THE HON’BLE SRI JUSTICE R. SUBHASH REDDY Writ Petition No.27314 of 2008 ORDER: 1 Petitioner, who is a licencee under the provisions of the A.P. Petroleum Products (Licensing & Regulation of Supplies) Order, 1980, filed the present Writ Petition questioning the validity of the order dated 15.03.2008 passed by the Collector (CS), Ananthapur in proceedings Rc.No.K3/607/2007 as confirmed by the Commissioner of Civil Supplies, the appellate authority, by order dated 24.09.2008 in proceedings No.CCS Progs.No.E2/2899/2008. 2 Petitioner is a dealer in petroleum products, which he is running in the name and style of Vijaya Shakti Nilayam, Kambadur, Ananthapur district and that he is having valid agreement for supply of petroleum products from IBP Oil Company. It is stated that for the purpose of running the petroleum bunk, he appointed one Mr.Manjunatha of Karnataka State as Manager and he is not conversant with Telugu language. 3 On 22.10.2007 the first respondent herein along with his staff inspected the business premises of the petitioner. Alleging that the petitioner, being the licence holder, is not running the business of the petroleum products by himself and it is being run by a benami person by name Gangini Narayana and also on the ground that there are variations in stocks when compared with the book balance and ground balance and that the petitioner is not maintaining true and correct accounts, the first respondent has seized 1919 liters of Motor Spirit and 8943 liters of High Speed Diesel Oil. The first respondent has also taken the samples on the allegation that the petitioner was indulging in clandestine business by adulterating motor spirit and High Speed Diesel Oil by contravening the provisions of the A.P. Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. 4 It is further submitted that pursuant to the seizure of stocks, separate proceeding were initiated under Section 6-A of the Essential Commodities Act. The seized samples were sent for chemical analysis to the Andhra Pradesh Forensic Science Laboratory, Hyderabad. After receipt of the report, the Joint Collector and Additional District Magistrate passed final orders dated 12.12.2007 in proceedings No.Rc.No.K3/DMV/599/07 releasing the entire stocks of the petitioner on the ground that the allegation of adulteration is not proved by recording a finding that the samples drawn and tested in the laboratory were within the reference range as per the standards of Bureau of Indian Standards specification. 5 With regard to the seizure, the Joint Collector, who is the licensing authority, had initiated separate proceedings to cancel the licence issued to the petitioner. In the cancellation proceedings, mainly four charges were framed. The said charges read as under: Charge No.1: Sri K Prabhakara Babu being a licence holder bearing No.1/88 is not running the business of the petroleum products by himself and it is being run by a benami person, Sri Gangini Narayana, which is in violation of Clause 22 of the Andhra Pradesh Products (Licensing & Regulation of Supplies) Order, 1980. Charge No.2: There are huge variations found in ground balance of Motor Spirit and High Speed Diesel beyond the permissible limits when the stocks were verified with that of stock register / meter reading / bill book. Thus the outlet has indulged in malpractices by violating the provisions of Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005. Charge No.3: The outlet is not maintaining true and correct accounts as the bills issued are not tallied with the stock register, which is in violation of Clause 22 (1) of the Andhra Pradesh Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. Charge No.4: The outlet has failed to furnish the C-Form Monthly Returns to the Licensing Authority, which is in violation of Clause No.12 (2) of the Andhra Pradesh Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. 6 With regard to the aforesaid charges the petitioner offered his explanation in detail. While denying the allegation that the petitioner is not running the business of the petroleum products by himself and it is being run by a benami person, Sri Gangini Narayana, it is stated that he appointed one Manjunatha, who belongs to Karnataka State, as Manager and he is not conversant with Telugu language, and he is looking after the business on behalf of the petitioner. 7 With reference to the Charge No.2, which pertains to variations in stocks, while denying the said allegation, the petitioner disputed the procedure adopted by the respondents in measuring the stock levels. It is stated that if the book balance is taken with reference to the sales through pump reading, the variations are within permissible limits. The allegations with reference to the Charges 3 and 4, which relate to non-maintaining of accounts and non-submitting of C Forms, are not correct and the said allegations are false. 8 The licensing authority, being not satisfied with the explanation offered by the petitioner, passed the impugned order dated 15.03.2008 in proceedings Rc.No.K3/607/2007 cancelling the licence of the petitioner. As against the said order of cancellation, the petitioner carried the matter by way of appeal as provided under Clause 31 of the A.P. Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. However, the appellate authority also dismissed the said appeal by order dated 24.09.2008 issued in proceedings No.CCS Progs.No.E2/2899/2008. Hence this Writ Petition. 9 In this Writ Petition the learned counsel for the petitioner contended that the petitioner is a licencee and he himself is running the business and that he has appointed one person by name Manjunatha, who is not conversant in Telugu language, as Manager to manage the day to day affairs of the business and in that view of the matter, it cannot be said that the petitioner himself is not doing the business and one person by name Gangini Narayana is running the business benami. It is further submitted that the respondents have not followed the standard procedure to arrive at the variations when stock balance are compared with the sales effected on the date of inspection. It is further submitted that the licencing authority, by adopting calculations with regard to the variations on different methods, have ultimately accepted the method suggested by the Assistant Manager of Indian Oil Corporation and recorded adverse findings though such procedure is not adopted during the course of inspection. With regard to the charge for not maintaining the true and correct accounts, it is contended that in absence of adopting correct procedure for calculation with regard to the available stocks and variations it is not open to the respondents to allege that the petitioner has violated Clause 12 (2) of the A.P. Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. In any event, it is submitted that as the inspection is mainly on the ground that the petitioner is selling adulterated petroleum products, when the samples were sent to the Forensic Science Laboratory, Hyderabad and the reports have come in favour of the petitioner. In that view of the matter, the entire stock seized from the petitioner was released and as such the respondents should not have cancelled the authorisation of the petitioner. 10 On the other hand, the learned Government Pleader for Civil Supplies appearing for the respondents submitted that several methods were adopted for calculating the stocks available taking into account the sales effected on the date of incident and as per the allegations in the show cause notice there are huge variations in the stocks, as such, in absence of proper explanation for such allegations, the impugned order of cancellation is passed. It is further submitted that in view of the statement of the Manager allegedly appointed by the petitioner, recorded at the time of inspection, it is clear that the petitioner himself who is the licencee was not doing the business, but, some other person by name Gangini Narayana was doing the business benami on the licence of the petitioner. It is further submitted that in view of the finding recorded by the primary authority, as confirmed by the appellate authority, there are no grounds to interfere with the order of cancellation of the authorisation of the petitioner. 11 There is an allegation against the petitioner that he is running the business benami. Such allegation is solely based on the statement, which is recorded in absence of the licencee at the time of inspection. It is the case of the petitioner that he has appointed one Mr.Manjunatha as manager to look after the business and the said Manjunatha hails from the State of Karnataka and is not conversant with Telugu language. Except naming of the person by the manager, no enquiry was made and no statement of said Gangini Narayana is recorded. It is to be noticed that the ex parte statement recorded during the course of inspection in absence of any other material to show that the petitioner has transferred the licence to one Gangini Narayana cannot be the basis to record a finding that the petitioner has transferred the licence to third party so as to allege that a benami person is running the business in the name of the petitioner. It is not in dispute that the petitioner who was the licencee was not available at the time of inspection and except the ex parte statement recorded from the manager, there is no other material to show that the petitioner has transferred the licence to any other person. More so, such an ex parte statement is also to be viewed from the explanation offered by the petitioner that one Mr. Manjunatha was appointed as manager who hails from Karnataka State and he is not conversant with Telugu language. In that view of the matter, in absence of any sufficient material, there no valid material to record a finding that the petitioner has transferred the licence in the name of some third party. 12 With regard to the allegation of variations and the petitioner is not maintaining true and correct accounts as alleged in charge Nos.2 and 3 in the show cause notice, it is relevant to note that the said variations are arrived with regard to Motor Spirit and High Speed Diesel Oil by adopting three different procedures. All the three different types basing on which the allegation of variation is alleged, are mentioned in the show cause notice. In the show cause notice column wise variations are shown in three different charts. As per one chart, the variations are arrived as per the bills issued on the date of inspection i.e. 22.10.2007. In the second charge variations are alleged taking into account the stock as per the meter reading of the pump at the time of inspection on 22.10.2007 and the sales recorded. In the third chart variations are alleged basing on the sales of the stock on 22.10.2007 by comparing the same with bill book and the meter reading. When such variations are alleged based on the calculations adopted in three different types, in his explanation the petitioner while denying such allegations has categorically pleaded that there are no variations and if the book balance and sales through pump reading are calculated, the variations are within the permissible limits. 13 In spite of such explanation being offered by the petitioner, but curiously, a finding is recorded with regard to the variations solely based on the letter, which was received from the Assistant Manager, retail sales of Indian Oil Corporation. As the respondents themselves are not sure of the calculations / measurements they have taken while alleging variations, it appears they have addressed to the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur, who has responded to the communication sent by the licencing authority and it appears that he has stated that the stock availability which is recorded by the respondents is correct with regard to the Motor Spirit and High Speed Diesel Oil. He has also communicated the standard method to arrive at the variations. From a reading of the impugned order it is clear that the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur has communicated that as per the Standard Method, the reference stock and pump meter (totaliser) readings should be taken from the last inspection report prepared by the authorised officer of the Oil Company / Companies and such inspection report will be signed by the dealer or dealer’s representative. Though such procedure is not adopted as indicated by the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur, in the impugned order it is stated that such procedure is taken into account and alleged that there is less stock of Motor Spirit. 14 At this stage, it is very important to note that the method of calculation as indicated by the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur, was not the calculation adopted at the time of inspection and also as stated in the show cause notice inviting explanation from the petitioner for cancellation. When such calculations are not made, and the allegation of variation is disputed by the petitioner, without adopting the procedure as indicated by the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur, the method of calculation adopted by the respondents should not have been taken as a standard method for the purpose of arriving at variations. If such is not the method, which is adopted at the time of inspection, the same should not have been the reason to record a finding of variations in the impugned order. Precisely, adopting one method of calculation proceedings were initiated for cancellation and in the show cause notice also explanation is sought for on such calculation. But when coming to the final order, a different standard method, which is suggested by the Assistant Manager, retail sales of Indian Oil Corporation, Ananthapur is taken into and the finding is recorded against the petitioner. The said finding is illegal. 15 Even with regard to the allegation of not maintaining correct accounts, as alleged in Charge No.3, it has also an automatic effect on the finding recorded in charge No.2. If the standard method is not followed, there is also no basis for alleging that the petitioner is not maintaining true and correct accounts so as to allege there is violation of Clause 12 (2) of the A.P. Petroleum Products (Licensing & Regulation of Supplies) Order, 1980. 16 With regard to Charge No.4, i.e. furnishing of C- Form Monthly Returns to the licensing authority this allegation is technical in nature and should not have been basis for cancelling the licence. 17 I have also perused the order of the appellate authority. The appellate authority, though extracted the grounds raised by the petitioner in the grounds of appeal, without appreciating the said grounds with reference to the standard method of calculation as indicated in the order passed by the primary authority, but by recording a similar finding, has summarily rejected the appeal preferred by the petitioner. 18 When the cancellation of the licence left drastic consequences on the licencee, and when the Control Order itself provides appeal, it is expected that the appellate authority should have proceeded with the matter by appreciating all the grounds of appeal raised by the petitioner. But in the instant case, the appeal is rejected by recording a finding similar to that of the primary authority. 19 From a reading of the order of cancellation, it is to be noticed that the very inspection was made based on the allegation that the petitioner is selling adulterated petroleum products. But from a perusal of the order dated 12.10.2007 issued in Rc.No.K3/DMV/599/07, a copy of which is placed before this Court at the time of hearing, it is clear that the samples sent for analysis were found to be within the reference range as per the references notified by the Bureau of Indian Standards. Taking into account such report sent by the Forensic Science Laboratory, Hyderabad the entire stock seized from the petitioner was also released in his favour in the final order passed by the Joint Collector in the proceedings initiated under Section 6-A of the Essential Commodities Act. 20 In that view of the matter, this Court is of the view that there is no valid basis and material to record an adverse finding against the petitioner and the findings are recorded not on the known procedure for calculation to arrive at the variations as alleged, and further taking into account the orders of the Joint Collector in the proceedings initiated under Section 6-A of the Essential Commodities Act dated 12.10.2007 issued in Rc.No.K3/DMV/599/07 this Court is of the view that the order cancelling the authorisation passed by the primary authority as confirmed by the appellate authority are required to be set aside. 21 For the aforesaid reasons, the Writ Petition is allowed and the order dated 15.03.2008 passed by the Collector (CS), Ananthapur in proceedings Rc.No.K3/607/2007 as confirmed by the Commissioner of Civil Supplies, the appellate authority, dated 24.09.2008 in proceedings No.CCS Progs.No.E2/2899/2008 is hereby set aside. No order as to costs. -------------------------- R.Subhash Reddy, J. 29.11.2011 Kvsn