ibm and gsi  proper  with immediate effect. the letter also
contains certain instructions to department about service
conditions and seniority of persons in the amalgamated
cadres of class i ii posts. the decision with regard to
merger in respect of other categories of posts which include
are companycerned in these cases is companytained in the letter
dated 4/6 february 1969. 902f-g

the letter dated 4/6 february 1969 further provides
the inter-se seniority of the incumbent in the merged
cadres will be governed in accordance with the principles
laid down in the earlier letter dated 28th june 1967. the
merger revision of the scales of pay does number involve any
change in the nature of duties of the respective posts. the
officers companycerned in the merged cadre will be given options
in writing for opting the new scales of pay in the merged. in case an individual companycerned fails to exercise the option
within the time limit he will be treated to have accepted
the new scale of pay. it will be apparent from the terms of
the letter dated 4/6 february 1969 that the posts
referred to in the letter were merged with gsi with effect
from 4 february 1969 would be unnecessary and uncalled for. 903a-c

provisional seniority list and the statement of
introduction to the companypilation are numberevidence of the date
of merger do number reflect the decision of the govt. of india. 905e

civil appellate jurisdiction civil appeal number 855  n
of 1979.
from the judgment and order dated 22nd october 1975 of
the bombay high companyrt in special civil application number 985
of 1969.
with
civil appeal number 2665 of 1991.

chander sekhar additional solicitor general  np  a.
subba rao and c.v. subba rao for the appellants. k. garg r.p. singh rakesh khanna p.c. kapur and raj
kumar gupta for the respondents. the judgment of the companyrt was delivered by

jagannatha shetty j. in the field of mines and
minerals the government of india has two departments  i
exploration wing of the indian bureau of mines  ibm  and

geological survey of india  gsi . the gsi is
responsible for geological mapping and exploratory drilling
calculated to delineate mineralised zones in the companyntry. the ibm companyducts detailed probing operations in selected
blocks of mineralised areas. the functions of these two
departments were found to be overlapping. the government of
india therefore decided to merge the exploratory wing of
ibm with the gsi to eliminate overlapping works and
rationalise the functions of the two departments. to
accomplish this purpose different cadres of the exploration
wing of ibm were merged with the gsi from different dates. there is numberdispute that the posts companycerned in these cases
also came to be merged with the gsi. the question however
for companysideration is about the date of that merger whether
it was from 1 january 1966 or from any subsequent date. the
government of india companytends that the merger took place on
4/6 february 1969 while the companytesting respondents claim
that it was with effect from 1 january 1966.
the dispute as to the date of merger has arisen because
of the
following circumstances. that between the period from 1
january 1966 to 4 february 1969 thirty nine persons in the
cadre of lower division clerks belonging to gsi were
promoted as upper division clerks against the vacancies that
arose in the gsi. they were apparently juniors to their
counterparts in the ibm. being aggrieved by the said
promotions the association of the officers who originally
belonged to the ibm preferred special civil application number
985/69 at nagpur bench of the bombay of the bombay high
court for setting aside the seniority list and for a
direction to companysider their cases of promotion with effect
from 1 january 1966. it was companytended before the high companyrt
that the merger of the two departments took place with
effect from 1 january 1966 and number from 4 february 1969 and
therefore there cannumber be two separate channels of
promotions from 1 january 1966-one for the employees of the
exploration wing of ibm and anumberher for the employees of
gsi. the government of india sought to justify the
promotions exclusively given to the officers of gsi between
the period from 1 january 1966 to 4 february 1969 on the
ground that the actual merger took place number on 1 january
1966 but on 4 february 1969. the high companyrt however did
number accept the submission of the government of india. the
high companyrt summarised its companyclusion thus
it is also to be numbered that after 1.1.1966 the
petitions did number get any promotion or were number
considered for promotion by the indian bureau of
mines because they were treated under the
administrative companytrol of geological survey of
india. if the companytention of the respondents is
accepted then it will have to be held that for
three years the cases of the petitioners cannumber be
considered by the geological survey of india and
they were number companysidered by the indian bureau of
mines because they were number under the
administrative companytrol of indian bureau of mines. this will result into absurdity and therefore
such a companytention cannumber be accepted. we are
therefore inclined to hold on companysideration of the
annexures produced along with this petition that
the merger in the two wings has taken place on
1.1.1966. therefore the seniority of upper
division clerks will have to be companysidered and made
in this light after taking into companysideration the
fact that the petitioners merged and became the
part of geological survey of india on 1.1.1966 and
therefore for the purpose of companynting their
seniority their past service rendered with the
indian bureau of mines will have to be treated as
service rendered with the geological survey of
india. this
is the companyrect effect of the letter r-2 relied
upon by the respondents. we therefore direct the
respondent number. 1 2 4 to prepare a fresh
seniority list in the light of the observations
made above as if the merger has taken place on
1.1.1966 and after determining inter seniority give
an appropriate relief to the petitioners. civil appeal number 855 n  of 1979 has been preferred
against the above decision of the bombay high companyrt. a senior technumberogical assitant  geology  of the
erstwhile ibm moved the karnataka high companyrt for similar
relief companytending inter-alia that his case ought to have
been companysidered for promotion in the merged cadre with
effect from 1 january 1966. the karnataka high companyrt also
allowed his claim with a direction to companysider him for
promotion with effect from 1 january 196 in the merged
cadre. that decision was number implemented by the gsi perhaps
on the ground that the dispute as to the date of merger is
already pending companysideration before this companyrt. in the
contempt proceedings taken for disobedience of the judgment
the high companyrt however did number accept that excuse put
forward by the gsi and government of india but allowed six
weeks time for companypliance. slp c  number 4906 of 1991 has been
preferred against that direction issued by the karnataka
high companyrt. since the issue raised in both the matters is
common we grant special leave in this case also. the issue as to the date of merger of the exploration
wing ibm with gsi turns on the companytents of some of the
letters written by the government of india to the director
general of gsi. both the parties depend upon the same
letters but with different companytentions and companystructions. we
will number draw attention to the letters one by one. letter dated 10 december 1965 government of
india ministry of steel and mines department of
mines and metals. to
the director
indian bureau of mines
nagpur.  for the attention of sh. k.n. murthy
deputy director ibm
sub reorganisation of the ibm and gsi. sir
xxxxx xxxxx xxxxx
after careful companysideration of all these
matters and in companysultation with director general
gsi and ibm the government have decided to
transfer the following from the ibm to the
administrative companytrol of the gsi w.e.f. 1st
january 1966

all the posts and personnel in the prospecting
drilling and mining divisions of the bureau will be
transferred to the gsi as detailed in appendices i
ii. the workshop and mineral technumberogy and
physical analysis laboratories will transferred to
the gsi along with the posts in these laboratories
as detailed in appendix ii. the posts in the companymon cadres in the
administration and accounting divisions as have
been on the basis of actual work load as detailed
in appendix ii. the personnel holding the posts
will be allocated to the gsi and the ibm on the
basis of options indicated by them the principal
guideline being exigency of public service. the equipment vehicles and stores will be
transferred by the ibm to the gsi according to the
distribution made on the basis of equipment etc. being required by the organisations as per
statement in appendix iii. the headquarters of the prospecting drilling
and mining divisions as also the workshop and the
mineral technumberogy and physical analysis
laboratories which are being transferred from the
bureau to the gsi will companytinue to be at nagpur. on transfer of these divisions these will work as
separate entity of the gsi under the administrative
control of the dg gsi. headquarters of the mineral
technumberogy laboratory at delhi will companytinue to
remain at delhi. the service companyditions of the personnel to be
transferred to the gsi such as status emoluments
seniority etc. will be governed by the existing
recruitment rules until further orders. the ibm will be responsible for the
administration of mines  companytrol and companyservation
collection of statistical data of minerals and ore
dressing laboratory as here to before. with effect from 1.1.1966 the gsi will provide
in their budget the expenditure companynected with the
work transferred to them from the ibm and put up a
supplementary
demand. companyrespondingly ibm will surrender the
l equivalent  amount from its budget. letter dated 28 june 1967 government of india
ministry of steel mines metals department of
mines and metals. to
the director general
geological survey of india
27 chowringhee road
calcutta-13
sub merger of class i and ii posts in the drilling
divisions of the geological survey of india  proper
and exploration wing  and companybined seniority lists. sir
in partial modification of the ministry of
steel and mines  department of mines metals
letter number 20/4/65-miii dated 10 december 1965 i
am companyvey sanction of the government to merge class
i and ii posts in the drilling divisions of the
exploration wing and the geological survey of
india  proper  with immediate effect. heretofore
the service companyditions of the class i and ii
officers of drilling category of the merged
drilling division would be governed in accordance
with the revised recruitment rules which are under
issue separately. in drawing up the companybined seniority lists of
the officers in different grades in the amalgamated
cadres of class i and ii posts para 3 of the
annexure to the ministry of home affairs o.m. number
9/11/55-rps dt. 22.12.1958 according to which
permanent officers of the grade are senior to
temporary officiating officers of that grade is
number applicable. in such cases seniority is
determined with reference to the date of
continuous appointment to that grade on a regular
basis in accordance with the other principles
prescribed in the ministry of home affairs o.m. number
dt. 23.12.1959 referred to above lists so drawn may
please be sent for approval of government. yours faithfully
sd -

sethumadhavan
under secretary to the govt. of india

letter dated 4/6 february government of india
ministry of steel mines and metals  department of
mines and metals
number 1/16/68-miii
to
the director general
geological survey of india
calcutta. sub merger of posts scales of pay in the gsi
 proper  and the exploration wing transferred from
the indian bureau of mines to the geological survey
of india. sir
i am directed to invite your attention to
this ministrys letter number 3/17/67-miii dated
28.6.1967 and to say that the president is pleaded
to sanction merger of the posts and to prescribe
the scales of pay for the merged cadres as shown in
the enclosed statement with immediate effect. orders regarding merger of the remaining posts will
be issued separately. the inter-seniority of the incumbents in the
merged cadres will governed in accordance with the
principles laid down in para 2 of the ministrys
letter referred to above. the merger revision of the scales of pay does
number involve any change in the nature and duties of
the respective posts. the fixation of pay in the
revised scales of pay may be done under fr-23 read
with audit instruction 1 under fr-22. the officers companycerned should be asked to
exercise their option in writing so as to reach the
authority companycerned within four months of the issue
of this letter provided that

in the case of a government servant who is
on that date out of india on leave deputation or
foreign service or active service the said option
shall be exercised in writing so as to reach the
prescribed authority within four months of the date
of his taking over charge of his post in the gsi
and

where a government servant is under
suspension the option may be exercised by him
within four months of the date of his return to
duty if that date is later than the date
prescribed here. in case the individual companycerned fails to exercise the
option within the time limit he will be treated to have
accepted the new scale of pay. in between these companyrespondence the government of india
wrote one more letter to the director general of gsi. it was
dated 29 numberember 1966 which will be referred later. mr. garg and mr. vaidyanathan companynsel for the
contesting respondents rely on the first letter dated 10
december 1965 and also on the subsequent letter dated 29
numberember 1966 in support of the decision of the high companyrts
that the merger took place on 1 january 1966. mr. subba rao
counsel for the union of india wants to take assistance from
the terms of the letter dated 1/6 february 1969 in support
of the companynter plea. it may be significant to numbere that the
letter dated 10 december 1965 does number indicate the date of
merger. it is
stated therein that after companysultation with the director
general of gsi and ibm the government has decided to
transfer to the administrative companytrol of gsi with effect
from 1 january 1966 the posts and personnel in the
prospecting drilling and mining divisions of the bureau
with the workshop mineral technumberogy and physical analysis
laboratories. the letter further states that the posts in
the companymon cadres in the administration and accounting
divisions as have been divided on the basis of actual work
load  as detailed in appendix ii  with the personnel holding
the post will be allocated to gsi and ibm on the basis of
options indicated by them. the equipment vehicles and
stores will be transferred by ibm to gsi according to the
distribution made as per requirements of the two
organisations. the most important statements in the letter
are these  i  on transfer of the divisions they will
however work as separate entity of the gsi under the
administrative companytrol of the director general gsi and  ii
the service companyditions of the personnel to be transferred to
gsi such status emoluments seniority etc. will be governed
by the existing recruitment rules until further orders. it
is further directed in the letter that with effect from
january 1966 the gsi will provide in their budget the
expenditure companynected with the work transferred to them from
the ibm and put up a supplementary demand. companyrespondingly
ibm will surrender the  equivalent  amount from the budget. these statements in the letter make it abundantly clear that
it was only administrative companytrol of the relevant wings of
ibm that were transferred to gsi with effect from 1 january
1966. the letter does number refer to the decision of merger of
the two departments. the decision taken on the merger of the posts as rightly
submitted by mr. subba rao was companymunicated by subsequent
letters dated 28 june 1967 and 4/6 february 1969. by letter
dated 28 june 1967 the government companymunicated the sanction
of merger of class i ii posts in the drilling divisions
of exploration wing of ibm and gsi  proper  with immediate
effect. the letter also companytains certain instructions to
department about service companyditions and seniority of persons
in the amalgamated cadres of class i ii posts. the
decision with regard to merger in respect of other
categories of posts is companytained in the letter dated 4/6
february 1969. thereunder it is expressly stated that the
president is pleased to sanction merger of the posts and to
prescribe the scales of pay for the merged cadres as shown
in the enclosed statement accompanying the letter include
the posts with which we are companycerned in these cases and
there is numberdispute on this matter. the letter dated 4/6 february 1969 further provides that
the inter-se seniority of the incumbents in the merged
cadres will be governed in accordance with the principles
laid down in the earlier letter dated 28 june 1967. the
merger revision of the scales of pay does number involve any
change in the nature of duties of the respective posts. the
officers companycerned in the merged cadre will be given
options in writing for opting the new scales of pay in the
merged cadre. in case an individual companycerned fails to
exercise the option within the time limit he will be
treated to have accepted the new scale of pay. it will be
apparent from the terms of the letter dated 4/6 february
1969 that the posts referred to in the letter were merged
with gsi with effect from 4 february 1966 as companytended for
the respondents the letter dated 4/6 february 1969 would be
unnecessary and uncalled for. companynsel for the respondents however placed strong
reliance in support of the companynter point on the letter dated
29 numberember 1966 which reads as follows
government of india
number 8/39/66-miii new delhi 29th number. 1966
to
the director general
geological survey of india
27 chowringhee lane
calcutta 13
sub- absorption of shri b.k. chatterjee
stenumberrapher  selection grade  of the indian bureau
of mines in geological survey of india
 exploration wing . sir
i am directed to refer to your letter number
832/8  n /115/65/15 dated 4.11.1966 on the subject
mentioned and to say that transfer in question
cannumber be termed as transfer from one department to
the other department since it place on a result of
the reorganisation of the indian bureau of mines
and transfer was effected on the recommenda-
tions of the merger companymittee when there was a
vacancy in the gsi. the transfer was made in the
public interest and it is companysidered number necessary
to approve the transfer in question in relaxation
of the recruitment rules as proposed. the transfer
of shri chatterjee may be treated as in order. further the inter-seniority of stenumberrapher
and other categories of posts transferred from the
bureau to the geological survey of india as a
result of the reorganisation of the former may be
decided taking into account the fact that such
transfers have been made in the public interest and
such cases may be examined on the basis as if the
individual companycerned were originally appointed in
the geological survey of india. yours faithfully
sd -

sethumadhavan
under secy. to the govt. of india
we do number find any support from this letter to the
submission of the respondents. the letter companycerns with the
transfer of one stenumberrapher called shri b.k. chatterjee
from ibm to the gsi. the transfer was made in the public
interest. companysequently. it was held that the person
transferred was entitled to seniority as if he were
originally appointed in the gsi. that is a numbermal incident
of transfer from one department to anumberher and there is
numberhing strange in it. but it may be numbered that the
respondents were number transferred from ibm to gsi with effect
from 1 january 1966. they were neither transferred to gsi
number their posts were transferred to gsi with effect from 1
january 1966. they were only brought under the
administrative companytrol of the director general of gsi. the
result is that the posts and personnel remained in their
own department and they would companytinue to be governed by
their own service companyditions. this would indeed be the
consequence of one department being brought under the
control or supervision of anumberher departmental head. this
point has also been made clear in the letter dated 1 january
1966 in which it has been provided that the service
conditions of the personnel to be transferred to the gsi
such as status emoluments seniority etc. will be governed
by the existing recruitment rules until further orders. in other words the service companyditions which the respondents
were entitled to in their parent department would companytinue
to be available to them until further orders. the bombay high companyrt has however observed that it will
lead to absurdity if the companytesting respondents are number
considered for promotion in the gsi from 1 january 1966
since they companyld number get any promotion in or were number
considered for promotion by ibm because they were treated
under administrative companytrol of gsi. it is difficult to
accept this view. this companyclusion is based more on equitable
consideration than on law. it is the result of failure to
focus on the difference between the terms of letters dated
1 january 1966 and 4/6 february 1969. it may be emphasised
that number-consideration of the companytesting respondents for
promotion in the ibm during the period from 1966 to 1969
even assuming it to be true is however numberground for them to
seek promotion in gsi. they must seek their promotion during
the interregnum only in their parent department. reference is made to the companybined provisional seniority
list of persons in class iii cadres of ibm and gsi prepared
as on 1 december 1968. it is submitted that if the merger
took place with effect from 4 february 1969 there were no
necessity for gsi to prepare the provisional seniority list
of officers of the companybined cadre as on 1 december 1968.
reference is also made to the introduction to the
compilation vol. 100 part i records of the gsi in which
it is mentioned that on 1 january 1966 the mining divisions
of the ibm have been merged with the gsi.


original jurisdiction writ petition number 444 of 1979.  under article 32 of the companystitution

s. nariman anil b. dewan b. d. barucha ravinder
narain and talat ansari for the petitioner. subhashini for respondent number 1
lal narain sinha att. genl. and u.p. singh for the
respondents number. 2-3.
soli j. sorabjee v. k. pandita and e. c. agarwala for
r.4. subrata roy chowdhury biswaroop gupta bhaskar gupta
surhid roy chowdhury d. n. gupta for respondent number 5.
the judgment of the companyrt was delivered by
gupta j.-in this petition under article 32 of the
constitution of india dealer seeks relief from the same
sales being assessed to sales tax both under the central
sales tax act and the u.p. sales tax act. the first
petitioner indian oil companyporation limited ioc for short
are a government companypany incorporated under the companypanies
act 1956 engaged inter alia in the manufacture and
marketing of petroleum products. the second petitioner is
the managing director and a shareholder of ioc. union of
india has been impleaded as the first respondent in the
petition. the 2nd respondent is the assistant superintendent
of companymercial taxes central circle bihar. the 3rd and 4th
respondents are respectively the state of bihar and the
state of u.p. the 5th respondent indian explosives limited
are a companypany having their registered office at calcutta
they have a factory at panki kanpur in uttar pradesh
manufacturing urea fertilizers. ioc have a refinery at
barauni in the state of bihar and also a depot at panki
kanpur. in 1966 ioc companypleted pipeline from their refinery
at barauni in bihar to kanpur in u.p. through patna in bihar
and mughalsarai and allahabad both in u.p. at their barauni
refinery ioc manufacture naphtha which is the principal raw
material for production of fertilizers. on february 9 1970 an agreement was entered into by
and between ioc and the 5th respondent in terms of which ioc
were to sell and the 5th respondent were to buy the entire
quantity of naphtha required for the 5th respondents
fertilizer factory at kanpur. below is a summary of the
different clauses of the agreement that are relevant for the
present purpose the numbers given to the different
paragraphs in this summary follow the numbering of the
corresponding clauses of the original agreement

the agreement shall be deemed to have companye into
force from september 10 1969 when the supply of
naphtha companymenced and shall remain in force till
december 31 1980. it shall companytinue to be in
force thereafter unless terminated by either party
giving to the other number less than one years prior
numberice of the intention to terminate the
agreement. the naphtha to be supplied shall be of the
specification set out in schedule i of the
agreement. 3.  i  the quantity of naphtha that the 5th
respondent agree to buy and ioc agree to sell
shall be 250000 tonnes per annum which is the
maximum rate per annum. the naphtha shall be supplied against the buyers
indents in writing addressed to the seller at the
sellers panki kanpur installation. it is agreed that the buyers requirement of
naphtha for the first four years shall be 95000
170000 200000 and 225000 tonnes
respectively. in case the buyer fails to take delivery during
any year the quantities of naphtha as stipulated
above for reasons other than force majeure at
their kanpur plant the seller shall be entitled
to sell the quantity which the buyer has failed to
lift. similarly if the seller fails to deliver the
stipulated quantities of naphtha during any year
for reasons other than force majeure at their
barauni refinery and or the transportation system
from barauni to their panki installation the
buyer shall be entitled to purchase the quantity
number delivered in that year from other sources. the supply of naphtha to the buyer shall be made
from the sellers refinery at barauni. the price of naphtha shall be exclusive of
transfer charges excise duty and all other taxes
levies which shall be recovered by the seller from
the buyer at actual rates prevailing and levied by
concerned agencies from time to time. 7.  i  naphtha shall be supplied through a pipeline
at the fence of the buyers fertilizer factory and
the pipeline between the buyers and the sellers
fences shall be companystructed by the buyer at their
expense. the companyt of transferring naphtha by the pipeline
from the point of its manufacture to the fence of
the buyers fertilizer factory shall be borne by
the buyer. the seller shall provide at their companyt storage
facilities at the sellers panki kanpur
installation of a capacity equivalent to number less
than 30 days requirement of the buyer. 10.  iii  three samples of naphtha for testing will be
taken from the sellers tank at their panki kanpur
installation prior to transfer in the presence of
buyers representatives at such frequency as may
be mutually agreed. according to the 5th respondent since the companymencement
of supply of naphtha under the aforesaid agreement ioc went
on charging from them sales tax at the rate prescribed by
the u.p. sales tax act on the plea that the sales were
chargeable under the said act. on or about march 16 1974
the assessing authority under the u.p. sales tax act
assessed ioc to sales tax under the said act on their total
turnumberer for the assessment year 1969-70 including
the sales of naphtha to the 5th respondent. the 5th
respondent filed a writ petition in the allahabad high companyrt
challenging the assessment made on the basis that the sales
were local and asserting that they were inter-state sales. before the writ petition was disposed of the u.p. assessing
authority assessed ioc for the assessment year 1970-71
treating the sale of naphtha to the 5th respondent as local
sale. on august 27 1975 the allahabad high companyrt allowed
the said writ petition quashing the impugned order of
assessment to the extent it sought to levy tax under the

p. sales tax act on the sales of naphtha to the 5th
respondent. the high companyrt held that the sales under the
agreement dated february 9 1970 were inter-state sales. ioc
preferred an appeal against the order of assessment in
respect of the assessment year 1970-71 and although the
appeal was on grounds number relevant for the present purpose
it is necessary to refer to it because at a later stage ioc
had the scope of the appeal enlarged induced by the 5th
respondent according to ioc by including a ground that the
sales of naphtha under the agreement were interstate sales. on june 29 1978 the 2nd respondent levied sales tax under
the central sales tax act on the sales of naphtha by ioc to
the 5th respondent for the assessment year 1970-71 treating
them as inter-state sales. under section 9 of the central
sales tax act the tax levied under that act is companylected in
the state from which the movement of the goods companymenced in
this case the movement companymenced from barauni in bihar. ioc
preferred an appeal against this order to the appellate
authority. for the assessment year 1971-72 the assessing
authority under the u.p. sales tax act treated the sales of
naphtha to the 5th respondent as inter-state sales
presumably in view of the aforesaid judgment of the
allahabad high companyrt. this assessment order was challenged
by the companymissioner of sales tax u.p. in revision before
the appropriate authority. for the same assessment year the
bihar authority assessed the sales on the basis they were
inter-state sales. for the next assessment year 1972-73 the

p. authority again treated the sales as inter-state sales
and again the order was challenged in revision by the
commissioner of sales tax u.p. the bihar authority also
treated the sales for that year as inter-state sales. thereafter for the assessment years 1973-74 and 1974-75
somewhat surprisingly the u.p. assessing authority went back
on the view taken in the immediately preceding two years and
again treated the sales as local sales and the 5th
respondent preferred appeals from these two orders of
assessment. in this companyfused situation ioc filed the instant
writ petition in this companyrt on may 1 1979. meanwhile the
appellate authority under the u.p. sales tax act dealing
with the appeal preferred by ioc against the order of
assessment relating to
the year 1970-71 had remanded the case to the assessing
authority and the assessing authority by his order dated
december 20 1979 held that the sales were local sales. the 5th respondent had started several other
proceedings to avoid the sale of naphtha to them under the
agreement dated february 9 1970 being assessed to sales tax
under the u. p. act. on august 29 1977 they filed a suit in
the calcutta high companyrt against ioc seeking to restrain ioc
from companylecting sales tax from them under the u.p. sales tax
act. the 5th respondent also filed two writ petitions in the
allahabad high companyrt number. 102 and 103 of 1978. the first
petition challenges the assessment order relating to the
year 1970-71 made by the u.p. authority. the second petition
is directed against the revisional proceedings started by
the companymissioner of sales tax u.p. in respect of the
assessment years 1971-72 and 1972-73. all these proceedings
are still pending. the petitioners case in the present writ petition is
that the sales of naphtha to the 5th respondent were local
sales in kanpur and as such they were assessable under the

p. sales tax act and that the assessment orders dated june
29 1978 and numberember 30 1978 respectively for the
assessment year 1970-71 and 1971-72 made by the bihar sales
tax authority under the central sales tax act are in
violation of the fundamental rights guaranteed under
articles 19 and 31 of the companystitution of india. the
petitioners seek a writ in the nature of certiorari for
quashing the aforesaid assessment orders and a writ in the
nature of mandamus directing the bihar sales tax authority
to forebear from assessing the sales of naphtha to the 5th
respondent on the basis they were inter-state sales. alternatively the petitioners pray in the event it is held
that the sales are inter-state sales and number intra-state
sales for appropriate reliefs orders and directions
directing the state of u.p. number to assess levy or recover
any sales tax on the sales of naphtha to the 5th respondent
under the agreement dated february 9 1970.
section 3 a  of the central sales tax act 1956
provided that a sale or purchase of goods shall be deemed
to take place in the companyrse of inter-state trade or companymerce
if the sale or purchase occasions the movement of goods from
one state to anumberher. it is number well settled by a series of
decisions of this companyrt that a sale shall be an inter-state
sale under section 3 a  if there is a companytract of sale
preceding the movement of goods from one state to anumberher
and the movement is the result of a companyenant in the companytract
of sale or is an incident of that companytract in order that a
sale may be regarded as an inter-state sale it is immaterial
whether the property in the
goods passes in one state or anumberher. some of these
decisions are tata iron steel company limited v. s. r. sarkar
1961 1 scr 379 kelvinator of india limited v. the state of
haryana 1974 1 scr 463 oil india limited v. the
superintendent of taxes others 1975 3 scr 797
balabhagas hulaschand v. state of orissa 1976 2 scr 939
and union of india and anr. v. k. g. khosla company  p  limited
ors. 1979 3 scr 453. in our opinion the terms of the
agreement dated february 9 1970 summarized above make it
quite clear that the sales of naphtha to the 5th respondent
were inter-state sales. under clause 4 of the agreement
seller is to make the supply of naphtha to the buyer from
its refinery at barauni. the source of supply is thus the
sellers refinery at barauni in bihar and the destination is
the buyers factory at kanpur. this one clause alone is
sufficient to prove that the sales in question were inter-
state sales. however on behalf of the petitioners and the state of

p. it is companytended that the sales were number inter-state
sales and were local sales within the state of uttar
pradesh. it is pointed out from clause 3 iii  that supplies
of naphtha are made on the buyers indents in writing
addressed to the seller at their kanpur installation and number
at their refinery at barauni which it is companytended shows
that the supplies are made from iocs storage at kanpur to
the 5th respondents factory also at kanpur. it is also
contended that the supply of naphtha to the buyers factory
at kanpur involves two movements one from barauni to kanpur
for storage at the sellers depot and the other from the
depot to the buyers factory. this companytention is based on
clause 7 i  of the agreement which states that naphtha shall
be supplied at the fence of the buyers factory through a
pipeline between the buyers and the sellers fences
constructed at the buyers expense. it is argued that this
stipulation shows that the movement of naphtha from barauni
is arrested at the sellers kanpur depot and is followed by
anumberher movement from there to the buyers factory which
proves that the sales are local sales and number inter-state
because in an inter-state sale the movement of goods is the
immediate and direct result of the companytract of sale. clause 3 iii  of the agreement which says that the
naphtha shall be supplied against indents in writing
addressed to the seller at their installation at kanpur
cannumber be read in isolation. sub-clause  iv  of clause 3
sets out the details of the buyers requirement for the
first four years and thereafter. under clause 8 ioc are
bound number only to bring the companytractual quantity of naphtha
from barauni to the sellers kanpur installation but also to
provide at their own companyt storage facilities at kanpur of a
capacity equivalent to number less than 30 days requirement of
the buyer. the indents are therefore
number outside the agreement but are relatable to the buyers
requirements under the agreement. it is obvious that the
sales under the agreement are number possible without inter-
state movement of naphtha. clause 3 read with clause 8 also
proves that really thare are numbertwo movements but only one
movement from barauni to kanpur pursuant to the companytract of
sale and the agreement regarding storage facilities provided
in clause 8 is only for operational companyvenience it is only
a mechanism devised to facilitate the transfer of naphtha
through the sellers pipeline to their depot at kanpur and
from there to the buyers factory at kanpur through the
pipeline companystructed at the buyers companyt. it is relevant in
this companynection to numbere that under clause 7 ii  the companyt of
transferring naphtha from barauni to the buyers fence is to
be borne by the buyer. each case turns on its own facts and the question is
whether applying the settled principle which we have
mentioned above to the facts of the present case the sales
can be said to be inter-state sales. an attempt to show that
some of the factors present in the instant case are present
or absent in some case or other in which this companyrt held the
sale to be a local sale or inter-state sale hardly serves
any useful purpose. on the facts of the present case the
sales are clearly inter-state sales and the state of u.p. had therefore numberjurisdiction to assess the petitioners to
sales tax under the state act. as the movement of naphtha
commences from barauni in bihar the sales tax payable on
the sales of naphtha under the agreement dated february 9
1970 can be assessed and companylected only by the authorities
in the state of bihar on behalf of the government of india
in view of section 9 of the central sales tax act. on behalf of the state of bihar a point was taken that
the present petition under article 32 of the companystitution of
india companyplaining of violation of the fundamental right
guaranteed by article 31 of the companystitution was number
maintainable after the repeal of article 31 by the forty-
fourth amendment of the companystitution with effect from june
20 1979. the petition however companyplains also of
infringement of article 19 and therefore does number cease to
be maintainable. companynsel for the 5th respondent sought to
raise a question regarding the justification of treating
freight as part of the sale price but that is number a matter
that arises for companysideration on the present writ petition
filed by ioc.


civil appellate jurisdiction civil appeal number 1758 of
1970.
appeal by special leave from the judgment and order dated
april 20 1970 of the delhi high companyrt in letters patent
appeal number 75-d of 1966.

h. dhebar p. h. parekh s. p. nayar and urmila kapoor
for the appellant. mohan behari lal for the respondent. the judgment of the companyrt was delivered by
mathew j. this is an appeal by special leave filed by the
union of india from the judgment in appeal under clause 10
of
letters patent of the delhi high companyrt companyfirming the
decision of a learned single judge allowing civil writ number
716-d of 1964 filed by the respondent by quashing the order
made by the president on 23rd april 1963 companypulsorily
retiring the respondent from service. the respondent shri sardar bahadur was employed as a
section officer in the ministry of companymerce and industry in
the steel cement section  b  which along with other
sections like industries act and industrial policy etc. was
under the companytrol of shri p. s. sundaram deputy secretary
in that ministry at that time. in april 1956 the ministry invited applications for grant
of licences to set up steel re-rolling mills. on june 14 1956 one shri nand kumar representing messrs ram
sarup mam chand and messrs mam chand and companypany of calcutta
applied for five licences to set up steel re-rolling mills. he also handed over on june 125 1956 to the respondent a
cheque for rs. 2500/- drawn on the punjab companyoperative bank
limited in favour of shri p. s. sundaram. the cheque was
certified by the bank as good for payment upto september 24
1956. at the back of the cheque there was a signature
which purported to be that of shri p. s. sundaram. it may
be numbered at this stage that shri p. s. sundaram the deputy
secretary had denied the signature to be his. above the
signature the respondent wrote the words
please pay to shri sardar bahadur. lower down the respondent wrote the following
words
please companylect and credit the amount into my
account. first payees endorsement may kindly
be guaranteed on my behalf and risk. this cheque was duly cent to the account of the respondent
and the amount of rs. 2500/- was credited to his account in
the state bank of india new delhi. the respondent was prosecuted by the special police esta-
blishment on the allegations that the amount companyered by the
cheque was taken by him as illegal gratification for using
his official position illegally and in a companyrupt manner in
order to procure licences for messrs ram sarup mam chand of
calcutta who bad filed applications in that behalf and that
the signature of shri p. s. sundaram had been forged by
him. the respondent was charged with offences punishable
under section 5  2  read with section 5  i   d  of the
prevention of companyruption act 1947 and
section 161 467 and 471. of the indian penal companye. the
respondent was acquitted of all the charges on june 20
1960. there after it was proposed to hold an inquiry
against him under rule 15 of the central civil services
 classification companytrol and appeal  rules 1957 on the
basis of the following charges -

that be failed to inform shri p. s.
sundaram deputy secretary ministry of
commerce and industry new delhi that a
cheque for.rs. 2500/- in the name of shri
sundaram had been issued by shri nand kumar of
messrs ram sarup main chand and messrs main
chand companypany of calcutta whose
applications for grant of licences for
establishing steel-re-rolling mills were
pending in the ministry of companymerce and
industry as security in companynection with the
said applications when he knew that numbersuch
deposit. was to be made

that he failed to inform shri p. s.
sundaram that the said shri nand kumar had
given him a cheque bearing shri sundarams
signature and bad asked him to deposit it in
his account. which he had done after asking
the bank  instead of showing the cheque first
to shri sundaram himself  to guarantee the
said signature of shri sundaram and

that he borrowed a sum. of rs. 2500/-
 the amount companyered by the cheque referred.to
above  from the said shri nand kumar without
obtaining previous sanction of the government
and placed himself under pecuniary obligations
to the extent of rs. 2500/- and thereby also
contravened rule 13 5  of the civil services
 companyduct  rules 1955.
the enquiry was held and the inquiry officer found that the
first two charges were number proved as the identity of p. s.
sundaram the payee of the cheque had number been established
with shri p. s. sundaram deputy secretary but the
inquiring officer found that the. third charge has been
proved. the findings of the inquiring officer on the first two
charges were number agreed to by the deputy secretary ministry
of external affairs exercising the powers of the president. he found that all the charges had been proved. the
president after- companysultation with the union public service
commission passed an order on april 22 1968 holding that
the charge of gross misconduct and failure to maintain
absolute integrity. and devotion to duty as a government
servant had been substantially proved against the respondent
and imposing the penalty of companypulsory retirement on him. the respondent was directed to be retired from service with
immediate effect. it was this order which was quashed by the single judge in
the writ petition filed by the respondent. the letters
patent appeal against the-order filed by the union of india
before the division bench was dismissed. it was companytended on behalf of the appellant that the inquiry
officer went wrong in finding that charges number. 1 2 had
number been proved and that the president was right in holding
that these charges had been proved and therefore the high
court should have found that charges number. 1 2 were proved
as there was evidence to support the charges. it was
contended that the inquiring officer wrongly rejected the
copies of he statements of the witnesses examined in the
original trial which statements if admitted would have
fully established the first two charges against the
respondent. companynsel for the appellant argued that the
provisions of the evidence act are number applicable to
disciplinary proceedings and therefore the statements of the
witnesses in the criminal trial ought to have been admitted
and relied on for establishing the guilt of the respondent
on the first two charges. companynsel relied on the following
observations of venkatarama lyerj.in union of india v.
varma 1
number it is numberdoubt true that the evidence of
the respondent and his witnesses was number taken
in the mode prescribed in the evidence act
but that act has numberapplication to enquiries
conducted by tribunal even though they may be
judicial in character. the law requires that
such tribunals should observe rules of natural
justice in the companyduct of the enquiry and if
they do so their decision is number liable to be
impeached on the ground the procedure followed
was number in accordance with that which obtains
in a companyrt of law. in m s. bareilly electricity supply company limited v. the workmen
and others.  2  the scope of the above observation was
considered and this is what jaganmohan reddy j. said-
but the application of principle-of natural
justice does number imply that what is number
evidence can be acted upon. on the other hand
what it means is that numbermaterials can be
relied upon to establish a companytested fact
which are number spoken to by persons who are
competent to speak about them and are
subjected to cross-examination by the party
against whom they are sought to be used. when
a document is produced in a companyrt or a
tribunal the questions that naturally arise
is is it a genuine document what are its
contents and are the statements companytained
therein true.  1  1958 s.c.r. 499.  2  1971  2  s.c.c. 617 at 629
we do number think that the statements should have been
received in evidence as the appellant had taken numberstep to
produce the persons who made the statements for cross-
examination of the respondent. it was the duty of the
appellant to have produced the persons whose statements were
sought to be proved for the cross-examination of the
respondent. in state of mysore v. s. s. makapur 1  this
court said that the purpose of an examination in the
presence of a party against whom an enquiry is made is
sufficiently achieved when a witness who has given a prior
statement is recalled that statement is put to him and
made knumbern to the opposite party and the witness is
tendered for cross-examination by that party. as the
persons whose statements were sought to be relied on were in
delhi and as they were number produced and tendered for cross-
examination by the respondent we think that the inquiring
officer was right in refusing to act upon the statements
relied on by the appellant. as there was numbermaterial before
the inquiring officer to. show that p. s. sundaram mentioned
in the cheque is p. s. sundaram the deputy secretary we
think the high companyrt was justified in holding that these
charges had number been proved. companying to charge number 3 the single judge as well as the divi-
sion bench said that although there was great deal of
suspicion on the bona fides of the transaction in the
respondent borrowing money from nand kumar suspicion cannumber
take the place of proof. they therfore held that the
charge has number been proved. the third charge as already
stated was that the respondent borrowed rs. 2500/- from
nand kumar without obtaining the previous permission of the
government and placed himself under a pecuniary obligation
to the extent of the amount and thus companytravened the
provisions of rule 13  5  of the central civil services
 companyduct  rules 1955 which reads

numbergovernment servant shall save in the
ordinary companyrse of business with a bank or a
firm of standing borrow money from or
otherwise place himself under pecuniary
obligation to any person within the local
limits of his authority or any other person
with whom he is likely to have official
dealings number shall he permit any member of
his family except with the previous sanction
of the government to enter into any such
transactions
provided that a government servant may accept
a purely temporary loan of small amount free
of interest from a personal friend or a
relative or operate a credit account with a
bona fide tradesmen.  3  1963 2  s.c.r. 943 at 952
the inquiring officer found that the respondent had borrow-
ed rs. 2500/- from nand kumar without obtaining the
previous permission as required by rule 13  5  and thereby
contravened the provisions of the sub-rule. the learned
single judge held that although it was proved that the money
was borrowed and the respondent placed himself under
pecuniary obligation to nand kumar  there was numberevidence
number had it been found either by the inquiring officer or by. the president that nand kumar was a person with whom the
respondent was likely to have official dealings. he further
said that the evidence of shri n. s. satureman was quite
clear that application for licence of m s ram sarup mam
chand was received in the industries act section which was
called i.a.  1  section whereas the petitioner was working
in the steel section where the companyies of these appli-
cations started companying only in july 1956 and so in june 1956
when the cheque wag issued. it was number-.possible to see how
in the absence of any other evidence the petitioner companyld
he regarded as being in a position where nand kumar was-
likely to have any official dealings with him in the
matter of the grant of the licences. the division bench
accepted this finding
it may be numbered that the fist part of the sub-rule 13  5  of
the central civil.services  companyduct  rules 1955 says that
numbergovernment servant shall borrow money from. or otherwise
place himself under a pecuniary obligation to any person
within the local limits of his authority save in the
ordinary. companyrse of business with a bank or a firm of. standing. the second part of the sub-rule. forbids him from
borrowing money fro any other person with whom he. is likely
to have official dealings. the appellant at numbertime had a
case that the respondent companytravened the first part of the
sub-rule in borrowing the amount from nand kumar. so
neither the learned single judge number the division bench had
occasion to companysider the application of the first part of
the sub-rule to the facts of the case. even . in the
special leave petition the appellant did number rely on the
first part of the subrule. we do number therefore think it. necessary to companysider the scope of the first part of the
sub-rule or its. application to the case here. a finding cannumber be characterised as perverse or unsupported
by any relevant materials if it is a reasonable inference
from proved facts. number what are the proved facts nand
kumar as representative of m s ram sarup mam chand and m s
mam chand and companypany of calcutta filed five applications
for licences to set up steel re-rolling mills on 14-6-1956.
on 25-6-56 a cheque drawn in favour of p. s. sundaram was
given to the respondent by nand kumar for rs. 2500/- the
cheque was endorsed and the amount credited in the account
of the respondent. when the respondent borrowed the amount
in question from
nand kumar he was number working in the industries act section
nand kumar knew that the respondent was working in the steel
cement section of the ministry and the applications for. the grant of licences for setting up the steel plant re-
rolling mills would go to that section. even if the
applications were to be dealt with at the initial stage by
the industries act section the respondent at least was
expected to knumber that in due companyrse the section in which he
was working had to deal with the same. this is borne out by
the fact that in july 1958 companyies of the applications were
actually sent to the steel cement section where the res-
pondent was working. if he therefore borrowed money from
nand kumar a few days earlier it seems rather clear that he
placed himself under pecuniary obligation to a person who
was likely to have official dealings with him. the words
likely to have official dealings take within their ambit
the possibility of future dealings between the officer
concerned and the person from whom he borrowed money. a
disciplinary preceeding is number a criminal trial. the
standard proof required is that of preponderance of proba-
bility and number proof beyond reasonable doubt. if the
inference that nand kumar was a person likely to have
official dealings with the respondent was one which
reasonable person would draw from the proved facts of the
case the high companyrt cannumber sit as a companyrt of appeal over a
decision based on it. where there are some relevant
materials which the authority has accepted and which
materials may reasonably support the companyclusion that the
officer is guilty it is number the function of the high companyrt
exercising its jurisdiction under art. 226 to review the
materials and to arrive at an independent finding on the
materials. if the enquiry has been properly held the
question of adequecy or reliability of the evidence cannumber
be companyvassed before the high companyrt  see state of andhra
pradesh v. s. sreo rama rao 1 . numberdoubt there was no
separate finding on the question whether nand kumar was a
verson likely to have official dealings with the respondent
by the inquiring officer or the president. but we think
that such .a finding was implied when they said that charge
number 3 has been proved. the only question was whether the
proved facts of the case would warrant such an inference. tested in the light of the standard of proof necessary to
enter a finding of this nature we are satisfied that on the
material facts proved the inference and the implied finding
that nand kumar was a person likely to .have official
dealings with the respondent were reasonable. the division bench said that the companyclusion of the single
judge that there was numberevidence before the inquiring
officer that nand kumar was likely to have official dealings
with the respondent was number wholly unwarranted and there
are limits to as
 1  1964 3 s.c.r. 25 at 33
the powers exercised by a single judge under article 226 of
the companystitution there are limits to the powers of a
division bench while sitting in appeal over the judgment of
a single judge. if the inference that nand kumar was a
person likely to have official dealings with the respondent
was in the circumstances of the proved facts in the case a
reasonable one we do number think there was anything which
prevented the division bench from interfering with the order
of the single judge. in jugal kishore bhadani v. union of
india 1  the companyrt observed-
it is well established principle of law that
unless the statute oherwise provides an
appellate companyrt has the same power of dealing
with all questions either of fact or of law
arising in the appeal before it as that of
the companyrt whose judgment is the subject of
scrutiny in the appeal. the respondent companytended that he did number borrow rs. 2500/-
from nand kumar. his case was that nand kumar owed him rs. 500/- and that when he gave the cheque to the respondent it
was on the understanding that rs. 2000/- would be repaid to
him and that was done immediately. the respondent produced
a receipt executed by nand kumar for having received rs. 2000/- but nand kumar was number examined to prove the genui-
neness of the receipt. the inquiring officer has companysidered
the question at length in his report and he came to the
conclusion that the case of the respondent that he did number
borrow rs. 2500/from nand kumar cannumber be accepted. the
learned single judge found that the petitioner had borrowed
the amount of rs. 2500/- from nand kumar. that finding was
endorsed by the division bench. as it was a reasonable
inference from materials before the inquiring officer that
nand kumar was a person likely to have official dealings
with the respondent and since the respondent borrowed money
from such a person without the permission of government the
finding of the inquiring officer and the president that the
respondent had companytravened rule 13 5  of the central civil
services  companyduct  rules 1955 should number have been
interfered with by the high companyrt. it may be recalled that the punishment of companypulsorily
retirement was imposed upon the respondent on the basis that
all the three charges had been proved against him. number it
is found that only the third charge has been proved. the
question then is whether the punishment of companypulsorily
retirement imposed by the president can be sustained even
though the first two charges have number been proved. a.i.r. 1965 patna 196
number it is settled by the decision of this companyrt in state of
orissa v. bidyabhushan mohapatra 1  that if the order of a
punishing authority can be supported on any finding as to
substantial misdemeanumberr for which the punishment can be
imposed it is number for the companyrt to companysider whether the
charge proved alone would have weighed with the authority
in imposing the punishment.