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Judgment
M.M. Ismail, C.J.—This is an appeal against the order of V. Ramaswami, J., dated 13th December 1979 dismissing W.P. No. 2006 of
1977 filed by the appellant herein. There is a fairly long history spread over nearly two decades and for the purpose of the disposal of this writ
appeal, it is necessary to refer to the same very briefly. The appellant herein is carrying on business in the manufacture and sale of bidis and
cheroots under the name and style of M/s. Speed Lover Bidi Company and he had been stocking beedi tobacco and cheroot tobacco in five
warehouses in different streets at Travel lore under the licences granted by the Central Excise authorities at Madras. The annual stock taking of the
materials in the warehouses took place on 30-9-1961. Two of the Inspectors of the Excise Department attached the Collector''s office at Madras
inspected the warehouses on 15-10-1961, 16-10-1961 and 17-10-1961 and checked the stock and continued the same till 21-10-1961. As a
result of the verification of the stocks, weighments of the existing stock were made and the weighment sheets were signed by the appellant himself.
Finding that there was a large deficiency in the stock, and beedi tobacco and cheroot tobacco were not stored in an orderly manner as required by
the Rules and were mixed up together, the Central Excise Department served an order on the appellant herein demanding payment of duty in an
aggregate sum of Rs. 69,606.59 on the entire shortages found at the time of the special stock taking. Complaining against this order, the appellant
herein filed writ Petition No. 1394 of 1961 praying for the issue of a writ of certiorari to quash the demand served on him without giving an
opportunity to put forward his case by the issue of a show cause notice. That writ petition was allowed by this Court on 20-8-1962. Thereafter,
the department issued a show cause notice on 31-10-1962 requiring the appellant herein to show cause why two separate penalties should not be
imposed on him under Rules 223 and 223-A of the Central Excise Rules, 1944, and why the duty on the deficiencies noted should not be
demanded under Rule 223-A of the said Rules. The appellant submitted his explanation on 3-11-1962 putting forward certain objections. These
objections were overruled and a demand was made on him and a penalty was levied. During the pendency of these proceedings there was a
departmental proceeding initiated against one Inspector and another Deputy Superintendent in regard to certain dereliction of duty and non-
compliance with the rules relating to the checking of the appellant''s warehouses prior to the annual stock taking in the present case. In these
departmental proceedings, the two Inspectors, who made a special inspection of the appellant''s warehouses, were examined as witnesses. The
appellant herein wanted copies of the depositions of those inspectors to be made available to him in connection with the enquiry with regard to the
shortages found in the warehouses of the appellant herein. But the enquiry officer refused to make available copies of these depositions on the
ground that the department did not propose to rely on the said depositions in respect of the charges framed against the appellant. Against this
refusal the appellant preferred an appeal to the Central Board of Revenue, New Delhi, represented by its Chairman, New Delhi. The said Central
Board of Revenue stated that no appeal lay to it. It is thereafter, the appellant filed writ petition No. 971 of 1968 on the file of this Court. In that
writ petition, the prayer, as is found in the original records of this Court, is to call for the records, issue a Writ of Certiorari or any other
appropriate writ or direction and quash the order of the first respondent therein, namely, the Central Board of Revenue, New Delhi represented by
its Chairman, New Delhi, being No. 4-B/92/67-CXV dated 8-9-1967 and direct the first respondent to re-entertain the appeal preferred by the
appellant herein and determine the same according to law. That writ petition was dismissed by a single Judge of this Court on 12-3-1968. Against
the said dismissal, the appellant preferred Writ Appeal No. 189 of 1968 before a Division Bench of this Court. That appeal was dismissed at the
stage of admission itself on 24-4-1968, but the Court made the following observation,:
Learned Counsel for the writ petitioner strenuously contends that his client is the best judge of how far these statements will aid him in his defence,
and that when he bona fide feels that copies of the statements will assist his defence, it is not in accordance with the principles of natural justice to
deny him the simple relief of the grant of copies. We think it is sufficient to observe that there is much to be said for this view as, if the enquiry
ultimately results in finding or findings adverse to the writ petitioner, the Departmental authorities obviously will not desire that the proceedings
themselves could be impugned as vitiated by a failure to observe principles of natural justice. For this reason, we think that the Departmental
authorities will do well to reconsider the question of the grant of these copies.
Basing himself upon these observations, the appellant requested the Central Excise authorities to grant him copies of the depositions of the two
Inspectors in the departmental enquiry. The departmental officers declined to grant any such copies on the ground that the writ petition and the writ
appeal have been dismissed, that these observations have been made in the absence of departmental officers, that the departmental officers were
not relying upon the evidence of these witnesses in the proceedings they are taking against the appellant herein and that consequently they were not
prepared to grant copies of the depositions. After having taken this stand, the authorities, after making the said two Inspectors available for cross-
examination by the appellant, in the enquiry as we have pointed out already, levied duty as well as penalty referred to above, and the appeal
preferred by the appellant to the Collector of Central Excise, Madras was rejected. Thereafter, the appellant filed a revision petition to the Central
Government u/s 36 of the Central Excises and Salt Act, 1944, and the Central Government itself dismissed the revision petition on 16-4-1977. It
is thereafter the appellant herein filed the present writ petition praying for the issue of a writ of certiorari to quash the order of the Union of India
dated 16-4-1977,
Before the learned Judge, two points were taken on behalf of the appellant herein. One was that the special inspection made on 15-10-1961
and on subsequent dates was unauthorised, because, under Rule 197 of the Central Excise Rules, such as inspection could be made only after
obtaining the sanction of the Collector of Central Excise and in this case no such sanction had been obtained and no such sanction had been
communicated to the appellant herein. The second was that the refusal on the part of the authorities to grant copies of the depositions of the two
Inspectors given in the departmental proceedings constituted failure of the principles of natural justice which prevented the appellant herein from
putting forward his defence effectively. V. Ramaswami J., rejected both these contentions and dismissed the writ petition, and hence the present
writ appeal.
Even before us, the above two contentions were repeated by the learned Counsel for the appellant, Rule 197 of the Central Excise Rules, 1944,
states:
Any officer duly empowered by the Collector in this behalf, shall have free access at all reasonable times to any premises licensed under these rules
and to any place where excisable goods are grown, processed, stored, sold or manufactured or to any place where composition for match-heads
or saltpeter for the manufacture of matches are made, processed or stored, and may, with or without notice to the owner inspect the building, the
plant, the machinery and the stocks, and the accounts, and may at any time require the owner to furnish such information relating to the stocks as
he may deem fit and make a physical check of such stocks, and may at any time check the records made of the goods stocked in, or removed
from the factory, warehouse or place, or their transfer within a factory to that part of the premises, if any, in which they are to be used for the
manufacture of any other commodity, whether for the purpose of testing the accuracy of any return submitted under these Rules, or of informing
himself as to any particulars regarding which. information is required for the purposes of the Act or these Rules.
It is seen from the affidavit filed in support of the earlier writ petition filed by the appellant herein, namely, Writ Petition No. 1394 of 1961, that
no contention was taken that the two Inspectors inspected the premises without the authority or sanction of the Collector; nor was it the case that
the appellant questioned those Inspectors to show any such authority and they refused to do so. Apart from this, V. Ramaswami J., rejected this
contention in the following terms:
There could be no doubt that such an order was issued by the Collector on 17-10-61, as the original writing of the then Collector of Central
Excise is found in file and in fact during the enquiry on 17-4-70 a letter was written to the petitioner''s consultant when the petitioner raised the
question of sanction by the Collector for such stock taking, informing him that on 17-10-61, the Collector of Central Excise has ordered a special
stock taking to be conducted in the above warehouses.
Mr. M.R. Narayanaswami, the learned Counsel for the appellant challenges this conclusion of the learned Judge by contending that even in the
counter-affidavit filed by the respondents herein they did not take up the stand that the Inspectors had the sanction of the Collector on 17-10-61,
but only during the time of the hearing of the writ petition, the respondents produced a file, and on a perusal of the file the learned Judge passed the
order in question. The point taken by the appellant in the writ petition is found in paragraph 18 of the affidavit filed in support thereof. In that
paragraph the appellant contended : that the said order of the first respondent, namely, Union of India, was vitiated by errors on the face of the
record. Then the affidavit proceeds to state:
The order proceeds (a) on the erroneous assumption which the Departmental authorities have been persisting right through, that there was an order
for special stock taking by the second respondent (the Collector of Central Excise, Madras) when there was none as required by the Rule 223-A
of the Central Excise Rules, (b) that such an order need not be intimated to me, (c) that the non-furnishing of the copies required by me did not
infringe or violate any principles of natural justice.
This contention contained in paragraph 18 had been traversed in paragraph 10 of the counter-affidavit filed by the respondents. In that it is stated:
It has already been held in the judgment dated 11-3-77, passed by the High Court in Crl. R.C. No. 235 of 1974 in CM. R.P. No. 229 of 1974
that the inspectors who are Central Excise Officers can conduct special stock taking in the warehouses on the direction issued by the Collector of
Central Excise, Madras, and now here it is stipulated either in the Central Excises and Salt Act, 1944, or in the rules made thereunder that the
order fur conducting the special stock taking in the petitioner''s warehouses has to be served on him.
The learned Counsel''s contention is that there is no specific averment that there was an order by the Collector on 17-10-1961. Though all the
three grounds have been put together by the appellant himself in paragraph 18 of the affidavit and the respondents in the counter-affidavit had dealt
with all the issues, still we are of the opinion because of one clinching factor present in this case, that the contention of the appellant in this behalf is
not correct. We have already extracted the portion of the order of V. Ramaswami, J., dealing with this aspect of the matter and that portion refers
to the learned Judge looking into the file and finding:
...in fact during the enquiry on 17-4-1970 a letter was written to the petitioner''s consultant when the petitioner raised the question of sanction by
the Collector for such stock taking, informing him that on 17-10-1961, the Collector of Central Excise has ordered a special stock taking to be
conducted in the above warehouses,
In the grounds of appeal filed before this Court the fact that such a letter was written to the appellant''s consultant has not been denied.
Therefore, we have to proceed on the basis that there was an order of the Collector on 17-10-1961 and that fact was communicated to the
consultant of the appellant by a letter written by the Central Excise Officers.
Apart from this, we are clearly of the opinion that even if there had been no sanction on the part of the Collector, the result of the stock taking
made by the Inspectors in the present case cannot be ignored or held to be illegal. When a stock taking is done and as a result of the stock taking
shortage is found, the authorities can take note of the shortage and proceed on that basis even though the initial action in entering into the premises
and the verification of the stocks may not be in accordance with the rules for want of sanction by the Collector. As far as the present case is
concerned, even this fact, namely, want of sanction on the part of the Collector may not be of much significance with regard to the evidentiary
value of the result of the stock taking for the simple reason that the weighment sheets were all attested by the appellant himself and that is the view
taken by the learned Judge. Not merely that is the view taken by the learned Judge, the appellant himself at the earliest opportunity had not
questioned the correctness of the weighments made in his presence by the Central Excise Officers. Not only this, the appellant proceeded only on
the basis that the stock taking took place with the sanction of the Collector. In paragraph 4 of the affidavit filed in support of the earlier writ
petition, namely, Writ Petition No. 1394 of 1961, the appellant stated:
It would, however, appear that the Collector of Central Excise, Madras, ordered a special stock taking of the petitioner''s warehouse on or before
15-10-1961 under Rule 223-A of the Central Excise Rules, though no copy of such an order was served on me up-to-date, by the executive
officers attached to his office. In pursuance of the said order the said officers began weighment of the stocks in my licensed promises on 15-10-
1961 and continued to do so day and night till 21-10-61. The said officers after weighments, several times, of the various lots of cheroot and beedi
non-duty paid tobacco, found quantities of tobacco short. Mahazars were prepared on 15.10.1961 and 16.10.1961 of such weighments and on
subsequent days records of weighments were made. Statements were also recorded from me in respect of the shortages during the course of their
investigation. In the statements I have made it clear that I was not personally responsible for the shortages and the shortages might have been
brought about by the machinations of my political opponents.
Two comments are called for with reference to this averment in the affidavit. One is that the appellant himself proceeded on the basis that there
was sanction of the Collector. The second is even assuming that the appellant was under a misapprehension with regard to the existence of the
sanction of the Collector, with regard to the later part about shortage, there can be no doubt whatever that the appellant admitted the existence of
the shortage, but only contended that he was not responsible for the shortage and that the shortage was brought about by the machinations of his
political opponents. In view of this, we are clearly of the opinion that even in fact if there was no sanction by the Collector, the result of the stock
taking cannot be ignored and can be acted upon lawfully by the departmental officers.
As far as the second point is concerned, the learned Judge referred to the observations made by a Division Bench of this Court in the writ
appeal referred to already and proceeded to state that the departmental officers could have supplied copies of the depositions of the two officers
to the appellant which were innocuous and which would not be of much help to the appellant, but yet he was not satisfied that the non-supply of
the copies of the depositions had prejudiced the appellant in any way. Though we cannot agree with the observations of the learned Judge, we are
clearly of the opinion that he was correct in his conclusion, [The observations of the Division Bench were made in a writ appeal which was not
concerned with the supply of copies at all, but was concerned with the complaint that the Central Board of Revenue, erroneously rejected the
appeal preferred by the appellant therein on the ground that such an appeal was not maintainable and the prayer of the appellant therein was to
quash that order and direct the Central Board of Revenue to re-entertain the appeal and dispose it of on merits]. We agree with the conclusion of
the learned Judge not merely because the appellant had signed the weighment sheets prepared at the time of the special inspection but in the
affidavit filed by the appellant in his earliest writ petition he had not questioned the correctness of the weighments and the existence of the shortages
and only contended that he was not responsible for the shortages; Therefore, this point also fails and hence, the writ appeal fails and is dismissed.