Withdrawal of NFU for want of vigilance clearance is valid; recovery after five years is impermissible absent misrepresentation.

The applicant, appointed as Inspector of Central Excise on 21.09.1990 and promoted as Superintendent of Central Excise with effect from 21.09.2002, was granted the higher Grade Pay of ₹5,400 in Pay Band–2 on a non-functional basis with effect from 21.04.2008.

The benefit was subsequently withdrawn by order dated 14.02.2019, and recovery of the excess amount paid was directed, on the ground that disciplinary proceedings were pending against him and that he was not clear from the vigilance angle.

In an earlier proceeding, OA No. 455/2013, the Tribunal had quashed the disciplinary and appellate orders and remanded the matter to the Disciplinary Authority; however, the charge memorandum and disciplinary proceedings remained pending.

In OA No. 572/2020, the Tribunal directed the respondents to treat the withdrawal order as a show-cause notice and consider the applicant’s reply.

After considering his representation, the Respondent No. 4 passed the impugned speaking order dated 05.12.2023, upholding withdrawal of the benefit and recovery of excess payments. The applicant challenged that order in the present OA.

Whether withdrawal of the applicant’s non-functional higher Grade Pay of ₹5,400, granted with effect from 21.04.2008, was legally justified when disciplinary proceedings were pending and vigilance clearance was unavailable?

Whether recovery of the excess pay drawn over a period exceeding five years was permissible in the circumstances of the case?

The Tribunal applied the CBIC clarification dated 16.09.2009, under which grant of the higher Grade Pay of ₹5,400 in PB–2 on a non-functional basis required completion of four years of regular service as Superintendent of Central Excise and clearance from the vigilance angle.

It further relied on the principle that quashing of disciplinary or appellate orders does not, by itself, extinguish the underlying charge memorandum or pending disciplinary proceedings where the matter has been remanded for fresh consideration.

For recovery, the Tribunal applied State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, particularly the principles that recovery of excess payment made for more than five years before the recovery order, and recovery that would be inequitable, harsh or arbitrary, should ordinarily not be permitted.

The Tribunal held that vigilance clearance was an express and mandatory condition for grant of the higher Grade Pay under the CBIC clarification dated 16.09.2009.

Although the earlier penalty orders had been quashed, the disciplinary proceedings had not been finally terminated; the charge memorandum remained operative and the matter had been remanded for fresh decision. Consequently, the applicant could not be treated as clear from the vigilance angle when the benefit was granted.

Withdrawal of the Grade Pay was therefore justified.

However, the Tribunal distinguished withdrawal from recovery. The applicant had not made any misrepresentation or committed fraud, and the benefit had been granted by the department after obtaining or acting upon vigilance clearance.

The respondents reconsidered the matter and initiated recovery only after approximately ten years. Applying Rafiq Masih, the Tribunal found that recovery after such a prolonged period would be harsh, arbitrary and inequitable, particularly when the excess payment was attributable to departmental action rather than any wrongdoing by the applicant.

However, it set aside the order to the extent that it directed recovery of the excess pay drawn, holding that such recovery, made after more than five years and absent misrepresentation or fraud, was iniquitous, harsh and arbitrary under the principles in Rafiq Masih.

The OA was accordingly allowed in part, with no order as to costs.