Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
SUPERINTENDENT (TECH. I) CENTRAL EXCISE I.D.D.JABALPUR AND
Vs.
RESPONDENT:
PRATAP RAI
DATE OF JUDGMENT26/04/1978
BENCH:
FAZALALI, SYED MURTAZA
BENCH:
FAZALALI, SYED MURTAZA
SINGH, JASWANT
PATHAK, R.S.
CITATION:
1978 AIR 1244 1978 SCR (3) 729
1978 SCC (3) 113
CITATOR INFO :
R 1981 SC 858 (4)
ACT:
Natural Justice, Principles of-When an order is struck down
by the appellate authority being in violation of the
principles of natural justice, there is no final decision
and fresh proceedings can be taken-Interpretation of the
Appellate Collector’s orders-Words and Phrases-Meaning of
"without prejudice" Customs Act, Section 122 and 128.
HEADNOTE:
Twenty-three watches on which no custom duty was paid were
seized from the respondent by the Customs Authorities and in
the adjudication proceedings under section 122 of the
Customs Act, the Assistant Collector of Customs ordered that
the watches which were seized be confiscated and imposed a
penalty of Rs. 250/- on the respondent under Section 112 of
the Act. In appeal, the Appellate Collector by his order
dated 22-2-1972 vacated "without prejudice" the order of the
Assistant Collector mainly on the ground that the Assistant
Collector had not complied with the rules of natural
justice. The department interpreted the order as an implied
order of remand and issued a fresh notice to the respondent
on 27-7-1972 and started fresh adjudication proceedings.
Thereafter, the respondent filed in the High Court of Madhya
Pradesh, a writ petition which was allowed. The notice and
the fresh adjudication proceedings were quashed.
Allowing the appeal by special leave, the Court
HELD : 1. Where an order passed in appeal vacates the order
of the first tribunal on purely technical grounds and
expressly states that it was being passed without prejudice
which means an order not on the merits of the case, such an
order does not debar fresh adjudicatory proceedings which
may be justified under the law. It is necessary for the
court interpreting an order of this kind to give full and
complete effect to the exact words used by the authorities
and not to draw a sweeping conclusion merely from the fact
that no explicit direction has been made by the appellate
authority. [735 C-D]
2. (a) Whenever an order is struck down as invalid being
in violation of the principles of natural justice there is
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
no final decision of the cause and fresh proceedings are
left open. All that is done. is that the order assailed by
virtue of its inherent defect is vacated but the proceedings
are not terminated.
[732 C]
(b) In the instant case
A perusal of the order of the Appellate Authority clearly
shows two important facts : (1) that the Appellant Collector
has not set aside or vacated the order of the Assistant
Collector on merits but has vacated it only on a technical
infirmity, namely, the violation of the rules of natural
justice and that is why the Appellate Collector has
advisedly used the words "without prejudice" in his order,
(2) that the Assistant Collector in his order dated 30th
June. 1969 had directed confiscation of the watches and
imposed a penalty of Rs. 250/- and if the Appellate
Collector intended to set aside this order completely and
irrevocably then he should have passed a consequential order
for refund of the amount of the penalty and release of the
property confiscated. The fact that no such order was
passed by the Appellate Collector clearly shows that he
never intended to bar fresh adjudicatory proceedings
provided they were conducted according to the principles of
natural justice. [731 A, 732 A-C]
(ii) The Appellate Collector found that the order of the
Assistant Collector suffered from a serious procedural
infirmity, viz., that it was passed without
12-315SCI/78
730
giving the respondent a proper opportunity of being heard,
and therefore, it cannot be said that fresh proceedings by
complying with the rules of natural justice could not be
started against the respondent. The Appellate Collector has
clearly used the words "without prejudice" which also
indicate that the order of the Collector was not final and
irrevocable. [732 G-H, 733 A]
M/s Thimmasamudram Tobacco Co. v. Assistant Collector of
Central Excise, Nellore Dt. Nellore, A.I.R. 1961 A.P. 324
approved.
3. (a) The implication of the term "without prejudice"
means (1) that the cause or the matter has not been decided
on merits, (2) that fresh proceedings according to law were
not barred. It is true that the Appellate Collector does
not say in so many words that the case is remanded to the
Assistant Collector but the tenor and the spirit of the
order clearly shows that what he intended was that fresh
proceedings should be started against the respondent after
complying with the rules of natural justice. [733E-F]
(b) A true interpretation of the order of the Appellate
Collector would be that the order of the Assistant Collector
was a nullity having violated the rules of natural justice
and having been vacated the parties would be relegated to
the position which they occupied before the order of the
Assistant Collector was passed. In this view of the matter
the Assistant Collector had ample jurisdiction in issuing
the notice against the respondent in order to start fresh
adjudicatory proceedings in accordance with law. [733F-G]
Collector of Central Excise, Madras v. K. Pulappa Nadar,
A.I.R. 1964 Mad. III and The Marsden Spg. and Co. Ltd. v.
Shri L. V. Pol. Superintendent of Central Excise (Tax),
I.L.R. 1965 Guj. III criticised, discussed and distin-
guished.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 363 of 1978.
Appeal by Special Leave from the Judgment and Order dated
the 29th November 1976 of the Madhya Pradesh High Court in
M.P. No. 32 of 1973.
E.C. Agarwala and Girish Chandra for the Appellant.
Naunit Lal and Kailash Vasdev for Respondent.
The Judgment of the Court was delivered by
FAZAL ALI, J.-This appeal by special leave is directed
against the judgment of the Madhya Pradesh High Court dated
19th November 1976 by which the High Court quashed the
notice dated 27th July 1972 issued by the Assistant
Collector of Customs and also quashed fresh adjudication
proceedings started by him under the provisions of the
Customs Act (hereinafter referred to as the Act).
The appeal lies within a very narrow compass and turns upon
the interpretation of the order passed by the appellate
authority under section 128 of the Act. On 27th February
1969 the respondent Pratap Rai was detrained at Jabalpur by
the Customs authorities while he was travelling by the
Bombay Janta Express. On being searched as many as 23 wrist
watches on which no custom duty was paid were recovered from
his person. Thereafter adjudication proceedings under
section 122 of the Act were commenced by the Assistant Col-
lector of Customs which culminated in the order of the
Assistant
731
Collector dated 30th June, 1969 by which the watches were
seized and ordered to be confiscated. A penalty of Rs.
250/- was levied on the respondent under section 112 of the
Act. The respondent then carried an appeal to the Appellate
Collector under section 128 of the Act against the order of
the Assistant Collector. The Appellate Collector by his
order dated 22nd February 1972 vacated the order of the
Assistant Collector mainly on the ground that the Assistant
Collector had not complied with the rules of natural
justice. The fate of this case depends on the interpretation
of the order passed by the Appellate Collector.
In order to appreciate the point in issue it may be
necessary to ,extract the relevant portion of the order of
the Appellate Collector which runs thus :-
"The adjudication, therefore, suffers for lack
of principle of natural justice, inasmuch as
adequate opportunities were not given to the
appellant to defend his case. 1, therefore,
without prejudice, vacate the order of the
adjudication passed by the Assistant
Collector, Central Excice, Jabalpur."
(Emphasis, supplied).
The department appears to have interpreted the aforesaid
order as an implied cider of remand and issued a fresh
notice to the respondent on the 27th July, 1972 and started
fresh adjudication proceeding according to the implied
direction of the Appellate Collector. Thereafter the
respondent filed a writ petition in the High Court of Madhya
Pradesh assailing the notice and praying that the
proceedings started by the Assistant Collector even after
the vacation of the order by the Appellate Collector be
quashed. The plea taken by the respondent appears to have
found favour with the High Court which allowed the petition,
quashed the notice as also the fresh adjudication
proceedings. The appellant obtained special leave of this
Court against the order of the High Court and hence this
appeal before us.
The only point that was contended before us by Mr. E. C.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
Agrawala appearing in support of the appeal was that the
High ’Court has erred in not properly interpreting the order
of the Appellate Collector. According to the learned
counsel, a true and plain interpretation. of the order of
the Appellate Collector would clearly reveal that he had
merely vacated the order of the Assistant Collector because
it suffered from a technical infirmity and had not barred
the commencement of fresh adjudicatory proceedings. Mr.
Naunit Lal appearing for the respondent however submitted
that there was no clear direction in the order of the
Appellate Collector from which it could be inferred that he
had remanded the case, and, therefore, there was no
jurisdiction in the Assistant Collector to issue a fresh
notice or start adjudicatory proceedings against the
respondent. In our opinion, the contention of counsel for-
the appellants appears to be sound and must prevail. A
perusal of the order of the Appellate Collector extracted
above clearly shows two important facts : (1) that the
Appellate Collector has not set aside or vacated the order
732
of the Assistant Collector on merits but has vacated it only
on a technical infirmity, namely, the violation of the rules
of_natural justice and that is why the Appellate Collector
has advised used the words "without prejudice" in his order,
(2) that the Assistant Collector in his order dated 30th
June 1969 had directed confiscation of the watches and
imposed a penalty of Rs. 250/- and if the Appellate
Collector intended to set aside this order completely and
irrevocably then he should have passed a consequential order
for refund of the amount of the penalty and release of the
property confiscated. The fact that no such order was
passed by the Appellate Collector clearly shows that he
never intended to bar fresh adjudicatory proceedings
provided they were conducted according to the principles of
natural justice. It seems to us that whenever an order is
struck down as invalid being in violation of the principles
of natural justice there is no final decision of the cause
and fresh proceedings are left open. AR that is done is
that the order assailed by virtue of its inherent defect is
vacated but the proceedings are not terminated.
In the case of M/s. Thimmasamudram Tobacco Co. v. Assistant
Collector of Central Excise, Nellore Dt. Nellore(2) while
construing the provisions of the Central Excise and Salt Act
which was almost on identical terms as the Customs Act a
Division Bench of the Andhra Pradesh High Court observed as
follows :
"Assuming that section 35 of the Central
Excise Act does not clothe the appellate
authority with power to remand the matter to
the officer whose orders is appealed against
nothing stands in the way of the Assistant
Collector initiating the proceedings afresh,
when his order was quashed not on merits but
on technical grounds, i.e. for not following
either the procedure or the dictates of
natural justice. In a case where the flaw in
the order appealed against consists of in the
non-observance of certain procedure or in not
giving effect to the maxim ’audi alteram
partem’, it is open to the officer concerned
to start the procedure once against with a
view to follow the rules of procedure and the
principles of natural justice".
We find ourselves in complete agreement with the view taken
by the Andhra Pradesh High Court and the observations made
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
by Reddy, C.J. who spoke for the Court. It is obvious that
in the instant case the Appellate Collector found that the
order of the Assistant Collector suffered from a serious
procedural infirmity, viz., that it was passed without
giving the respondent a proper opportunity of being heard,
and, therefore, had to be vacated, In such circumstances,
therefore, it cannot be said that fresh proceedings by
complying with the rules of natural justice could not be
started against the respondent. The Appellate Collector has
clearly used the words "without
(1) A.I.R. 1961 A p. 324
733
prejudice " which also indicate that the order of the
Collector was not final and irrevocable. The term ’without
prejudice has been defined in Black’s Law Dictionary as
follows :
"Where an offer or admission is made ’without
prejudice’, or a motion is denied or a bill in
equity dismissed ’without prejudice’, it is
meant as a declaration that no rights or
privileges of the party concerned are to be
considered as thereby waived or lost, except
in so far as may be expressly conceded or
decided. See.. also, Dismissal without
Prejudice".
Similarly, in Wharton’s Law Lexicon the author while
interpreting the term ’without prejudice’ observed as
follows
"The words import an understanding that if the
negotiation fails, nothing that has passed
shall be taken advantage of thereafter; so, if
a defendant offer, ’without prejudice’, to pay
half the claim, the plaintiff must not only
rely on the offer as an admission of his
having a right to some payment.
’The rule is that nothing written or said
’without prejudice’ can be considered at the
trial without the consent of both parties-not
even by a judge in determining whether or not
there is good cause for depriving a successful
litigant of costs .... The word is also
frequently used without the foregoing
implications in statutes and inter parties to
exclude or save transactions, acts and rights
from the consequences of a stated proposition
and so as to mean not affection’, ’saving’ or
’excepting"’.
In short, therefore, the implication of ,he term ’without,
prejudice’ means (1) that the cause or the matter has not
been decided on merits, (2) that fresh proceedings according
to law were not barred. It is true that the Appellate
Collector does not say in so many words that the case is
remanded to the Assistant Collector but the tenor and the
spirit of the order clearly shows that what he intended was
that fresh proceedings should be started against the
respondent after complying with the rules of natural
justice. Thus, in our view a true interpretation of the
order of the Appellate Collector would be that the order of
the Assistant Collector was a nullity having violated the
rules of natural justice and having been vacated the parties
would be relegated to the position which they occupied
before the ,order of the Assistant Collector was passed. In
this view of the matter the Assistant Collector had ample
jurisdiction in issuing the notice against the respondent
in order to start fresh adjudicatory proceedings in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
accordance with law.
The High Court however strongly relied on two decisions,
namely, the decision of the Madras High Court in the case of
The Collector of Central Excise, Madras v. K. Palappa
Nadar(1) and
(1) A.I.R. 1964 Mad. 111.
734
of the Gujarat High Court in the case of The Marsden Spg.
and Co. Ltd. v. Shri L. V. Pol, Superintendent of Central
Excise (Tax)
In the Madras case (supra) the order impugned ran as follows
"Having regard to all the circumstances of the
case, the Central Board of Revenue hereby
directs, without prejudice to the merits of
the case, [italics (here in ’) ours] the order
dated 3rd March, 1956 passed by the Collector
of Central Excise, Madras shall be vacated".
The High Court while interpreting the order
observed as follows
"After careful consideration of the arguments
of the learned Advocate General for the
appellant and also of the respondent, we are
of the opinion that, in the absence of any
specific words in the order of the Central
Board of Revenue, it is not possible to spell
out from its terms a precise direction for a
de novo enquiry, giving jurisdiction to the
Collector, for that purpose".
In our opinion, the interpretation put by the Madras High
Court does not appear to be correct and is too narrow and
does not carry out the object of the Act. The Central Board
of Revenue had merely vacated the order without prejudice to
the merits of the case which clearly meant that the merits
were not decided by it. Secondly, the order impugned in the
Madras case (supra) does not indicate the ground on which
the order was vacated whereas in the instant case the
Appellate Collector has expressly stated that the order was
vacated because it violated the rules of natural justice.
The reason given by the Appellate Collector in the instant
case makes all the difference. In these circumstances,
therefore, the Madras case {supra) being clearly
distinguishable as indicated above, we are of the opinion
that the view taken by the Madras High Court is of no
assistance to the respondent,’
The case of The Marsden Spg. & Co. Ltd. (supra) is also
clearly distinguishable. In that case the impugned, order
was extracted thus :-
" Having regard to all the facts of the case
and taking into account the contentions put
forth by the appellants, I hereby order that
the decision of the Superintendent Central
Excise (Tax), Ahmedabad, shall be set aside.
2. The amounts of excise duty and penalty
recovered from the appellants in pursuance
thereof shall be refunded to them".
Construing this order the High Court observed
as follows
"If the appellate order merely annulled the
original order without containing any other
directions, there was no power in the
original tribunal to initiate de novo
proceedings and impose a fresh penalty."
(1) I.L.R. [1965] Guj. 111.
735
It appears that the Gujarat High Court practically adopted
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
the reasonings of the Madras High Court in the case
mentioned above but the order impugned in the Gujarat case
was clear and explicit and was final and irrevocable. The
order clearly shows that it was passed on the merits of the
case after taking into account the contentions put forth by
the appellant. Secondly, the consequential order, viz.,
that the amount of excise duty and penalty recovered from
the appellants was to be refunded to them which clearly
indicated that there was no question of any fresh
proceedings being initiated. On the other hand, in the
instant case such a consequential order is wholly wanting in
the judgment of the Appellate Collector. For these reasons,
therefore, the Gujarat case is clearly distinguishable
because the order in that case was couched in terms very
different from the one we have in the instant case. Thus,
on a careful consideration of the facts and circumstances of
the present case we are clearly of the opinion that where an
order passed in appeal vacates the order of the first
tribunal on purely technical grounds and expressly states
that it was being passed without prejudice which means an
order not on the merits of the case, such as order does not
debar fresh adjudicatory proceedings which may be justified
under the law. It is necessary for the court interpreting
an order of this kind to give full and complete effect to
the exact words used by the authorities and not to draw a
sweeping conclusion merely from the fact that no explicit
direction has been made by the appellate authority. We are
unable to agree in this case with the High Court that as no
express words were used in the order of the Appellate
Collector remanding the case the Assistant Collector was not
justified in commencing fresh adjudicatory proceedings
against the respondent.
For these reasons, therefore, we allow the appeal, set aside
the order of the High Court and dismiss the writ petition
filed by the respondent in the High Court and restore the
fresh adjudicatory proceedings started by the Assistant
Collector by virtue of the notice dated 27-7-1972. In the
peculiar circumstances of this case we make no order as to
costs.
S. R. Appeal allowed.
736