circular dtd.19.9.2005 Annex.A (Page 139 of the paperbook) issued by the Sr. Divisional Commercial Manager, Norther-Western Railway, Jodhpur, the learned Counsel for the petitioner argued that since by said circular, all the concerned staff of the forwarding station were strictly warned to be more careful and vigilant while loading and ensure that no overloading was done at forwarding station in future. If overloading is detected en-route, the staff of station who supervises the loading will be taken up. In view of this circular, the learned counsel submitted that it was not the responsibility of the petitioner – company, if there was any overloading, but on the contrary, it was the responsibility of the concerned staff of the Railways and they were to be held responsible in this regard and therefore, no penalty could be imposed on the petitioner. Added to this was the contention SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 12/51 based on definition of “Railway Receipt” given in Section 65 of the Act, Sub-section (2) of which stipulated that a railway receipt shall be prima facie evidence of weight and the number of packages stated therein, therefore, it was submitted that since Railway receipt was issued to the petitioner – company on the basis of weight indicated in the Railway receipt, the Railway Administration was not entitled to charge anything beyond the weight indicated in the Railway receipt. 5. The learned counsel for the petitioner relied upon the following judgments in support of his submissions: A. In Jindal Stainless Ltd. and anr. V/s State of Haryana and ors. reported in (2006(7) SCC 241, the Hon'ble Supreme Court while dealing with the case of compensatory tax in the form of entry tax held as under: “The concept of compensatory tax is not there in the Constitution but is judicially evolved in the seven-Judge case of Automobile Transport, 1963 (1) SCR 491, as a SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 13/51 part of regulatory charge. The fallout is that compensatory tax becomes a sub-class of fees. A compensatory tax is levied on an individual as a member of a class, whereas a fee is levied on an individual as such.” “For a tax to be compensatory, there must be some link between the quantum of tax and the facilities/services. Every benefit is measured in terms of cost which has to be reimbursed by compensatory tax or in the form of compensatory tax. In other words, compensatory tax is a recompense/reimbursement. (para 42)” B. In Krishna Mohan Pvt.Ltd. V/s Municipal Corporation of Delhi and ors. reported in AIR 2003 (SC) 2935, the Hon'ble Supreme Court while dealing with vires of Section 116(3) of the Delhi Municipal Corporation Act relating to rateable value for valuation of land/building for imposition of property tax, held as under: SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 14/51 “Section 116(3) is invalid for excessive delegation of legislative powers as it vests arbitrary and unguided discretion in the Commissioner to declare any machinery situated in or upon a land or building to be deemed to form part of the land and building for the purpose of determining the rateable value thereof. The contention of the Municipal Corporation that the statute indicates the guidelines, namely, that the Commissioner's power to notify under S.116(3) is only in respect of things which are of the same nature as would fall within the ambit of expression “land”, as defined under S.2(24) is a classic case of post hoc ergo propter hoc. Obviously, the power given to the Commissioner under sub-sec. (3) of S.116 intended to be exercised only in a case where the plant or machinery does not fall within the ambit of the expression “land” or “building” as defined in the Act. It is only in such cases that the question of exercise of the discretion on the part of the Commissioner arises. Thus, the so called guideline is wholly chimerical. There are no legislative SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 15/51 guidelines on which Commissioner's power under S.116 (3) could be exercised. The vice discovered by Supreme Court in Rule 7(2) of the BPMC Act, 1949 in New Manek Chowk AIR 1967 SC 1801, equally invalidates S. 116(3) of the D.M.C. Act. (Paras 45, 47, 52) Apart from there being no guidelines in the statute, the exercise of discretion by the Commissioner is not subject to any appeal to a higher authority. It is true that the discretion can be exercised by Commissioner only with the approval of the Standing committee and, secondly, that the rateable value is subject to an appeal under the statute. But, there is no provision in the statute for an appeal against inclusion of any plant of machinery within “land” or “building” for determination of the rateable value.” C. On the question of quantum of penalty under Section 11AC of the Central Excise Act, 1944, the Division Bench of this Court in the case of Commissioner of C.Ex., Jaipur V/s SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 16/51 Banswara Syntex Ltd. reported in 2007(212) E.L.T., 171 (Raj) held that it was not necessary to impose maximum penalty only. Para 29 and 30 in this regard are extracted below : “29. It is also clear from the amendment brought in Section 11AC by way of inserting second proviso that where the duty determined under sub-section (2) of Section 11A along with interest thereon is paid within thirty days from the date of notice of demand, the amount of penalty has to be reduced to 25% of the duty levied. Thus, prescribing minimum leviable penalty, since amendment under Section 11AC, to 25% of the duty on deposit of the amount for which demand has been created along with interest within prescribed time and waived amount over and above it. Therefore, keeping in view this provision, we are persuaded to hold that where show cause notice under Section 11AC as well as 173Q has been issued for the same defaults, the assessing officer cannot overlook the provisions of Rule 173Q for the purpose of levying maximum penalty only SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 17/51 using his discretion to levy penalty under Section 11AC without considering the provision of Rule 173Q. If he has discretion to use, and case is made out for imposing lesser penalty, he cannot use his discretion not to invoke the provisions of Rule 173Q at all and insist on levying maximum penalty only. 30. The two provisions read together make it fairly clear that the limit of penalty provided under section 11AC serves as a maximum limit upto which penalty could be levied but the assessing officer in his discretion may levy lesser penalty.” D. While dealing with the question of alternative remedy under the Railways Act, 1890, the Constitution Bench of the Hon'ble Supreme Court in the case of Rai Chand Amulakh Shah V/s Union of India reported in AIR 1964(SC) 1268 held as under: “(9) Let us now see whether remedy is provided by the Act for an aggrieved party to ask for a refund of the SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 18/51 charges collected on the ground mentioned in the plaint. The Tribunal constituted under S. 34 of the Act has jurisdiction to decide whether the charges levied by the railway administration other than the standardised terminal charges were unreasonable. The Act does not provide for any remedy for an aggrieved party to approach the Tribunal for a refund of the amount collected by the railway administration by way of wharfage and demurrage on the ground that the rules governing the said administration to do so are ultra vires or that the amounts so collected are in excess of wharfage or demurrage leviable under the rules. If the impugnd charges are standardised terminal charges, the dispute in regard thereto falls outside S.41 of the Act. If they are charges other than the standardised terminal charges, the jurisdiction of the Tribunal is confined only to the question of its reasonableness. It has no jurisdiction to decide whether the rules empowering the railway administration to levy a particular charge are ultra vires or whether the railway administration SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 19/51 collected amounts in excess of the charges which it can legally levy under a rule. If so, it is clear that no provision has been made under the Act giving a remedy to an aggrieved party to ask for a refund of amounts, such as those alleged to have been collected from the appellants. Section 26, therefore, cannot be a bar against the maintainability of the suits filed by the appellants.” 6. On the basis of aforesaid contentions, the learned counsel for the petitioner urged that the impugned levy and recovery of punitive charges from the petitioner company or its consignee was illegal and Rules of 1990 and 2004 in this regard were ultra vires and therefore, the same deserved to be struck down by this Court. 7. On the side opposite, Mr. Kamal Dave learned counsel appearing for the Railway Administration opposed all the aforesaid submissions and he submitted that as a matter of fact all these issues raised by the petitioner in the present writ petition stand answered and concluded by the decision of the Apex court in the case of Jagjit Cotton Textiles Mills reported in 1998(5) SCC 126. He heavily SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 20/51 relied upon the said decision besides the Division Bench decision of this Court in the case of Straw Products Ltd. and ors. V/s Union of India and ors. reported in 1995(2) Western Law Cases 720 and a Single Bench decision of this Court in the case of J.K. Cement Works V/s Union of India (S.B. Civil Writ petition No.1813/2005 decided on 6.4.2005) in which while raising similar issues, another company M/s J.K. Cement had withdrawn its writ petition and the Court permitted the said withdrawal with the liberty to the petitioner to approach Railway Rates Tribunal, Chennai. The learned counsel for the respondents also relied upon a Single Bench decision of J & K High Court in the case of Darshan Kumar Mahajan V/s Station master, Railway Station and ors reported in AIR 1986 (J &K ) 74. He submitted that therefore, the writ petition deserves to be dismissed not only on the ground of alternative remedy, but challenge to the vires of Rules of 1990 or 2004 also deserves to fail in view of aforesaid decisions. 8. Further elaborating his submissions, the learned counsel for the respondents Mr. Kamal Dave submitted as under :-- SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 21/51 (a) The Railway Administration had ample statutory power under Section 78 of the Act to re-measure or re-weigh or re- classify any consignment before delivery of consignment and thus, re-weighment at weigh-bridge at Merta road could not be challenged by the petitioner. (b) The Railway receipts issued to the petitioner – Company at forwarding Station at Jaisalmer clearly indicates that “sender's weight accepted”, therefore, the Railway Administration had issued such railway receipt only subject to further verification of load at weigh-bridge at Merta Road because that cannot be installed at every Railway Station and there was no reason to disbelieve the weight of wagons taken at Merta Road, through a fully efficient and accurate computerized system and punitive charges in question could be levied under the relevant statutory provisions of the Rules. (c) The learned counsel for the petitioner also urged that these punitive charges was in fact not penalty, but were SBCWP NO.79/2006–RSMM LTD. . V/S THE UNION OF INDIA AND ORS.. : JUDGMENT DTD.7.5.2008 22/51 compensatory in nature as held by the Hon'ble Supreme Court in J.C. Cotton Mills case and that was for