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Thursday, November 29, 2012

service - a dispute of inter se seniority between Income Tax Inspectors of the Income Tax Department. Direct recruits and promotees are pitted on opposite sides.=In all these cases the advertised vacancies were filled up in the original/first examination/selection conducted for the same. None of the direct recruit Income Tax Inspectors herein can be stated to be occupying carried forward vacancies, or vacancies which came to be filled up by a “later” examination/selection process. The facts only reveal, that the examination and the selection process of direct recruits could not be completed within the recruitment year itself. For this, the modification/amendment in the manner of determining the inter-se seniority between the direct recruits and promotees, carried out through the OM dated 7.2.1986, and the compilation of the instructions pertaining to seniority in the OM dated 3.7.1986, leave no room for any doubt, that the “rotation of quotas” principle, would be fully applicable to the direct recruits in the present controversy. The direct recruits herein will therefore have to be interspaced with promotees of the same recruitment year. 34. In view of the above, the Civil Appeals, the Transferred Case, as well as, the Transfer Case (filed by the direct recruits and the Union of India) are hereby allowed. The claim of the promotees, that the direct recruit Income Tax Inspectors, in the instant case should be assigned seniority with reference to the date of their actual appointment in the Income Tax Department is declined.



                                                                “REPORTABLE”


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                     CIVIL APPEAL Nos. 7514-7515 OF 2005


Union of India & Ors.                              …. Appellants

                                   Versus

N.R. Parmar & Ors.                                 …. Respondents

                                    WITH

                     CIVIL APPEAL Nos. 3876-3880 of 2007

Mukund Lal & Anr.                                        …. Appellants

                                   Versus

Pritpal Singh & Ors.                               …. Respondents

                                    WITH

                        CIVIL APPEAL No. 7516 OF 2005

Virendra Kumar & Ors.                              …. Appellants

                                   Versus

Union of India & Ors.                              …. Respondents

                                    WITH

                           T.C. (C) No. 91 OF 2006

Pritpal Singh & Ors.                               …. Petitioners

                                   Versus

Union of India & Ors.                              …. Respondents




                                    WITH

                         TRANSFER CASE No......2012
                  (Arising out of T.P. (C) No. 681 OF 2006

Union of India & Ors.                              …. Petitioners

                                   Versus

R.K. Bothra & Ors.                                       …. Respondents


                               J U D G M E N T


JAGDISH SINGH KHEHAR, J.

1.    The present controversy is a dispute of  inter  se  seniority  between
Income Tax Inspectors of the Income Tax  Department.   Direct  recruits  and
promotees are pitted on opposite sides.
2.    One of the matters in hand  came  to  be  considered  by  the  Central
Administrative Tribunal, Ahmedabad Bench,  Ahmedabad  (hereinafter  referred
to as “the CAT, Ahmedabad”) in R.C. Yadav & Ors. vs. Union of India  &  Ors.
(OA no.92 of 2003).  The said Original Application had been filed by  direct
recruits.  Another Original Application, on the same subject  matter,  being
OA no.123 of 2003 (N.R. Parmar & Ors. vs. Union of India & Ors.)  was  filed
by promotees.  Both the OA no.92 of 2003 and OA no.123 of 2003 were  decided
by a common order dated 12.1.2004.  In its determination the CAT,  Ahmedabad
 held, that seniority of direct recruits would have to  be  determined  with
reference to the date of their actual appointment.  The implicit  effect  of
the aforesaid determination was, that the date  of  arising  of  the  direct
recruit vacancies, or the date of initiation of the process of  recruitment,
or the date when the Staff Selection Commission   had  made  recommendations
for the filling  up  direct  recruit  vacancies,  were  inconsequential  for
determination of seniority of direct recruits.
3.    The decision rendered  by  the  CAT,  Ahmedabad  dated  12.1.2004  was
assailed  before  the  High  Court  of  Gujarat  at  Ahmedabad  (hereinafter
referred to as “the Gujarat High Court”), in Union of India & Ors. vs.  N.R.
Parma & Ors. (Special  Civil  Appeal  no.3574  of  2004).   Direct  recruits
separately filed Special Civil Application no.1512 of 2004  (Virender  Kumar
& Ors. vs. Union of India & Ors.).  The Gujarat  High  Court  by  its  order
dated 17.8.2004, upheld the order of the CAT, Ahmedabad, dated 12.1.2004.
4.    The Union of India assailed the  order  passed  by  the  Gujarat  High
Court dated 17.8.2004 before this Court, through Civil Appeal  nos.7514-7515
of 2005 (Union of India & Ors. vs. N.R. Parmar  &  Ors.).   Direct  recruits
have also separately raised a challenge to the order passed by  the  Gujarat
High  Court  dated  17.8.2004,  by  filing  Civil  Appeal  No.7516  of  2005
(Virender Kumar & Ors. vs. Union of India & Ors.).
5.    On the same subject, an identical controversy was  raised  before  the
Central Administrative Tribunal, Principal  Bench,  New  Delhi  (hereinafter
referred to as “the  CAT,  Principal  Bench”).   After  a  series  of  legal
battles between the rivals, i.e., promotee Income Tax Inspectors and  direct
recruit Income Tax Inspectors (details  whereof  are  being  narrated  at  a
later juncture), the CAT, Principal Bench passed an order  dated  22.9.2004.
The aforesaid order of the CAT,  Principal  Bench  was  assailed  by  direct
recruit Income Tax Inspectors by filing Writ  Petition  (C)  nos.3446-49  of
2005 before the Delhi High Court.
6.    In Writ Petition (C) nos.3446-49 of  2005  a  Division  Bench  of  the
Delhi High Court on 2.3.2005, while issuing notice, had stayed the  impugned
order passed by the CAT, Principal Bench dated 22.9.2004.  Mukund  Lal  (one
of the applicants in OA no.2107 of 2003, Mahender Pratap &  Ors.  vs.  Union
of India & Ors.), respondent no.9 in Writ Petition (C) nos.3446-49 of  2005,
filed an application for vacation of the interim order passed by  the  Delhi
High Court dated 2.3.2005 (whereby the order of  the  CAT,  Principal  Bench
dated 22.9.2004 had been stayed).  Since the application  was  not  disposed
of by the Delhi High Court  within  the  time  frame  expressed  in  Article
226(3) of the Constitution of India, Mukund Lal aforesaid,  approached  this
Court to assail the order dated 2.3.2005 by filing  Civil  Appeal  nos.3876-
3880 of 2007.  Since the subject matter of the controversy in the  aforesaid
writ petitions was identical to the one raised  in  Civil  Appeal  nos.7514-
7515 of 2005 (Union of India & Ors. vs. N.R. Parma & Ors.) and Civil  Appeal
no.7516 of 2005 (Virender Kumar & Ors. vs. Union of India & Ors.), the  said
writ petitions were transferred to be heard with the Civil Appeals  referred
to hereinabove.  On transfer to this Court,  the  aforesaid  writ  petitions
were re-numbered as Transferred Case (C) No.91  of  2006  (Pritpal  Singh  &
Ors. vs. Union of India & Ors.).
7.    OA no.270 of 2002 (R.K. Bothra & Ors. vs. Union of India &  Ors.),  OA
no.271 of 2002 (G.R. Chalana & Ors. vs. Union of India &  Ors.),  OA  no.275
of 2002 (Bhanwar Lal Soni & Ors. vs. Union of India & Ors.),  OA  no.293  of
2002 (Ranjeet Singh Rathore & Ors. vs. Union of India &  Ors.),  were  filed
by  promotee  Income  Tax  Inspectors  before  the  Central   Administrative
Tribunal, Jodhpur Bench, Jodhpur  (hereinafter  referred  to  as  “the  CAT,
Jodhpur”), to assail the seniority-list wherein direct  recruit  Income  Tax
Inspectors, though appointed later, were placed  higher  in  the  seniority-
list, i.e., above  promotee  Income  Tax  Inspectors,  merely  because  they
occupied vacancies of earlier years.  The CAT, Jodhpur allowed the claim  of
the promotee Income Tax Inspectors by a common order  dated  8.9.2003.   The
order passed by the CAT, Jodhpur dated  8.9.2003  was  assailed  before  the
High Court of Judicature for Rajasthan at Jodhpur (hereinafter  referred  to
as “the Rajasthan High Court”)  by  filing   four  writ  petitions  (DBC  WP
no.785 of 2004, Union of India & Ors. vs. R.K. Bothra & Ors.; DBC WP  no.786
of 2004, Union of India & Ors. vs. Banwari Lal Soni & Ors; DBC WP no.787  of
2004, Union of India & Ors. vs. Giriraj Prasad Sharma & Ors; DBC  WP  no.788
of 2004, Union of India & Ors. vs. G.R. Chalana &  Ors.).   The  petitioners
in the aforesaid writ petitions  before  the  Rajasthan  High  Court  (i.e.,
Union of India) filed Transfer Petition (C) no.681  of  2006  under  Article
139A(1) of the Constitution of India, seeking the transfer of the  aforesaid
writ petitions to this  Court  by  asserting  that  the  controversy  raised
therein was identical to the one pending adjudication before this  Court  in
the Civil Appeals already mentioned above.   Accordingly  Transfer  Petition
(C) no.681 of 2006 was ordered to be tagged with Civil Appeal  nos.7514-7515
of 2005 (and other connected matters).
8.    Learned counsel for the rival  parties  are  agreed,  that  the  legal
issue involved in all the matters, referred to hereinabove which are  tagged
together  for  disposal,  is  the  same.   During  the  course  of   hearing
submissions came to be advanced first of all in Transferred  Case  no.91  of
2006.  As such, the facts recorded in the said case have  been  adverted  to
while passing the instant judgment.
9.    Appointment to the cadre of Income Tax Inspectors  in  the  Income-Tax
Department is made by way of promotion, as also, by  direct  recruitment  in
the ratio of 2:1 respectively, i.e.,  66-2/3  by  promotion  and  33-1/3  by
direct recruitment.  The controversy in TC (C) no.91  of  2006  pertains  to
vacancies for the year 1993-94.  The vacancies for the  year  1993-94  which
were identified to be filled up by way of promotion  were  referred  to  the
Departmental Promotion Committee (hereinafter referred  to  as  “the  DPC”),
whereas, those identified to  be  filled  up  by  direct  recruitment,  were
simultaneously referred to  the   Staff  Selection  Commission  (hereinafter
referred to as “the SSC”).
10.    Based  on  the  recommendations  made  by  the  DPC,  the  Income-tax
Department promoted five persons from the feeder  cadre(s)  (respondents  5,
7, 8, 10 and 11) as Income Tax Inspectors on 30.8.1993.   A  day  later,  on
1.9.1993, one more  person  (respondent  no.6)  was  similarly  promoted  as
Income Tax Inspector.  Thereafter on 14.12.1993 yet  another  promotion  (of
respondent no.9) was ordered, in  the  same  manner.   Likewise,  respondent
no.12 was promoted as Income Tax Inspector on 8.9.1995.  It is essential  to
emphasize,  that  all  these  promotions  were  ordered   against   promotee
vacancies, identified for the year 1993-94.
11.   On the receipt of a requisition pertaining to the post of  Income  Tax
Inspectors from the Income Tax Department, the SSC issued advertisements  in
May/June, 1993, inviting applications  for  appointment  by  way  of  direct
recruitment, against vacancies of Income Tax Inspectors of  the  year  1993-
94.  To fill up these vacancies, the SSC  held  the  Inspectors  of  Central
Excise and Income Tax Examination, 1993.  All  the  petitioners  in  TC  (C)
no.91  of  2006  responded  to  the  aforesaid  advertisement.    The   said
petitioners, were in  the  first  instance,  subjected  to  a  written  test
conducted by the SSC in December, 1993.   Thereafter,  those  who  qualified
the written examination, were invited for an interview/viva-voce.   All  the
petitioners appeared for the viva-voce test conducted in October  1994.   On
21/28.1.1995 the SSC declared  the  result  of  the  Inspectors  of  Central
Excise and Income-Tax Examination, 1993.  The names of  the  petitioners  in
TC (C) no.91 of 2006, figured in the list of successful  candidates.   After
verification of  their  character  and  antecedents,  and  after  they  were
subjected to a medical fitness examination, the petitioners in TC (C)  no.91
of 2006 were issued offers of appointment as Income Tax  Inspectors  in  the
Department of Income Tax.  All the petitioners joined the  cadre  of  Income
Tax Inspectors between March and May, 1995.
12.   In the interregnum, some promotee Income Tax Inspectors were  promoted
to the next higher post of Income Tax Officer.  Certain direct recruits  who
considered  themselves  senior  to  the  promoted   Income   Tax   Officers,
approached the CAT, Principal Bench, seeking consideration for promotion  to
the cadre of Income Tax Officers, from the date their juniors were  promoted
as such.  Reference in this behalf may be made to two Original  Applications
being K.C. Arora & Ors. vs. Union of India & Ors (OA no.1478  of  1995)  and
J.S. Tanwar & Ors. vs. Union of India & Ors. (OA no.1899 of 1995).   In  the
pleadings of the aforesaid two original applications,  it  was  acknowledged
by the official-respondents, that the impugned promotions in  the  aforesaid
two original applications, had been made  on  purely  adhoc  basis,  as  the
seniority list of the cadre of Income Tax Inspectors had not  by  then  been
finalized.  It was also mentioned therein, that after the seniority-list  is
finalized, the official-respondents  would  review  the  promotions  already
made, and if necessary, a review DPC would also  be  convened.   During  the
pendency  of  the  aforesaid  two  original  applications,  the  Income  Tax
Department issued a seniority list of the cadre of Income Tax Inspectors  on
8.2.1999.  The aforesaid factual-position was brought to the notice  of  the
CAT, Principal Bench, whereupon, the  aforesaid  two  original  applications
came to be disposed of with the following directions on 8.9.1999:
      “6.   In the result, both the OAs are disposed of as follows:


           1.    As admitted in the counter reply mentioned  above  and  in
           view of the seniority list dt.8.2.1999 the official  respondents
           are directed  to  make  promotions  strictly  in  terms  of  the
           seniority list dt.8.2.1999.  They must arrange a review  DPC  to
           consider the claim of the applicants for  promotion.   In  case,
           the applicants are found fit and suitable for promotion  by  the
           review DPC then on the basis of the  said  seniority  list,  the
           applicants shall  be  granted  promotion  from  the  date  their
           juniors got promotion.  The applicants should get seniority over
           the juniors in case  they  are  found  suitable  for  promotion.
           However, the applicants will not be  entitled  to  any  monetary
           benefits.  In such a case, the  applicants’  pay  may  be  fixed
           notionally  from  the  dates  of  their   deemed   retrospective
           promotion.  However, the applicants will not be entitled to  any
           actual arrears of monetary benefits  till  the  date  of  actual
           order  of  promotion.   The   actual   monetary   benefits   are
           prospective, only from  the  date  of  order  of  promotion  and
           consequent date of assuming charge.


           2.    In the circumstances of the case, the official respondents
           are granted three months time from the date of receipt  of  copy
           of this order to comply with these directions.


           3.    In the circumstances of the case, there will be  no  order
           as to costs.”


On 10.9.1999 a clarificatory order was passed by the CAT,  Principal  Bench.
A  relevant  extract,  of  the  aforesaid  clarificatory  order,  is   being
reproduced hereunder:

      “2.   But, on reconsideration and on  second  thought,  we  feel  that
      there is no necessity to allow this  M.A.  and  to  recall  our  order
      dt.8.9.99 for the simple reason that our order will not prejudice  the
      case of the private respondents in any way.  What we  have  stated  in
      our order dt.8.9.1999 is that the official respondents should strictly
      enforce the seniority list dt.8.2.99  and  then  on  that  basis  hold
      review DPC and consider the claim of  the  applicants  for  promotion.
      This order we have passed on the basis of the admission  made  by  the
      official respondents in their reply.  Now, the private respondents are
      contending that the seniority list dt.8.2.1999 has been challenged  by
      the applicants in OA 676/99 and other cases and there is a stay  order
      granted by the  Delhi  High  Court  in  C.W.  No.3468/99  staying  the
      official respondents holding a review DPC on the basis of the impugned
      seniority list dt.8.2.1999.


      3.    We may place it on  record  that  we  have  not  considered  the
      correctness and legality of the impugned seniority  list  dt.8.2.1999.
      We have simply  directed  the  administration  to  follow  the  latest
      seniority list as admitted by the official respondents in their reply.
       We may also place it on record that we have not expressed any opinion
      on the correctness or legality of the seniority list dt.8.2.1999.   We
      have simply directed the Administration to follow the latest seniority
      list which they have issued and considers the case of  the  applicants
      for promotion.  If the seniority list itself is  in  dispute  and  its
      correctness is challenged  by  other  officials,  then  naturally  the
      department will not be able to take any decision unless the  seniority
      list is upheld by the Tribunal.  If  there  is  any  such  stay  order
      granted by any Tribunal or High Court, then naturally our direction in
      our order dt.8.9.1999 will be  subject  to  such  directions  or  stay
      orders passed by any Tribunal or any High Court.   We  also  place  on
      record that we have not expressed any opinion whether the promotion of
      private respondents was regular or ad-hoc, but only  referred  to  the
      contentions in the reply statement without giving a  finding  on  that
      point.  If the private respondents feel  that  their  promotions  were
      regular, then it is for them  to  take  up  the  stand  whenever  that
      occasion arises.  But, we have not given any finding on that  disputed
      question of fact.  In view of this clarifications issued by us,  there
      is no necessity to allow the M.A. or recall our order dt.8.9.1999.


      4.    In the result, the M.A. No.1938/99 is  disposed  of  subject  to
      above observations. No order as to costs.”


13.   Some direct recruits again approached  the  CAT,  Principal  Bench  by
filing Original Application no.2307 of 1999  (Sanjeev  Mahajan  &  Ors.  vs.
Union of India & Ors.) alleging,  that  while  drawing  the  seniority  list
dated 8.2.1999, the Department of Income Tax had  not  applied  the  “quota”
and “rota” principle.  On 23.2.2000, the CAT, Principal  Bench  disposed  of
OA no.2307 of 1999,  and  other  connected  original  applications  (Krishan
Kanahiya & Ors. vs. Union of India, OA No.676 of 1999; H.P.S Kharab  &  Ors.
vs. Union of India & Ors., OA no.387 of 1999;  Muneesh  Rajani  &  Ors.  vs.
Union of India & Ors., OA no.964 of 1999) by a common order.   In  paragraph
7 of its order the CAT, Principal Bench, narrated the issues which  came  up
for its determination as under:
      “7.   The short question which is posed for our consideration is as to
      what is the precise date on which direct recruits  can  be  considered
      for seniority vis-à-vis the promotees.  Whether it is (i) the date  on
      which the vacancies have arisen; (ii) the date when the same have been
      notified by the  department  by  sending  requisitions  to  the  Staff
      Selection Commission;  (iii)  the  date  on  which  selection  by  the
      Commission is made; (iv) the date when the selection  is  reported  to
      the department; or (v) the date on which the direct  recruit  actually
      assumes office.”


During the course of hearing of the  aforementioned  original  applications,
it  was  acknowledged  by  the  rival  parties,  that  the  questions  under
consideration had to be determined with reference to instructions  contained
in  two  office  memoranda  dated  7.2.1986  and  3.7.1986,  issued  by  the
Department of Personnel & Training (hereinafter referred to as the  “DoPT”).
 Based on the aforesaid office memoranda, the  CAT,  Principal  Bench,  vide
its order dated 23.2.2000  quashed  the  seniority-list  dated  8.2.1999  by
holding as under:
      “8.   In our  judgment,  for  deciding  the  aforesaid  controversy  a
      reference to the office memorandum of 7.2.1986 may usefully  be  made.
      In the earlier O.M. it has inter alia been provided as under:


                 …..the relative seniority of direct recruits and  promotees
           shall be determined according to rotation of  vacancies  between
           the direct recruits and the promotees, which will  be  based  on
           the quota of  vacancies  reserved  for  direct  recruitment  and
           promotion respectively in the Recruitment Rules……


                 ……….the present practice of keeping vacant slots for  being
           filled up by direct recruits of later years, thereby giving them
           unintended seniority over promotees who are already in position,
           would be dispensed with.


                 Thus, if adequate number of direct recruits do  not  become
           available in any particular year, rotation  of  quotas  for  the
           purpose of determining seniority would take place  only  to  the
           extent of the available direct recruits and the  promotees.   In
           other words, to the extent direct recruits  are  not  available,
           the promotees will be bunched together  at  the  bottom  of  the
           seniority list below the last position upto which it is possible
           to determine seniority, on the basis of rotation of quotas  with
           reference to the actual number of  direct  recruits  who  become
           available.  The  unfilled  direct  recruitment  quota  vacancies
           would,  however,  be  carried   forward   and   added   to   the
           corresponding direct recruitment vacancies of the next year (and
           to subsequent years  where  necessary)  for  taking  action  for
           direct recruitment for the total number according to  the  usual
           practice.  Thereafter, in  the  year  while  seniority  will  be
           determined between direct recruits and promotees, to the  extent
           of the number of vacancies for direct recruits and promotees  as
           determined according to the quota for the year,  the  additional
           direct recruits selected against the carried  forward  vacancies
           of the previous year would be placed on en bloc below  the  last
           promotee for direct  recruit  (as  the  case  may  be),  in  the
           seniority list based on the rotation of vacancies for the  year.
           The same principle holds good for determining seniority  in  the
           event of  carry  forward,  if  any,  of  direct  recruitment  or
           promotion quota vacancies (as the case may be) in the subsequent
           years.


            ILLUSTRATION:


                 Where the Recruitment Rules provide 50% of  the  vacancies
           of grade to be filled by promotion  and  the  remaining  50%  by
           direct recruitment, and assuming there are ten vacancies in  the
           grade arising in each of the years 1986 and 1987  and  that  two
           vacancies  intended  for  direct  recruitment,  remain  unfilled
           during 1986 and they could be filled during 1987.  The seniority
           position of the promotees and direct recruits of these two years
           will be as under:


                 1986             1987
                 1. P1            9.   P1
                 2. D1            10. D1
                 3. P2            11. P2
                 4. D2            12. D2
                 5. P3            13. P3
                 6. D3            14. D3
                 7. P4            15. P4
                 8. P5            16. D4
                                  17. P5
                                  18. D5
                                  19. D6
                                  20. D7




      It is not necessary to make  a  reference  to  the  subsequent  office
      memorandum of 3.7.1986 as the same is nothing but a repetition of  the
      instructions contained in the office memorandum dated 7.2.1986.


      9.    We have heard the learned counsel appearing for  the  contending
      parties at considerable length and we are of the view that as  far  as
      inter se seniority is concerned, the same  has  to  be  based  on  the
      vacancies arising for a particular year.   Thereafter,  the  seniority
      has to be determined on the basis of rota quota rule  which  has  been
      illustrated in the aforesaid illustration contained  in  the  O.M.  of
      7.2.1986.  As far as direct recruits are concerned, the  crucial  date
      on which they have to be considered will be the date  when  the  Staff
      Selection Commission makes the selection of  direct  recruits.   Hence
      the  date  of  forwarding  the  dossier  of  direct  recruits  by  the
      Commission to the department, date of actual joining  or  taking  over
      charge by the direct recruit would all be irrelevant.  It would be the
      date on which the Staff Selection Commission makes  the  selection  of
      the direct recruits that will be the  material  date  for  fixing  the
      seniority.  This would  avoid  injustice  being  done  on  account  of
      administrative delays, i.e., delay in matter of  issue  of  orders  of
      appointment and posting and of actual taking over of charge.   Similar
      will be the position in regard to promotees.  It will be the  date  on
      which the promotee is  selected  for  promotion  by  the  departmental
      promotion committee.  Hence the date on which  the  promotee  actually
      assumes charge of the promotional post  similarly  will  be  relevant.
      The seniority list which is impugned in the  present  proceedings,  it
      appears, has not followed the instructions which we are not issuing in
      the present order.


      10.   In the circumstances, the said seniority list is hereby  quashed
      and set aside.  Respondent no.3 is directed to  recast  the  seniority
      list on the basis of directions contained in this order.  The  present
      order will also apply to seniority list of UDCs which is  the  subject
      matter of OA No.676/1999.


      11.   All the OAs stand disposed of on the above lines.  There  shall,
      however, be no order as to costs.”


14.   Direct recruit Income  Tax  Inspectors,  assailed  the  interpretation
placed by the CAT, Principal Bench, on the office memorandum dated  7.2.1986
(in its order dated 23.2.2000), by filing a number of writ petitions  (Civil
Writ Petition No.460 of 2000, Sanjiv Mahajan & Ors. vs.  Union  of  India  &
Ors; Civil Writ Petition No.670 of 2002, Pankaj Saxena vs. Union of India  &
Ors.; Civil Writ Petition No.7356 of 2000, Chief Commissioner of Income  Tax
vs. Sanjiv Mahajan & Ors; Civil Writ Petition No.5549 of 2001, Kamal  Khanna
& Ors. vs. Union of  India  &  Ors.)  before  the  Delhi  High  Court.   The
aforesaid writ petitions were disposed of by  the  Delhi  High  Court  by  a
common order dated 25.9.2002, whereby, the order dated 23.2.2000  passed  by
the CAT, Principal Bench, was set aside with the following observations:
      “23.  Having regard to the fact  that  the  judgment  of  the  learned
      Tribunal is absolutely cryptic and no cogent or valid reason has  been
      assigned in support thereof, and as the contentions raised before  the
      Tribunal as also before us have not been considered at all, we are  of
      the opinion that for determination of the crucial questions where for,
      it may be necessary, for the parties to adduce further  evidence,  the
      matter may be remitted back to the learned Tribunal for  consideration
      of the matter afresh and the parties may bring on record such other or
      further materials as may be directed by  the  learned  Tribunal.   The
      impugned judgment is, therefore, set aside.  However, having regard to
      the facts and circumstances of the case, we would request  the learned
      Tribunal to consider the desirability of disposing of  the  matter  as
      expeditiously as possible.


      These  writ  petitions  are  disposed  of  with   the   aforementioned
      observations and directions without any order as to costs.”


15.   Consequently, the matters referred to above  went  back  to  the  CAT,
Principal Bench for re-adjudication.  During their pendency before the  CAT,
Principal Bench, an additional affidavit dated 12.3.2003 was  jointly  filed
by the official-respondents.  In  the  aforesaid  additional  affidavit   it
was, inter alia, pleaded as under:
      “Para 4
      (a)   …..   …..
      (b)   The respondent has since obtained  the  advice  of  the  Central
      Board of Direct Taxes and the Deptt. of Personnel and  Training  which
      is the nodal Ministry for promulgation and monitoring of the  relevant
      rules  and   regulations,   issuing   Office   Memorandums   and   the
      clarifications thereof.  Based on the advice of the  DOP&T  there  has
      been a change in the stand taken by the respondent before this Hon’ble
      Tribunal and as such, an application for amendment was made before the
      Hon’ble Delhi High Court which allowed the application  and  has  also
      taken note of the same in its judgment dt.25.9.2002.  In view  of  the
      revised position, the seniority list dt.8.2.1999 was not in conformity
      with the clarifications provided by the DoP&T with  reference  to  its
      O.M. Dt.7.2.1986 and 2.7.1986.  Relevant extracts based on the DoP&T’s
      O.M. dt.7.2.1986 and 3.7.1986 and the clarifications furnished by that
      department which formed part of the application for amendment  of  the
      writ petition which was filed before the Hon’ble Delhi High  Court  is
      annexed (Annexure R-1).


      (c) to (q)  …..        …..”


The applicants before the CAT, Principal Bench were direct  recruits.   They
were satisfied with the latest position adopted by the official  respondents
before the CAT, Principal  Bench  through  the  additional  affidavit  dated
12.3.2003.  They therefore,  chose  not  to  press  their  applications  any
further.  The CAT, Principal Bench passed the following order on 26.4.2003:
      “Learned counsel for the applicants, keeping in view the amended reply
      dated 12.3.2003, does not press the present application.


      Accordingly, the OA is dismissed as withdrawn.”


16.   The Income Tax Department thereupon, issued another seniority list  of
Income Tax Inspectors, dated 17.7.2003, by following the “quota” and  “rota”
principle prescribed in the office memoranda dated  7.2.1986  and  3.7.1986.
The aforesaid seniority-list was assailed by promotee Income Tax  Inspectors
before the CAT, Principal Bench, through OA no.2068 of 2003 (C.P.S. Yadav  &
Anr. vs. Union of India & Ors.), OA no.2107 of 2003 (Mahender Pratap &  Ors.
vs. Union of India & Ors.), OA No.124 of  2004  (S.K.  Puri-II  &  Anr.  vs.
Union of India & Ors.).  The CAT, Principal Bench, by a common  order  dated
22.9.2004 allowed the claim preferred by the promotee Income  Tax  Officers,
and as such,  quashed  the  seniority  list  dated  17.7.2003.   The  direct
recruit  Income  Tax  Inspectors,  who  were  respondents  in  the  original
applications referred to above,  assailed  the  order  passed  by  the  CAT,
Principal Bench, dated 22.9.2004, before the  Delhi  High  Court  by  filing
Writ Petition (C) No.3446-49 of 2005 (Pritpal Singh  &  Ors.  vs.  Union  of
India &  Ors.).   As  already  mentioned  hereinabove,  the  aforesaid  writ
petitions were transferred to this Court and assigned TC (C) no.91 of 2006.
17.   During the course of hearing, learned counsel for  the  rival  parties
agreed, that the seniority dispute between the promotee and  direct  recruit
Income Tax Inspectors  of  the  Income  Tax  Department  was  liable  to  be
determined on the basis of office memoranda  dated  7.2.1986  and  3.7.1986,
read with the clarificatory  office  memoranda  and  office  notes.   It  is
important to notice, before embarking upon the claim of the  rival  parties,
that none of the parties have assailed the vires  of  the  office  memoranda
dated 7.2.1986 and 3.7.1986 (or for that matter,  the  clarificatory  office
memoranda/office  notes).   It  is  therefore  apparent,  that  the  dispute
between  the  rival  parties  is  nothing  but,   the   true   and   correct
interpretation of the office memoranda dated  7.2.1986  and  3.7.1986,  read
with clarificatory office memoranda and  office  notes.   It  is  therefore,
that the matter in hand is being examined in  the  light  of  the  aforesaid
office memoranda.
18.   General principles for determining seniority in Central  services  are
shown to have been laid down in an annexure to an  office  memorandum  dated
22.11.1959 issued by the Government  of  India,  Ministry  of  Home  Affairs
(hereinafter referred to as “the OM dated 22.11.1959”).  Paragraph 6 of  the
annexure, referred to above, laid down the manner of  determining  inter  se
seniority between direct recruits  and  promotees.   Paragraph  6  is  being
extracted hereunder:

      “6. Relative seniority of Direct Recruits and Promotees.

      The relative seniority of direct recruits and of  promotees  shall  be
      determined according to  the  rotation  of  vacancies  between  direct
      recruits and promotees which shall be based on the quotas of vacancies
      reserved for direct recruitment  and  promotion  respectively  in  the
      Department Rules.”



It is apparent from the above extract of the OM dated 22.11.1959,  that  the
“quota” between promotees and direct  recruits  was  to  be  read  into  the
seniority rule.  The OM also provided for a definite rotation  of  seniority
points  (“rota”)  between  promotees  and  direct  recruits.   The  rotation
provided for was founded on  the  concept  of  rotation  of  quotas  between
promotees and direct recruits.  It is therefore apparent, that under the  OM
dated 22.11.1959  inter  se  seniority  between  the  promotees  and  direct
recruits was based on the “quota” and “rota” principle.  The same  has  been
meaningfully  described  as  “rotation  of  quotas”   in   some   of   these
instruments.
19.   The aforesaid prescription of  the  manner  of  determining  inter  se
seniority between the direct recruits and promotees, determined through  the
OM dated 22.11.1959, was modified by an office  memorandum  dated  7.2.1986,
issued by the Government of India,  Department  of  Personnel  and  Training
(hereinafter referred to as, “the OM  dated  7.2.1986”).   The  modification
introduced through  the  OM  dated  7.2.1986  was  to  redress  a  situation
wherein, vacancies of one of the sources were kept  (or  remained)  unfilled
during the process of selection, and  the  unfilled  vacancies,  had  to  be
filled  up  through   “later”   examinations   or   selections.    For   the
determination of seniority,  in  the  contingency  wherein  the  process  of
recruitment resulted in filling the vacancies earmarked for the two  sources
of recruitment,  the  manner  of  determining  inter  se  seniority  between
promotees  and  direct  recruits,  expressed  in  the  OM  dated  22.11.1959
remained unaltered.  But where the vacancies could not  be  filled  up,  and
unfilled vacancies had  to  be  filled  up  “later”  through   a  subsequent
process of selection, the manner of determining inter se  seniority  between
promotees and direct recruits, was modified.
20.   Since it is the case of the rival  parties  before  us,  that  the  OM
dated 7.2.1986 is the  principal  instruction,  on  the  basis  whereof  the
present controversy is to be settled, the same is being extracted  hereunder
in its entirety.




      “The 7 February, 1986.

                              Office Memorandum

      Subject: General Principles for determining the seniority  of  various
      categories of persons employed in Central Services.

      As the Ministry of Finance etc. are aware, the General Principles  for
      determination of seniority in the Central Services  are  contained  in
      the Annexure to Ministry of Home Affairs O.M.  No.  9/11/55-RPS  dated
      22nd December 1959. According to Paragraph-6 of the said Annexure, the
      relative  seniority  of  direct  recruits  and  promotees   shall   be
      determined according to  rotation  of  vacancies  between  the  direct
      recruits and the promotees, which  will  be  based  on  the  quota  of
      vacancies reserved for direct recruitment and  promotion  respectively
      in the Recruitment Rules.  In  the  Explanatory  Memorandum  to  these
      Principles, it has been  stated  that  a  roster  is  required  to  be
      maintained  based  on  the  reservation  of   vacancies   for   direct
      recruitment  and  promotion  in  the  Recruitment  Rules.  Thus  where
      appointment to a grade is to be made 50% by direct recruitment and 50%
      by promotion from a lower grade,  the  inter-se  seniority  of  direct
      recruits and promotees is determined on 1:1 basis.

      2. While the above mentioned principle was working  satisfactorily  in
      cases where direct recruitment and promotion kept pace with each other
      and recruitment could also be made to the full extent of the quotas as
      prescribed, in cases where there was delay in  direct  recruitment  or
      promotion, or where enough number of direct recruits or promotees  did
      not become available, there was difficulty in  determining  seniority.
      In such cases, the practice followed at  present  is  that  the  slots
      meant for direct recruits or promotees, which could not be filled  up,
      were left  vacant,  and  when  direct  recruits  or  promotees  became
      available through  later  examinations  or  selections,  such  persons
      occupied the vacant slots, thereby became senior to persons  who  were
      already working in the grade on regular basis. In  some  cases,  where
      there was short-fall in direct recruitment in two or more  consecutive
      years,  this  resulted  in  direct  recruits  of  later  years  taking
      seniority over some of the promotees with fairly long years of regular
      service already to their credit. This matter  had  also  come  up  for
      consideration in various Court Cases both before the High  Courts  and
      the Supreme Court and in several  cases  the  relevant  judgement  had
      brought out the inappropriateness of direct recruits  of  later  years
      becoming senior to promotees with long years of service.

      3. This matter, which was also discussed in the National  Council  has
      been engaging the attention of the Government for quite some time  and
      it has been decided that in future, while the principle of rotation of
      quotas will still be followed for determining the  inter-se  seniority
      of direct recruits and promotees,  the  present  practice  of  keeping
      vacant slots for being filled up by direct recruits  of  later  years,
      thereby giving them unitended seniority over promotees who are already
      in position, would be dispensed with.  Thus,  if  adequate  number  of
      direct recruits do  not  become  available  in  any  particular  year,
      rotation of quotas for purpose of  determining  seniority  would  take
      place only to the extent of the  available  direct  recruits  and  the
      promotees. In other words, to  the  extent  direct  recruits  are  not
      available, the promotees will be bunched together at the bottom of the
      seniority list, below the last position upto which it is  possible  to
      determine seniority on the basis of rotation of quotas with  reference
      to the actual number of direct  recruits  who  become  available.  The
      unfilled direct recruitment quota vacancies would, however, be carried
      forward and added to the corresponding direct recruitment vacancies of
      the next year (and to subsequent years  where  necessary)  for  taking
      action for direct recruitment for the total number  according  to  the
      usual practice. Thereafter, in  that  year  while  seniority  will  be
      determined between direct recruits and promotees, to the extent of the
      number of vacancies for direct recruits and  promotees  as  determined
      according to the quota for that year, the additional  direct  recruits
      selected against the carried forward vacancies of  the  previous  year
      would be placed en-bloc below the last promotee (or direct recruit  as
      the case may be) in the  seniority  list  based  on  the  rotation  of
      vacancies for that year. The same principle holds good in  determining
      seniority in the event of carry forward, if any, of direct recruitment
      or promotion quota vacancies (as the case may be)  in  the  subsequent
      years.

      Illustration:
           Where the Recruitment Rules provide 50% of the  vacancies  in  a
           grade to be filled by promotion and the remaining 50% by  direct
           recruitment, and assuming there are 10 vacancies  in  the  grade
           arising in each of the years 1986 and 1987 and that 2  vacancies
           intended for direct recruitment remained  unfilled  during  1986
           and they could be filled during 1987, the seniority position  of
           the promotees and direct recruits of these two years will be  as
           under:

           1986                         1987
           1. P1                             9. P1
           2. D1                             10. D1
           3. P2                             11. P2
           4. D2                             12. D2
           5. P3                             13. P3
           6. D3                             14. D3
           7. P4                             15. P4
           8. P5                             16. D4
                                       17. P5
                                       18. D5
                                       19. D6
                                       20. D7

      4.    In order to help the appointing authorities in  determining  the
      number of vacancies to be filled during  a  year  under  each  of  the
      methods of recruitment prescribed, a Vacancy Register giving a running
      account of the vacancies arising and being filled from  year  to  year
      may be maintained in the proforma enclosed.

      5. With a view to curbing any tendency of  under-reporting/suppressing
      the vacancies to be notified to the concerned authorities  for  direct
      recruitment, it is clarified that promotees will be treated as regular
      only to the extent to which direct recruitment vacancies are  reported
      to the recruiting authorities on the basis of the quotas prescribed in
      the relevant recruitment rules. Excess promotees,  if  any,  exceeding
      the share falling to the promotion quota based  on  the  corresponding
      figure, notified for direct recruitment would be treated only  as  ad-
      hoc promotees.

      6. The General Principles of seniority issued on 22nd  December,  1959
      referred to above, may be deemed to have been modified to that extent.



      7. These orders shall take  effect  from  1st  March  1986.  Seniority
      already determined in accordance with the existing principles  on  the
      date of issue of these orders will not  be  reopened.  In  respect  of
      vacancies for which recruitment action has already been taken, on  the
      date of issue of these orders either by way of direct  recruitment  or
      promotion, seniority will continue to be determined in accordance with
      the principle in force prior to the issue of this O.M.

      8. Ministry of Finance etc. are requested to bring these  instructions
      to the notice of all the Attached/Subordinate Offices  under  them  to
      whom the General Principles  of  Seniority  contained  in  O.M.  dated
      22.12.1959 are applicable within  2  week  as  these  orders  will  be
      effective from the next month.

                                 Sd/- Joint Secretary to the Govt. of India”
                                                          (emphasis is ours)

Since the OM dated 7.2.1986 would primarily constitute the determination  of
the present controversy, it is considered just and appropriate to render  an
analysis thereof.  The following conclusions are  apparent  to  us,  from  a
close examination of the OM dated 7.2.1986:
(a)   Paragraph 2 of the  OM  dated  7.2.1986  first  records  the  existing
manner of  determining  inter  se  seniority  between  direct  recruits  and
promotees (i.e., as contemplated by the OM dated 22.11.1959), namely,  “…the
slots meant for direct recruits or promotees, which could not be filled  up,
were left vacant, and when direct recruits  or  promotees  become  available
through later examinations or selections, such persons occupied  the  vacant
slots, (and) thereby became senior to persons who were  already  working  in
the grade on regular basis. In some cases,  where  there  was  shortfall  in
direct recruitment in two  or  more  consecutive  years,  this  resulted  in
direct recruits of later years taking seniority over some of  the  promotees
with fairly long years of regular service to their  credit….”.   The  words,
“when  direct  recruits  or  promotees  become   available   through   later
examination  or  selections”,   clearly   connotes,   that   the   situation
contemplated is  one  where,  there  has  been  an  earlier  examination  or
selection, and is then followed by a “later” examination or  selection.   It
is implicit, that in the  earlier  examination  or  selection  there  was  a
shortfall, in  as  much  as,  the  available  vacancies  for  the  concerned
recruitment  year  could  not  all  be   filled   up,   whereupon,   further
examination(s) or selection(s) had to  be  conducted  to  make  up  for  the
shortfall.  In the  instant  situation,  the  earlier  OM  dated  22.11.1959
contemplated/provided,  that  slots  allotted  to  a  prescribed  source  of
recruitment which remained vacant, would be filled up only from  the  source
for which the vacancy  was  reserved,   irrespective  of  the  fact  that  a
candidate from the source in question became available in the  next  process
of examination or  selection,  or  even  thereafter.   In  other  words  the
“rotation of quotas” principle was given effect  to  in  letter  and  spirit
under the OM dated 22.11.1959, without any scope of relaxation.
(b)   The position expressed in the sub-paragraph (a) above, was  sought  to
be modified by the OM dated 7.2.1986, by providing in paragraph  3  thereof,
that the earlier “…principle of rotation of quotas would still  be  followed
for determining the inter se seniority of direct  recruits  and  promotees…”
except when the direct recruit vacancies were being “… filled up  by  direct
recruits of later years…”.  Read in conjunction with paragraph 2 of  the  OM
dated 7.2.1986, the  words  “…direct  recruits  of  later  years…”  must  be
understood to mean, direct recruits who  became  available  through  “later”
examination(s) or selection(s).  Essentially the “later”  examination(s)  or
selection(s) should be perceived as those  conducted to fill up the  carried
forward vacancies, i.e., vacancies which could not be filled  up,  when  the
examination  or  selection  for   the   concerned   recruitment   year   was
originally/ first   conducted.   This change it was clarified, was  made  to
stop direct recruits of “later” years, from gaining  “…unintended  seniority
over promotees who are  already  in  position…”,  as  High  Courts  and  the
Supreme Court had “…brought out  the  inappropriateness…”  thereof.   It  is
therefore apparent, that  the  OM  dated  7.2.1986  partially  modified  the
“rotation of quotas” principle in the determination of  inter  se  seniority
originally expressed in the OM dated 22.11.1959.   The  OM  dated  7.2.1986,
provided that the “rota” (rotation of quotas) would be adhered to “…only  to
the extent of available direct recruits and promotees…”, i.e., for  promotee
and  direct  recruit  vacancies  which  could  be  filled  up  through   the
original/first  process  of  examination  or  selection  conducted  for  the
recruitment year in which the vacancies had arisen.
(c)    For  the  vacancies   remaining   unfilled   when   the   same   were
originally/first sought to be filled  up,  the  slots  available  under  the
“rota” principle under the OM dated 22.11.1959, would be lost to the  extent
of the shortfall.  In other words, the “rotation of quotas” principle  would
stop operating after, “…the last position upto which it  is  (was)  possible
to determine seniority on  the  basis  of  rotation  of  quotas…”,  for  the
concerned recruitment year.
(d)   Paragraph  3  of  the  OM  dated  7.2.1986  provided,  the  manner  of
assigning seniority to vacancies carried forward on account of their  having
remained unfilled in the original/first examination  or  selection  process.
The change contemplated in the OM dated 7.2.1986, referred  to  hereinabove,
was made absolutely unambiguous by expressing  that,  “The  unfilled  direct
quota vacancies would …be carried forwarded and added to  the  corresponding
direct  recruitment  vacancies  of  the  next  year.….”.   It  is  therefore
apparent, that seniority of carried forward vacancies  would  be  determined
with reference to vacancies of the recruitment year wherein their  selection
was made,  i.e.,  for  which  the   “later”  examination  or  selection  was
conducted.
(e)   The OM dated 7.2.1986 formulated the stratagem to be  followed,  where
adequate number of vacancies in a recruitment year could not be  filled  up,
through the examination or selection conducted therefor.  The  OM  provided,
“…to the extent direct recruits are not available,  the  promotees  will  be
bunched together at the  bottom  of  the  seniority  list,  below  the  last
position upto which it is (was) possible to determine the seniority  on  the
basis of rotation of quotas with reference to the actual  number  of  direct
recruits who become available...”.
(f)   Paragraph 3 of the OM dated  7.2.1986  further  postulated,  that  the
modification contemplated therein would be applied prospectively, and  that,
“…the present practice of keeping  vacant  slots  for  being  filled  up  by
direct recruits of later years, …over promotees who are  (were)  already  in
position, would be dispensed with…”.  It is  therefore  apparent,  that  the
slots assigned to a particular source of recruitment, would be relevant  for
determining inter se seniority between promotees  and  direct  recruits,  to
the extent the vacancies could successfully be filled up (and  the  unfilled
slots would be lost) only for vacancies  which  arose  after  the  OM  dated
7.2.1986, came to be issued.
(g)   The illustration provided in paragraph 3  of  the  OM  dated  7.2.1986
fully substantiates the analysis of the OM dated 7.2.1986  recorded  in  the
foregoing sub-paragraphs.  In fact, the conclusions drawn in  the  foregoing
sub-paragraphs  have  been  drawn,   keeping   in   mind   the   explanatory
illustration narrated in paragraph 3 of the OM dated 7.2.1986.
(h)   In paragraph 6 of the OM dated 7.2.1986  it  was  asserted,  that  the
general principles for determining seniority  in  the  OM  dated  22.11.1959
were being “modified” to the extent expressed (in the  OM  dated  7.2.1986).
The extent of  modification  contemplated  by  the  OM  dated  7.2.1986  has
already been delineated in the foregoing sub-paragraphs.  Para  6  therefore
leaves no room for any doubt, that the OM dated 22.11.1959  stood  “amended”
by the OM  dated  7.2.1986  on  the  issue  of  determination  of  inter  se
seniority between direct recruits and promotees, to the extent mentioned  in
the preceding sub-paragraphs.  The said amendment  was  consciously  carried
out by the  Department  of  Personnel  and  Training,  with  the  object  of
remedying   the   inappropriateness   of   direct   recruits   of    “later”
examination(s) or selection(s) becoming senior to promotees with long  years
of service, in terms of the OM dated 22.11.1959.

21.   The O.M. dated 7.2.1986, was followed  by  another  Office  Memorandum
issued by the Government of India, Department  of  Personnel  and  Training,
dated 3.7.1986 (hereinafter referred to  as,  “the  O.M.  dated  3.7.1986”).
The purpose of the instant O.M., as the subject  thereof  suggests,  was  to
“consolidate” existing governmental orders  on  the  subject  of  seniority.
Paragraphs 2.4.1 to 2.4.4 of the O.M. dated 3.7.1986 dealt  with  the  issue
of inter se seniority between the direct recruits and promotees.   The  same
are accordingly being reproduced hereunder:-
      “2.4.1      The relative seniority of direct recruits and of promotees
           shall be determined  according  to  the  rotation  of  vacancies
           between direct recruits and promotees which shall  be  based  on
           the quota of  vacancies  reserved  for  direct  recruitment  and
           promotion respectively in the Recruitment Rules.

      2.4.2 If adequate number of direct recruits do not become available in
           any particular year, rotation  of  quotas  for  the  purpose  of
           determining seniority would take place only to the extent of the
           available direct recruits and the promotees.

           In other words, to the extent direct recruits are not  available
           the promotees will be bunched together  at  the  bottom  of  the
           seniority list below the last position upto which it is possible
           to determine seniority, on the basis of rotation of quotas  with
           reference to the actual number of  direct  recruits  who  become
           available.  The  unfilled  direct  recruitment  quota  vacancies
           would,  however,  be  carried   forward   and   added   to   the
           corresponding direct recruitment vacancies of the next year (and
           to subsequent years  where  necessary)  for  taking  action  for
           direct recruitment for the total number according to  the  usual
           practice. Thereafter  in  that  year  while  seniority  will  be
           determined between direct recruits and promotees, to the  extent
           of the number of vacancies for direct recruits and promotees  as
           determined according to the quota for that year, the additional,
           direct recruits selected against the carried  forward  vacancies
           of the previous year would be  placed  en-bloc  below  the  last
           promotee (or  direct  recruit  as  the  case  may  be),  in  the
           seniority list based on the rotation of vacancies for that year.
           The same principle holds good for determining seniority  in  the
           event of  carry  forward,  if  any,  of  direct  recruitment  or
           promotion quota vacancies (as the case may be) in the subsequent
           year.

           ILLUSTRATION:    Where the Recruitment Rules provide 50% of  the
           vacancies of a grade to be filled by promotion and the remaining
           50%  by  direct  recruitment,  and  a  assuming  there  are  ten
           vacancies in the grade arising in each of the year 1986 and 1987
           and that two vacancies intended for  direct  recruitment  remain
           unfilled during 1986 and they could be filled during  1987,  the
           seniority position of the promotees and direct recruits of these
           two years will be as under:

           1986                         1987
           1. P1                             9. P1
           2. D1                             10. D1
           3. P2                             11. P2
           4. D2                             12. D2
           5. P3                             13. P3
           6. D3                             14. D3
           7. P4                             15. P4
           8. P5                             16. D4
                                       17. P5
                                       18. D5
                                       19. D6
                                       20. D7

      2.4.3       In order to help the appointing authorities in determining
           the number of vacancies to be filled during a year under each of
           the methods of recruitment prescribed, a Vacancy Register giving
           a running account of the vacancies arising and being filled from
           year to year may be maintained in the proforma enclosed.

      2.4.4   With   a   view   to   curbing   any   tendency   of    under-
           reporting/suppressing  the  vacancies  to  be  notified  to  the
           concerned authorities for direct recruitment,  it  is  clarified
           that promotees will be treated as regular only to the extent  to
           which  direct  recruitment  vacancies  are   reported   to   the
           recruiting authorities on the basis of the quotas prescribed  in
           the  relevant  recruitment  rules.  Excess  promotees,  if  any,
           exceeding the share failing to the promotion quota based on  the
           corresponding figure, notified for direct recruitment  would  be
           treated only as ad-hoc promotees.”
                                                          (emphasis is ours)

The following conclusions  have  been  drawn  by  us  from  the  O.M.  dated
3.7.1986:-
(a)   If adequate number of direct recruits (or  promotees)  do  not  become
available in any particular year, “rotation of quotas” for  the  purpose  of
determining seniority, would stop after the available  direct  recruits  and
promotees are assigned their slots for the concerned recruitment year.

(b)   To the extent direct recruits were not  available  for  the  concerned
recruitment year, the promotees would be bunched together at the  bottom  of
the seniority list, below the last position upto which it  was  possible  to
determine seniority, on the basis of rotation of quotas.  And vice versa.

(c)   The unfilled direct recruitment  quota  vacancies  for  a  recruitment
year, would be carried  forward  to  the  corresponding  direct  recruitment
vacancies of the next year (and to subsequent years, where necessary).   And
vice versa.  In this behalf, it is  necessary  to  understand  two  distinct
phrases used in the OM dated 3.7.1986.  Firstly, the phrase “in  that  year”
which connotes  the  recruitment  year  for  which  specific  vacancies  are
earmarked.  And  secondly,  the  phrase  “in  the  subsequent  year”,  which
connotes  carried  forward  vacancies,  filled  in  addition  to,  vacancies
earmarked for a subsequent recruitment year.

(d)   The additional direct recruits selected, against the  carried  forward
vacancies of the previous year, would  be  placed  en-bloc  below  the  last
promotee.  And vice versa.

It is, therefore, apparent, that the position expressed in the  O.Ms.  dated
7.2.1986 and 3.7.1986, on the subject of inter se seniority  between  direct
recruits and promotees, was absolutely identical.  This  is  indeed  how  it
was intended, because the OM dated 3.7.1986 was only meant to  “consolidate”
existing governmental instructions, on the subject of seniority.

22.   Chronologically, it is necessary, at the present juncture to refer  to
an Office Note of the Department of Personnel  and  Training,  Establishment
(D) Section, dated 20.12.1999 (hereinafter referred to as, “the  O.N.  dated
20.12.1999”).  Undoubtedly, an office note has no  legal  sanction,  and  as
such, is not enforceable in law.  Yet an office note is  certainly  relevant
for determining the logic and process of reasoning which  prevailed  at  the
relevant point of time.  These  would  aid  in  the  interpretation  of  the
binding office memoranda, only when the language of the office memoranda  is
ambiguous. Ofcourse, only where there is no conflict between the  two  i.e.,
the office note and the office memoranda sought to be  interpreted.  In  the
aforesaid background, and for the aforesaid limited  purpose,  reference  is
being made to the O.N. dated  20.12.1999.   The  same  is  being  reproduced
hereunder:-

      “Department of Personnel and Training
            Estt.(D) Section

      Ref.  Preceding notes.

            It is not clear whether the instructions contained in  our  O.M.
      dated 07.02.1986 has been interpreted correctly.  It is clarified that
      on a perusal of our O.M. dated 22.12.1959 read  with  our  O.M.  dated
      07.02.1986 it will be clear that  the  inter-se  seniority  of  direct
      recruits and  promotees  will  have  to  be  fixed  by  following  the
      principle of rotation of quotas prescribed for them in the recruitment
      rules subject to the condition that the rotation as per quota will  be
      made only upto the actual number of DRs/Promotees available and to the
      extent direct  recruits/promotees  do  not  become  available  in  any
      recruitment year the promotees or the direct recruits as the case  may
      be will be bunched together at the bottom of the seniority  list.   In
      other words, only where appointing authority has not been able to fill
      up the post inspite of best efforts with reference to the  requisition
      for the particular recruitment  year  in  question,  the  instructions
      contained in O.M. dated 07.02.1986  will come into operation  as  will
      be clear from para 5 thereof.  For example, if the quota  in  the  Rrs
      and DR and promotee is fifty-fifty and if  the  UPSC  has  recommended
      only 2 DRs against the three vacancies  of  a  particular  recruitment
      year, say 1987 for which requisition was sent to them in 1987 and even
      if both the DRs had joined in 1988 the inter-se seniority of  DRs  and
      promotees may be fixed in the ratio of 1:1  upto  the  number  of  DRs
      available i.e. the first four places in the  seniority  list  will  be
      assigned alternatively to DR and promotee, the 5th  in  the  seniority
      list which would have normally gone to DR will not go to the  promotee
      because of the non-availability of DR and the 6th will in any case  go
      to promotee.  But for the instructions contained  in  our  O.M.  dated
      07.02.1986, the 5th place would have been kept reserved for the DR  as
      and when it is actually filled by DR, even if it takes  a  few  years.
      However, after the issue of our O.M. dated 07.02.1986, it is no longer
      kept vacant but is assigned to the promotee who is available.   It  is
      not necessary that the DR for 1987 vacancy should join in 1987 itself.
      It would suffice if action has been initiated for 1987 DR vacancies in
      1987 itself. This is because, in a case of direct recruitment, if  the
      administrative action in filling up the post by DR takes more  than  a
      year or  so  the  individual  cannot  be  held  responsible  for  such
      administrative delay and hence it would not be appropriate to  deprive
      him of his due seniority for delay on the part  of  administration  in
      completing his selection by direct recruitment. In fact ordinarily the
      process of direct recruitment takes more than a year to  be  completed
      and if DR is to join in the same year for getting  seniority  of  that
      year then no DR will get seniority of the same year because as already
      stated the DR process takes more than a year. Hence, as already stated
      initiation of action for recruitment in sufficient.

           It is  not  clear  whether  our  O.M.  of  07.02.1986  has  been
      interpreted correctly on the above line  by  the  Deptt.  of  Revenue.
      Hence the above position may be suitably incorporated in the para-wise
      comments prepared by them and it may be modified accordingly.  Subject
      to this, the parawise comments appear to be generally in order.  It is
      however for the Department of Revenue to ensure the correctness of the
      factual position mentioned therein.

            Deptt. of Revenue may please see.

                                                                        Sd/-
                                                            (K. Muthu Kumar)
                                                             Under Secretary
      3357/DIR E 1/99
      20/12

      Dir (E-1)

      The clarification given above needs to be adhered to as we  have  been
      consistently   advising   on   the   aforesaid   lines.    Any   other
      interpretation of the relevant instructions would be illogical.
                                                                        Sd/-
                                                                   DIR (E-1)
                                                                   21.12.99”
                                                          (emphasis is ours)

The logic and the  process  of  reasoning,  emerging  from  the  O.N.  dated
20.12.1999, as they appear to us, are analysed below:-

(a)   Only where the appointing authority has not been able to fill  up  the
vacancies earmarked for direct recruits/promotees,  with  reference  to  the
requisition for a particular recruitment year, inspite of its best  efforts,
the instructions contained in O.M. dated 7.2.1986 will come into operation.

(b)   It is not necessary, that the  direct  recruits  for  vacancies  of  a
particular  recruitment  year,  should  join  within  the  recruitment  year
(during which the vacancies had  arisen)  itself.   As  such,  the  date  of
joining would not be a relevant factor for determining seniority  of  direct
recruits.  It would suffice if action has been initiated for direct  recruit
vacancies, within the recruitment year in which  the  vacancies  had  become
available.  This is so, because  delay  in  administrative  action,  it  was
felt, could not deprive an  individual  of  his  due  seniority.   As  such,
initiation of action for recruitment within the recruitment  year  would  be
sufficient to assign seniority to the concerned appointees in terms  of  the
“rotation of quotas” principle, so as to arrange them with other  appointees
(from the alternative source), for vacancies of the same recruitment year.
23.   Following the ON dated 20.12.1999, the  Department  of  Personnel  and
Training, Establishment (D) Section,  examined  the  issue  in  yet  another
Office Note dated  2.2.2000  (hereinafter  referred  to  as  “the  ON  dated
2.2.2000”).  Just like the earlier  ON  dated  20.12.1999,  the  instant  ON
dated 2.2.2000 also has no legal sanction, and as such, is  not  enforceable
in law.  But just like  the  earlier  office  note,  the  instant  ON  dated
2.2.2000 would also be relevant in determining  the  logic  and  process  of
reasoning which prevailed at the relevant point of time.  This would aid  in
the interpretation of binding office memoranda, only where the  language  is
ambiguous,  and only if there is no conflict between  the  two  (the  office
note and the office memoranda, sought to be interpreted).  In the  aforesaid
background, and for the aforesaid limited purpose, reference is  also  being
made to the ON dated 2.2.2000.  The same is being extracted hereunder:
      “           Department of Personnel & Training
                       Estt. (D) Section


            Notes from p.17/ante may please be seen with  reference  to  our
      earlier note on Pp.9-10 ante.


            With reference to ‘X’ on p.18 and ‘Y’ on p.19/ante, it  will  be
      clear from our note on Pp.9-10/ante that if action for the Recruitment
      Year 1986-1987 has been initiated at any time during that  Recruitment
      Year even if the exam is held in 1988 and the results are declared  in
      1989 and the candidate  join  only  in  1990,  since  the  action  for
      recruitment was initiated  in  1986-1987  itself  merely  because  the
      process of recruitment took so long for which the candidates cannot be
      blamed and since the responsibility for the delay  in  completing  the
      process of recruitment squarely lies with the administration, it would
      not be appropriate to deprive the candidates of their due seniority of
      1986-87.  Consequently, if action was initiated during the Recruitment
      Year 1986-1987 even if it culminates in the joining  by  the  selected
      candidates only in 1990, they will get seniority of  1986-1987.   This
      applies equally to DRs as well as promotees.  In other words, if  such
      DRs of 1986-1987 ultimately join in 1990 yet they will be rotated with
      promotees of 1986-87.


            As regards  point  (1)  on  page  19/N,  it  is  clarified  that
      “initiation  of  action  for  recruitment/initiation  of   recruitment
      process” would refer to the date of sending  the  requisition  to  the
      recruiting authority for a particular Recruitment Year in question.
            Points (2) & (3) are the concern of Estt.(B).


            As regards point (4), it is clarified that as already stated the
      concept of initiation of action for recruitment is applicable  equally
      to direct recruits and promotees.


            As regards point (5), it may be stated that even if DOPT is also
      one   of   the   respondents,   it   is   for    the    Administrative
      Ministry/Department who are concerned with the persons involved in the
      CAT court case to take necessary action on behalf of  DOPT  also.   In
      any case, our comments are already contained in our  earlier  note  as
      well as this note.  It is for the  Administrative  Ministry/Department
      to incorporate them suitably in the counter reply.  Hence, the counter
      reply on Pp.159-175/Cor. May be suitably modified in the light of  our
      advice on Pp.9-10/ante as already advised at ‘X’ on p.10/ante and this
      note.


            In future, the Department of Revenue, if they want  our  advice,
      refer such cases well in time (instead of making such reference at the
      eleventh hour) to enable us to  consider  the  matter  in  its  proper
      perspective without any time constraint.


            Estt.(B) may please see for comments on points (2)  and  (3)  on
      Pp.19-20/ante before the file is returned to Department of Revenue.


                                                                        Sd/-
                                                           (Under secretary)
                                                                  2.2.2000.”


The logic and process of reasoning emerging from the ON dated  2.2.2000,  as
is apparent to us,  is being analysed below:
(a)    If  the  process  of  recruitment  has  been  initiated  during   the
recruitment year (in which the vacancies have arisen) itself,  even  if  the
examination for the said recruitment is held in a subsequent year,  and  the
result is declared in a year later (than the one in  which  the  examination
was held), and the selected candidates joined in a further later year  (than
the one in which the result was declared), the selected candidates  will  be
entitled to be assigned seniority, with reference to  the  recruitment  year
(in which the requisition of vacancies was made).  The logic  and  reasoning
for the aforesaid conclusion (expressed in the ON  dated  2.2.2000)  is,  if
the process of direct recruitment  is  initiated  in  the  recruitment  year
itself, the selected candidate(s) cannot be blamed  for  the  administrative
delay, in completing the process of selection.
(b)   The words “initiation  of  action  for  recruitment”,  and  the  words
“initiation of recruitment process”, were explained to  mean,  the  date  of
sending the requisition to the recruiting authority.
24.   Having examined the matter thus far, it is necessary to refer  to  the
Ministry  of  Finance,  Department  of  Revenue’s,  letter  dated  11.5.2004
(hereinafter referred to as, “the letter dated 11.5.2004”).   The  aforesaid
letter is being reproduced below:
      “                            New Delhi, the 11th May, 2004
      To,
            The Chief Commissioner of Income Tax (CCA),
            CHANDIGARH


      Subject:    Fixation of inter-se seniority of DR and  Promotee  Income
                 Tax Inspectors in view of clarification given by  DOP&T  in
                 r/o OM dated 3.7.87


      Sir,


            I am directed to refer to  your  letter  F.No.CC/CHD/2003-04/935
      dated 4.12.2003 on the above subject and to say that  the  matter  has
      been examined in consultation with DOP&T and  necessary  clarification
      in the matter is given as under:


      |Point/querry raised        |Clarification                |
|Whether direct recruit     |‘It is clarified by DOP&T    |
|inspectors should be given |that Direct Recruits’        |
|seniority of the year in   |seniority vis-à-vis the      |
|which selection process    |promotees is reckoned from   |
|initiated or vacancy       |the year in which they are   |
|occurred orotherwise       |actually recruited.  DRs     |
|                           |cannot claim seniority of the|
|                           |year in which the vacancies  |
|                           |had arisen.  The question of |
|                           |grant of seniority to DRs of |
|                           |the period when they were not|
|                           |even in service does not     |
|                           |arise.’                      |


      3.    The representations may please be disposed off accordingly.


                                                           Yours faithfully,


                                                                        Sd/-


                                 Under Secretary to the Government of India”


A perusal of the letter dated 11.5.2004 reveals, that it adopts  a  position
in clear conflict with the one expressed  in  the  OMs  dated  7.2.1986  and
3.7.1986, as well as, in the ONs dated  20.12.1999  and  2.2.2000.   In  the
aforesaid letter dated 11.5.2004 it was sought to be “clarified”,  that  the
seniority of direct recruits vis-à-vis promotees, would be  determined  with
reference to the year in which  the  direct  recruits  are  appointed.   And
further, that direct recruits cannot claim seniority with reference  to  the
year in which the vacancies against which they  are  appointed  had  arisen.
In our considered view reliance on  the  letter  dated  11.5.2004,  for  the
determination of the present controversy, is liable to  outright  rejection.
This is so because,  the  letter  dated  11.5.2004  has  been  styled  as  a
“clarification” (see heading in right hand column).  One  of  the  essential
ingredients  of  a  clarification  is,  that  it  “clarifies”  an   unclear,
doubtful,  inexplicit   or   ambiguous   aspect   of   an   instrument.    A
“clarification” cannot be in conflict  with  the  instrument  sought  to  be
clarified.   The  letter  dated  11.5.2004  breaches  both   the   essential
ingredients of a “clarification” referred to above.  That apart, the  letter
dated 11.5.2004 is liable to be ignored in view of  two  subsequent  letters
of the Ministry of  Finance,  Department  of  Revenue  dated  27.7.2004  and
8.9.2004.  The letter dated 27.7.2004 is reproduced hereunder:
      “                            New Delhi, the 27th July, 2004
      To
            Chief Commissioner of Income Tax (CCA)
            CHANDIGARH


      Subject:    Fixation of inter-se seniority of DR and  Promotee  Income
                 tax Inspectors in view of clarification given by  DOP&T  in
                 r/o OM dated 3.7.86.


      Sir,


            I am directed to refer to Board’s letter of  even  number  dated
      11.5.2004 on the above subject and to request that the application  of
      this clarification may be kept in abeyance till further orders.


                                                           Yours faithfully,


                                                                        Sd/-


                                 Under Secretary to the Government of India”


A perusal  of  the  letter  dated  27.7.2004  reveals,  that  the  allegedly
clarificatory letter dated  11.5.2004,  had  been  kept  in  abeyance.   The
second letter dated 8.9.2004 (referred to above) is  also  being  reproduced
below:


      “                New Delhi, the 8th September, 2004
      To
            Al CCITs(CCA)


      Sub:  Fixation of inter se seniority between Direct Recruits (DR)  and
           Promotee (PR) Inspectors of Income tax in various charges of the
           Income tax Department – regarding.


      Sir,


            I am directed to say that a number of OAs/WPs are  pending/under
      adjudication in the various benches of CAT  and  High  Courts  on  the
      above subject.  The Board has been taking a consistent  stand  in  all
      those cases that the policy as laid down  in  Sanjeev  Mahajan’s  case
      (pertaining  to  CCIT,  Delhi  Charge),   which   was   finalized   in
      consultation with DOP&T and the Ministry of Law would prevail and that
      seniority  of  DRs  would  be  reckoned  with  reference  to  date  of
      initiation of recruitment process in their case.


      2.    Subsequently on a query raised by CCIT, Chandigarh on  an  issue
      relating to the treatment to be given to the promotee Inspectors,  who
      would face reversion on account of  refixation  of  seniority  as  per
      DOP&T/Ministry of Law’s advice, the Board issued a clarification  vide
      letter of even number,  dated  11.5.2004,  which  created  an  adverse
      situation before the Gujarat High Court in a related  case.   As  such
      this clarification was held in abeyance vide letter  dated  27.07.2004
      till further orders.


      3.    The matter has been reexamined and it has been decided that  the
      stand taken/finalized by the Board in  the  case  of  Sanjeev  Mahajan
      would hold good in future also and all the cases on the issue would be
      handled/defended in the light of clarification submitted in that case.


      4.    All CCITs(CCA)  are  accordingly  requested  to  take  necessary
      action in the matter of  fixation  of  seniority  of  DRs  &  Promotee
      Inspectors accordingly.


                                                           Yours faithfully,


                                                                        Sd/-


                                                      Under Secretary (V&L)”


A perusal of the letter  dated  8.9.2004  reveals,  that  the  clarification
given in the letter dated 11.5.2004, would  be  ignored  in  favour  of  the
position adopted  in  Sanjeev  Mahajan’s  case,  in  consultation  with  the
Department of Personnel and Training.  It would be relevant to notice,  that
the position adopted in Sanjeev Mahajan’s case, referred to  in  the  letter
dated 8.9.2004 was, that seniority of  direct  recruits  would  be  reckoned
with reference to the date of initiation of the process  of  recruitment  in
their case.   In  the  aforesaid  view  of  the  matter,  the  letter  dated
11.5.2004 is bound to be disregarded and  excluded  from  consideration  not
only because it does not satisfy the legal parameters of a  “clarification”,
but also because, it is deemed to have been  superseded  by  the  subsequent
letters dated 27.7.2004 and 8.9.2004.
25.    Reference  necessarily  needs  to  be  made  to  yet  another  office
memorandum issued by the Government of India, Department  of  Personnel  and
Training,  dated  3.3.2008  (hereafter  referred  to  as,  “the   OM   dated
3.3.2008”).  In view of the emphatic reliance  on  the  OM  dated  3.3.2008,
during the course of hearing, the  same  is  reproduced  hereunder,  in  its
entirety:
      “                New Delhi, dated the 3rd March, 2008


                              OFFICE MEMORANDUM


      Subject:    Consolidated instructions on seniority contained in  DOP&T
                 O.M.    No.22011/7/1986-Estt.(D)    dated    3.7.1986     –
                 Clarification regarding


            The undersigned  is  directed  to  refer  to  this  Department’s
      consolidated instructions contained in  O.M.  No.22011/7/1986-Estt.(D)
      dated  3.7.1986  laying  down  the  principles  on  determination   of
      seniority of persons appointed to  services/posts  under  the  Central
      Government.


      2.    Para 2.4.1 and 2.4.2 of the O.M.  dated  3.7.1986  contains  the
      following provisions:


      2.4.1 The relative seniority of direct recruits and of promotees shall
           be determined according to the  rotation  of  vacancies  between
           direct recruits and promotees, which shall be based on the quota
           of vacancies  reserved  for  direct  recruitment  and  promotion
           respectively in the Recruitment Rules.


      2.4.2 If adequate number of direct recruits does not become  available
           in any particular year, rotation of quotas for  the  purpose  of
           determining seniority would take place only  to  the  extent  of
           available direct recruits and the promotees.


      3.     Some  references  have  been  received  seeking  clarifications
      regarding the term ‘available’ used in the preceding para  of  the  OM
      dated 3.7.1986.  It  is  hereby  clarified  that  while  the  inter-se
      seniority of direct recruits and promotees is to be fixed on the basis
      of the rotation of quota of vacancies, the year of availability,  both
      in the case of direct recruits as  well  as  the  promotees,  for  the
      purpose of rotation and fixation of seniority,  shall  be  the  actual
      year  of  appointment  after  declaration  of  results/selection   and
      completion  of  pre-appointment  formalities  as  prescribed.   It  is
      further clarified that when appointments  against  unfilled  vacancies
      are made in subsequent year or years, either by direct recruitment  or
      promotion, the persons so appointed shall not  get  seniority  of  any
      earlier year (viz. year of vacancy/panel or year in which  recruitment
      process is initiated) but should get the  seniority  of  the  year  in
      which  they  are  appointed  on  substantive  basis.   The   year   of
      availability will be the vacancy year in  which  a  candidate  of  the
      particular batch of selected direct recruits  or  an  officer  of  the
      particular batch of promotees joins the post/service.


      4.    Cases of seniority already decided with reference to  any  other
      interpretation of the term ‘available’  as  contained  in  O.M.  dated
      3.7.1986 need not be reopened.


      5.    Hindi version will follow.


                                                                        Sd/-


                                                          Director (Estt.I)”
                                                          (emphasis is ours)


The following conclusions, in our view, can  be  drawn  from  the  OM  dated
3.3.2008:
(a)   The OM dated 3.3.2008 is in the nature of a  “clarification”,  to  the
earlier consolidated instructions on seniority, contained in  the  OM  dated
3.7.1986 (referred to and analysed, in paragraph 21 above).
(b)   The term “available” used in para 2.4.2 in the OM dated  3.7.1986  has
been “clarified” to mean, both  in  case  of  direct  recruits  as  well  as
promotees, for the purpose of fixation of seniority,  would  be  the  actual
year of appointment “…after the declaration of the  result/selection,  i.e.,
after the conclusion of the selection process, and  after  the  “…completion
of the pre-appointment formalities…” (medical fitness, police  verification,
etc.).
(c)   As per the OM dated  3.7.1986,  when  appointments  are  made  against
unfilled vacancies in subsequent year(s), the persons appointed would  “not”
get seniority with reference to the year in which the vacancy arose, or  the
year in which the recruitment process was initiated, or the  year  in  which
the selection process was conducted.
(d)   As per the OM dated  3.3.2008,  when  appointments  are  made  against
unfilled vacancies in subsequent year(s), the persons  appointed  would  get
seniority of the year in which they are appointed “on substantive basis”.
26.   Before examining the merits of the controversy on the basis of the  OM
dated 3.3.2008, it is necessary to examine one related  submission  advanced
on behalf of  the  direct  recruits.   It  was  the  contention  of  learned
counsel, that the OM dated 3.3.2008 being an executive order issued  by  the
Department of Personnel and Training, would apply  only  prospectively.   In
this behalf it was pointed out, that the disputed  seniority  between  rival
parties before this Court was based on  the  appointment  to  the  cadre  of
Income Tax Inspectors, well before the OM dated 3.3.2008   was  issued.   As
such, it was pointed out, that the same  would  not  affect  the  merits  of
controversy before this Court.  We have considered the  instant  submission.
It is not possible for us to accept the  aforesaid  contention  advanced  at
the hands of the learned counsel.  If the  OM  dated  3.3.2008  was  in  the
nature of an amendment, there may well have been merit  in  the  submission.
The OM dated 3.3.2008 is in the nature of a  “clarification”.   Essentially,
a clarification does not introduce anything new,  to  the  already  existing
position.  A clarification, only explains the true purport  of  an  existing
instrument.  As such, a clarification always relates back  to  the  date  of
the instrument which is sought to be clarified.  In so far  as  the  instant
aspect of the matter is concerned, reference may be  made  to  the  decision
rendered by this Court in S.S. Garewal vs. State of Punjab, (1993) 3  Suppl.
234, wherein this Court had observed as under:

      “8    ….. In the alternative, it was urged that the order dated  April
      8, 1980 could only have prospective operation  with  effect  from  the
      date of issue of the said order and the sub-roster  indicated  by  the
      said order could be given effect to only from that date  and  on  that
      basis the first post  reserved  for  Scheduled  Castes  should  go  to
      Balmikis or Mazhabi Sikhs and on that basis also respondent No. 3  was
      entitled to be placed against point No. 7 in the 100-point roster  and
      Shri G.S. Samra against point No. 9 in the said roster.

      9.    From a perusal of the letter dated April 8, 1980, we  find  that
      it gives clarifications on certain doubts that  had  been  created  by
      some Departments in the matter of implementation of  the  instructions
      contained in the earlier letter dated May  5,  1975.  Since  the  said
      letter dated April 8, 1980 is only clarificatory in nature,  there  is
      no question of its having an operation independent of the instructions
      contained in the letter dated  May  5,  1975  and  the  clarifications
      contained in the letter dated April 8, 1980 have to be read as a  part
      of the instructions contained in the earlier letter dated May 5, 1975.
      In this context it may be stated that according to the  principles  of
      statutory construction a statute which is explanatory or clarificatory
      of the earlier enactment is usually held to  be  retrospective.  (See:
      Craies on Statute Law, 7th Ed., p.58). It  must,  therefore,  be  held
      that all appointments against vacancies reserved for Scheduled  Castes
      made after May 5, 1975 (after May 14, 1977 in so far as the Service is
      concerned), have to be made in accordance  with  the  instructions  as
      contained in the letter dated May 5, 1975 as clarified by letter dated
      April 8, 1980. On that view, the appointment of Shri Bal want  Rai  in
      1979 has to be treated to  be  an  appointment  made  under  the  said
      instructions and operation of these instructions cannot  be  postponed
      till April 8, 1980…..”




In view of the above, it is not possible for us to accept that the OM  dated
3.3.2008, would only apply prospectively.  We are also satisfied,  that  the
OM dated 3.3.2008 which is only a “clarification” of the  earlier  OM  dated
3.7.1986, would relate back to  the  original  instrument,  namely,  the  OM
dated 3.7.1986.
27.   We shall now endeavour to examine the effect of OM dated  3.3.2008  on
the subject of inter se seniority between  direct  recruits  and  promotees.
Would the OM dated 3.3.2008 supersede the earlier OMs dated 7.2.1986  and/or
3.7.1986?  And, would the OMs dated 7.2.1986  and  3.7.1986  negate  the  OM
dated 3.3.2008, to the extent that the same is repugnant to the earlier  OMs
(dated 7.2.1986 and 3.7.1986)?   In our view, what needs to be kept in  mind
while determining an answer to the aforesaid queries is, that the  OM  dated
7.2.1986 is in the nature of an amendment/modification.  The  Department  of
Personnel  and  Training  consciously  “amended”  the   earlier   OM   dated
22.11.1959, by  the  later  OM  dated  7.2.1986.   The  said  amendment  was
consciously carried out, with the object of remedying the  inappropriateness
of direct recruits of later years becoming senior  to  promotees  with  long
years of service.  It is not the case of any of the parties before us,  that
the OM dated 7.2.1986,  has  ever  been  “amended”  or  “modified”.   It  is
therefore imperative to conclude, that the OM dated 7.2.1986 is binding  for
the determination of the issues expressed therein, and that,  the  same  has
the force of law.  The OM dated 3.7.1986 is in the nature  of  consolidatory
instruction, whereby, all earlier instructions  issued  from  time  to  time
were compiled together.  This is apparent, not only from the subject of  the
aforesaid OM dated 3.7.1986, but also, the contents of paragraph 1  thereof.
 Paragraph 1 of the OM dated 3.7.1986, is being reproduced hereunder:
      “                            Dated 3.7.86


                              OFFICE MEMORANDUM


      Subject:    SENIORITY – consolidated orders on


            The undersigned is directed to say that instructions  have  been
      issued by this Department from time to time laying down the principles
      for determining seniority of persons appointed to services  and  posts
      under  the  Central  Government.   For  facility  of  reference,   the
      important orders on the subject have been consolidated in this  office
      memorandum.  The number and date of  the  original  communication  has
      been quoted in the margin so  that  the  users  may  refer  to  it  to
      understand fully the context  in  which  the  order  in  question  was
      issued.”
                                              (emphasis is ours)


It is therefore clear, that the OM dated 3.3.2008 is neither in  the  nature
of an “amendment” nor in the nature  of  a  “modification”.   Since  the  OM
dated  3.3.2008,  is  a  mere  “consolidation”  or  compilation  of  earlier
instructions on the subject of seniority, it is  not  prudent  to  draw  any
inferences  therefrom  which  could  not   be   drawn   from   the   earlier
instruction/office memoranda being “consolidated” or  compiled  therein,  or
which is contrary thereto.
28.   It is relevant to notice,  that  there  is  a  marginal  note  against
paragraph 2.4.2 in the OM dated 3.7.1986.  The aforesaid  marginal  note  is
being extracted hereunder:
      “DOPT No.35014/2/80-Estt(D) dt.7.2.86”


Therefore, paragraph 2.4.2 must be deemed  to  have  been  recorded  in  the
consolidating OM, on the basis  of  the  OM  dated  7.2.1986.   The  instant
assertion has been made on account of it having been expressly mentioned  in
the opening paragraph of the OM dated 3.7.1986 (extracted above),  that  the
number and date of  the  original  communication  has  been  quoted  in  the
margin, so that the user may refer to it, to understand  fully  the  context
in which the order in question was issued.  Therefore, for all  intents  and
purposes the OM dated 3.3.2008 is with reference to the OM  dated  7.2.1986.
It is for this reason, that while debating  the  exact  purport  of  the  OM
dated 3.3.2008, it  has  been  our  endeavour  to  examine  the  same,  with
reference to the earlier OMs dated 7.2.1986 and 3.7.1986, which  were  inter
alia “consolidated” in the OM dated 3.3.2008.
29.   A perusal of the OM dated 3.3.2008, would reveal, that a reference  to
paragraphs 2.4.1 and 2.4.2 of the OM dated 3.7.1986, has been made  therein.
 Thereupon, the meaning of the term “available” used in paragraph  2.4.2  of
the OM dated 3.7.1986, is statedly “clarified”.  In view of  the  conclusion
drawn in the foregoing paragraph, the said clarification must be  deemed  to
be with reference, not only to the OM dated 3.7.1986 but also the  OM  dated
7.2.1986.  We have already noticed,  in  an  earlier  part  of  the  instant
judgment, the essential ingredients of a “clarification” are, that it  seeks
to explain an unclear,  doubtful,  inexplicit  or  ambiguous  aspect  of  an
instrument, which  is  sought  to  be  clarified  or  resolved  through  the
“clarification”.   And  that,  it  should  not  be  in  conflict  with   the
instrument sought to be explained.  It is in the aforesaid background,  that
we will examine the two queries posed in the preceding paragraph.   We  have
already analysed the true purport of the OM dated 7.2.1986 (in paragraph  20
hereinabove).  We have also recorded our conclusions with reference  to  the
OM dated 3.7.1986 wherein we have duly taken  into  consideration  the  true
purport of paragraph 2.4.2 contained in the OM dated 3.7.1986 (in  paragraph
21 hereinabove).  The aforesaid conclusions are  not  being  repeated  again
for reasons of brevity.  We have separately analysed the effect  of  the  OM
dated 3.3.2008 (in  paragraph  26  of  the  instant  judgment).  It  is  not
possible for us to conclude that  the  position  expressed  in  the  earlier
office memoranda is unclear, doubtful, inexplicit or  ambiguous.   Certainly
not on the subject sought to be  clarified  by  the  OM  dated  3.3.2008.  A
comparison of the conclusions recorded in paragraph 20  (with  reference  to
the OM dated  7.2.1986)  and  paragraph  21  (with  reference  to  OM  dated
3.7.1986) on the one hand, as against, the conclusions  drawn  in  paragraph
26 (with reference to OM  dated  3.3.2008)  on  the  other,  would  lead  to
inevitable conclusion, that the  OM  dated  3.3.2008  clearly  propounds,  a
manner of  determining  inter  se  seniority  between  direct  recruits  and
promotees, by a method which is indisputably in conflict with the OMs  dated
7.2.1986 and 3.7.1986.  Ofcourse, it was  possible  for  the  Department  of
Personnel and Training to “amend” or “modify” the earlier office  memoranda,
in the same manner  as  the  OM  dated  7.2.1986  had  modified/amended  the
earlier OM dated 22.11.1959.  A perusal of the OM  dated  3.3.2008,  however
reveals, that it was not the intention of the Department  of  Personnel  and
Training to alter the manner  of  determining  inter  se  seniority  between
promotees and direct recruits, as  had  been  expressed  in  the  OMs  dated
7.2.1986 and 3.7.1986.  The intention was only to “clarify” the  earlier  OM
dated 3.7.1986 (which would implicitly include the OM dated 7.2.1986).   The
OM dated 3.3.2008 has clearly breached the parameters  and  the  ingredients
of a “clarification”.  Therefore, for all intents and purposes the OM  dated
3.3.2008, must be deemed to be non-est to the extent that  the  same  is  in
derogation of the earlier  OMs  dated  7.2.1986  and  3.7.1986.   Having  so
concluded, it is natural to record, that as the position  presently  stands,
the OMs dated 7.2.1986 and 3.7.1986 would have  an  overriding  effect  over
the OM dated 3.3.2008 (to the extent of conflict between them).  And the  OM
dated 3.3.2008 has to be ignored/omitted to the extent that the same  is  in
derogation of the earlier OMs dated 7.2.1986 and 3.7.1986.  In the light  of
the conclusions recorded hereinabove, we are satisfied  that  the  OM  dated
3.3.2008 is not relevant for the determination of the present controversy.
30.   Besides the interpretation of the relevant OMs  issued  by  the  DOPT,
learned  counsel  representing  the  promotees  placed  reliance   on   some
judgments of this Court in order to press their contention,  that  seniority
for direct recruits could  not  be  determined  with  reference  to  a  date
preceding the date of their recruitment.  In so far as  the  instant  aspect
of the matter is concerned, reliance was placed on  Jagdish  Ch.  Patnaik  &
Ors. v. State of Orissa and others, (1998) 4 SCC 456; Suraj Prakash Gupta  &
Ors. v. State of J&K & Anr., (2000) 7 SCC 561;  and  Pawan  Pratap  Singh  &
Ors. v. Reevan Singh & Ors., (2011) 3 SCC 267.
31.   The seniority rule applied in Jagdish Ch. Patnaik’s case  (supra)  has
been extracted in paragraph 24 of the said judgment.  The seniority rule  in
question, inter alia expressed, that  seniority  would  be  determined  with
reference to the  date  of  recruitment.   In  Suraj  Prakash  Gupta’s  case
(supra), the relevant seniority rule was extracted  in  paragraph  53  which
provided, that seniority would be determined with reference to the  date  of
first appointment.  The rule itself expressed that the words “date of  first
appointment” would mean the date of first substantive appointment against  a
clear vacancy.  In Pawan Pratap Singh’s  case  (supra)  the  question  which
arose for consideration, related to  determination  of  inter  se  seniority
between two sets of direct recruits.  The first set comprised  of  vacancies
advertised in 1987 which came to be filled up in 1994, and  the  second  set
comprised of vacancies of the year 1990 which came to be filled  up  in  the
year 1991.  The  controversy  in  Pawan  Pratap  Singh’s  case  (supra)  was
conspicuously different from the controversy in hand. In view  of  the  fact
that the seniority rules, as also the factual matrix  in  the  cases  relied
upon was substantially at variance with the relevant OMs dated 7.2.1986  and
3.7.1986 (which are the subject of interpretation in so far as  the  present
case is concerned), as also the facts of the cases in hand, it is  apparent,
that the judgments relied upon by the learned counsel  are  inapplicable  to
determine the present controversy.
32.   One finds attracted  to  the  observations  recorded  in  Jagdish  Ch.
Patnaik’s case (supra) wherein it was observed, “when the language  used  in
the statute is unambiguous and on a plain grammatical  meaning  being  given
to the words in the statute,  the  end  result  is  neither  arbitrary,  nor
irrational nor contrary to the object of the statute, then it  is  the  duty
of the court to give effect to the words used in  the  statute  because  the
words declare the intention of the law making authority best”.   We  are  of
the view that  the  aforesaid  observations  are  fully  applicable  to  the
present controversy.  We may add that the various ONs and letters issued  by
the DOPT (referred to above) do not leave room for any ambiguity.
33.   Having interpreted the effect of the OMs dated 7.2.1986  and  3.7.1986
(in paragraphs 20 and 21 hereinabove), we are satisfied, that not  only  the
requisition but also the advertisement for direct recruitment was issued  by
the SSC in the recruitment  year  in  which  direct  recruit  vacancies  had
arisen.  The said factual position, as confirmed by the  rival  parties,  is
common in all matters being collectively disposed of.  In  all  these  cases
the  advertised   vacancies   were   filled   up   in   the   original/first
examination/selection conducted for the same.  None of  the  direct  recruit
Income Tax Inspectors herein can be stated to be occupying  carried  forward
vacancies,  or  vacancies  which  came  to  be  filled  up  by   a   “later”
examination/selection process.  The facts only reveal, that the  examination
and the selection process of direct recruits could not be  completed  within
the recruitment year itself.  For this, the  modification/amendment  in  the
manner of determining the inter-se seniority  between  the  direct  recruits
and  promotees,  carried  out  through  the  OM  dated  7.2.1986,  and   the
compilation of the instructions pertaining to  seniority  in  the  OM  dated
3.7.1986, leave no room  for  any  doubt,  that  the  “rotation  of  quotas”
principle, would be fully applicable to the direct recruits in  the  present
controversy.   The  direct  recruits  herein  will  therefore  have  to   be
interspaced with promotees of the same recruitment year.
34.   In view of the above, the Civil  Appeals,  the  Transferred  Case,  as
well as, the Transfer Case (filed by the direct recruits and  the  Union  of
India) are hereby allowed.  The claim of  the  promotees,  that  the  direct
recruit Income Tax Inspectors,  in  the  instant  case  should  be  assigned
seniority with reference to the date of  their  actual  appointment  in  the
Income Tax Department is declined.


                   ……………………………………J.
                                         (D.K. Jain)


                   ……………………………………J.
                                         (Jagdish Singh Khehar)
NEW DELHI;
NOVEMBER 27, 2012
-----------------------
48


whether ‘soft serve’ served at the restaurants/outlets commonly and popularly known as McDonalds, is classifiable under heading 21.05 (as claimed by the revenue) or under heading 04.04 or 2108.91 (as claimed by the assessee) of the Central Excise and Tariff Act, 1985 (for short “the Tariff Act”).=Upon a reading of the notification it is clear that the exemption in the notification is granted for the whole of excise duty which was payable on such softy ice cream and non alcoholic beverages dispensed through vending machines, but was not being levied during the relevant period, which is not the case here. In the present case, as aforenoted, three show cause notices had been issued to the assessee alleging that ‘soft serve’ was classifiable under heading 21.05 and attracted duty @ 16%. The show cause notices issued by the revenue also indicated that the assessee was liable to pay additional duty under Section 11A of the Act. This clearly shows that the excise duty was payable by the assessee and was being levied by the revenue. Therefore, the assessee’s case does not fall within the ambit of the said notification and is not eligible for the exemption granted to “softy ice- cream”, dispensed through a vending machine for the relevant period. 49. For the view we have taken, it is unnecessary to examine the issue whether the product in question bears a brand name. 50. Resultantly, the appeals are allowed and the impugned orders of the Tribunal are set aside, leaving the parties to bear their own costs.


                                                                  REPORTABLE
|IN THE SUPREME COURT OF INDIA                                      |
|CIVIL APPELLATE JURISDICTION                                       |
|CIVIL APPEAL  NOS. 5307-5308 0F 2003                               |
|                                                                   |
|COMMISSIONER OF CENTRAL EXCISE,   |—         |      APPELLANT       |
|NEW DELHI                         |          |                      |
|                                                                   |
|VERSUS                                                             |
|M/S CONNAUGHT PLAZA RESTAURANT (P)|—         |RESPONDENT            |
|LTD., NEW DELHI                   |          |                      |


                               J U D G M E N T


D.K. JAIN, J.

1. The short question of law for consideration in these  appeals,  filed  by
   the revenue, under Section 35L of the Central Excise Act, 1944 (for short
   “the Act”) is whether ‘soft  serve’  served  at  the  restaurants/outlets
   commonly and popularly known as McDonalds, is classifiable under  heading
   21.05 (as claimed by the revenue) or under heading 04.04 or  2108.91  (as
   claimed by the assessee) of the Central Excise and Tariff Act, 1985  (for
   short “the Tariff Act”).

2. During the relevant period, the respondent-assessee was  engaged  in  the
   business of selling burgers, nuggets, shakes, soft-serve etc. through its
   fast food chain of restaurants, named above. In so far as the manufacture
   and service of ‘soft serve’ is concerned, the assessee  used  to  procure
   soft serve mix in liquid form from one M/s  Amrit  Foods,  Ghaziabad;  at
   Amrit Foods, raw milk was pasteurised, skimmed milk powder was added (the
   milk fat content in the said mixture is stated to be 4.9%, not  exceeding
   6% at any stage); sweetening agent in the form of sugar or glucose  syrup
   and permitted stabilizers were added; the mixture, in  liquid  form,  was
   then homogenized, packed in polyethylene pouches and  stored  at    0  to
   40C.  This material was then transported to the outlets  under  the  same
   temperature control, where the liquid mix was pumped into a ‘Taylor-make’
   vending machine; further cooled along  with  the  infusion  of  air,  and
   finally, the end product, ‘soft serve’, was drawn through the nozzle into
   a wafer cone or in a plastic cup and  served  to  the  customers  at  the
   outlet.

3. For the periods from April 1997 to March 2000, three show  cause  notices
   came to be issued to the assessee. These alleged that  the  ‘soft  serve’
   ice-cream was classifiable under Chapter 21, relating  to  “Miscellaneous
   Edible Preparations” of the Tariff Act, attracting 16% duty under heading
   21.05, sub-heading 2105.00 -“Ice-cream and other edible ice,  whether  or
   not containing cocoa”.   Invoking  the  proviso  to  sub-section  (1)  of
   Section 11A of the Act, additional duty was also demanded. A proposal for
   imposing penalty on the assessee and on their Managing Director was  also
   initiated.

4. While adjudicating on the first show cause notice, vide order dated  31st
   May, 2000, the adjudicating  authority  held  that  :  ‘soft  serve’  was
   classifiable under heading 04.04.  Describing the goods as  “other  dairy
   produce; edible products of animal origin,  not  elsewhere  specified  or
   included”, it held that the process undertaken by the  assessee  amounted
   to manufacture and the extended period of limitation was not  applicable.
   However, while adjudicating on the second show cause notice,  vide  order
   dated 28th September, 2001, the adjudicating  authority  concluded  that:
   soft serve was classifiable under heading 21.05; the  process  undertaken
   by the assessee for conversion of soft serve mix to ‘soft serve’ amounted
   to manufacture and that the assessee was  not  entitled  to  small  scale
   exemption  because  of  use  of  the  brand   name   “McDonalds”.   While
   adjudicating on the third show cause notice, the  adjudicating  authority
   reiterated that : ‘soft serve’ was classifiable under heading 21.05;  the
   process undertaken by the assessee for conversion of soft  serve  mix  to
   ‘soft serve’ amounted to manufacture and small scale  exemption  was  not
   available to the assessee because of use of the brand  name  “McDonalds”.
   In an appeal filed by the assessee, the Commissioner  of  Central  Excise
   (Appeals) reversed the above finding and classified  ‘soft  serve’  under
   the sub-heading 2108.91.

5. Being aggrieved, cross appeals were filed, both by the  revenue  as  also
   the assessee, before the Customs, Excise  and  Gold  (Control)  Appellate
   Tribunal, New Delhi, as it then existed, (for short “the Tribunal”).  The
   appeals arising from the first two show cause notices were disposed of by
   the main order, dated 29th January, 2003. The  appeal  arising  from  the
   third show cause notice was disposed of by the Tribunal vide order  dated
   3rd August, 2004, following its earlier decision  in   order  dated  29th
   January, 2003. The Tribunal came  to  the  conclusion  that  the  process
   undertaken by the assessee, namely, conversion of soft serve mix to ‘soft
   serve’ amounted to manufacture and that  ‘soft  serve’  was  classifiable
   under sub-heading 2108.91, describing the goods as “Edible  preparations,
   not elsewhere specified or  included”  –  “not  bearing  a  brand  name”,
   attracting nil rate of duty.  The  Tribunal held thus :-


    “In view of the technical literature, ISI Specification and  provisions
    made in Prevention of  Food  Adulteration  Act,  1955  and  Rules  made
    thereunder, the impugned product  cannot  be  classified  as  ice-cream
    merely on the ground that the consumer understood the same as ice-cream
    or the ingredients of both the products are same. The  statement  given
    by the Managing Director also cannot be a  basis  for  determining  the
    exact classification of the product in the Central Excise  Tariff.  The
    ratio of the decision in the case of Shree  Baidyanath  Ayurved  Bhavan
    Limited case is not applicable to the facts of the present matter.  The
    dispute in the said case was as to whether the  ‘Dant  Manjan  Lal’  is
    Ayurvedic medicine or ‘Tooth Powder’.  In  that  context,  the  Supreme
    Court observed that resort should not be  had  to  the  scientific  and
    technical meaning of the  terms  and  expressions  used  but  to  their
    popular meaning, which does not mean that if a  particular  product  is
    not ice-cream it can be classified as ice-cream because some  consumers
    treated it as ice-cream. Accordingly, the product in  question  is  not
    classifiable under Heading 21.05 of the Central Excise Tariff.”



6. It is manifest that the Tribunal based its conclusion  on  the  technical
   meaning and specifications of the product “ice-cream”, stipulated in  the
   Prevention of Food Adulteration Act,  1955  (for  short  “the  PFA”)  and
   rejected the common parlance test, viz. the consumers’  understanding  of
   the product.  Being aggrieved by the said approach, the revenue is before
   us in these appeals.

7. Mr. Arijit Prasad, learned counsel appearing for the  revenue,  submitted
   that the enquiries conducted by the revenue revealed that in common trade
   parlance, ‘soft serve’ is known as “ice-cream”; all the ingredients  used
   and the process of manufacture adopted for preparation of ‘soft serve’ is
   essentially the same as is adopted for manufacture of an “ice-cream”; and
   therefore, manufacture of ‘soft serve’ cannot be said to be distinct from
   the manufacture of “ice-cream”. It was urged that the specifications  for
   manufacture of “ice-cream” under the PFA are irrelevant in so far as  the
   question of classification of goods under the Tariff  Act  is  concerned.
   It was asserted that the identity of ‘soft serve’ is associated with  how
   the public  at  large  identifies  it,  and  not  by  the  parameters  or
   specifications indicated in other statutes including the PFA in  relation
   to “ice-cream”. According to the learned counsel ‘soft serve  ice-cream’,
   ‘soft ice-cream’ and ‘Softies’ are commonly taken as different  kinds  of
   “ice-cream”. Finally, it was submitted that since  the  product  is  sold
   from the outlets of “McDonalds”, the brand is in the customer’s mind when
   he/she enters the outlet and therefore, it cannot be covered  under  sub-
   heading 2108.91, as erroneously held by the Tribunal.

8. Mr. V. Lakshmi Kumaran, learned counsel appearing for  the  assessee,  on
   the other hand, asserted that but for heading 21.05,  “ice-cream”  itself
   was a dairy product and would have been classified under  heading  04.04.
   Therefore, ‘soft serve’ would also be classifiable under  heading  04.04.
   It was argued that ‘soft serve’ cannot be referred to as “ice-cream” even
   by applying the common parlance test, in as much as ‘soft serve’ is  sold
   throughout the world not as “ice-cream” but only as ‘soft  serve’.  “Ice-
   cream”, the world over, is commonly understood to have milk  fat  content
   around 10%  whereas  ‘soft serve’ does not contain milk fat of more  than
   5%.

9. Referring to the technical meaning of “ice-cream”, given  in  Kirk-Othmer
   Encyclopedia of Chemical  Technology,  Third  Edition  –  Volume  15  and
   “Outlines of Dairy Technology” by Sukumar De, learned counsel  vehemently
   submitted that all these books describe “ice-cream” as a  dessert,  which
   is frozen to a hard stage, whereas,  soft  serve  dispensed  through  the
   Taylor machine is served in a semi-solid state, by processing the pre-mix
   by blowing air into it.  ‘Soft serve’ is not as hard as an ice-cream  is,
   and thus, cannot  be  called  as  “ice  cream”  even  if  tested  on  the
   touchstone of  the   common  parlance  test.   The  main  thrust  of  the
   submission of the learned counsel was that if the assessee markets  ‘soft
   serve’ as “ice-cream”, they will be liable to prosecution under the  PFA,
   because the milk fat  content  in  ‘soft  serve’  is  less  than  10%,  a
   statutory requirement for manufacture of “ice-cream”. In support  of  the
   submission, learned counsel commended us to the decision of this Court in
   State of Maharashtra Vs. Baburao Ravaji Mharulkar & Ors.[1],  wherein  it
   was held that a person selling ice-cream with 5% milk fat content instead
   of minimum 10% milk fat, was selling adulterated ice-cream and was liable
   to prosecution.  Reliance was also placed on the decision of  this  Court
   in Akbar Badrudin Giwani Vs. Collector of Customs, Bombay[2], to  contend
   that in matters pertaining to classification of  a  commodity,  technical
   and scientific meaning of the product is to prevail over  the  commercial
   parlance meaning.

10. Lastly, Mr.  V. Lakshmi Kumaran urged that even if we were to hold  that
   ‘soft serve’ is an “ice-cream”,  under  notification  No.16/2003-CE  (NT)
   dated 12th March, 2003, granting exemption to “softy ice-cream” dispensed
   through a vending machine, issued under  Section  11C  of  the  Act,  the
   assessee will not be liable to pay any Excise duty in respect  of  “softy
   ice-cream” during the relevant period.

11. In short, the case of the assessee is that “soft  serve”  is  a  product
   distinct and separate from “ice-cream” since the world  over  “ice-cream”
   is commonly understood to have milk fat content above  8%  whereas  ‘soft
   serve’ does not contain more than 5% of milk fat; it cannot be considered
   as “ice-cream” by common parlance understanding since it is  marketed  by
   the assessee the world  over  as  ‘soft  serve’;  “ice-cream”  should  be
   understood in its scientific and technical sense; and  hence,  for  these
   reasons, ‘soft serve’ is to be classified under heading 04.04  as  “other
   dairy produce” and not under heading 21.05. On the  other  hand,  Revenue
   claims that “ice-cream” has not been defined under heading  21.05  or  in
   any of the chapter notes of Chapter 21; upon conducting enquiries it  was
   found that ‘soft serve’ is known as “ice-cream” in common  parlance;  and
   hence, it must be classified in the category of “ice-cream” under heading
   21.05 of the Tariff Act.

12. Before we proceed to evaluate the rival stands, it  would  be  necessary
   to notice the length and breadth of the relevant tariff entries that have
   been referred to by both the learned counsel.
|“Chapter 4           |Dairy Produce, etc.              |312           |
|                     |                                 |              |
|04.04                |Other dairy produce; Edible      |              |
|                     |products of animal origin, not   |              |
|                     |elsewhere specified or included  |              |
|                     |-Ghee :                          |              |
|0404.11              |--Put up in unit containers and  |Nil           |
|                     |bearing a brand name             |              |
|0404.19              |--Other                          |Nil           |
|0404.90              |--Other                          |Nil           |

|Heading No.   |Sub-heading  |Description of goods      |Rate of duty  |
|              |No.          |                          |              |
|(1)           |(2)          |(3)                       |(4)           |
|21.05         |2105.00      |Ice cream and other edible|16%           |
|              |             |ice, whether or not       |              |
|              |             |containing cocoa          |              |
|21.08         |             |Edible preparations, not  |              |
|              |             |elsewhere specified or    |              |
|              |             |included                  |              |
|              |2108.91      |-Not bearing a brand name |Nil”          |


13. Chapter 4 of the Tariff Act reads “dairy  produce;  edible  products  of
   animal origin, not elsewhere specified or  included.”  Heading  04.04  is
   applicable to “other dairy produce; or edible products of  animal  origin
   which are not specified  or  included  elsewhere.”  As  is  evident  from
   Chapter note 4, the terms of heading 04.04 have been couched  in  general
   terms with wide amplitude. Chapter note 4 reads:
      “4. Heading No. 04.04 applies, inter  alia,  to  butter-milk,  curdled
      milk, cream, yogurt, whey, curd, and products  consisting  of  natural
      milk constituents, whether or not  containing  added  sugar  or  other
      sweetening matter or flavoured or containing added fruit or cocoa  and
      includes fats and oils derived from milk (e.g. milkfat, butterfat  and
      butteroil), dehydrated butter and ghee.”



14.  On  the  other  hand,  Chapter  21  of  the  Act   is   applicable   to
   “Miscellaneous Edible Preparations”. Heading 21.05 refers  to  “ice-cream
   and other edible ice”. It is significant to note that none of  the  terms
   have been defined in the chapter. Further heading 2108.91 is a  residuary
   entry of wide amplitude applicable to “edible preparations, not elsewhere
   specified or included” and “not bearing a brand name”.

15. According to the rules of interpretation for the First Schedule  to  the
   Tariff Act, mentioned in Section 2 of the Tariff Act,  classification  of
   an excisable good shall be determined  according  to  the  terms  of  the
   headings and any corresponding chapter or section notes. Where these  are
   not clearly determinative of classification, the same shall  be  effected
   according to Rules 3, 4 and 5 of the  general  rules  of  interpretation.
   However, it is also a well known principle that in  the  absence  of  any
   statutory definitions, excisable goods mentioned in  tariff  entries  are
   construed according to the common parlance understanding of such goods.

16. The general rules of interpretation of taxing statutes  were  succinctly
   summarized by this Court in Oswal Agro Mills Ltd. & Ors. Vs. Collector of
   Central Excise & Ors.[3]; as follows :
       “4. The provisions of the  tariff  do  not  determine  the  relevant
       entity of the goods. They deal whether and  under  what  entry,  the
       identified entity attracts duty. The goods are to be identified  and
       then to find the appropriate heading, sub-heading  under  which  the
       identified  goods/products  would  be  classified.   To   find   the
       appropriate  classification  description  employed  in  the   tariff
       nomenclature should be appreciated having regard to the terms of the
       headings read with the relevant provisions  or  statutory  rules  or
       interpretation put up thereon. For exigibility to  excise  duty  the
       entity must be specified in positive terms under a particular tariff
       entry. In its absence it must be deduced from a proper  construction
       of the tariff entry. There is neither intendment  nor  equity  in  a
       taxing statute. Nothing is implied. Neither can we insert nor can we
       delete anything but it should be interpreted and  construed  as  per
       the words the legislature has chosen to employ in the Act or  rules.
       There is no room for assumption or presumptions. The object  of  the
       Parliament has  to  be  gathered  from  the  language  used  in  the
       statute.……….. ..
           ***                    ***                           ***
       …Therefore, one has to gather its meaning in the  legal  setting  to
       discover the object which the Act seeks to serve and the purpose  of
       the amendment brought about.
       The task of interpretation of the statute is not a  mechanical  one.
       It is more than mere reading  of  mathematical  formula.  It  is  an
       attempt to discover  the  intention  of  the  legislature  from  the
       language used by it, keeping always in mind, that the language is at
       best an imperfect instrument for  the  expression  of  actual  human
       thoughts. It is also idle to expect that the  draftsman  drafted  it
       with  divine  prescience  and  perfect  and   unequivocal   clarity.
       Therefore, court would endeavour to eschew literal  construction  if
       it produces manifest absurdity or unjust  result.  In  Manmohan  Das
       v. Bishun Das : (1967) 1 SCR  836,  a  Constitution  Bench  held  as
       follows:


          “…The ordinary rule of construction  is  that  a  provision  of  a
          statute must be construed in accordance  with  the  language  used
          therein unless there are compelling  reasons,  such  as,  where  a
          literal construction would reduce the provision  to  absurdity  or
          prevent manifest intention of the legislature from  being  carried
          out.”


17. Therefore, in order to find an appropriate entry for the  classification
   of ‘soft serve’, it would be necessary to first construe the  true  scope
   of the relevant headings. As noted above, none of the  terms  in  heading
   04.04 and heading 21.05 have been defined and no technical or  scientific
   meanings have been given in the chapter notes. Evidently, ‘soft serve’ is
   not defined in any of the chapters aforesaid. Under these  circumstances,
   it becomes imperative to examine if the subject good could come under the
   purview of any of the classification descriptions employed in the  Tariff
   Act.  Having regard to the nature of the pleadings, the issue is  whether
   the term “ice-cream” in heading  21.05  includes  within  its  ambit  the
   product ‘soft serve’.  That leads us to the pivotal question, whether, in
   the absence of a statutory definition, the term “ice-cream” under heading
   21.05 is to be  construed  in  light  of  its  scientific  and  technical
   meaning, or, whether we are to consider this term in its common  parlance
   understanding to determine  whether  its  amplitude  is  wide  enough  to
   include ‘soft serve’ within its purview.

Common Parlance Test :
18. Time and again, the principle of common parlance  as  the  standard  for
   interpreting terms in the taxing  statutes,  albeit  subject  to  certain
   exceptions, where the statutory context runs to the  contrary,  has  been
   reiterated. The  application  of  the  common   parlance   test   is   an
   extension of the general principle  of  interpretation  of  statutes  for
   deciphering the mind of the law maker;  “it  is  an attempt  to  discover
    the  intention of  the  legislature   from  the  language  used  by  it,
   keeping always in mind,  that  the  language  is  at  best  an  imperfect
   instrument for the expression of actual  human  thoughts.”  [(See  :Oswal
   Agro Mills Ltd (supra)].


19. A classic example on the concept of common parlance is the  decision  of
   the Exchequer Court of Canada in The King Vs. Planter Nut  and  Chocolate
   Company Ltd.[4]. The question involved in the said decision  was  whether
   salted peanuts and cashew nuts could  be  considered  to  be  "fruit"  or
   "vegetable" within the  meaning  of  the  Excise  Tax  Act.  Cameron  J.,
   delivering the judgment, posed the question as follows:

      “...would a householder when asked to bring home fruit  or  vegetables
      for the evening meal bring home salted peanuts, cashew or nuts of  any
      sort? The answer is obviously `no'.”


Applying the test, the Court held that the  words  “fruit”  and  “vegetable”
are not defined in the Act or any of the Acts  in  pari  materia.  They  are
ordinary  words  in  every-day  use  and  are  therefore,  to  be  construed
according to their popular sense.

20.  In  Ramavatar  Budhaiprasad  Etc.  Vs.  Assistant  Sales  Tax  Officer,
   Akola[5], the issue before this Court was whether betel leaves  could  be
   considered as “vegetables” in the Schedule of the C.P. & Berar Sales  Tax
   Act, 1947 for availing the benefit of  exemption.  While  construing  the
   import of the word “vegetables” and holding that betel leaves  could  not
   be held to be “vegetables”, the Court observed thus :

        “…But this word must be construed not in any  technical  sense  nor
        from the botanical point  of  view  but  as  understood  in  common
        parlance. It has not been defined in the Act and being  a  word  of
        every day use it must be construed in  its  popular  sense  meaning
        “that sense which people conversant with the  subject  matter  with
        which the statute is dealing would attribute to it.”





21. In Commissioner of Sales Tax, Madhya Pradesh  Vs. Jaswant  Singh  Charan
   Singh[6], the Court had to decide whether “charcoal” could be  classified
   as “coal” under Entry I of Part III of Schedule II of the Madhya  Pradesh
   General Sales Tax Act, 1958. Answering the question in  the  affirmative,
   it was observed as follows :

         “3. Now, there can be no dispute that while  coal  is  technically
        understood as a mineral product, charcoal is manufactured by  human
        agency from products like wood and other things. But it is now well-
        settled that while interpreting items in statutes  like  the  Sales
        Tax Acts, resort should  be  had  not  to  the  scientific  or  the
        technical meaning of such terms but to their popular meaning or the
        meaning attached to them by those dealing in them, that is to  say,
        to their commercial sense……”


        XXX            XXX             XXX              XXXX


        “5.  The  result  emerging  from  these  decisions  is  that  while
        construing the word ‘coal’ in Entry I of Part III of  Schedule  II,
        the test that would be applied is what would be the  meaning  which
        persons dealing with coal and consumers purchasing it as fuel would
        give to that word. A sales tax statute is being one levying  a  tax
        on goods must in the absence of a  technical  term  or  a  term  of
        science or art, be presumed to have used an ordinary term  as  coal
        according to the meaning ascribed to it in common parlance.  Viewed
        from that angle both a merchant dealing  in  coal  and  a  consumer
        wanting to purchase it would regard  coal  not  in  its  geological
        sense but in the sense as ordinarily understood and  would  include
        ‘charcoal’ in the term ‘coal’. It is only when the question of  the
        kind or variety of coal would arise that  a  distinction  would  be
        made between coal and charcoal; otherwise, both of  them  would  in
        ordinary parlance as also in their commercial sense  be  spoken  as
        coal.”





22. In Dunlop India Ltd. Vs. Union of India & Ors.[7], at  page  251,  while
   holding that VP Latex was to be classified as “raw rubber” under Item  39
   of the Indian Tariff Act, 1934, this Court observed:
          “29. It is well established that in interpreting  the  meaning  of
          words in a taxing statute, the acceptation of a particular word by
          the trade and its popular meaning should  commend  itself  to  the
          authority.”


          “34. We are, however, unable to accept the submission. It is clear
          that meanings given to articles in a fiscal  statute  must  be  as
          people  in  trade  and  commerce,  conversant  with  the  subject,
          generally treat and understand them in the usual course. But  once
          an article is classified and put under a distinct entry, the basis
          of the classification is  not  open  to  question.  Technical  and
          scientific tests offer  guidance  only  within  limits.  Once  the
          articles are in circulation and come to be described and known  in
          common  parlance,  we  then  see  no  difficulty   for   statutory
          classification under a particular entry.”

23. In Shri Bharuch Coconut Trading Co. and Ors.  Vs. Municipal  Corporation
   of the City of Ahmedabad & Ors.[8], this Court applied the test as "would
   a householder when asked to bring some fresh fruits or some vegetable for
   the evening meal, bring coconut too as vegetable (sic)?” The  Court  held
   that when a person goes to a commercial market to ask for  coconuts,  "no
   one will consider brown coconut to be vegetable or fresh fruit much  less
   a green fruit. No householder would purchase it as a  fruit.”  Therefore,
   the meaning of the word ‘brown coconut’,  and  whether  it  was  a  green
   fruit, had to  be  “understood  in  its  ordinary  commercial  parlance.”
   Accordingly it was held that brown coconut would  not  be  considered  as
   green fruit.

24. In Indian Aluminium Cables Ltd. Vs.  Union  of  India  &  Ors.[9],  this
   Court observed the following:
      “…This Court has consistently taken the view that, in determining  the
      meaning or connotation of words and expressions describing an  article
      in a tariff schedule, one principle which is  fairly  well-settled  is
      that those words and expressions should be construed in the  sense  in
      which they are  understood  in  the  trade,  by  the  dealer  and  the
      consumer. The reason is that it is they who are concerned with it and,
      it is the sense in which they  understand  it  which  constitutes  the
      definitive index of the legislative intention”.


25. In  Collector  of  Central  Excise,  Kanpur  Vs.  Krishna  Carbon  Paper
   Co.[10], this Court has opined thus :
        “12. It is a well settled principle of construction,  as  mentioned
       before, that where the word has a scientific  or  technical  meaning
       and also an ordinary meaning according to common parlance, it is  in
       the latter sense that in a taxing statute the word must be  held  to
       have been used, unless contrary intention is  clearly  expressed  by
       the legislature…..
       …But there is a word of caution that has to be borne in mind in this
       connection, the words must be understood in popular sense,  that  is
       to say, these must be confined to the words  used  in  a  particular
       statute and  then  if  in  respect  of  that  particular  items,  as
       artificial definition is given in the sense that a  special  meaning
       is attached to particular words in the  statute  then  the  ordinary
       sense or dictionary meaning would not be applicable but the  meaning
       of that type of goods dealt with by that type of goods in that  type
       of market, should be searched.”



26. In Reliance Cellulose Products Ltd., Hyderabad Vs. Collector of  Central
   Excise, Hyderabad-I Division, Hyderabad[11], it was observed:
      “20. In other  words,  if  the  word  used  in  a  fiscal  statute  is
      understood in  common  parlance  or  in  the  commercial  world  in  a
      particular sense, it must be taken that the Excise Act has  used  that
      word in the commonly understood sense. That sense cannot be taken away
      by attributing a technical meaning to the word. But if the legislature
      itself has adopted a technical term, then that technical term  has  to
      be understood in the technical sense. In other words, if in the fiscal
      statute, the article in question falls within the ambit of a technical
      term used under a particular entry, then that article cannot be  taken
      away from that entry and placed  under  the  residuary  entry  on  the
      pretext that the article, even though it comes within the ambit of the
      technical term used in a particular entry,  has  acquired  some  other
      meaning in market parlance. For example, if a type of explosive  (RDX)
      is known in the market as Kala Sabun by a section of  the  people  who
      uses  these  explosives,  the  manufacturer  or  importer   of   these
      explosives cannot claim that the explosives must be classified as soap
      and not as explosive.”




27. There is a catena of decisions that has dealt  with  the  classification
   of Ayurvedic products between the categories of medicaments and cosmetics
   and in the process made significant pronouncements on the common parlance
   test.

28. In Shree  Baidyanath  Ayurved  Bhavan  Ltd.  Vs.  Collector  of  Central
   Excise, Nagpur[12],  at page 404 this Court  while  applying  the  common
   parlance test held that the appellant’s product “Dant Lal  Manjan”  could
   not qualify as a medicament and held as follows:

      “The Tribunal rightly points out that in  interpreting  statutes  like
      the Excise Act the primary object of which is to raise revenue and for
      which purpose various  products  are  differently  classified,  resort
      should not be had to the scientific and technical meaning of the terms
      and expressions used but to their popular meaning, that is to say  the
      meaning attached to them by those using the product. It  is  for  this
      reason that the Tribunal came to the conclusion  that  scientific  and
      technical meanings would not advance the case of the appellants if the
      same runs  counter  to  how  the  product  is  understood  in  popular
      parlance.”

29. In Naturalle Health Products (P) Ltd. Vs.  Collector of Central  Excise,
   Hyderabad[13], two appeals were under consideration. One was with respect
   to Vicks Vapo Rub and Vicks Cough Drops while the other was with  respect
   to Sloan's Balm and Sloan's Rub. It was observed that when  there  is  no
   definition of any kind in  the  relevant  taxing  statute,  the  articles
   enumerated in the tariff schedules must be construed as far  as  possible
   in their ordinary or popular sense,  that  is,  how  the  common man  and
   persons dealing with it understand it. The Court held that  in  both  the
   cases the customers, the practitioners in Ayurvedic medicine, the dealers
   and the licensing officials treated the products in question as Ayurvedic
   medicines and not as Allopathic medicines, which gave an indication  that
   they were exclusively Ayurvedic medicines or that they were used  in  the
   Ayurvedic system  of  medicine,  though  they  were  patented  medicines.
   Consequently, it was held that the said products  had  to  be  classified
   under the Chapter dealing with medicaments.

30.  B.P.L.  Pharmaceuticals  Ltd.  Vs.   Collector   of   Central   Excise,
   Vadodara[14] was a case in  which  product  "Selsun  Shampoo"  was  under
   consideration for the purpose of classification  under  the  Tariff  Act.
   According to the manufacturers this shampoo was a medicated shampoo meant
   to treat dandruff which is a disease of the hair. This  Court  held  that
   having  regard  to  the  preparation,   label,   literature,   character,
   common and commercial parlance, the product was liable to  be  classified
   as a medicament. It was  not  an  ordinary  shampoo  which  could  be  of
   common use by common people. The shampoo was meant to cure  a  particular
   disease of hair and after the cure it was not meant to  be  used  in  the
   ordinary course.

31.  Therefore, what flows from a reading of the  afore-mentioned  decisions
   is that in the absence of a statutory definition in precise terms; words,
   entries and items in taxing statutes must be construed in terms of  their
   commercial or trade understanding, or according to their popular meaning.
   In other words they have to be constructed in the sense that  the  people
   conversant with the subject-matter of the statute, would attribute to it.
   Resort to rigid interpretation  in  terms  of  scientific  and  technical
   meanings should be avoided in such circumstances. This, however, is by no
   means an absolute rule. When the legislature  has  expressed  a  contrary
   intention, such as by providing a statutory definition of the  particular
   entry, word or item in specific, scientific  or  technical  terms,  then,
   interpretation  ought  to  be  in  accordance  with  the  scientific  and
   technical meaning and not according to common parlance understanding.



Classification of ‘Soft-Serve’

32. In light of these principles, we may  now  advert  to  the  question  at
   hand, viz. classification of ‘soft serve’ under the appropriate  heading.
   As aforesaid, the Tribunal  has  held  that  in  view  of  the  technical
   literature and stringent provisions of the PFA, ‘soft  serve’  cannot  be
   classified as “ice-cream” under Entry 21.05 of the Tariff Act. We are  of
   the opinion, that in the absence of a technical or scientific meaning  or
   definition of the term “ice-cream” or ‘soft serve’, the  Tribunal  should
   have examined the issue at hand on the touchstone of the common  parlance
   test.

33. As noted before, headings 04.04 and 21.05  have  been  couched  in  non-
   technical  terms.  Heading  04.04  reads  “other  dairy  produce;  edible
   products of animal origin, not elsewhere specified or  included”  whereas
   heading 21.05  reads  “ice-cream  and  other  edible  ice”.  Neither  the
   headings nor  the  chapter  notes/section  notes  explicitly  define  the
   entries in a scientific or technical sense.  Further, there is no mention
   of any specifications in respect of either of the entries. Hence, we  are
   unable to accept the argument that since ‘soft serve’  is  distinct  from
   “ice-cream” due to a difference in its milk fat content, the same must be
   construed in the scientific sense for the purpose of classification.  The
   statutory context of these  entries  is  clear  and  does  not  demand  a
   scientific interpretation of any  of  the  headings.  Therefore,  in  the
   absence of any statutory definition or technical description, we  see  no
   reason to deviate from the application of the common  parlance  principle
   in construing whether the term “ice-cream” under heading 21.05  is  broad
   enough to include ‘soft serve’ within its import.

34. The assessee has averred that ‘soft serve’ cannot be regarded  as  “ice-
   cream” since the former is marketed and sold around the  world  as  ‘soft
   serve’. We do not see any merit in this averment. The manner in  which  a
   product may be marketed by a manufacturer, does not  necessarily  play  a
   decisive role  in  affecting  the  commercial  understanding  of  such  a
   product. What matters is the way in  which  the  consumer  perceives  the
   product at the end  of  the  day  notwithstanding  marketing  strategies.
   Needless to say the common parlance test operates on the standard  of  an
   average reasonable person who is not expected to be  aware  of  technical
   details relating to the goods. It is highly unlikely that such  a  person
   who walks into a “McDonalds” outlet with the  intention  of  enjoying  an
   “ice-cream”, ‘softy’ or ‘soft serve’, if at all these are to be construed
   as distinct products, in the first place,  will  be  aware  of  intricate
   details such as the percentage of milk fat content, milk non-solid  fats,
   stabilisers, emulsifiers or the  manufacturing  process,  much  less  its
   technical distinction from “ice-cream”. On the contrary,  such  a  person
   would enter the outlet with the intention of simply having an “ice-cream”
   or a ‘softy ice-cream’, oblivious of its technical composition.  The true
   character of a product cannot be veiled behind a charade  of  terminology
   which is used to market a product. In other words, mere semantics  cannot
   change the nature of a product in terms of how it is perceived by persons
   in the market, when the issue at hand is one of excise classification.

35. Besides, as noted above,  learned  senior  counsel,  appearing  for  the
   assessee quoted some culinary authorities for  the  submission  that  ice
   cream must necessarily contain more than 10%  milk  fat  content  and  be
   served only in a frozen to hard stage for it to qualify as  “ice  cream”.
   It was argued that classifying  ‘soft  serve’,  containing  5%  milk  fat
   content,  as  “ice  cream”,  would  make  their  product  stand  foul  of
   requirements of the PFA which demands that an “ice-cream”  must  have  at
   least 10% milk fat content.

36. Such a hard and fast definition of a culinary product like “ice-  cream”
   that has seen constant evolution and  transformation,  in  our  view,  is
   untenable. Food experts suggest that the earliest form of ice  cream  may
   have been  frozen  syrup.  According  to  Maguelonne  Toussaint-Samat  in
   her History of Food, “They poured a mixture of snow  and  saltpeter  over
   the exteriors of containers filled with syrup, for, in the  same  way  as
   salt raises the boiling-point of water, it lowers the  freezing-point  to
   below zero.” The author charters the evolution  of  “ice  cream”  in  the
   landmark work from its primitive syrupy form to its  contemporary  status
   with more than hundred different forms, and categorizes ‘soft  serve’  as
   one such form.

37. Noted author C. Clarke states the  following  in  “The  Science  of  Ice
   Cream”:
        “The legal definition of ice cream varies from country to  country.
        In the  UK  ‘ice  cream’  is  defined  as  a  frozen  food  product
        containing a minimum of 5% fat and 7.5% milk solids other than  fat
        (i.e. protein, sugars and minerals), which  is  obtained  by  heat-
        treating and subsequently freezing an emulsion of fat, milk  solids
        and sugar (or sweetener), with or without other substances.  ‘Dairy
        ice cream’ must in addition contain no fat  other  than  milk  fat,
        with the exception of fat that is present  in  another  ingredient,
        for example egg, flavouring, or emulsifier.’ In the USA, ice  cream
        must contain at least 10% milk fat and 20% total milk  solids,  and
        must weigh a  minimum  of  0.54  kg  I-’.Until  1997,  it  was  not
        permitted to call a product ‘ice cream’ in the USA if it  contained
        vegetable fat.


        Ice cream is often categorized as  premium,  standard  or  economy.
        Premium ice cream is generally made from best  quality  ingredients
        and has a relatively high amount of dairy fat and a low  amount  of
        air (hence it is relatively expensive), whereas economy  ice  cream
        is made from cheaper ingredients (e.g. vegetable fat) and  contains
        more air. However, these terms have no legal standing within the UK
        market, and one manufacturer’s economy ice cream may be similar  to
        a standard ice cream from another.”


Therefore, while some authorities are  strict  in  their  classification  of
products as “ice cream” and base it on milk fat  content,  others  are  more
liberal and identify it by other characteristics. There is, thus,  no  clear
or unanimous view regarding the true technical meaning of  “ice  cream”.  In
fact, there are different forms of “ice cream” in  different  parts  of  the
world that have varying characteristics.

38. On the basis of the authorities cited on  behalf  of  the  assessee,  it
   cannot be said that “ice cream” ought to contain more than 10%  milk  fat
   content and must be served only frozen and hard. Besides, even if we were
   to assume for the sake of argument that there is one standard  scientific
   definition of “ice cream” that distinguishes it from other products  like
   ‘soft serve’, we do not see why such a definition must be resorted to  in
   construing excise statutes. Fiscal statutes are framed at a point of time
   and meant to apply for  significant  periods  of  time  thereafter;  they
   cannot  be  expected  to  keep  up  with  nuances  and  niceties  of  the
   gastronomical world. The  terms  of  the  statutes  must  be  adapted  to
   developments of  contemporary  times  rather  than  being  held  entirely
   inapplicable. It is  for  precisely  this  reason  that  this  Court  has
   repeatedly applied the “common parlance test”  every  time  parties  have
   attempted to differentiate their products on  the  basis  of  subtle  and
   finer characteristics; it has tried understanding a good in  the  way  in
   which it is understood in common parlance.

39. Learned counsel for the assessee had strongly relied on  Akbar  Badrudin
   Giwani (supra) to buttress his  claim,  that  in  matters  pertaining  to
   classification of commodity taxation, technical and scientific meaning of
   the product will prevail rather than the commercial parlance,  and  hence
   on this basis, headings 04.04 and 21.05 were to be harmoniously construed
   so that ‘soft serve’ would be classified  under  heading  04.04.  We  are
   afraid, reliance on this judgment is misplaced and  out  of  context.  It
   would be useful to draw a  distinction  between  the  contexts  of  Akbar
   Badrudin Giwani (supra) and the present factual matrix.

40. In Akbar Badrudin Giwani (supra) the issue  was  whether  the  slabs  of
   calcareous stones (which were in commercial  parlance  known  as  marble)
   being imported by the Appellant were to be   regarded as  “marble”  under
   Item No. 62 of the List of Restricted Items, Appendix 2, Part 8 of Import
   and Export Policy given that Item No. 25.15 (Appendix 1-B, Schedule I  to
   the  Import  (Control)  Order,  1955  referred  to  “marble,  travertine,
   ecaussine and  other  calcareous  monumental  or  building  stone  of  an
   apparent specific gravity of 2.5 or  more  and  Alabaster…”.  Hence,  the
   controversy revolved around whether “marble” should be construed  in  its
   scientific  and  technical  meaning,  or  according  to  its   commercial
   understanding, in order to determine whether the appellant’s goods  would
   come within the ambit of Entry No. 62 of List of  Restricted  Items.  The
   Court examined both the entries and opined that Item No.  25.15  referred
   specifically not only to marble  but  also  to  other  calcareous  stones
   having specific gravity of 2.5, whereas, Entry No.  62  referred  to  the
   restricted item “marble” only. The content of Item  No.  25.15  had  been
   couched in scientific and technical terms and therefore, “marble” had  to
   be construed according to its scientific meaning and not in the sense  as
   commercially understood or  meant  in  trade  parlance.  Hence,  in  this
   context this Court held that the general principle of  interpretation  of
   tariff entries is of a commercial nomenclature but the said  doctrine  of
   commercial nomenclature or trade understanding should be departed from in
   a case where the statutory content in which  the  tariff  entry  appears,
   requires such a departure. In  other  words,  a  trade  understanding  or
   commercial nomenclature can be given only in cases where the word in  the
   tariff entry has not been used in a scientific  or  technical  sense  and
   where there is no conflict between the words used in the tariff entry and
   any other entry in the Tariff Schedule. Thus, these observations  of  the
   Court were made in a context where one of the tariff entries was  couched
   in a scientific and technical sense and had to  be  harmonized  with  the
   other entry. It would have run counter to the statutory  content  of  the
   legislation, to construe the term “marble” in its commercial sense.

41. It is significant to note that the question of classification  of  ‘soft
   serve’ is based on a different set  of  facts  in  a  different  context.
   Heading 21.05 which refers to “ice cream and other  edible  ice”  is  not
   defined in a technical or scientific manner, and  hence,  this  does  not
   occasion the need to construe the term  “ice-cream”  other  than  in  its
   commercial or trade understanding. Since, the first condition itself  has
   not been fulfilled; the question of harmonizing heading 21.05 with  04.04
   by resort to the scientific and technical meaning of the entries does not
   arise at all. Hence, we are of  the  opinion  that  the  ratio  of  Akbar
   Badrudin Giwani (supra) does not apply to the facts of the present case.

42. Learned counsel for the assessee had  vociferously  submitted  that  the
   common parlance understanding of  “ice-cream”  can  be  inferred  by  its
   definition as appearing under the PFA.  According to Rule A 11.20.08  the
   milk fat content of “ice-cream” and “softy ice-cream” shall not  be  less
   than 8% by weight. Hence, according, to the  learned  counsel,  the  term
   “ice-cream” under heading 21.05 had to be  understood  in  light  of  the
   standards provided in the PFA, more so when selling “Ice-cream” with  fat
   content of less than 10%  would  attract  criminal  action,  as  held  in
   Baburao Ravaji Mharulkar (supra).

43. We are unable to persuade ourselves to agree with the submission. It  is
   a settled principle in excise classification that the definition  of  one
   statute having a different object, purpose and scheme cannot  be  applied
   mechanically to another statute. As aforesaid, the object of  the  Excise
   Act  is  to  raise  revenue  for  which  various  goods  are  differently
   classified in the Act. The conditions or restrictions contemplated by one
   statute having a different object and purpose should not be  lightly  and
   mechanically imported and applied to a fiscal  statute  for  non-levy  of
   excise  duty,  thereby  causing  a  loss   of   revenue.   [See:   Medley
   Pharmaceuticals Limited Vs. Commissioner of Central Excise  and  Customs,
   Daman[15] and Commissioner of Central Excise, Nagpur Vs. Shree Baidyanath
   Ayurved Bhavan Limited[16]]. The provisions of  PFA,  dedicated  to  food
   adulteration, would require a technical and scientific  understanding  of
   “Ice-cream” and thus, may require different standards for a  good  to  be
   marketed as “ice-cream”.   These  provisions  are  for  ensuring  quality
   control and have nothing to do with the class of goods which are  subject
   to excise duty under a particular tariff  entry  under  the  Tariff  Act.
   These provisions are not a standard for interpreting goods  mentioned  in
   the Tariff Act, the purpose and object of which is completely different.

44.  Learned counsel for the assessee also contended  that   based  on  Rule
   3(a) of the General Rules of Interpretation which states that a  specific
   entry shall prevail over a general entry, ‘soft serve’  will  fall  under
   heading 04.04 since it is a specific entry. We do not see  any  merit  in
   this contention.  The  learned  counsel  for  the  assessee  had  himself
   contended that “ice-cream” was  a  dairy  product  and  would  have  been
   classified under heading 04.04 if heading 21.05  had  not  been  inserted
   into the Tariff Act. However, in the presence  of  heading  21.05,  “ice-
   cream” cannot be classified as  a  dairy  product  under  heading  04.04.
   Hence, it is obvious that in relation to heading 04.04, heading 21.05  is
   clearly a specific entry. Therefore, we cannot  subscribe  to  the  claim
   that heading 04.04 is to be regarded as a specific entry under Rule  3(a)
   of the General Rules of  Interpretation,  since  such  an  interpretation
   would be  contrary  to  the  statutory  context  of  heading  21.05.   In
   conclusion, we reject the view taken by the Tribunal and hold that  ‘soft
   serve’ is to be classified as “ice-cream” under heading 21.05 of the Act.

45. At this stage it may be relevant to refer to  Trade  Notice          No.
   45/2001 dated 11th June, 2001 of Mumbai Commissionerate IV which came  to
   our notice. According to the  said  notification,  “softy  ice-cream/soft
   serve” dispensed by vending machines, sold and consumed  as  “ice-cream”,
   is classifiable under Entry 21.05 of the  Act.  The  same  is  reproduced
   below:
      “Classification of Softy Ice  Cream  being  sold  in  restaurant  etc.
      dispensed by vending machine —
      [Mumbai Commissionerate IV Trade Notice No.45/2001, dt. 11.6.2001]


            Ice Cream dispensed by vending machine falling under chapter  21
      has been made liable to nil rate of duty vide Sl. No.8 of Notification
      No.3/2001-CE dated 1.3.2001.


            Doubts have been raised as  regards  to  the  classification  of
      softy ice cream/soft serve dispensed by vending machine and soft serve
      mix used for its manufacture prior to 1.3.2001.   A  manufacturer  was
      obtaining soft serve mix and  processing  it  in  his  restaurant  for
      manufacture of softy ice cream.   The  process  involved  lowering  of
      temperature so that it changes its  form  from  liquid  to  semi-solid
      state and  incorporation  of  air,  which  results  in  production  of
      overrun, in Tylor Vending Machine.


            The product that emerges after  this  process  is  a  completely
      different product and is ready to be consumed immediately.  It has all
      the ingredients of an ice cream.  The product is sold and consumed  as
      ice cream.


            In the circumstances, it is clarified by the  Board  that  softy
      ice cream is correctly classifiable under  heading  21.05  of  Central
      Excise Tariff.  As per HSN Explanatory Notes, heading 19.01 also cover
      mix bases (e.g. powders) for making ice cream.  It  has  been  further
      clarified that soft serve mix will  be  correctly  classifiable  under
      heading 19.01.


            All the trade associations are requested to bring  the  contents
      of this trade notice to the attention of their member manufacturers in
      particular, and trade in general.


                                                                        Sd/-
                                                        (Neelam Rattan Negi)
                                                                Commissioner
                                                  Central Excise, Mumbai-IV”

While it is true that the trade notice is not binding upon  this  Court,  it
does indicate the commercial understanding of ‘soft-serve’  as  ‘softy  ice-
cream’.  Further, as this  trade  notice  is  in  no  way  contrary  to  the
statutory provisions of the Act, we see no reason to diverge  from  what  is
mentioned therein.

46. In view of the aforegoing discussion, we are of  the  opinion  that  the
   Tribunal erred in law  in  classifying  ‘soft-serve’  under  tariff  sub-
   heading 2108.91, as  “Edible  preparations  not  elsewhere  specified  or
   included”, “not bearing  a  brand  name”.   We  hold  that  ‘soft  serve’
   marketed by the assessee, during the relevant period, is to be classified
   under tariff sub-heading 2105.00 as “ice-cream”.

47. Lastly, learned counsel for the assessee had also contended that in  the
   event ‘soft serve’ was classifiable under heading 21.05, the assessee was
   entitled to the benefit under Notification No. 16/2003-CE (NT) dated 12th
   March 2003. The notification reads:

      “Notification: 16/2003-C.E. (N.T.) dated 12-Mar-2003

      Softy  ice cream and non-alcoholic beverage dispensed through  vending
           machine exempted during period 1-3-1997 to 28-2-2001

            Whereas the Central Government is satisfied that a practice that
      was generally prevalent regarding levy of duty  of  excise  (including
      non-levy thereof) under section 3 of the Central Excise Act,  1944  (1
      of 1944) (hereinafter referred to as the said Act), on softy ice cream
      and  non-alcoholic  beverages  dispensed  through  vending   machines,
      falling under Chapters 20, 21 or 22  of  the  First  Schedule  to  the
      Central Excise Tariff Act, 1985 (5 of 1986), and that such  softy  ice
      cream and non-alcoholic beverages dispensed through  vending  machines
      were liable to duty of excise which was not being levied according  to
      the said practice during the period commencing on and from the 1st day
      of March, 1997 and ending with 28th February, 2001.

            Now, therefore, in exercise of the powers conferred  by  section
      11C of the said Act, the Central Government hereby  directs  that  the
      whole of the duty of excise payable on such softy ice  cream  and  non
      alcoholic beverage dispensed through vending  machines,  but  for  the
      said practice, shall not be required to be paid  in  respect  of  such
      softy ice cream and non alcoholic beverages on which the said duty  of
      excise was not being levied during the aforesaid period in  accordance
      with the said practice.”




48. We are afraid we are unable to take this  argument  into  account  since
   such a plea was not urged before the Tribunal in the first  place.  Given
   that this is a statutory appeal  under Section 35L of the Act, it is  not
   open to either party, at this stage of the appeal, to raise a new  ground
   which was  never  argued  before  the  Tribunal.   Our  scrutiny  of  the
   arguments advanced has to be limited only to  those  grounds  which  were
   argued by the parties and addressed  by  the  Tribunal  in  its  impugned
   order.  Since, the impugned orders at hand do not  reflect  the  argument
   raised by the learned counsel for  the  assessee;  we  do  not  find  any
   justification to entertain this submission. Nonetheless, for the sake  of
   argument, even if we assume that this ground had been  urged  before  the
   Tribunal, in our view, learned counsel’s reliance on this notification is
   misplaced. Upon a reading of  the  notification  it  is  clear  that  the
   exemption in the notification is granted for the whole  of   excise  duty
   which was payable on such softy ice cream  and  non  alcoholic  beverages
   dispensed through vending machines, but was not being levied  during  the
   relevant period, which is not the case here.  In  the  present  case,  as
   aforenoted, three show cause notices had  been  issued  to  the  assessee
   alleging that ‘soft serve’  was  classifiable  under  heading  21.05  and
   attracted duty @ 16%. The show cause notices issued by the  revenue  also
   indicated that the assessee was  liable  to  pay  additional  duty  under
   Section 11A of the Act. This clearly  shows  that  the  excise  duty  was
   payable by the assessee and was being levied by the revenue.   Therefore,
   the  assessee’s  case  does  not  fall  within  the  ambit  of  the  said
   notification and is not eligible for the exemption granted to “softy ice-
   cream”, dispensed through a vending machine for the relevant period.

49. For the view we have taken, it  is  unnecessary  to  examine  the  issue
   whether the product in question bears a brand name.

50. Resultantly, the appeals are allowed and  the  impugned  orders  of  the
   Tribunal are set aside, leaving the parties to bear their own costs.


|                            |……..………………………………….                      |
|                            |(D.K. JAIN, J.)                         |
|                            |                                        |
|                            |                                        |
|                            |……..………………………………….                      |
|                            |(JAGDISH SINGH KHEHAR, J.)              |
|                                                                     |
|NEW DELHI,                  |                                        |
|NOVEMBER 27, 2012           |                                        |

RS


-----------------------
[1]    (1984) 4 SCC 540
[2]    (1990) 2 SCC 203
[3]    1993 Supp (3) SCC 716 at page 720
[4]    (1951) C.L.R. (Ex. Court) 122
[5]    (1962) 1 SCR 279
[6]    (1967) 2 SCR 720
[7]    (1976) 2 SCC 241
[8]    1992 Suppl.(1) SCC 298
[9]    (1985) 3 SCC 284
[10]   (1989) 1 SCC 150
[11]   (1997) 6 SCC 464
[12]   (1996) 9 SCC 402
[13]   (2004) 9 SCC 136
[14]   (1995) Suppl. 3 SCC 1
[15]   (2011) 2 SCC 601
[16]   (2009) 12 SCC 419