Case: Zunjarrao Bhikaji Nagarkar Vs. U.O.I.

2. Appellant Zunjarrao Bhikaji Nagarkar was posted as Collector of Central Excise, Nagpur in the year 1995. Collector is now called Commissioner after amendment ofthe Central Excise Act, 1944 (for short the `Act) by the Finance Act of 1995. Presently the appellant is posted as Director, National Academy of Customs, Excise and Narcotics, Mumbai. He was served with a memorandum dated September 2, 1997 under Rule 14 of the Central Civil Services (Classification, Control and Appeal) Rules, 1965 informing him that the President proposes to hold an inquiry against him on the allegation that he favoured M/s. Hari Vishnu Packaging Ltd., Nagpur (assessee) by not imposing penalty on it under Rule 173-Q of the Central Excise Rules, 1944 (`Rules for short) when he passed an order in Original No. 20/95 dated March 2, 1995 holding that the assessee had clandestinely manufactured and cleared the excisable goods wilfully and evaded the excise duty and had ordered confiscation of the goods.3. The appellant approached the Central Administrative Tribunal, Mumbai (CAT) challenging the proposed inquiry by filing Original Application No. 250 of 1998 on March 18, 1998. While admitting the application CAT granted interim relief and stayed the disciplinary proceedings against the appellant. This application was, however, dismissed by CAT by order dated August 12, 1998 with the result the interim order stood vacated. Immediately thereafter the appellant filed a writ petition in the Bombay High Court, it being Writ Petition No. 4717 of 1998. It was dismissed in limine by a Bench of the High Court by order dated September 7, 1998. This led the appellant to come to this Court in appeal by filing Special Leave Petition. While issuing notice on the Petition this Court granted interim stay.4. The appellant has challenged the initiation of disciplinary proceedings against him. Before we consider his pleas we may as well note sequence of events leading to the issuance of the memorandum dated September 2, 1997.5. Section 33 of the Act gives powers to Central Excise authorities to adjudicate. Under this Section `where by the rules made under the Act anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged without limit, by a Commissioner of Central Excise.6. In exercise of powers conferred by Section 33 of the Act the appellant held adjudication proceedings against the assessee and two others. A show-cause notice was issued to the assessee on the following groundsIt had clandestinely cleared 2,55,000 Nos. of HDPE woven sacks totally valued at Rs. 13,77,000/- without payment of Central Excise duty amounting to Rs. 4,81,950/- (including the 95,000 Nos. of HDPE sacks seized in transit) without cover of GPIs and without recording the productions, clearance in Central Excise records in contravention of Central Excise Rules 9, 49, 52A, 53, 173G and 226 of Central Excise Rules, 1944. Hence duty of Rs. 4,81,950/- appeared recoverable from them under Rule 9(2) of Central Excise Rules, 1944 read with proviso (i) to Section 11-A of Central Excise Rules, 1944.(b) It appeared to have wilfully with the intention to evade Central Excise duty, cleared clandestinely 95,000 Nos. of HDPE sacks valued at Rs. 4,18,000/- without recording in Central Excise records, without issue of Central Excise gate pass and without payment of Central Excise duty. These goods seized in transit along with Truck No. 4145 on 16.1.1994 appeared liable for confiscation under Rule 173-Q of Central Excise Rules, 1944.(c) It also appeared to have wilfully not recorded the production of 25,500 Nos. of `L shaped HDPE sacks valued at Rs. 1,27,500/- in their RG-1 register with the intention to clear the same clandestinely without payment of duty as this quantity was found in excess than the recorded balance and therefore appeared liable to confiscation under Rule 173-Q of the Central Excise Rules, 1944.(d) It also appeared liable for penal action under Rule 173-Q of the Central Excise Rules, 1944.The assessee was asked to show-cause as to why central excise duty of Rs. 4,81,950/- be not recovered from him under Rule 9(2) read with proviso to Section 11-A of the Act and why not 95,000 numbers and 25,500 numbers of HDPE bags seized in transit and from its factory premises be confiscated and why penalty be not imposed on it under Rule 173-Q of the Rules.8. After examining the evidence on record and hearing the assessee the appellant by his order in Original No. 20 of 1995 held as under :- Â?3:Â?3  Å"In view of the foregoing, I hereby pass the following orderconfirm the excise duty of Rs. 3,57,000/- on 25,500 Nos. of HDPE Woven sacks removed by Noticee-1 clandestinely under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11-A of the CESA, 1944.95,000 bags cleared clandestinely by Noticee-1 and seized on 16.1.1994 are liable for confiscation under Rule 173-Q of C.Ex. Rules, 1944. However, I find that the goods had been released provisionally on execution of bond for the full value of the goods and cash security of Rs. 1 lakh. As the goods are not available for confiscation, I appropriate the amount of Rs. 10,000/- in lieu of confiscation.I order confiscation of `L shaped 25,500 Nos. of HDPE woven sacks valued at Rs. 1,27,500/- under Rule 173-Q of C.Ex. Rules, 1944. I however, allow the goods to be redeemed on payment of Rs. 10,000/- (Rs. Ten thousand only).Appellant directed release of the vehicle from where the goods were seized by appropriating the cash security of Rs. 10,000/- in lieu of confiscation. He said the owner of the vehicle was a transporter. He did not impose any penalty on the transporter but cautioned him not to repeat such act as the same would be viewed seriously in future. As regards the third notice he was also cautioned.10. Under Section 35B of the Act an appeal lies to the Customs, Excise and Gold (Control) Appellate Tribunal (Appellate Tribunal) against a decision or order passed by the Commissioner of Central Excise as an adjudicating authority. Powers have been conferred on the Central Board of Excise and Customs (Board) under Section 35E of the Act to pass certain orders. This Section, in relevant part, is as underPowers of Board or Commissioner of Central Excise to pass certain orders. - (1) The Board may, of its own motion, call for and examine the record of any proceedings in which a Commissioner of Central Excise as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Commissioner to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order.(2) .......(3) No order shall be made under sub-section (1) or sub-section (2) after the expiry of one year from the date of the decision or order of the adjudicating authority.(4) Where in pursuance of an order under sub-section (1) or sub-section (2) the adjudicating authority or the authorised officer makes an application to the Appellate Tribunal or the Commissioner (Appeals) within a period of three months from the date of communication of the order under sub-section (1) or sub-section (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the Commissioner (Appeals), as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of sub-section (4) of section 35B shall, so far as may be, apply to such application."(5) .......By order dated February 26, 1996 made under Section 35E of the Act Board directed the appellant to file appeal to the Appellate Tribunal to determine whether his order in Original No. 20/95 dated March 20, 1995 against the assessee was correct, legal and proper and whether the appellant ought to have imposed penalty. Accordingly appeal was filed before the Appellate Tribunal which, it is stated, is still pending.

Reasoning:
32. It would, thus, be seen that under provisions of Section 271 of the Income Tax Act in the first instance there is a discretion with the assessing authority whether to impose any penalty or not and if the assessing authority finds that it is a case for imposition of penalty then it has no discretion in the matter and the certain amount of penalty depending on the facts and circumstances of each case has to be imposed subject to the maximum limit mentioned in the section.Considering whole aspects of the matter, we are of the view that it was not a case for initiation of any disciplinary proceedings against the appellant. Charge of misconduct against him was not proper. It has to be quashed.43. Before concluding, there are two aspects of the matter which we wish to point out. These are :1. In the counter-affidavit filed by the Union of India, it has been said that the special leave petition filed by the appellant "is totally misconceived, premature and highly irresponsible". In the whole body of counter-affidavit strong language has been used. Union of India is not a private litigant. Such language in the pleading should be avoided. One can be firm without being impolite.2. There is a charge of misconduct against the Collector (now Commissioner) of Central Excise. While disciplinary proceedings are pending against him, he is transferred to the National Academy of Custom Excise and Narcotics to guide the probationers. It is certainly a paradoxical situation that a man who is not fit to hold that post of Collector is fit enough to impart training to the probationers entering the service. Best talent should be sent to the academy to teach the probationers. Posting to the academy should be considered as an honour and not punishment. Our comment is not reflection on the appellant herein as we have set aside the initiation of disciplinary proceedings against him.