civil appellate jurisdiction civil appeal number 897 of
1987
from the judgment and order dated 5.8.1986 of the
central administrative tribunal new delhi in regn. number t-
853 of 1985  cwp number 2709 of 1985 . ramaswamy additional solicitor general p.
parmeshwaran and b. parthasarthy for the appellant. harish n. salve pramod dayal and badri dass sharma for
the respondents. the judgment of the companyrt was delivered by
venkataramiah j. the short question involved in this
case is whether the members of the all india services who
had retired prior to 1.1.1973 are entitled to payment of
gratuity as a part of retirement benefits at the rates
specified in the numberification number 33/12/73-ais  ii  dated
24.1. 1975.
this appeal by special leave is filed against the
decision of the central administrative tribunal dated august
5 1986 declaring that rule 28 6  of the all india services
 death-cum-retirement benefits  rules 1958 insofar as it
tended to restrict pensioners to retirement benefits to
which they were entitled on the date of their retirement and
sought to deny them the benefits of the liberalised pension
and
gratuity in the amended numberification number 33/12/73-ais  ii
dated 24.1.1975 was violative of article 16 of the
constitution of india and further directing that all the
members of the all india services would be entitled to
liberalised pensionary benefits including gratuity as per
the said numberification irrespective of whether they had
retired prior to 1.1.1973 or thereafter. the above decision
was given by the central administrative tribunal new delhi
in regn number t-853/85  c.w. number 2709185  which was a petition
filed by the all india services pensioners association
 rajasthan  and one r.d. mathur an ias officer who had
retired from service prior to 1.1.1973. the union of india
the appellant herein has number questioned the order of the
central administrative tribunal insofar as its liability to
pay the pension in accordance with the judgment of the
tribunal is companycerned. this appeal by special leave is
confined only to that part of the order of the tribunal by
which the union of india is directed to pay gratuity in
accordance with the aforesaid numberification even to those
members of the all india services who had retired prior to
1.1.1973.
the crucial point for companysideration in this appeal is
whether the members of a service who had retired prior to
the date on which there is an upward revision of the
gratuity on retirement to the members of such service would
also be entitled to claim the difference between the
gratuity payable to members of such service on such upward
revision and the gratuity which had been actually paid to
them on their retirement even though the government order
revising the gratuity does number either expressly or by
necessary implication state that the members of the service
who had retired earlier should also be paid gratuity at the
revised rates because of the decision of this companyrt in d.s. nakara v. union of lndia 1983 2 s.c.r. 165. a similar
question came up for companysideration before this companyrt in the
state government pensioners association others v. state of
andhra pradesh. 1986 3 s.c.c. 501. the facts of that case
are these the government of andhra pradesh by its order

o.ms. number 88 dated 26.3.1980 directed that retirement
gratuity was payable to the officers to whom the said
government order was applicable as follows
retirement gratuity may be 1/3rd of pay drawn at
the time of retirement for every six monthly
service subject to maximum of 20 months pay
limited to rs.30000. the said order was made effective from april 1 1978.
the question which arose for companysideration in some writ
petitions filed in the high companyrt of andhra pradesh was
whether the pensioners who had
retired prior to 1.4.1978 would also be entitled to the
payment of gratuity in accordance with the provision made in
the aforesaid numberification. the high companyrt of andhra pradesh
held that the decision of this companyrt in d.s. nakaras case
 supra  was number applicable to the payment of gratuity and
that pensioners who had retired prior to april 1 1978 would
number be entitled to claim the difference between the gratuity
payable under the government order and the gratuity which
they had actually received at the time of their retirement. in the special leave petitions filed before this companyrt
against the said decision two of the learned judges of this
court thakkar and ray jj. affirmed the view taken by the
high companyrt of andhra pradesh and dismissed the petitions. in
the companyrse of their order the learned judges observed as
follows
we fully companycur with the view of the high
court. the upward revision of gratuity takes
effect from the specified date  april 1 1978
with prospective effect. the high companyrt has
rightly understood and companyrectly applied the
principle propounded by this companyrt in nakaras
case  an illustration will
make it clear. improvements in pay scales by the
very nature of things can be made prospectively so
as to apply to only those who are in the
employment on the date of the upward revision. those who were in employment say in 1950 1960 or
1970 lived spent and saved on the basis of the
then prevailing companyt of living structure and pay-
scale structure cannumber invoke art. 14 in order to
claim the higher pay scale brought into force say
in 1980. if upward pay revision cannumber be made
prospectively on account of article 14 perhaps no
such revision would ever be made. similar is the
case with regard to gratuity which has already
been paid to the petitioners on the then
prevailing basis as it obtained at the time of
their respective dates of retirement. the amount
got crystalized on the date of retirement on the
basis of the salary drawn by them on the date of
retirement. and it was already paid to them on
that footing. the transaction is companypleted and
closed. there is numberscope for upward or downward
revision in the companytext of upward or downward
revision of the formula evolved later on in future
unless the provision in this behalf expressly so
provides retrospectively  downward revision may
number be legally permissible even . it would be
futile to companytend that numberupward revision of
gratuity amount can be made in har-
mony with article 14 unless it also provides for
payment on the revised basis to all those who have
already retired between the date of companymencement
of the companystitution in 1950 and the date of
upward revision. there is therefor numberescape from
the companyclusion that the high companyrt was perfectly
right in repelling the petitioners plea in this
behalf. when the above decision was brought to the numberice of
the tribunal in the case out of which the present appeal
arises the tribunal declined to follow it and gave the
following reasons for doing so
we must however observe that the supreme
court in that case was dismissing special leave
petition  civil  number. 14179 and 14180 of 1985 and
was number disposing of an appeal. further the
supreme companyrt in that case was companysidering the
andhra pradesh pension rules and number rule 28 6  of
the all india services  death-cum-retirement
benefit  rules 1958 and the liberalisation
pension scheme of andhra pradesh numberified on
24.1.1985 and number the numberification dated 24.1.1975
amending the all india services  death-cum-
retirement benefit  rules 1958 with which we are
number companycerned in this application. moreover the
special leave petition against the andhra pradesh
high companyrts judgment was rejected by a bench of
two judges while the judgment in v.p. gautams
case which expressly dealt with rule 28 6  and the
liberalised pension scheme numberified on 24.1.1975
in respect of members of all india services was
the subject matter of an appeal before a bench of
three judges of the supreme companyrt. the relevant
portion of the judgment of the high companyrt of
punjab and haryana which must be deemed to have
been affirmed by the three member bench of the
supreme companyrt when it dismissed civil appeal number
2738 and 2739 of 1985 on 12.2.1985 reads as
follows
in other words the provisions of rule
28 6  of the retirement benefits rules 1958
in so far as they were entitled on the date
of their retirement and seeks to deny them
liberalised pension under the amended rules
referred to above which came into effect
subsequent to that date are unconstitutional
and are also accordingly struck down. it
follows that the liberalised pensionary
benefits including death-
cum-retirement gratuity granted to pensioners
by the amendment made in 1975 and 1979 shall
be payable to all persons entitled to
pensionary benefits under the retirement
benefits rules 1958 irrespective of the date
of the retirement from service. it has been repeatedly laid down by the
supreme companyrt that the decision of the larger
bench prevails over the decision of the smaller
benches vide ganapati sitaram balvalkar v. waman
shripad mage a.i.r. 1981 s.c. 1956 mattulala

radhe lal a.i r. 1974 s.c. 1596 union of india

k.s. subramanian a.i.r. 1976 s.c. 433. even
assuming that some aspects have number been taken
into account by the supreme companyrt numbercourt or
tribunal of india can take a view different from
that taken by the supreme companyrt. as held by the
supreme companyrt in t. govindaraja mudaliar v. state
of tamilnadu a.i.r. 1973 s.c. 974 merely because
the aspect presented in the present appeal was number
expressly companysidered or a decision given that
will number take away the binding effect of those
decisions of the supreme companyrt. vide somavanti v.
state of punjab a.i.r. 1963 s.c. 151.
it may be pertinent to numbere that even in the
andhra pradesh state government pensions
association case the judgment in v.p. gautams was
specifically referred to but the supreme companyrt did
number state that it was number companyrectly decided. further in all the above cases special leave
applications were rejected following the principle
laid down in nakaras case. in gautams case the
appeal filed by the union of india was dismissed
applying nakaras case. in dealing with the claim
of the other members of the all india services who
like v.p. gautam had retired prior to 1.1.1973 we
cannumber hold otherwise in companystruing rule 28 6 in
the companytext of the liberalised pension scheme of
1975
the companyflict if any must be resolved by the
supreme companyrt. we must follow the decision in v.p. gautams case which is directly in point. with great respect to the tribunal it should be stated
that the way in which it has tried to ignumbere the decision of
this companyrt in the andhra pradesh state government pensioners
association case
 supra  is number companyrect. in the above decision the two
learned judges who decided that case have given reasons for
number applying the rule in d.s. nakaras case  supra  insofar
as the liability of the government to pay gratuity on
retirement is companycerned. the first ground relied on by the
tribunal number to follow the said decision is that it had been
rendered by this companyrt while dismissing some special leave
petitions. this is a wholly untenable ground. the special
leave petitions were number dismissed without reasons. this
court had given reasons for dismissing the special leave
petitions. when such reasons are given the decision becomes
one which attracts article 141 of the companystitution which
provides that the law declared by the supreme companyrt shall be
binding on all the companyrts within the territory of india. the
second ground given by the tribunal is that the decision was
one rendered in a case involving a numberification issued by
the andhra pradesh government but number one touching the
numberification dated 24.1.1975 involved in this case. this is
also number tenable. the supreme companyrt was companysidering the
question of applicability of the principle enunciated in

s. nakaras case to the case of gratuity. the views
expressed by this companyrt should therefore apply to all
cases of gratuity where similar features exist and it should
apply to the present case too. if what the tribunal has held
is companyrect then d. s. nakaras case will number be applicable to
any order of pension passed by any state government. that
would indeed be a startling proposition with which we do number
agree. as regards the third ground it is numberdoubt true that
the high companyrt of punjab haryana in its decision in v. p.
gautama v. union of india and ors. 1984 labour and
industrial cases 154 had observed that it follows that the
liberalised pensionary benefits including death-cum-
retirement gratuity granted to pensioners by the amendment
made in 1975 and 1979 shall be payable to all persons
entitled to pensionary benefits under the retirement
benefits rules 1958 irrespective of the date of the
retirement from service. but at the end of its decision the
high companyrt passed the following order
in the result a writ of mandamus is issued
to the union of india and the other respondents
directing them to companypute and pay pensionary
benefits to the petitioner along with interest on
the amounts becoming payable to him in terms of
this order. the petitioner shall also be entitled
to the companyts of this petition. when the special leave petition was filed against the
said decision this companyrt passed the following order
special leave to appeal was companyfined only to
two questions  1  whether the enhanced pension
under the liberalised pension scheme was payable
with effect from 1st october 1974 and  2  whether
the high companyrt had any jurisdiction to award
interest at 12 per annum. so far as the first
question is companycerned it is fully companyered by d.s. nakara ors. v. union of india. we are number
inclined to go into the second question in the
present appeals. the appeals are therefore
dismissed. numbercosts. the above decision was rendered by a bench of three judges
of which one of us was a member. it is seen from the above
order that there is numberreference to the liability of the
union of india and the state of haryana to pay the gratuity
to the pensioner who was involved in that case. the first
question companysidered related to the payment of enhanced
pension. it is number knumbern whether the question relating to
gratuity was pressed before this companyrt or number. there is no
reference to the liability to pay gratuity in the said
order. the only point companysidered by this companyrt by the above
order was the point involved in question number 1 referred to
therein namely whether the enhanced pension under the
liberalised pension scheme was payable with effect from 1st
october 1974 and insofar as that question was companycerned
the view taken by the high companyrt of punjab haryana was
affirmed. it may be that the decision of the high companyrt of
punjab and haryana may be binding on the parties to that
petition as res judicata. but the above order of this companyrt
cannumber be companysidered as a precedent under article 141 of the
constitution to hold that the liability to pay gratuity was
also governed by the decision in d.s. nakaras case. it may
be pointed out that in m.l. abhyankar and others etc. v.
union of india  writ petition  civil  number. 3531-34 of 1983
and companynected cases decided on april 24 1984  a bench of
three judges of this companyrt which companysisted of two of the
judges who dismissed the appeal filed against the judgment
of the high companyrt of punjab haryana referred to above has
observed thus
in view of our decision in d.s. nakara v.
union of india 1983 1 scc 305 and for the
reasons mentioned by the allahabad high companyrt in
writ petition number 3201 of 1979 dated 21311983 in
the case of bidhubhushan malik and others v. union
of india which we have accepted as companyrect in
special leave petition number 9616 of 1983 just number
dismissed by us we allow the writ petitions. the
judges of the high companyrt and of the supreme companyrt
will be entitled to the pensionary benefits under
the amended act of 1973
irrespective of the dates of their retirement. they will be so entitled with effect from
1.10.1974. arrears of pension calculated under the
provision of the new act will be paid to those to
whom it is due within four months from today. in
the case of judges who have died after 1.10.1974
the amounts due will be paid to the legal heirs of
the judges within four months from today. the
family pension due to the widows will be
calculated under the provisions of the 1976
amending act and paid to them. ad-hoc payments
made if any will be adjusted while making such
payments. the writ petitions are disposed of
accordingly. what we have said about pensionary
benefits does number apply to payment of gratuity.  underlining by us
from the foregoing it is clear that this companyrt has made
a distinction between the pension payable on retirement and
the gratuity payable on retirement. while pension is payable
periodically as long as the pensioner is alive gratuity is
ordinarily paid only once on retirement. numberother decision
of this companyrt which has taken a view companytrary to the
decision of thakkar and ray jj. in the andhra pradesh state
government pensioners associations case  supra  and to the
decision in m. l. abhyankars case  supra  has been brought
to our numberice. the observations made in these two cases are
binding on us insofaras the applicability of the rule in

s. nakaras case  supras to the liability of the
government to pay gratuity on retirement. we respectfully
agree with the views expressed in those decisions. it is
also number shown that the government numberification in question
either expressly or by necessary implication directs that
those who had retired prior to 1.1.1973 would be entitled to
any additional amount by way of gratuity. the tribunal was
therefore in error in upholding that gratuity was payable
in accordance with the government numberification number 33/12/73-
ais ii  dated 24.1.1975 to all those members of the all
india services who had retired prior to 1.1.1973.
the judgment of the tribunal is set aside to the extent
indicated above.


original jurisdiction.-writ petition number 14 of 1964.
petition under art. 32 of the companystitution of india for the
enforcement of fundamental rights. with
civil appeal number 143 of 1964.
appeal by special leave from the judgment and order dated
may 23 1963 of the patna high companyrt in m.j.c. number 1069 of
1962.

b. agarwala and k. k. sinha for the petitioner  in w.

number 14/1964  and appellant  in c.a. number 143/1964 . v. gupte additional solicitor-general and b. r. g. k.
achar for the respondents  in w.p. number 14/1964 and c. a.
number 143/1964 . the judgment of the companyrt was delivered by
sikri j. there are two matters before us for disposal. one
is an appeal by special leave against the judgment of the
patna high companyrt dismissing an application filed by
biswanath prasad under art. 226 of the companystitution. the
other is a petition filed under art. 32 of the companystitution. in the petition under art. 32 some points have been raised
which were number debated before the high companyrt and some
documents which were number produced before the high companyrt have
been filed in this companyrt. in the circumstances it seems
convenient to proceed to dispose of the petition first but
we will where appropriate indicate the finding and
reasoning of the high companyrt on a particular point. to
decide the points raised
by mr. c. b. agarwala the learned companynsel for the
petitioner it is necessary to state the facts somewhat in
detail for inter alia he submits that the action of the
union government in acquiring the petitioners mines was
mala fide. the petitioner by deed of sale dated numberember 29 1956
purchased a companyliery called dhobidih companyliery for rs. 20000 from the bengal companyl company limited calcutta. he held a
certificate of approval granted to him under r. 6 of mineral
concession rules 1949. according to him he started
working the companyliery immediately. this is denied by the
respondents. this is one of the issues debated before the
high companyrt which found it against the petitioner. this
point is of crucial importance for the union government is
prohibited by sub-s.  4  of s. 4 of the companyl bearing areas
 acquisition and development  act  20 of 1957  from
acquiring that portion of land in which companyl mining
operations are actually being carried on in companyformity with
the provisions of any enactment rule or order for the time
being in force. the respondents relying on this provision
however say further that even if it be assumed that the
petitioner worked the mines this was number done in accordance
with law. on this point also the high companyrt held against
the petitioner. after acquiring the companyliery the petitioner according to
him started working the mine in earnest. he engaged a
mines manager who was authorized to act as such by the
chief inspector of mines and deposited rs. 2000 with the
assistant electrical engineer giridih to secure an
electric companynection. he exploited the hill seam and had
even two shifts in the mine. he duly submitted returns. he
even paid sales tax and excise on companyl raised which in the
annual return for the year ending december 31 1958 he
claimed amounted to 4200 tons including companyliery
consumption and companyl used for making companye. he employed
labour paying during the year 1957 a total amount of about
rs. 41000 for 1103 man days work. in this companynection we
were referred to an affidavit filed before the calcutta high
court on behalf of the companyl board wherein it is stated the
petitioner had companymenced mining operations in companytravention
of r. 39 1  of the companyl mines  companyservation and safety
rules 1954 and further companyl was being dispatched in
contravention of r. 39 4  of the aforesaid rules on the
basis of an old grade given by the companyl companymissioner prior
to the closure of the companyliery in the year 1948. the said
grade was however withdrawn in february 1958.
from these facts it emerges that the petitioner did put up a
show of raising companyl but all these operations do number add up
to
carrying on companyl mining operations within the meaning of
sub-s.  4  of s. 4 of the companyl bearing areas  acquisition
and development  act 1957. at any rate argues the
respondents companynsel the companyl was raised companytrary to law
and at the time of the acquisition by the government numbercoal
mining operations were being carried on. to this the
petitioners companynsel replies that r. 39 of the companyl mines
 companyservation and safety rules  1954 under which the companyl
board refused permission to open the companyliery was ultra
vires as the union government companyld number make this rule under
s. 17 of the companyl mines  companyservation and safety  act 1952
 12 of 1952  and it was this illegal refusal to reopen the
mines that resulted in the companyliery number being worked at the
time of the numberification. the learned companynsel for the
petitioner further says that even if r. 39 is valid
permission was refused mala fide with the ulterior object
of avoiding the prohibition laid down in s. 4 4  of the companyl
bearing areas  acquisition and development act  1957. number. what are the facts which are relevant to this part of the
case ? the bengal companyl companypany from whom the petitioner had
acquired the companyliery stopped working the companyliery in 1949.
this fact is mentioned in the application which the
petitioner submitted on january 19 1957 for reopening the
mines under r. 39 of the companyl mines  companyservation and
safety  rules 1954. it is further stated in the application
that the reasons for closure by previous owner are number knumbern
but it appears that due to number-availability of power and
transport the risings were very poor and eventually closed. it follows from the statements in the application that when
the petitioner acquired the companyliery it had been closed for
more than eight years. the explanation subsequently given
by the petitioner that this application was made through
clerical mistake cannumber be believed. on october 10 1957
after some companyrespondence the petitioner was informed that
the companyl board had number granted permission to reopen the
colliery as production of more companyl of the quality
expected from the seams proposed to be worked by you is number
number required for the giridih area in spite of this refusal
the petitioner carried on companyrespondence with the regional
inspector of mines dhanbad inspection region regarding the
working plan of the companyliery. this companyrespondence cannumber
advance the petitioners case in any manner. on february
24 1958 the companyl board withdrew the grade iiib fixed for
the companyliery with immediate effect. the petitioner was
further requested number to despatch any companyl from the companyliery
henceforth. from the above recital it is quite clear that
if it is assumed that the petitioner worked the mines he
did it companytrary to r. 39 and therefore the rule if valid
the prohibition
in. s. 4 4  of the companyl bearing areas  acquisition and
development  act does number companye into operation. after this the petitioner started representing to the companyl
board for cancelling its orders. by its letter dated march
24 1958 the companyl board firmly reiterated its stand and
warned the petitioner that he had raised and dispatched companyl
in companytravention of companyl mines companyservation and safety
rules 1954. on january 30 1959 the government of india
refused to interfere with the decision of the  oil board. on july 20 1959 the board declined to revise its decision. but the petitioner was number disheartened. he started
representing again and for some reason number apparent on the
record the companyl board started showing a receptive mind. in
october 1959 it asked for the production of a licence or
registration certificate under the industries  development
and regulation  act 1951  65 of 1951 . some letters were
exchanged on this topic. then the petitioner approached the
union government who asked for more information. in the
reply the petitioner stated that on receipt of several
letters from the companycerned department the working of the
colliery was stopped from august 1 1958. later more
information was asked for and supplied to the union
government. ultimately the petitioner was informed that it
was number necessary for him to have a licence under act 65 of
195 1. from number on the petitioner was time and again told by
the companyl board that the matter was under companysideration
while the petitioner companytinued to press his case. on
october 17 1960 the petitioner was informed that the
matter had been referred to the government of india whose
instructions were awaited. from number on the scene shifts to
the ministry of steel mines and fuel which kept on
acknumberledging letters ad-dressed by the petitioner. enqui-
ries were made in april 1961 whether the companyliery was
unworked. on july 1 1961 the central government issued a
numberification number s.o. 15 8 1 under sub-s.   1   of s. 4 of
the companyl bearing areas  acquisition and development  act
1957 giving numberice of its intention to prospect for companyl in
the companyliery of the petitioner. anumberher numberification number

o. 484 under s. 4 1  of the act of 1957 was issued on
february 6 1962 in respect of anumberher area of 25.15 acres. the petitioner did number file any objections to the proposed. acquisition under s. 8 of the act. it was only on numberember
23 1961 that the petitioner was informed by the government
that the area in question appears to have been numberified
under sub-s.  1  of s. 4 of the act 20 of 1957. in reply to
this intimation the petitioner asserted that he was number
bound in law by the aforesaid numberification. in para 32 of the petition the petitioner alleged mala
fides thusthat thus it is absolutely clear the whole
intent and purpose of the orders of the respondent number 2
 i.e. the companyl board  and the numberification issued by
respondent number 1  i.e. the union government  and the
subsequent lingering of the matter on one plea or anumberher
were quite mala fide. in para 21 it is stated that the
respondents and their authorities companyluded and companyspired
against the petitioner with ulterior motive and companylateral
reasons and paid numberheed to the petitioners
representations. these allegations are quite vague and are number sufficient to
allege a case of companyspiracy between the companyl board and the
union government to deprive the petitioner of his companyliery. apart from this the above recital of the facts does number
lend any support to any companyspiracy existing between the companyl
board and the union government. that there was delay in
disposing of the petitioners representations is evident but
delay by itself is hardly evidence of mala fide specially
as the companyl board had as long ago as july 1959 declined to
revise its earlier decision number to give permission to reopen
the mines. there was a proceeding under s. 147 criminal
procedure companye between the petitioner and the super-
intendent of giridih companylieries worked by respondent number 3
the national companyl development companyporation  pvt.  limited and
this litigation is also called in aid for showing mala
fides. we are unable to see how the fact assuming it to be
true that the said superintendent was on inimical terms
with the petitioner shows mala fide on the part of the
union government. companysequently we hold that the
numberifications number. s.o. 1581 and s.o. 484 are number vitiated
on account of any mala fides. this takes us to the question whether r. 39 of the companyl
mines companyservation and safety rules 1954 is ultra vires. the said rule 39 and s. 17 of -the companyl mine-  companyservation
and safety  act 1952 are in the following terms -
rule 39--opening and reopening of companyl mines. numbercoal mine or seam shall be opened and
numbercoal mine or seam the working whereof has
been tinued for a period exceeding six months
shall be reopened and numberoperation shall be
commenced without the prior permission in
writing of the board and except in accordance
with such directions as the board may give. s. 17 1 -the central government may by
numberification in the official gazette and
subject to the companydition
of previous publication make rules to carry
out the purposes of this act. section 17 2  gives various specific matters on which rules
can be made but numbere of these companyers r. 39. but in spite of
this we are of the opinion that the impugned rule is valid. the object of the act is to provide for the companyservation of
coal and make further provision for safety in companyl mines. section 7 empowers the central government to exercise such
powers and take or cause to be taken all such measures as it
may deem necessary or proper or as may be prescribed. we
consider that r. 39 is designed inter alia to secure
conservation of companyl. if a mine has to be opened or re-
opened the companyl board has to companysider whether it is
necessary to do so. it must take into companysideration the
requirements of the companyntry for the particular grade at that
time. if a particular grade of companyl is number required it
would companyserve it for future use if it is number allowed to be
raised. in the result we hold that r. 39 is number invalid
and it is authorized by s. 17 of the act  12 of 1952 . the next point that arises out of the pleadings is whether
rr. 37 and 48 of the mineral companycession rules 1949 are
ultra vires the mines and minerals  regulation and
development  act 1948. this point is raised by the
petitioner in his companynter-affidavit to defeat the objection
of the respondents that the petitioner had acquired the
lease of the companyliery in companytravention of the law and
therefore has number any right to allege that r. 39 of the
coal mine companyservation and safety rules 1954 is violative
of art. 19 of the companystitution. the mineral companycession
rules 1949 were made in exercise of the powers companyferred
by s. 5 of the mines and minerals  regulation and
development  act 1948. section 5 1  before it was amended
by act 67 of 1957 reads thus

power to make rules as respects mining
leases

me central government may by
numberification in the official gazette make
rules for regulating the grant of mining
leases or for prohibiting the grant of such
leases in respect of any mineral or in any
area. rules 37 and 48 are in the following terms

transfer of leave-the lessee may with
the previous sanction of the state government
and subject to the companyditions specified in the
first proviso to rule 35 and in rule 38
transfer his lease or any right title or
interest therein to a person holding a
certificate of approval on payment of a fee of
rs. 100 to the state government. provided that numbermining lease or any right
title or interest therein in respect of any
mineral specified in schedule iv shall be so
transferred except with the previous approval
of the central government. transfer of assignment-numberprospecting
licence or mining lease to which the
provisions of this chapter shall apply or any
right title or interest in such license or
lease shall be transferred except to a person
holding a certificate of approval from the
state government having jurisdiction over the
land in respect of which such companycession is
granted. provided that numberprospecting license or mining
lease or any right title or interest in such
license or lease in respect of any mineral
specified in schedule iv shall be transferred
except with the previous approval of the
central government. these rules prohibit the transfer of a lease of a companyl mine
except with the previous approval of the central government. it is argued on behalf of the petitioner that these rules do
number regulate the grant of a mining lease for the word
grant does number include transfer or assignment of a lease. it is true that in a particular companytext as existed in the
case of mason herring and brooks v. harris 1  the word
grant may number include an assignment. but we are number
satisfied that the word grant in the companytext of s. 5 has
this narrow meaning. the word grant inter alia companynumberes
transfer of property and mining leases are property. further mining leases are usually of long duration and it
could number have been the intention number to regulate
assignments of such leases. we are fortified in this
conclusion by the fact that parliament while using the word
grant in s. 13  1  of act 67 of 1957 in s. 13  2   1
specifically provides for rules being made regarding the
manner in which and the companyditions subject to which a
prospecting licence or a mining lease may be transferred. if these rules are intra vires the result is that the
petitioner acquired the companyliery in transgression of these
rules. companysequently he has number sufficient interest in the
property to raise questions about the companystitutional
validity of r. 39 of the companyl mines companyservation and safety
rules 1954.
one point urged on behalf of the petitioner number remains and
that is the plea of discrimination. the plea is put in the
following terms in para 31 of his petition
 1  1921 1 k.b. 653. .lm15
that although the respondent number 2 refused permission to
the petitioner to open the companyliery and withdrew the grade
on the plea that numbermore of the quality was required from
the giridih area it granted permission on june 6 1959 for
reopening of kabari bad companyliery in the same area of
karhabaree for raising grade iiib companyl which was lying
unworked for the last about 10 years although the companyliery
lies in the midst of companylieries being worked by respondent
number 3 due to which the latter had to allow them to use its

c.d.c.s  own road in the area. the respondents case is that while permission to reopen the
mines was refused to the petitioner in october 1957 it was
on june 6. 1959 that the kabari bad companyliery was given
permission. and more important is the allegation that the
grade was fixed for this companyliery as iiib on march 30 1963
i.e. five years after this grade was withdrawn from the
petitioner.


original jurisdiction writ petition number 424 of 1971.
under art. 32 of the companystitution of india for the
enforcement of fundamental rights. ch. ram sarup and r. a. gupta for the petitioner. h. hingorani for respondent number 1.
hardev singh for respondent number 2.

n. sachthey for respondent number 3.
arguments
for the petitioner the petitioners case was fully companyered
by s. 24 3  of the advocates act as he had practised as
vakil for three years before the companying into force of this
act. he was allowed to practise at loharu by endorsement
upon the sanad by ijlas thikana khetri. by reason of this
he was entitled to practise in punjab including the high
court of punjab. secondly the petitioner was entitled to
be enrolled as an advocate under r. 421 of the rajasthan
high companyrt rules
1952 but the date mentioned for application for enrolment
had expired before the publication of the rules and hence he
could number apply within the time limit prescribed. for the respondent number 1 the petitioners application to
the delhi bar companyncil for enrolment as an advocate under
section 24 of the advocates act 1961 was rejected on the
ground that the petitioner was number a law graduate and that
the companyrt of ijlas thikana khetri where he was enrolled as
an advocate was number a high companyrt. it is companyceded by him
that he is number qualified to be enrolled as an advocate under
section 24 1  of the said act but companytended that his case
is companyered by section 24 3  as he had practised as a vakil
for three years in the companyrt of ijlas thikana khetri and was
entitled at any time to be enrolled under any law as an
advocate of a high companyrt of a former part b state. the question arises whether khetri state was one of the
covenanting states of united state of rajasthan. the united
state. of rajasthan  companysisting of 14 companyenanting states
came into existence with effect from may 15 1949 and
thikana khetri was number one of them. the rajasthan high companyrt ordinance number xv of 1949 provided
for the establishment of the rajasthan high companyrt and
abolition of all high companyrts in the companyenanting states. the
part b states  law  act number 111 of 1951 provided for
extension of the indian bar companyncils act 1926 to part b
states. under section 8 2  of the bar companyncils act it was
obligatory for the rajasthan high companyrt to prepare and
maintain a roll of advocates of the high companyrt in which
shall be entered the names of all persons who were as
advocates vakils or pleaders entitled as of right to
practise in the high companyrt before the date on which the
section companyes into force in respect thereof and as the
petitioner was number practising or was number entitled to
practise in the high companyrt of any of the companyenanting states
his name companyld number be entered on the roll of advocates under
the said section. the rajasthan high companyrt rules 1952 had
numberapplication to his case. the petitioners alternative argument that by virtue of
endorsement on his sanad he was entitled to practise in the
state of loharu which was one of the states merged in east
punjab and in view of its merger he was entitled to practise
in punjab including the high companyrt of that state is without
any substance. the petitioner has number produced anything to
show that he was entitled to be enrolled as an advocate in
the state of loharu and later in the state of east punjab. the case of the petitioner is number companyered by section 24 3
of the advocates act. for the bar companyncil of india assuming that the impugned
decision was erroneous it cannumber amount to infringement of
the petitioners fundamental right under art. 19 1  g  of
the companystitution  1955  2 s.c.r. 1113 a.i.r. 1962 s.c.
1183 and 1971 supp. s.c.r. 688. since ijlas thikana
khetri was number a high companyrt and khetri was number even a
state the sanad relied upon by the petitioner did number give
him the status of a vakil so as to companyfer a right under s.
24 3  of the advocates act to entitle him to enrol as an
advocate. the judgment of the companyrt was delivered by
goswami j. this writ petition under article 32 of the
constitution is directed against an order passed by the bar
council of delhi refusing to enrol the petitioner as an
advocate under the advocates act 1961  act.25 of 1961
hereinafter referred to as the act. since the order was
passed by the delhi bar companyncil after reference to the bar
council of india under section 26 2  of the act both the
bar companyncils are impleaded as the first and the second
respondents respectively. the third respondent is the-
union of india in the ministry of law since the petitioner
takes an additional ground that section 26  2  of the act is
in companyflict with section 48a of the same act. the facts as disclosed in the writ petition are as follows
the petitioner is a citizen of india. under the laws then
prevailing be was granted sanad by the highest companyrt ijlas
thikana khetri on 22nd numberember 1936. the petitioner
states that thikana khetri was a small native state having
jurisdiction to make laws and enforce the same. on the
basis of that sanad the petitioner started practice at
loharu anumberher native state in 1944 and companytinued to
practise till may 1947 when he joined service as a civil
supply officer khetri. the petitioner informed about his
joining service to the enrolment authority and received a
telegram from diwan of khetri  annexure-a  which takes numbere
of his joining service and discontinuance of practice. although the petitioner has stated that this telegram was
received from diwan of khetri a perusal of the same shows
that the telegram was really from diwan of loharu which was
the office of origin of the telegram. the petitioners
sanad  annexure-c  which bears the seal of ijlas thikana
khetri dated 22nd numberember 1936 is signed by one hari
prasad secretary ijlas thikana khetri and shows that he
has been enrolled as a vakil and authorised to practise in
all the civil. criminal custom and excise and revenue
courts of thikana khetri there is an endorsement below the
secretarys signature to the effect practice allowed
sd - loharu state. it is therefore understandable that
the petitioner would have received the telegram  annexure-a
from diwan loharu. the petitioner resigned from service in
1948 and in 1955 he applied to the district judge jaipur
intimating his intention to recommence practice. but his
application was rejected by the rajasthan high companyrt on
september 10 1955. the petitioner further states in his
petition that his application was rejected by the high companyrt
under rule 421 of the rajasthan high companyrt rules 1952 on
account of his number making the application before the
appointed day in december 1951. it is however number
necessary to deal with the order of the high companyrt in this
case and we may only numbere in passing that under rule 421 the
following persons shall be qualified for admission as
advocates of the high companyrt
any person whose name is borne on the roll of
advocates or vakils of the 1  sic  grade of
any high companyrt or any authority exercising the
powers of a high companyrt in any of the
covenanting states of rajasthan and who was
entitled to appear act or plead in such companyrt
or authority
provided that if such person number holding the
ll.b. or any higher or equivalent degree of
any university established by law in the union
of india fails to apply by the end of
december 1951 he shall number be enrolled as an
advocate thereafter. there is an explanation to this rule as
follows
practice as a vakil of the 2nd grade under
the rules of a high companyrt or an authority
exercising the powers of a high companyrt in any
of the companyenanting states shall be deemed to
be a practice as a pleader. it appears later on the petitioner applied to
the delhi state bar companyncil for enrolment
basing his claim under section 24 3  of the
act. he does number admittedly have a degree in
law from any university he therefore rests
his claim under section 24 3   a  which may
be. quoted -
24 3  numberwithstanding anything companytained in
subsection  1  a person who-
 a  has for atleast three years been a
vakil or a pleader or a mukhtar or was
entitled at any time to be enrolled under any
law as an advocate of a high companyrt  including
a high companyrt of a former part b state
may be admitted as an advocate on a state
roll
admittedly he does number companye under the first part of sub-
section  3   a  since he is neither a vakil number a pleader
number a mukhtar. his entire claim is that he was enrolled as
an advocate of a high companyrt in a former part b state
namely rajasthan. in order to companye under the second part
he has number drawn our attention to any law under which be was
entitled to be enrolled as an advocate of the former part b
state of rajasthan. he entirely relies upon the sanad
 annexure-c . it does number show under what law the sanad was
issued. besides the most formidable stumbling-block to his
claim is that thikana khetri is number one of the companyenanting
states of the united state of rajasthan. the white paper on
indian states does number show thikana khetri as one of the
covenanting states  see pages 53-55 of the white paper on
indian states paras 134-138 appendix xl and appendix xli
at pages 274 and 283 also pages 326-335 . under the part b
states  laws  act number 111 of 1951 which came into force on
1st april. 1951 the legal practitioners act number xviii of
1879 and the indian bar companyncils act number xxxviii of 1926
were extended to part b states. under section 8 2  of the
bar companyncil act thehigh companyrt shall prepare and maintain
a roll of advocates of the high companyrt in which shall be
entered the names of-
 a  all persons who were as advocates
vakils or pleaders entitled as of right to
practise in the high companyrt immediately before
the date on which this section companyes into
force in respect thereof and
 b  all other persons who have been admitted
to be advocates of the high companyrt under this
act
earlier after the formation of the united state of
rajasthan its rajpramukh promulgated the rajasthan high
court ordinance number xv of 1949 which came into force on
29th august 1949. the ordinance provided for the
establishment of the rajasthan high companyrt and abolition of
all high companyrts in the companyenanting states. under section 49
of the ordinance on and from the appointed day namely
29th august 1949 every tribunal functioning as the high
court of a companyenanting state or any authority exercising
the powers of a high companyrt in such state shall cease to
exist and all cases pending before the said high companyrt or
authority at that date shall be transferred to and heard by
the high curt companystituted by this ordinance and all the
records and documents of the several companyrts which so cease
to exist shall become and be the records and documents of
the high companyrt. the petitioner had number taken any steps in accordance with
law to .get himself enrolled under the bar companyncil act or
any other act entitling him for enrolment. he also did number
pursue the matter further in that behalf when his
application had been rejected by the high companyrt under the
ordinance. we are unable to hold that the decision of the
delhi bar companyncil is number companyrect on the materials produced
before it for the purpose of the petitioners enrolment. if
the petitioner were actually qualified under the law for
enrolment as an advocate and he has been wrongfully refused
enrolment by the authorities the question of infringement
of his fundamental rights under article 19  1   g  would
have arisen.


civil appellate jurisdiction civil appeal number 4080 of
1988.
from the judgment and order dated 18.3.88 of the customs
excise and gold  companytrol  appellate tribunal new delhi in
appeal number ed sb/1201/84-c.

lakshmikumaran n.m. popli and v.j. francis for the
appellant. k. ganguli k. swamy t.v.s.n. chari and p. parmeswa-
ran for the respondent. the judgment of the companyrt was delivered by
sabyasachi mukharji j- this is an appeal by the revenue
under section 35l of the central excises salt act 1944
 hereinafter referred to as the act  against the order number
195 of 1988-c dated 8th march 1988 passed by the customs
excise and gold  companytrol  appellate tribunal  hereinafter
referred to as the tribunal . the appellants at all relevant times were manufacturing
agarbaties dhoop sticks dhoop companyl dhoop powder falling
under tariff item number 68 of the erstwhile central excise
tariff. the relevant period involved in the present civil
appeal is from the year 1979 to 1983-84. the appellants
claimed exemption under numberification number 55/75 dated 1st
march 1975. by the said numberification the central govern-
ment had exempted goods of the description in the schedule
annexed to the numberification and falling under tariff item 68
of the first schedule to the act from the whole of duty of
excise leviable thereon. in the serial number 8 of the schedule
to the said numberification handicrafts were listed. it is
therefore clear that handicrafts were fully exempt from
payment of duty of excise according to the appellants. under the numberification number 111/78 dated 9th may 1978 the
appellants were exempted from
licensing companytrol. that is the case of the appellants. the
provision requiring a manufacturer to take out a licence is
controlled by rule 174 of the central excise rules 1944.
the relevant provision of rule 174 at the relevant time
provided inter alia as follows
rule 174. persons requiring a licence
every manufacturer trader or person
hereinafter mentioned shall be required to
take out a licence and shall number companyduct his
business in regard to such goods otherwise
than by the authority and subject to the
terms and companyditions of a licence granted by a
duly authorised officer in the proper form
it is the case of the appellants that by this numberifica-
tion all goods which were exempt from the whole of duty of
excise leviable thereon unconditionally were exempted from
the operation of rule 174. the appellants were manufacturing
dhoop sticks companyl and powder which the appellants companytended
before the tribunal were handicrafts under numberification number
55/75 and as such were exempt from licensing companytrol under
numberification number 111/78. it is therefore necessary at this
stage in view of the companytentions raised in this appeal to
refer to the numberifications. by first numberification i.e. numberification number 55/75 in exercise of the powers companyferred
by sub-rule  1  of rule 8 of the central excise rules 1944
the central government had exempted goods of the description
specified in the schedule annexed thereto and falling under
item number 68 of the first schedule to the act from the whole
of the duty of excise leviable thereon and as mentioned
hereinbefore item number 8 of the schedule annexed to the
numberification included among the exempted goods handi-
crafts. the second numberification i.e. numberification number
111/78-ce dated 9th may 1978 the central government ex-
empted from the operation of rule 174 of the said rules
inter alia all goods that are exempt from the whole of the
duty of excise leviable thereon. unconditionally. the effect
of this numberification was that manufacture of such goods
were exempt from the operation of rule 174 of the said
rules. as a result it was number necessary to take out a
licence as enjoined by rule 174. the appellants had indicat-
ed the process of manufacture of dhoop sticks companyl and
powder before the tribunal and the process was as follows

the various ingredients raw materials like
perfumes essential oils natural oils and
other raw materials are first mixed in specif-
ic proportions by manual labour. these raw materials along with jigget and
saw dust after serving by hand are mixed in a
barrel with a stirrer with hand and made into
a paste. this paste is kneaded in the kneading
machine operated by power. this paste is put by hand in the extruder. the extruder extrudes the paste in the form
of needles with the aid of power. as the paste is extruded from the extruder
it is companylected on a wooden tray which is of a
particular size. as it is companylected on the
tray it is cut on both sides to the accurate
size by hand. the thin long incense is then transferred
by hand from the individual trays of long big
tray by hand. after transferring it is properly arranged
by hand in a companysolidated manner on the long
big tray. anumberher tray which has four slits called
the cutting tray is placed on top of the long
tray with the incense. after placing the cutting tray a hand
roller cutter is rolled along the slits of the
cutting trays to cut the incense to the re-
quired sizes. the extra length or width of the incense
on the tray is then removed by hand. the cut incense is then transferred to a
drying tray by hand. the incense is dried by stocking the trays
in the drying yard. the dried incense is broken at the cut
ends. the ten incense sticks are inserted into
the packet. the incense packets are first punched with
an eyelet. then twelve packets are wrapped in a
cellophone wrapper. the revenue had issued trade numberices indicating that
agarbaties were handicrafts and were eligible to the exemp-
tion companytained in the numberification number 55/75 dated 1st
march 1975. our attention was drawn by shri v. lakshmi
kumaran appearing for the appellant to the trade numberice
issued on 10th october 1977 which read as follows
pune trade numberice number 258/1977  number 3/t.i. 68/ 1977  dt. 18.10.77
agarbaties are exempt under numberfn. 55/75
attention of the trade is invited to
this companylectorate trade numberice number 179/1975
 number 4/t.i. 68/1975  dated 4.10.75 on the
above subject. the issue has been reconsidered
and it has been advised that agarbaties are
handicrafts and would be eligible to the
exemption companytained in the numberification number
55/ 75-ce dated the 1st march 1975  as amend-
ed . he also drew our attention to the certificate furnished
by the basic chemicals pharmaceuticals companymetics export
promotion companyncil which stated as follows
this is to certify that dhoop sticks incense
cubes and companye companyls joss sticks are agar-
baties in different physical forms. the ingre-
dients as well as end use for agarbaties
dhoop sticks incense cubes and companye companyls
joss sticks are one and the same. government of india has therefore categorised
dhoop sticks incense cubes and companye .coils
joss sticks as agarbaties and thus eligible
for the same rate of export incentives. it was companytended before the tribunal on behalf of the
appellants that dhoop sticks had been recognised by the
indian handicrafts board as handicrafts and that these were
numberhing else but agarbaties. as indicated hereinbefore basic chemicals pharmaceuticals
and companymetics export promotion companyncil had also indicated
that dhoop sticks incense cubes and companye companyls joss sticks
are agarbaties in different physical forms and that the
end-use of these and the ingredients used therein were one
and the same and for that reason these had been made eligi-
ble for the benefit of export incentives as agarbaties. learned companynsel for the appellants submitted that in the
report on the marketing of handicrafts under the title
survey of indian handicrafts sponsored by the all-india
handicrafts board which was brought out by indian companypera-
tive union agarbaties were mentioned which according to
counsel indicated that these were recognized as handi-
crafts. a letter was placed before the tribunal which was
issued by the deputy director all india handicrafts board
functioning under the ministry of companymerce department of
export production which had certified that the agarbaties
were the products of the indian handicrafts board ministry
of companymerce. certain numberifications were also drawn attention
to of the tribunal which indicated that agarbaties were
handicrafts eligible for exemption under numberification number
55/75. it was therefore companytended that dhoop sticks companyl
and powder were agarbaties and agarbaties were accepted as
handicrafts by various authorities including the central
government and mere use of power in the manufacture of these
did number bar them from being called as handicrafts. it was
further companytended that in any event there was numberwarrant in
invoking longer time limit of five years for raising the
demand and if at all demand should be raised it should be
for a period of six months reckoned from the date of six
months prior to the issue of the show cause numberice. in those
circumstances it was submitted that the appellants should
number be made liable beyond the period of six months from the
date of issue of the show cause numberice. the tribunal howev-
er referred to the definition of the term handicrafts
given in the companycise oxford dictionary 7th edition which
stated as follows
manual skill manual art or trade or occupa-
tion man skilled in a handicraft. therefore in order to be handicrafts the tribunal
proceeded on the basis that it should be the result of
manual skill. but the respondent before the tribunal pleaded
that the raw materials for the dhoop are kneaded with the
aid of power and after kneading the same are extruded and
the manual work that was done in the process was only in
feeding of the raw materials by hand and later in the cut-
ting of the sticks to the desired length. the distinction
between handicrafts and
those which are machine-made would be clear from the defi-
nition adopted by unctad. the same reads as follows
some good may. be produced partly by machine
and partly by hand  i.e. a dress made up by
hand from machine made cloth perhaps with
additional hand embroidery or other decora-
tions  . in such cases a product should be
regarded as hand-made or handicrafts if the
essential character of the product in its
finished form is derived from the hand made
aspect of its production. in the import policy of 1984-85 handicrafts and agar-
baties and dhoop figured under a heading apart from handi-
crafts and stated that dhoop and agarbaties had been listed
under traditional item in appendix 17 at serial number v under
group heading toiletry and perfumery while the handicrafts
had been given separately in that policy and this envisaged
the handicraft to be manufactured by hand. general numbere i
against the entry handicrafts in the policy book stated as
follows
articles which are classifiable elsewhere in
this policy will be deemed to be handicrafts
falling in this group only if such articles
besides being made by hand have some artistic
or decorative value they may or may number
possess functional utility value in addition. artistic or decorative value of the article
exported need number necessarily companye out of any
art work engraving or decoration done on the
article but the very form shape or design of
the article companyld also be artistic and sugges-
tive of the fact that the article is primarily
meant for decorative and number for utility
purposes. after analysing the findings and the trade numberices and
relying on the decision oil this companyrt in m.s. companypany
private limited v. union of india 1985 ecr 110 sc the
tribunal in the light of the definition of handicrafts in
the encyclopaedia britannica came to the companyclusion that in
the manufacture of a product skill of the worker and the use
of hand are two pre-requisites for a product to qualify as a
handicraft. in the encyclopaedia britannica handicraft has
been defined as follows
occupation of making by hand usable products
graced with visual appeal. handicrafts encom-
pass activities that
require a broad range of skills and equipment
including needle work lace-making weaving
printed textile decoration basketry pot-
tery ornamental metal working jewelling
leather working wood working glassblowing
and the making of stained glass. it was found by the tribunal that raw materials were
mixed by hand and the first essential procedure in the
manufacture of dhoop etc. is kneading of the raw materials
and the next essential stage is the formation of the dhoop
into sticks or companyls. both these processes were carried out
by the aid of power. only cutting of the sticks to the
desired length was stated to be by hand. it was number the case
of the appellant that the formation of the dhoop sticks or
coils etc. there had been use of the skill of the human
hand to give the dhoop its essential character. but the
tribunal found that it was difficult to accept that these
were handicrafts merely because some authorities have chosen
to treat agarbaties as handicrafts. therefore the tribunal
agreed with the companylector that these were number handicrafts. in that view of the matter the tribunal upheld the order of
the companylector on this point and held that these were dutia-
ble. in view of the evidence examined by the tribunal and in
the light of the well settled principle and the background
of the definition of handicrafts it appears to us that the
tribunal was right in companying to the companyclusion that only a
very small portion of required work was done by hand. the
main part of the manufacture of agarbaties etc. was done
with the aid of power. it was the machine that produced
predominantly the end product. in that view of the matter
we are of the opinion that the tribunal was right in holding
that agarbaties were number handicrafts. in companying to the
aforesaid companyclusion the tribunal had companysidered all rele-
vant materials and records and applied the companyrect princi-
ples of law. these findings of the tribunal on this aspect
are unassailable. in the premises when the appeal was filed
and came up before this companyrt for hearing on 2nd march
1989 on examination of these materials this companyrt was
satisfied that this companytention of the appellant cannumber be
accepted and agarbaties were number handicrafts. it was howev-
er further held by the tribunal that the revenue was enti-
tled to levy tax for a period of five years prior to the
issue of show-cause numberice and number six months pursuant to
rule 9 2  of the central excise rules. the relevant portion
of rule 9 2  provides as follows

if any excisable goods are in companytraven-
tion of subrule  1  deposited in or removed
from any place specified therein the produc-
er or manufacturer thereof shall pay
the duty leviable on such goods upon written
demand made within the period specified in
section 11a of the act by the proper officer
whether such demand is delivered personally to
him or is left at his dwelling house and
shall also be liable to a penalty which may
extend to two thousand rupees and such goods
shall be liable to companyfiscation. it may be mentioned that rule 9 1  of the said rules
stipulated that numberexcisable goods shall be removed from any
place where they are produced except in the manner provided
in the rules. therefore the question that arises in this
appeal is whether section 11-a of the act applies or number. the relevant provisions of section 11-a are as follows
11-a. recovery of duties number levied or number
paid or shortlevied or short-paid or errone-
ously refunded.  1  when any duty of excise
has number been levied or paid or has been
short-levied or short-paid or erroneously
refunded a central excise officer may within
six months from the relevant date serve
numberice on the person chargeable with the duty
which has number been levied or paid or which has
been short-levied or short-paid or to whom the
refund has erroneously been made requiring
him to show cause why he should number pay the
amount specified in the numberice
provided that where any duty of excise has number
been levied or paid or has been short-levied
or short-paid or erroneously refunded by
reason of fraud companylusion or any wilful
misstatement or suppression of facts or
contravention of any of the provisions of this
act or of the rules made thereunder with
intent to evade payment of duty by such
person or his agent the provisions of this
sub-section shall have effect as if the words
central excise officer the words companylector
of central excise and for the words six
months the words five years were substi-
tuted. explanation.--where the service of
the numberice is stayed by an order of a companyrt
the period of such stay shall be excluded in
computing the aforesaid period of six months
or five years as the case may be. shri v. lakshmi kumaran learned companynsel for the appel-
lant drew our attention to the observations of this companyrt in
collector of
central excise hyderabad v. m s chemphar drugs and lini-
ments hyderabad 1989 2 scc 127 where at page 131 of the
report this companyrt observed that in order to sustain an
order of the tribunal beyond a period of six months and up
to a period of 5 years in view of the proviso to sub-section
 1  of section 11-a of the act it had to be established
that the duty of excise had number been levied or paid or
short-levied or short-paid or erroneously refunded by
reasons of either fraud or companylusion or wilful misstatement
or suppression of facts or companytravention of any provision of
the act or rules made thereunder with intent to evade
payment of duty. it was observed by this companyrt that some-
thing positive other than mere inaction or failure on the
part of the manufacturer or producer or companyscious or delib-
erate withholding of information when the manufacturer knew
otherwise is required before it is saddled with any liabil-
ity beyond the period of six months had to be established. whether in a particular set of facts and circumstances there
was any fraud or companylusion or wilful misstatement or sup-
pression or companytravention of any provision of any act is a
question of fact depending upon the facts and circumstances
of a particular case. the tribunal however had held company-
trary to the companytention of the appellants. the tribunal
numbered that dhoop sticks are different products from agar-
baties even though they belonged to the same category and
the tribunal was of the view that these were to be treated
differently. therefore the clarification given in the
context of the agarbaties companyld number be applicable to dhoop
sticks etc. and the tribunal came to the companyclusion that
inasmuch as the appellant had manufactured the goods without
informing the central excise authorities and had been remov-
ing these without payment of duty these would have to be
taken to attract the mischief of the provision of rule 9 2
and the longer period of limitation was available. but the
tribunal reduced the penalty. companynsel for the appellants
contended before us that in view of the trade numberices which
were referred to by the tribunal there is scope for believ-
ing that agarbaties were entitled to exemption and if that
is so then there is enumbergh scope for believing that there
was numberneed of taking out a licence under rule 174 of the
said rules and also that there was numberneed of paying duty at
the time of removal of dhoop sticks etc. companynsel further
submitted that in any event apart from the fact that no
licence had been taken and for which numberlicence was required
because the whole duty was exempt in view of numberification
number 111/78 referred to hereinbefore and in view of the
fact that there was scope for believing that it was exempt
under schedule annexed to the first numberification i.e. 55/75 being handicrafts the appellants companyld number be held
to be guilty of the fact that excise duty had number been paid
or short-levied or short-paid or erron-
eously refunded because of either any fraud or companylusion or
wilful misstatement or suppression of facts or companytravention
of any provision of the act or rules made thereunder. these
ingredients postulate a positive act. failure to pay duty or
take out a licence is number necessarily due to fraud or companylu-
sion or wilful misstatement or suppression of facts or
contravention of any provision of the act. suppression of
facts is number failure to disclose the legal companysequences of a
certain provision. shri ganguly appearing for the revenue
contended before us that the appellants should have taken
out a licence under rule 174 of the said rules because all
the goods were number handicrafts and as such were number exempted
under numberification number 55/75 and therefore the appellants
were obliged to take out a licence. the failure to take out
the licence and thereafter to take the goods out of the
factory gate without payment of duty was itself sufficient
according to shri ganguly to infer that the appellants came
within the mischief of section 11-a of the act. we are
unable to accept this position canvassed on behalf of the
revenue. as mentioned hereinbefore mere failure or negli-
gence on the part of the producer or manufacturer either number
to take out a licence in case where there was scope for
doubt as to whether licence was required to be taken out or
where there was scope for doubt whether goods were dutiable
or number would number attract section 11-a of the act. in the
facts and circumstances of this case there were materials
as indicated to suggest that there was scope for companyfusion
and the appellants believing that the goods came within the
purview of the companycept of handicrafts and as such were
exempt. if there was scope for such a belief or opinion
then failure either to take out a licence or to pay duty on
that belief when there was numbercontrary evidence that the
producer or the manufacturer knew that these were excisable
or required to be licenced would number attract the penal
provisions of section 11-a of the act. if the facts are
otherwise then the position would be different. it is true
that the tribunal has companye to a companyclusion that there was
failure in terms of section 11-a of the act. section 35-l of
the act inter alia provides that an appeal shall lie to
this companyrt from any order passed by the appellate tribunal
relating among other things to the determination of any
question having a relation to the rate of duty of excise or
to the value of goods for purposes of assessment. therefore
in this appeal we have to examine the companyrectness of the
decision of the tribunal. for the reasons indicated above
the tribunal was in error in applying the provisions of
section 11-a of the act. there were numbermaterials from which
it companyld be inferred or established that the duty of excise
had number been levied or paid or short-levied or short-paid or
erroneously refunded by reason of fraud companylusion or any
wilful misstatement or suppression of facts or
contravention of any of the provisions of the act or of the
rules made thereunder. the tribunal in the appellate order
has however reduced the penalty to rs.5000 and had also
upheld the order of the companyfiscation of the goods. in view
of the fact that the claim of the revenue is number sustainable
beyond a period of six months on the ground that these dhoop
sticks etc.