Holding

Penalty under Rule 173Q is mandatory and a mere error of law or discretionary view on penalty does not amount to misconduct; therefore the charge‑sheet is illegal and must be quashed.

Summary

Zunjarrao Bhikaji Nagarkar, then Collector of Central Excise, ordered confiscation of excisable goods and confirmed duty against Mis. Hari Vishnu Packaging Ltd. but did not impose a penalty under Rule 173Q of the Central Excise Rules. The Central Board of Excise directed him to appeal to the Appellate Tribunal on the question of penalty. A disciplinary inquiry was later initiated under Rule 14 of the CCS Rules alleging misconduct for favouring the assessee by not levying the penalty. Nagarkar challenged the inquiry before the CAT, the Bombay High Court and finally the Supreme Court. The Court examined whether the levy of penalty under Rule 173Q is mandatory and whether the charge‑sheet disclosed a prima facie case of misconduct. It held that Rule 173Q makes the imposition of penalty obligatory (the amount is discretionary) and that a mere error of law or a discretionary view on penalty does not constitute misconduct. Initiation of disciplinary proceedings on vague or indefinite information, or merely on the basis of an error of law, is impermissible. Consequently, the charge‑sheet was quashed and the disciplinary proceedings set aside.

Issues considered

The levy of penalty under Central Excise Rule 173Q – whether it is mandatory or discretionary.
Whether the charge‑sheet against Nagarkar disclosed a prima facie case of misconduct sufficient to justify disciplinary proceedings.
Whether an error of law in a quasi‑judicial adjudication can constitute misconduct.
Whether vague or indefinite information and mere suspicion can be the basis for initiating disciplinary action.
Whether strong language by the State in pleadings is appropriate.

Legislation cited

Central Civil Services (Classification, Control & Appeal) Rules, 1965s. Rule 14
Central Excise Act, 1944s. 11A, s. 11AC, s. 33, s. 35E
Central Excise Rules, 1944s. Rule 173Q
Income Tax Act, 1961s. 271
Indian Penal Code, 1860s. 325, s. 63

Subjects

penaltycentral excisequasi‑judicial authoritydisciplinary proceedingsmisconductRule 14 CCSRule 173Qadministrative lawcharge‑sheetvague informationsuspicionappellate tribunal

Judgment

ZUNJARRAO BHIKAJI NAGARKAR A
v.
UNION OF INDIA AND ORS.

AUGUST 6, 1999

[S. SAGHIR AHMAD AND D.P. WADHWA, JJ.] B

Servi~ law:

Central Civil Services (Classification, Control & Appeal) Rules, I965:-
Rule I 4-Disciplinary Proceedings-Initiation of -On the basis of vague C
and indefinite information-Held, not correct, suspicion has no role to play
in such matter.

MISCONDUCT : Allegation of-Against quasi-judicial authority-On
the basis of wrong exercise of jurisdiction-Held, to maintain any charge D
sheet against a quasi judicial authority something more has to be alleged
than a mere mistake of law. e.g., in the nature of some extraneous
consideration-Wrong exercise ofjurisdiction cannot form basis for initiating
disciplinary proceedings, since the wrong can be corrected in appeal.

ACADEMY : For training probationers-Posting of person charged of E
misconduct-Not proper-Best talent to be sent to academy-Posting to
Academy should be considered as an honour and not punishment.

CENTRAL EXCISE ACT 1944 : Section l IAC.-Central Excise Rule,
173 Q-Levy of penalty-Whether discretionary-Held, No. It is only the
amount of penalty, which is discretionary. F
PRACTICE & PROCEDURE : Pleading-Use of strong language-By
the State-Held, State not being a private litigant strong language should
be avoided.

WORDS & PHRASES: Liable-Meaning of G
Appellant, a Commissioner of Central Excise, in an adjudication
proceeding against an assessee, did not impose penalty on him under rule
173 Q of Central Excise Rules, despite holding that the assessee had
clandestinely manufactured and cleared excisable goods wilfully and avoided
87 H
88 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A excise duty, and despite ordering confiscation of the goods.

The Central Board of Excise and Customs passed an order u/s 35E of
the Central Excise Act, directing the appellant to file an appeal to the
Appellate Tribunal on the question whether his order against the assessee
was correct, legal and proper and whether he ought to have imposed penalty.
B Appeal was accordingly filed which is pending.

Thereafter, inquiry was proposed against him on the allegation that in
his order against the assessee, by not imposing penalty, he had favoured him.
The memo of charge read with imputation of misconduct only alleged that
C he was in error by not having imposed penalty on the assessee. No allegation
of corrupt motive was there. The Respondent did not want to produce any
witnesses and the list of documents pertained only to record of the case.

Appellant challenged the proposed inquiry, before the Central
Administrative Tribunal, which was dismissed. A writ petition against the
D same in High Court was also dismissed.

In appeal to this Court, appellant c"Ontended that provisions of Rule
J 73Q are not mandatory and that the adjudication order being quasi judicial
in nature, any error committed therein could be corrected by recourse to the
Appellate Forum.
E
Allowing the appeal, this Court

HELD: 1.1. The contention that levy of penalty was not mandatory
under Rule 173Q and it became so after insertion of section 11 AC in the
Central Excise Act does not appear to be correct. In both Rule t 73Q and
F s~~tion 11 AC the language is somewhat similar. Under rule l 73Q apart
from confiscation of the goods the person concerned is liable to penalty.
Under Section l IAC, the word "also" has been used but that does not appear
to be quite material in interpreting the word 'liable' used both in rule l 73Q
and section llAC, and if liability to pay penalty has to be fixed by the
G adjudicating authority. [104-F; 105-A]

1.2. While examining Rule 173Q, it does not appear that apart from
the offending goods which are liable to confiscation, the person concerned
with that shall be liable for penalty upto the amount specified in the Rule.
The argument that levy of penalty is discretionary, cannot be accepted. It is
H only the amount of penalty, which is discretionary. Both things are necessary
Z. B."NAGARKAR v.U.0.1. 89
•
(1) goods are liable to confiscation and (2) person concerned is liable to A.
penalty. The penalty to be imposed has to be in commensurate with the
gravity of the offence and the extent of the evasion. [105-C-D)

State of Madhya Pradesh v. Bharat Heavy Electricals, (1998) 99 ELT
33 SC and Rajasthan Pharmaceuticals Laboratory, Bangalore and Ors. v
State of Karnataka, [1981)1SCC 645, referred to • B
Tetar Gope v. Ganauri Gope, AIR (1968) Patna 287, overruled.

2.1. Negligence in a quasi judicial adjudication is not negligence
perceived as carelessness, inadvertence or omission but as culpable
negligence. In a case like this which was being adjudicated upon by the C
.appellant, imposing of penalty was inoperative. But when there is nothing
wrong or improper on the part of the appellant to form an opinion that
imposition of law cannot be mandatory, a wrong interpretation of Law cannot
be a ground for misconduct. It is a different matter altogether if it is
deliberate and actuated by malafides. (109-F-G; 110-D-E) D
2~2. When penalty is not levied, the assessee certainly benefits. But it
,cannot be said that by not levying the penalty the officer has favoured the
assessee or shown undue favour to him. There has to be some basis for the
disciplinary authority to reach such a conclusion even primafacie. Record
in the present case does not show whether the disciplinary authority had any E
information within its possession from where it could form an opinion that
the appellant showed favour to the assessee by not imposing the penalty. He
may have wrongly exercised his jurisdiction. But that wrong can be corrected
in appeal. That cannot always form basis for initiating disciplinary proceedings
for an officer while he is acting as quasi judicial authority, it must be kept
in mind that being a quasi judicial authority, he is always subject to judicial
F
supervision in appeal. (110-F to HJ

2.3. Initiation of disciplinary proceedings against an officer, cannot
take place on an information which is vague or indefinite. Suspicion has no
role to play in such matter. There must exist reasonable basis for the G
disciplinary authority to proceed against the delinquent officer. (111-A)
..,. .
2.4. If every error of law were to constitute a charge of misconduct, it
would impinge upon the independent functioning of quasi-judicial officers.
Since in sum and substance, misconduct is sought to be inferred by the
appellant having committed an error of law, the charge sheet on the face of H
90 SUPREME COURT REPORTS (1999] SUPP. l S.G.R.

A it does not proceed on any legal premise, rendering it liable to be quashed.
To maintain any chargesheet against a quasi judicial authority something
more has to be alleged than a mere mistake of law e.g., in the nature of some
extraneous consideration influencing the quasi judicial order. Since nothing
of the sort is alleged herein, the impugned chargesheet is rendered illegal.
(111-B-C-D]
B
2.5. The chargesheet if sustained will thus, impinge upon the confidence
and independent functioning of a quasi judicial authority. The entire system
of administrative adjudication where under quasi judicial authorities function
would fall into disrepute if officers performing such functions are inhibited
C in performing their functions without fear or favour because of the constant
threat of disciplinary proceedings. [111-D-E)

Union of India v. K.K. Dhawan, (1993) 2 SCC 56; V.D. Trivedi v. Union.
of India, [1993) 2 SCC 55; Union of India v. R.K. Desai, [1993) 2 SCC 49;
Union of India v. A.N. Saxena, (1992) 3 SCC 124; S. Govind Menon v. Union
D of India, AIR (1967) SC 1274; Union of India v. Upendra Singh, (1994) 3 '
SCC 357; Deputy Inspector General of Police v. K.S. Swaminathan, (1996]
11 SCC 498; Mis Hindustan Steel Ltd. v. The State of Orissa, AIR (1970) SC
253; Madan Mohan Chaudhary v. State of Bihar & Ors., (1999( 3 SCC 396
and State of Punjab & Ors. v. Ram Singh Ex. Co{lstable, (1992) 4 SCC 54,
referred to.
E
Government of Tamilnadu v. K.M. Ramamurthy, (19971 7 SCC 101,
distinguished.

3. In the whole body of the counter affidavit filed by the Union of India
F strong language was used. Union of India is not a private litigant. Such
language in the pleading should be avoided. One can be firm without being
impolite. [111-G(

4. The Appellant, while disciplinary proceeding were pending against
him on the charge of misconduct, was transferred to the National Academy
G of Custom Excise & Narcotics to guide the probationers. It is paradoxical
that a man who is not fit to hold the post of Collector is fit to impart training
to the probationers entering the service. Best talent should be sent to ....
academy to teach the probationer entering the service. Posting to the Academy
should be considered as an honour and not punishment. (112-A-B]

H CIVIL APPELLATE JURISDICTION : <";ivil Appeal No. 4294 of 1999.
Z. B. NAGARKAR v. U.0.1. [D.P. WADHWA, J.] 91
From the Judgment and Order dated 7.9.98 of the Bombay High Court A
in W.P. No. 4717of1998.

Raju Ramachandran, H. Ahmadi, L.C. Agrawala, Dr. Rajeev and
B. Masodkar for the Appellant.

Harish Chandra, Ms. Kanupriya Mittal and V.K. Verma for the B
Respondents.

The Judgment of the Court was delivered by

D.P. WADHWA, J. Leave granted.

Appellant Zunjarrao Bhikaji Nagarkar was posted as Collector of Central C
Excise, Nagpur in the year 1995. Collector is now called Commissioner after
amendment of the 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 D
President proposes to hold an inquiry against him on the allegation that he
favoured Mis. Hari Vishnu Packaging Ltd., Nagpur (assessee) by not imposing
penalty on it under Rule 173Q of the Central Excise Rules, 1944 ('Rules' for
short) when he passed an order in Original No. 20/95 dated March 2, I 995
holding that the assessee had clandestinely manufactured and cleared the
E
excisable goods wilfully and evaded the excise duty and had ordered
confiscation of the goods.

The appellant approached the Central Administrative Tribunal, Mumbai
(CAT) challenging the proposed inquiry by filing Original Application No. 250
of 1998 on March I 8, 1998. While admitting the application CAT granted p
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 G
Court in appeal by filing Special Leave Petition. While issuing notice on the
'. Petition this Court granted interim stay.

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, I 997. H
92 SUPREME COURT REPORTS [1999) SUPP. I S.C.R.

·A 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'.

B 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 grounds:-

"(a) It had clandestinely cleared 2,55,000 Nos. of HDPE woven sacks
totally valued at Rs.13, 77 ,000 without payment of Central Excise duty
c amounting to Rs. 4,81,950 (including the 95000 Nos. ofHDPE sacks
seized· in transit) without cover of GP l's and without recording the

D
productions, clearance in Central Excise records in contravention of .
Central Excise Rules 9, 49, 52A, 53, l 73G 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 CESA, 1944.

(b) It appeared to have willfully with the intention to evade Central
Excise duty, cleared clandestinely 95000 Nos. of HDPE sacks valued
at 4, 18,000 without recording in Central Excise records, without issue
E of Central Excise gate pass and witliout payment of Central Excise
duty. These goods seized in transit along with Truck No. 4145 on
16.1.94 appeared liable for confiscation under Rule l 73Q of CESA,
1944.

(c) It also appeared to have willfully not recorded the production of
F 25,500 Nos. of 'L' shaped HDPE sacks valued at Rs. l ,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.

G (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
ofRs.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
H of HDPE bags seized in transit and from its factory premises be confiscated
Z. B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.) 93

r and why penalty be not imposed on it under Rule 173-Q of the Rules. A
After examining the evidence on record and hearing the assessee the
appellant by his order in Original No. 20 of 1995 held as under:-

"In view of the foregoing, I hereby pass the following order:-

! confirm the excise duty of Rs. 3,57,000 on 25,500 Nos. ofHDPE B
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 Notlcee-1 and seized on C
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. I lakh. As the goods are not available for confiscation, I
appropriate the amount of Rs.10,000 in lieu of confiscation.
D
I order confiscation of 'L' shaped 25,500 Nos. of HOPE woven
sacks valued at Rs.1,27,500 under Rule 173Q ofC. Ex. Rules, 1944. I
however, allow the goods t~ be redeemed oofpayment of Rs. I 0,000 -
(Rs. Ten Thousand only)." ·

Appellant directed release of the vehicle from where the goods were E
seized by appropriating the cash security or Rs. I 0,000 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 noticee he was
also cautioned.
F
Under Section 358 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 ~f Excise and
Customs (Board) under Section 35E of the Act to pass certain orders., This G
...
Section, in relevant part, is as under:-

"35E. Powers of Board or Commissioner of Central Excise to pass .
.certain orders.-{ I) The Board may, of its own motioii; call for and

.. examine the record of any proceeding in which a Commissioner of
Central Excise as an adjudicating authority has passed any decision H
94 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.

A 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.

B (2) .........

(3) No order shall be made under sub-section (I) or sub-section (2)
after the expiry of one year from the date of the decision or order of
the adjudicating authority.

c (4) Where in pursuance of an order under sub-section (I) or sub-
sectfon (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 (I) or sub-section (2) to the adjudicating
authority, such application shall be heard by the Appellate Tribunal
D 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 ofthisAct regarding appeals,
including the provisions of sub-section (4) of Sktion 35B shall, so far.
as may be, apply to such application.
E (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. 20195 dated March 20, 1995
against the assessee was correct, legal and proper and whether the appellant
.F ought to have imposed penalty. Accordingly appeal was filed before the
Appellate Tribunal which, it is stated, is still pending.

· Mr. Raju Ramachandran, learned senior advocate, appearing for the
appellant, raised the following points in support of the appeals :-

G I. Adjudication order by the appellant is quasi judicial in nature whereby
he confirmed the confiscation.of the goods and the duty demanded. He did
not t:hoose to impose any penalty in the facts and circumstances of the case.
Merely on that ground he could not be subjected to the disciplinary·
proceedings.
H 2. The undisputed facts which appear from the record are as follows:-
Z. B. NAGARKAR v.U.0.I. (D.P. WADHWA, J.] 95
(a) Admittedly by the said order, the goods in question stood A
confiscated and the duty demand amounting to Rs. 3,57,000
stood confirmed.
(b) The memo of charge read with the imputation of misconduct
• only alleged that the appellant was in error by not having imposed
a penalty but there is no allegation of any corrupt motive or any B
familiarity with the party.
(c) The aforesaid is further buttressed by the fact that the
Department does not want to produce any witness and the list
of documents only pertain to the record of this case.

3. In view of the above, the allegations made in the charge-sheet do C
not show any culpability on the part of the petitioner nor do they amount to
misconduct. That being so, the present charge-sheet is liable to be quashed
.. because on the face of it, no misconduct is disclosed which is a sine qua non
to the maintainability of any charge-sheet. In this context, the appellant relies
upon the analogy underlying Order 7 Rule 11, CPC and Section 482 ofCr.P.C. D
for quashing of FIRs.

4. Even otherwise, as per the decision of this Court in Union of India
and uthers v. K.K. Dhawan, [1993] 2 SCC 56, a charge sheet can only be
issued ifthere is primafacie material. In the present case, there is no material
let alone prima facie material, rendering the charge-sheet void ab initio. E
5. A perusal of the statement of imputations annexed along with the
charge-sheet demonstrates that the case of the respondents is that by having
committed an error of law which was favourable to the party, the appellant
has shown favour. On the face of it, such conduct cannot constitute favour
as required to sustain a charge of a misconduct. In other words, in the F
submission of the appellant committing an error of law does not amount to
showing of favour which is the sine qua non for the maintainability of the
charge-sheet.

6. An error of law, assuming it was committed can only be corrected by
recourse to the Appellate Forum. G
7. Provisions of Rule l 73Q are not mandatory and the discretion vests
with the adjudicating authority whether to impose any penalty or not in the
circumstances of the case. Section I lAC was introduced in the Act by
Finance (No. 2) Act, 1996, w.e.f. September. 28, 1996, under which levy of
penalty is now mandatory. H
96 SUPREME COURT REPORTS [1999] SUPP. l S.C.R.

A In answer to these pleas rah;~d by the appellant Mr. Harish Chandra,
learned senior advocate for the Union of India submitted that there was
sufficient material to proceed against the appellant and that the CAT and the
High Court were right in· not interfering in the disciplinary proceedings at the
very threshold. He said the appellant would have the opportunity to defend
B himself in the proceedings which have been initiated against him. He said
provisions of Rule 173Q are mandatory and that Section l IAC also mandates
levy of penalty. r
I

In the course of the arguments in support of the rivaf contentions we
were referred to various judgments of this Court. Before we examine these
C judgments we may set out the provisions of Rule l 73Q and Section l IAC:-

"173Q. Confiscation and penalty.-{l) If any manufacturer, producer,
registered person of a warehouse or a registered dealer -

(a) removes any excisable goods in contravention of any of the
D provisions of these rules; or

(b) does not account for any excisable goods manufactured, produced
or stored by him; or

(bb) ·········
E (bbb) ........ .

(c) ........ .

(d) contravenes any of the provisions of these rules with intent to
...
evade payment of duty,
F then, all such goods shall be liable to confiscation and the
manufacturer, producer, registered person of a warehouse or a
registered dealer, as the case may be, shall be liable to a penalty not
exceeding three times the value of the excisable goods in respect of
which any contravention of the nature referred to in dause (a) or
G clause (b) or clause (bb) or clause (c) or clause (d) has been committed,
or five thousand rupees, whichever is greater."

"11 AC. Penalty for short-levy or non- levy of duty in certain cases.
- Where any duty of excise has not been levieCI or paid or has been
short-levied or short-paid or erroneously refunded by reasons of
H fraud, collusion or any willful mis-statement or suppression of facts,

'"1
Z. B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.] 97
or contravention of any of the provisions of this Act or of the rules A
made thereunder with intent to evade payment of duty, the person
who is liable to pay duty as determined under sub-section (2) of
section 1 lA, shall also be liable to pay a penalty equal to the duty
so determined:

Provided that where the duty determined to be payable is reduced or B
increased by the Commissioner (Appeals), the Appellate Tribunal or,
as the case may be, the court, then, for the purposes of this section,
the duty as reduced or increased, as the case may be, shall be taken
into account."

Section 37 of the Act empowers the Central Government to make rules C
carrying into effect the purposes of the Ai:t. Sub-section (5) of Section 37 is
relevant, which is as under:-

"(5) Notwithstanding anything contained in sub-section (3), the Central
Government may make rules to provide for the imposition upon any D .
person who acquires possession of, or is in any way concerned in
transporting, removing, depositing, keeping, concealing, selling or
purchasing, or in any other manner deals with, any excisable goods
which he knows or has reason to believe are liable to confiscation
under this Act or the rules made thereunder, a penalty not exceeding
three times the value of such goods or fi:ve thousand rupees, whichever E
is greater."

Reference may now be made to a few decisions cited at the Bar.

In Union of India v. K.K. Dhawan, [1993] 2 SCC 56 respondent was
working as Income Tax Officer. A charge Memorandum was served on him F
that it was proposed to hold an inquiry against him under Pule 14 of the
Central Civil Services (Classification, Control and Appeal) Rules, 1965. In the
statement of article of charge framed against him, it was alleged that he
completed assessment of nine firms in "an irregular manner, in undue haste
and apparently with a view to conferring undue favour upon the assesses G
concerned". An· application' filed by the respondent against the proposed
action was allowed by the Central Administrative Tribunal and it was held
that orders passed by the respondent as Income Tax Officer were quasi
judicial and could not have formed the basis of disciplinary action. Charge
Memorandum was, thus, set aside. The question before this Court was whether
an authority enjoyed immunity from disciplinary proceedings with respect to H
.:.\
I
98 SUPREME COURT REPORTS [1999) SUPP;-I- S.C.R.

" A matters decided by him in exercise of quasi judicial functions. After examining
the early decisions of this Court in V.D. Trivedi v. Union of India, [1993] 2
SCC 55 ; Union of India v. R.K. Desai, [1993] 2 SCC 49; Union of India v.

-
A.N. Saxena, [1992] 3 SCC 124 and also in S. Govinda Menon v. Union of
India, AIR (1967) SC 1274 this Court held as under :

B "Certainly, therefore, the officer who exercises judicial or quasi judicial
powers acts negligently or recklessly or in order to confer undue
favour on a person is not acting as a Judge. Accordingly, the contention
of the respondent has to be rejected. It is important to bear in mind
that in the present case, we are not concerned with the correctness
or legality of the decision of the respondent but the conduct of the
c respondent in discharge of his duties as an officer. The legality of the
orders with reference to the nine assessments may be questioned in
appeal or revision under the Act but we have no doubt in our mind
that the Government is not precluded from taking the disciplinary
'-
action for violation of the Conduct Rules. Thus, we conclude that the
D disciplinary action can be taken in the following cases :
(i) Where the officer had acted in a manner as would reflect on his
reputation for integrity or good faith or devotion to duty;
(ii) ifthere is primafacie material to show recklessness or misconduct
in the discharge of his duty;
E
(iii) ifhe has acted in a manner which is unbecoming of a Government
servant;
(iv) if he had acted negligently or that he omitted the prescribed
conditions which are essential for the exercise of the statutory
F powers;
(v) if he had acted in order to unduly favour a party;
(vi) if he had been actuated by corrupt motive, however, small the
bribe may be because Lord Coke said long ago "though the
bribe may be small yet the fault is great".
G
The instances above catalogued are not exhaustive. However, we
may add that for a mere technical violation or merely because the
order is wrong and the action not falling under the above enumerated
instances, disciplinary action is not warranted. Here, we may utter a
word of caution. Each case will depend upon the facts and no absolute
H rule can be postulated."
Z.B. NAGARKAR v. U.0.1. [D.P. WAD HWA, J.] 99
In Union ofIndia & Ors. v. Upendra Singh, [1994] 3 SCC 357, question A
was again raised if the Central Administrative Tribunal was right in staying
the disciplinary proceedings against the respondent who was served with a
charge-sheet. It was alleged against him that while working as Deputy
Commissioner of Income-Tax, he' gave illegal and improper directions to the
assessing officer to complete the assessments of three firms under Section
143(1) of the Income Tax Act even though at the relevant time proceedings B
under Section l 44A of the Income Tax Act were pending before him and these
cases did not come within the purview of summary assessment scheme of
Amnesty Scheme of the Central Board of Direct Taxes and, therefore,
respondent had violated Rule 3(1Xi), 3(l)(ii) and 3(I)(iii) of the CCS (Conduct)
Rules, 1964. Aggrieved by the . interim order of the Tribunal, Union of India C
came to this Court. Again this Court examined its earlier decisions and said
that the Tribunal or Court can interfere only if on the charges framed (read
with imputation or particulars of the charges, if any) no misconduct or other
irregularity alleged can be said to have been made out or the charges framed
are contrary to any law and that at that stage the Tribunal had no jurisdiction D
to go into the correctness or truth of the charges. Order of the Tribunal was
set aside.

In Dy. Inspector General of Police v. K.S. Swaminathan, [1996] 11 SCC
498 a charge memo imputing misconduct on the part of the respondent, an
Inspector of police, was issued to him. Tamil Nadu Administrative Tribunal E
on an application filed by the respondent set aside the charge memo on the
ground that the charges were vague. On appeal to this Court, it was held that
at the stage of framing of the charge, the statement of facts and the charge
sheet supplied are required to be looked into by the Court or the tribunal as
to the nature of the charges, i.e., whether the statement of facts and material
in support thereof supplied to the delinquent officer would disclose the F
alleged misconduct. This Court ' observed that the tribunal, therefore, was
totally unjustified in going into the charges at that stage.

In MS. Bindra v. Union ofIndia & Ors., [ 1998] 7 SCC 310 the appellant
was served with an order of compulsory retirement. His challenge to this order
did not find favour with the Central Administrative Tribunal. On appeal to this G
Court it was observed that judicial scrutiny of any order imposing premature
compulsory retirement is permissible if the order is rather arbitrary or mala fide
or if it is based on no evidence. Then this Court observed as under :

"While viewing this case from the next angle for judicial scrutiny, i.e.,
want of evidence or material to reach such a conclusion,. we may add H
100 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A that want of any material is almost equivalent to the next situation that
from the available materials, no reasonable man would reach such a
\
conclusion. While evaluating the materials, the authority should not ·
altogether ignore the reputation in which the officer was held till
recently. The maxim "nemo firut repente turpissimus" (no one becomes
dishonest all of a sudden) is not unexceptional but still it is a salutary
B guideline to judge human conduct, particularly in the field of
administrative law. The authorities should not keep their eyes totally
closed towards the overall estimation in which the delinquent officer
was held in the recent past by those who were supervising him earlier.
To dunk an officer into the puddle of "doubtful integrity'', it is not
c enough that the doubt fringes on a mere hunch. That doubt should
be of such a nature as would reasonably and consciously be
entertainable by a reasonable man on the given material. Mere
possibility is hardly sufficient to assume that it would have happened.
There must be preponderance of probability for the reasonable man
to entertain doubt regarding that possibility. Only then there is
D justification to ram an officer with the lable "doubtful integrity".

In Mis. Hindustan Steel Ltd. v. The State ofOrisa, AIR (1970) SC 253'
the authorities under the Orissa Sales Tax Act, 1947 had imposed penalty on
the appellant. One of the question before this Court was whether the Tribunal
E is right in holding that penalties under SectiOn 12(5) of the Act had been
rightly levied and whether in view ofthe serious dispute of the law it cannot
be said that there was sufficient cause for not applying for registration. This
Court then said as under:

"Under the Act penalty may be imposed for failure to register as a
F dealer: Section 9(1) read with Section 25(l)(a) of the Act. But the
liability to pay penalty does not arise merely upon proof of default in
registering as a dealer. An order imposing penalty for failure to carry
out a statutory obligation is the result .of a quasi-criminal proceeding,
and penalty will not ordinarily be imposed unless the party obliged
either acted deliberately in defiance of law or was guilty of conduct
G
contumacious ~r dishonest, or acted in conscious disregard of its
obligation. Penalty will not also be imposed merely because it is lawful
to do so. Whether penalty should be imposed for failure to perform
a statutory obligation is a matter of discretion of the authority to be
exercised judicially and on a consideration of all the relevant
H circumstances. Even if a minimum penalty is prescribed, the authority
Z.B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.] 101
competent to impose the penalty will be justified in refusing to impose A
penalty, when there is a technical or venial breach of the provisions
of the Act or where the breach flows from a bona fide belief that the
offender is not liable to act in the manner prescribed by the statute.
Those in charge of the affairs of the Company in failing to register the
Company as a dealer acted in the hpnest and genuine belief that the B
Company was not a dealer. Granting that they erred, no case for
imposing penalty was made out."

In the case of Madan Mohan Choudhary v. State of Bihar and others,
[1999] 3 SCC 396, this Court set aside the order of compulsory retirement of
the appellant, a member of the Bihar Superior Judicial Service, on the ground C
that there was no material on record to reasonably form an opinion that
compulsory retirement of the officer was in public interest.
'•
We may note some more judgments.

In State of Madhya Pradesh v. Bharat Heavy Electricals, (1998) 99 ELT D
, 33 SC this Court examined the validity of Section 7(5) of the Madhya Pradesh
Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, which provides
for levy of penalty. Earlier the Madhya Pradesh High Court in a writ petition
had held the provisions of the Act were ultra vires and also violative of
Articles 14 and 19 of the Constitution. Sub-section (5) of Section 7 of the Act
relevant for our purpose is as under : E
"7. Registered dealers to issue bill etc. stating that goods sold are
local goods.-

(5) Where a registered dealer referred to in sub-section (I) or sub-
section (2) has, in the course of his business, sold local goods tq F
other registered dealers and has failed to make the statement referred
to in sub-section (l) [ ... ], it shall be presumed that he has facilitated
the evasion of entry tax on the local goods so sold and accordingly
he shall be liable to pay penalty equal to ten times the amount of entry
tax payable on such goods as if they were not goods of local origin."
G
After considering the stand of the State Government that presumption
raised in sub-section (5) of Section 7 was rebuttable and that the said provision
did not provide for a fixed rate of penalty and that the assessing authority
has discretion to impose reasonable amount of penalty, this Court held:

"FrQm the aforesaid it follows that Section 7(5) has to be construed H
102 SUPREME COURT REPORTS [1999] SUPP. l S.C.R.

A t0 mean that the presumption contained. therein is rebuttable and
secondly the penalty of ten times the amount of entry tax stipulated
therein is only the maximum amount which could be levied and the
assessing authority has the discretion to levy lesser amount,
depending upon the facts and circumstances of each case. Construing
Section 7(5) in this manner the decision of the High Court that Section
B 7(5) is ultra vires cannot be sustained."

It will be thus seen that once there was a case of imposition of penalty
only the amount of penalty to be· levied was left to the discretion of the
assessing authority on the facts of the case.

C In Government of Tamil Nadu v. KN. Ramamurthy, [1997] 7 SCC 101
it has been held that failure to exercise quasi judicial power properly amounts
t-0 misconduct. In this case, the respondent working as Deputy Commercial
Tax Officer was served with the following charges:

"(i) That he failed to analyse the facts involved in each and every
D case referred to above;
(ii) that he failed to check the accounts deeply and thoroughly
while making final assessment;

(iii) that he failed to subject the above turnover to tax originally; and

E (iv) that he failed to safeguard government revenue to a huge extent
of Rs.44,850."

These charges were held proved against him and he was imposed with
a punishment of stoppage of increment for three years with cumulative effect.
Against the order of punishment, the respondent approached the Tamil Nadu
F Administrative Tribunal which set aside the disciplinary proceedings against
the respondent. The Tribunal was of the view that the order of assessment
passed by the respondent was in his quasi judicial capacity and there were
hierarchy of authorities under the General Sales Tax Act to correct his order
if it was erroneous. Tribunal held·the disciplinary proceedings initiated against
G the respondent are warranted and set aside the punishment imposed on him.
In appeal by the Government of Tamil Nadu against the judgment of the
Tribunal this Court referred to certain decisions in the cases of Union of India
v. UpendraSingh, [1994] 3 SCC 357; Unionofindiav.A.N. Saxena, [1992]
3 SCC 124 and Union of India v. K.K. Dhawan, [1993] 2 SCC 56. In the case
of Upendra Singh, this Court had ruled that the Tribunal had no jurisdiction
H to go into the correctness of truth of the charges and the l;ribunal cannot
Z.B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.] 103
take over the functions of the disciplinary authority. This Court had also A
observed that the function of the court/Tribunal is one of judicial review, the
parameters of which are repeatedly laid down by this Court. A Tribunal or
court can interfere only if the charge (read with imputation or particulars of
the charge, if any) no misconduct or other irregularity alleged can be said to
have been made out or the charge framed is contrary to any law. This Court
said that the finding accepted by the disciplinary authority was to the effect B
that by the act of negligence in making the assessment the delinquent caused
loss to the government exchequer to the extent of Rs. 44,850 and that that
finding of the disciplinary authority was not open to challenge on the facts
of the case.

In State of Punjab and Ors. v. Ram Singh Ex-Constable, [ 1992] 4 SCC
c
54 this Court, referred to the definition of 'misconduct' as given in Black's
Law Dictionary and Aiyar's Law Lexicon and said as under:-

"Thus it could be seen that the word 'misconduct' though not capable
of precise definition, on reflection receives its connotation from the D
context, the delinquency in its performance and its effect on the
discipline and the nature of the duty. It may involve moral turpitude,
it must be improper or wrong behaviour; unlawful behaviour, willful
in character; forbidden act, a transgression of established and definite
rule of action or code of conduct but not mere error of judgment,
carelessness or negligence in performance of the duty; the act E
complained of bears forbidden quality or character. Its ambit has to
be construed with reference to the subject matter and the context
wherein the term occurs, regard being had to the scope of the statute
and the public purpose it seeks to serve."

Keeping in view the provisions of law and guidelines led by various F
judgments of this Court, we may now refer to the Article of Charge given to
the appellant. It reads as under :

"Shri Z.B. Nagarkar while working as Collector, Central Excise, Nagpur
(now redesignated as Commissioner of Central Excise) has passed an G
Order-in-Original No.20/95 dated 20.03.95 in which he had favoured
Mis. Hari Vishnu Packaging Ltd., Nagpur by not imposing any penalty
on the said party even though he had held that Mis. Hari Vishnu
Packaging Ltd. had clandestinely manufactured and cleared the
excisable goods and evaded the excise duty wilfully. Shri Nagarkar has
thus failed to maintain absolute integrity and devotion to duty and H
104 SUPREME COURT REPORTS [1999) SUPP. I S.C.R.

A acted in a manner unbecoming of a Govt. Servant and contravened
Rule 3{l)(i) and (ii) and (iii) of the CCS (Conduct) Rules, 1964."

Statement of imputations of misconduct or misbehavioµr in support of.
the article of charge briefly refers to the show cause notice issued to HVPL
- the assessee - by the appellant and his Orders-in- Original as adjudicating
B authority under the Act. Reference has also been made to the explanation
submitted by the appellant when he was asked to explain as to why he did
not think it necessary to impose a penalty on HVPL - the assessee. In
rejecting the explanation of the appellant, the statement of imputations of
misconduct concludes :
c "The judgments quoted by Shri Nagarkar do not appear to be relevant
to the case of Mis. HVPL as these judgments refer to those cases
where there are technical lapses/violations of the law; whereas in the
instant case, Shri Nagarkar himself had reached the conclusion that
Mis. HVPL had clandestinely cleared the goods with an intention to
D evade payment of duty. He had also held that Mis. Delite plastics
Industries had actively supported Mis. HVPL to evade the duty. It
was based on the findings that he had ordered confiscation of the
goods and confirmed the duty. Therefore, when the goods were
confiscated and duty was confirmed, appropriate penalty should have
been imposed by Shri Nagarkar on Mis. HVPL. The above action of
E Shri Na,garkar amounts to unjustified favour shown by him to Mis.
HVPL."

·Two principal issues arise for our consideration: (1) if levy of penalty
under Rule I 73Q was obligatory and (2) was there enough background material
for the Central Government to form a prima facie opinion to proceed against
F the officer on the charge of misconduct on his failure to levy penalty under
Rule I 73Q. Appellant has contended that it is only now after insertion of
Section l lAC in the Act that levy of penalty has become mandatory and that
it was not so under Rule I 73Q. This contention does not appear to be correct.
In both Rule l 73Q and Section 11 AC the language is somewhat similar. Under
G Rule 173Q "such goods shall be liable to confiscation" and the person
concerned "shall be liable to penalty" not exceeding three times the value of
excisable goods or five thousand rupees whichever is greater. Under Section
1 IAC the person, who is liable to pay duty on the excisable goods as~
determined "shall also be liable to pay penalty equal to the duty so determined".
What is the significance of the word "liable" used both in Rule l 73Q and
H Section l IAC? Under Rule 173Q apart from confiscation of the goods the
Z.B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.) 105

... person concerned is liable to penalty. Under Section l lAC the word "also" A.
has been used but that does not appear to be quite material in interpreting
the word "liable" and if liability to pay penalty has to be fixed by the
adjudicating authority. The word "liable" in the Concise Oxford Dictionary
means, "legally bound, subject to a tax or penalty, under an obligation". In
Black's Law Dictionary (sixth edition), the word "liable' means, "bound or
obliged in law or equity; responsible; chargeable; answerable; compellable to B
make satisfaction, compensation, or restitution .... Obligated; accountable for
or chargeable with. Condition of being bound to respond because a wrong
has occurred. Condition out of which a legal liability might arise .... Justly or
legally responsible or answerable".

When we examine Rule l 73Q it does appear to us that apart from the
c
offending goods which are liable to confiscation the person concerned with
that shall be liable to penalty upto the amount specified in the Rule. It is
difficult to accept the argument of the appellant that levy of penalty is
discretionary. It is only the amount of penalty which is discretionary. Both
things are necessary: (I) goods are liable to confiscation and (2) person D
concerned is liable to penalty. We may contrast the provisions of Rule l 73Q
and Section l lAC with Section 271 of the Income-tax Act, 1961. This Section,
prior to amendment in I 988, stood as under :

"Failure to furnish returns, comply with notices, concealment of
income, etc. 271. (I) If the Income Tax Officer or the Appellate E
Assistant Commissioner or the Commissioner (Appeals) in the course

- of any proceedings under this Act is satisfied that any person -
(a) has failed to furnish the return of total income which he was
required to furnish under sub-section (I) of Section 139 or by
notice given under sub-section (2) of section 139 or section 148 F
or has failed to furnish it within the time allowed and in the
manner required by sub-section (I) of section 139 or by such
notice as the case may be, or
(b) has without reasonable cause failed to comply with a notice
under sub- section (1) of section 142 or sub-section (2) of G
section 143 or fails to comply with a direction issued under sub-
section (2A) of section 142, or
(c) has concealed the particulars of his income or deliberately
furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty- H
106 SUPREME COURT REPORTS [1999) SUPP. I S.C.R.

A (i) in the cases referred to in clause (a),-

(a) in the case of a person referred to in sub-section (4A) of section
139, where the total income in respect of which he is assessable
as a representative assessee does not exceed the maximum amount
which is not chargeable to income~tax, a sum not exceeding one
B per cent of the total income computed under this Act without
giving effect to the provisions of sections 11 and 12 for each
year or part thereof during which the default continued;

(b) in any· other case, in addition to the amount of the tax, if any,
payable by him, a sum equal to two per cent of the assessed tax
c for every month during which the default continued.

Explanation.- In this clause "assessed tax" means tax as reduced by
the sum, if any, deducted at source under Chapter XVII-B or paid in
advance un.der Chap~er XVII-C;

D (ii) in the cases referred to in clause (b), in addition to any tax
payable by him, a sum which shall not be less than ten per cent
but which shall not exceed fifty per cent of the amount of the
tax, if any, which would have been avoided ifthe income returned
by such person had been accepted as the correct income;
E (iii) in the cases referred to in clause (c), in addition to any tax
payable by him, a sum which shall not be less than, but which
shall not exceed twice, the amount of tax sought to be evaded
by reason of the concealment of particulars of his income or the
furnishing of inaccurate particulars of such income : ... "

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
G circumstances of each case has to be imposed subject to the maximum limit
mJtioned in the section.

Now when show-cause notice was issued to the assessee he was also ·
asked to show cause as to why penalty be not imposed upon him. The stand
of the Union of India before us, as stated in the counter affidavit, is : "It was
H observed that the petitioner in his capacity as adjudicating authority came to
Z.B. NAGARKAR v.U.O.l. [D.P. WADHWA, J.J 107
the conclusion that the party Mis. HVPL had clandestinely cleared the goods A
with an intention to evade the payment of duty. He also ordered for the
confiscation of the goods and confirmed the duty. In these circumstances, he

.. would have imposed appropriate penalty on the party. It was under these
circumstances, that the impugned charge memo was issued." And further it
appeared "that the discretion in this regard did not appear to have been
exercised clearly and reasonably". It is not that non-levy of penalty by the B
appellant in his adjudication order was mere omission. Order is silent as to
why he did not think it fit to impose any penalty on the assessee. In the case
of the transporter who was also proceeded against the appellant did not
impose any penalty as he said he (transporter) being the owner of a public
vehicle. The transporter was merely cautioned "not to repeat such an act, as C
the same would be viewed seriously in future". The third noticee was also
cautioned. Rather non-levy of penalty by the appellant on the assessee was
intentional as he himself in his explanation dated November 18, 1996 said:
(1) On going through the records of the case he was aware that there was
no conclusive evidence against the assessee and the material evidence on
record was not sufficient to sustain the charges levelled against the party. (2) I)
He took a pro-revenue stance in this case although there was perhaps a case,
at least an arguable one, in their favour and his conclusion regarding mens
rea on the part of the assessee was also based purely on circumstantial
evidence; and that it was a weak case for the department which he could
uphold only on placing a little extra reliance on evidence on record. (3) It E
would have been unfair to impose penalty on the assessee since the penal
provisions should be invoked only in cases where the adjudicator is fully
convinced with the material and there is direct evidence substantiating the
guilt of the notice and this view was fully supported by the judgments of the
High Court, some High Courts and the Tribunal. (4) He had a nagging feeling
that had he imposed any penalty on the assessee, they would have gone on F
appeal before the Appellant Tribunal and the department would have not only
lost the case in terms of penal action but probably the confirmation of the
duty demanded could have been jeopardized.

The question is : If such a stance by the appellant was to "favour" the G
assessee or the officer was rightly of the view that it was not a case of levy
_ of penalty. It is a quasi judicial order. Merely because penalty imposable has
·- not been imposed, which was obligatory for the officer to impose, could it be
said that if it is a case of misconduct and he is liable to be proceeded against?
The officer did impose the excise duty and also ordered confiscation of the
goods. What is the evidence before the authority to come to prima facie view H
108 SUPREME COURT REPORTS [1999] SUPP. l S.C.R.

A of levying charge of misconduct on the officer? H.;: was served with the
memorandum dated September 2, 1997. It was accompanied with annexure I
(Article of charge), annexure II (State!nent of Imputations of misconduct or
misbehaviour in support of th¢ Article of Charge), annexure III (List of
documents) and annexure IV (List of witnesses). Article of charge we have
B reproduced above. Statement of Imputations of misconduct or misbehaviour
referred to the Order in O~iginal passed by the officer and his explanation as
to why he did not think it fit to impose penalty. List of. documents mentions
only three documents, namely, Order-in- original, (2) order of the Board under
Section 129 of the Act for filing appeal and (3) explanation dated November
18, 1996 of the officer. l)here is no witness mentioned in the list of witnesses.
C So the Order in OriginaJ, the explanation of the officer and the direction of
the Board for filing appeal are the basis for the charge of misconduct or

-
misbehaviour.

Penalty to be imposed has to be in commensurate with the gravity of
the offence and the extent of the evasion. In the present case, penalty could
D have been justified. Appellant was, however, of the view that imposition of
penalty was not mandatory. He could have formed such a view. Under Section
325 Indian Penal Code, a person found guilty "shall be punished with
imprisonment of either description for a term which may extend to seven
years, and shall also be liable to fine". Section 63 IPC provides that where
E no sum is expressed to which a fine may extend, the amount of fine to which
the offender is liable is unlimited, but shall not be excessive. A single Judge
of the Patna High Court in Tetar Gope v. Ganauri Gope, AIR (1968) Patna
287 took the view that expression "shall also liable to fine" in Section 325 IPC
does not mean that a sentence of fine must be imposed in every case of
conviction in that section. He said :
F
"Such an expression has been used in the Penal Code only in
connection with those offences where the legislature has provided
that a sentence of imprisonment is compulsory. In regard to such
offences, the legislature has left. a discretion in the Court to impose
also a sentence of fine in appropriate cases in addition to the imposition
G
of a sentence of imprisonment which alone is obligatory."

We do not think that the view expressed by the Patna High Court is."
correct as it would appear from the language of the section that sentences
of both imprisonment and fine are imperative. It is the extent of fine which
H has been left to the discretion of the court. In Rajasthan Pharmaceuticals
Z.B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.] 109

- Laboratory, Bangalore & Ors. v. State of Karnataka, [1981] l SCC 645 this
Court has taken the view that imprisonment and fine both are imperative when
the expression "shall also be liable to fine" was used under Section 34 of the
A

- Drug and Cosmetics Act, 1940. In that case, this Court was considering
Section 27 of the Drugs and Cosmetics Act, 1940, which enumerates the
penalties for illegal manufacture, sale, etc., of drugs and is as under -

"Whoever himself or by any other person on his behalf manufacture -
B

for sale, sells, stocks or exhibits for sale or distributes -

(a) any drug -

(i) .....
c
(ii) without a valid licence as required under clause (c) of Section 18,

shall be punishable with imprisonment for a term which shall not be
less than one year but which may extend to ten years and shall also
be liable to fine :
D
Provided that the court may, for any special reasons to be recorded
in writing, impose a sentence of imprisonment of less than one year: ...."

This Court said that the High Court imposed a fine of two thousand
-- rupees on each of the three appellants for the offence under Section 18(c) of
the Act when Section 27(a)(ii) makes a sentence of imprisonment of not less E
than one year compulsory for such offence in addition to fine unless for
special reasons a sentence of imprisonment for lesser period was warranted.
It would, thus appear that this Court was of the opinion that in such a case
the imprisonment and fine both are imperative.

When we talk of negligence in a quasi judicial adjudication, it is not F
negligence perceived as carelessness inadvertance or omission but as culpable
negligence. This is how this court in State of Punjab & Ors. v. Ram Singh
Ex-Constable, [1992] 4 SCC 54 interpreted 'misconduct' not coming within the
purview of mere error in judgment, careless11ess or negligence in performance
of the duty. In the case of K.K. Dhawan [1993] 2 sec 56, the allegation was G
of conferring undue favour upon the assessees. It was not a case of negligence
as such. In Upendra Singh's, case [1994] 3 SCC 357, the charge was that he
gave illegal and improper directions to the assessing officer in order to unduly
favour the assessee. Case of K.S. Swaminathan, [ 1996] 11 SCC 498, was not
where the respondent was acting in any quasi judicial capacity. This Court
said that at the stage of framing of the charge the statement of facts and the H
110 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A charge-sheet supplied are required to be looked into by the Court to see
whether they support the charge of the alleged misconduct. In MS. Bindra 's
case [1998] 7 SCC 310) where the appellant was compulsorily retired this Court

B
said that judicial scrutiny of an order imposing premature compulsory retirement
is permissible if the order is arbitrary or mala fide or based on no .evidence.
Again in the case of Madan Mohan Choudhary [1999] 3 SCC 396, which was
also a case of compulsory retirement this Court said that there should exist
-
material on record to reasonably form an opinion that compulsory retirement
of the officer was in public interest. In K.N. Ramamurthy's, case [1997] 7 SCC
IO l, it was certainly a case of culpable negligence. One of the charges was
that the officer had failed to safeguard Government revenue. In Hindustan
C Steel Ltd's, case AIR (1970) SC 253, it was said that where proceedings are
quasi judicial penalty will not ordinarily be imposed unless the party charged

-
had acted deliberately in defiance of law or was guilty of conduct contumacious
or dishonest or acted in conscious disregard of its obligation. This Court has
said that the penalty will not also be imposed merely because it is lawful so
to do. In the present case, it is not that the appellant did not impose penalty
D because of any negligence on his part but he said it was not a case of
imposition of penalty. We are, however, of the view that in a case like this
which was being adjudicated upon by the appellant imposition of penalty was
imperative. But then, there is nothing wrong or improper on the part of the
appellant to form an opinion that imposition of penalty was not mandatory.
E We have noticed that Patna High Court while interpreting Section 325 IPC
held that imposition of penalty was not mandatory which again we have said
is not a correct view to take. A wrong interpretation of law cannot be a
ground for misconduct. Of course it is a different matter altogether if it is
deliberate and actuated by mala tides.
-
F When penalty is not levied, the assessee certainly benefits. But it
cannot be said that by not levying the penalty the officer has favoured the
assessee or shown undue favour to him. There has to be some basis for the
disciplinary authority to reach such a conclusion even prima facie. Record
in the present case does not show if the disciplinary authority had any
G information within its possession from where it could form an opinion that the
appellant showed 'favour' to the assessee by not imposing the penalty. He
may have wrongly exercised his jurisdiction. But that wrong can be corrected
in appeal. That cannot always form basis for initiating disciplinary proceedings
for an officer while he is acting as quasi judicial authority. It must be kept in
mind that being a quasi judicial authority, he, is always subject to judicial
H supervision in appeal.
Z.B. NAGARKAR v.U.0.1. [D.P. WADHWA, J.) 111
Initiation of disciplinary proceedings against an officer cannot take A
·place on an information which is vague or indefinite. Suspicion has no role
to play in such matter. There must exist reasonable basis for the disciplinary
authority to proceed against the delinquent officer. Merely because penalty
was not imposed and the Board in the exercise of its power directed filing of
appeal against that order in the Appellate Tribunal could not be enough to B
proceed against the appellant. There is no other instance to show that in
similar case the appellant invariably imposed penalty.

If, every error of Jaw were to constitute a charge of misconduct, it would
impinge upon the independent functioning of quasi judicial officers like the
appellant. Since in sum and substance misconduct is sought to be inferred C
by the appellant having committed an error of law, the charge-sheet on the
face of it does not proceed on any legal premise rendering it liable to be
quashed. In other words, to maintain any charge-sheet against a quasi judicial
authority something more has to be alleged than a mere mistake of Jaw, e.g.,
in the nature of some extraneous consideration influencing the quasi judicial
order. Since nothing of the sort is alleged herein the impugned charge-sheet D
is rendered illegal. The charge- sheet, if sustained, will thus impinge upon the
confidence and independent functioning of a quasi judicial authority. The
entire system of administrative adjudication whereunder quasi judicial powers
are conferred on administrative authorities, would fall into disrepute if officers
performing such functions are inhibited in performing their functions without E
fear or favour because of the constant threat of disciplinary proceedings.

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.
F
Before concluding, there are two aspects of the matter which we wish
to point out. These are :

I. 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 G
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 H
112 SUPREME COURT REPORTS (1999] SUPP. l S.C.R.

A 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 the post of Collector is fit enough to impart
training to the probationers entering the service. Best talent
B should be sent to the academy to teach the probationers. Posting
to the academy should be considered as an honour .. aild not
punishment. Our comment is no reflection on the appellant herein
as we have set aside the initiation of disciplinary proceedings
against him.
c With these observations, the appeal is allowed with costs. The Order
of the Central Administrative Tribunal dated August 12, 1998 and the impugned
judgment dated September 7, 1998 of the High Court are set aside. Article of
Charge issued against the appellant is quashed.

K.K.T. Appeal allo.wed.