The Building and Other Construction Workers’ Welfare Cess Act, 1996 The appellants are engaged in the business of construction of buildings etc. In the present matters their grievance is against demand of cess under The Building and Other Construction Workers’ Welfare Cess Act, 1996 (Act 28/96) (hereinafter referred to as ‘the Cess Act’) in the following factual premise. Their agreements or contracts for construction of projects belonging to departments and instrumentalities of Government of Madhya Pradesh were finalized and work orders were issued to contractors (the appellants) between December 2002 to March 2003. Since the Madhya Pradesh Building and Other Construction Workers’ Welfare Board (hereinafter referred to as ‘the Board’) came to be constituted only on 9.4.2003 followed by gazette publication on 10.4.2003, there could be no provision in the contracts as to who shall bear the burden of paying cess under the Cess Act. On that as well as several other grounds the appellants, being aggrieved with the demand of cess made upon them, challenged such demand by preferring writ petitions which have been dismissed by the impugned common judgment dated 21.6.2004 of the Division Bench following an earlier judgment dated 17.3.2004 in LPA no. 169 of 2003. We are of the considered view that after the Cess Act and the Rules came into effect and the Board was constituted, with the notification specifying the rate of cess to be levied upon the cost of construction incurred by the employer already in place, the respondents were duty bound to collect the cess by raising the demands in respect of the on going construction works if the workers in such construction activities were eligible for benefits under the BOCW Act.- Such beneficial measures for the welfare of workers are applicable even to the construction activity which may have commenced before coming into force of the BOCW Act and the Cess Act, if they are subsequently covered by the provisions of these Acts. There can be no legal obstacle in ignoring the construction cost incurred before the cess became leviable by distinguishing it from the cost of construction incurred later, from a date when the Board is available to render service to the Building and other construction workers. Levy of cess in these facts and circumstances cannot be faulted for any reason. Demand of cess in the given facts cannot amount to retrospective application of the Cess Act. Hence the appeals must fail. 14. Before parting with the judgment, it is made clear that the appellants did not press their contention that if cess is found leviable, its liability should be borne by the principal, i.e, Government of Madhya Pradesh. They have sought liberty that they be permitted to raise such contention in an appropriate proceeding, in accordance with law. This liberty is granted. 15. The appeals are dismissed but without costs. If any dues of cess payable by the appellants to the respondents has remained unpaid on account of interim orders, all such lawful dues should be paid by the appellants as per law at the earliest and in any case within eight weeks.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 375 OF 2006


A. Prabhakara Reddy & Co.                      …..Appellant

      Versus

State of Madhya Pradesh & Ors.                      …..Respondents


                                   W I T H


                          C.A.Nos. 376-379 of 2006



                               J U D G M E N T



SHIVA KIRTI SINGH, J.


The questions of law in these appeals are same  and  arise  out  of  similar
factual matrix. Hence, they have been heard together and shall  be  governed
by this common judgment.
The appellants are engaged in the  business  of  construction  of  buildings
etc. In the present matters their grievance is against demand of cess  under
The Building and Other Construction Workers’ Welfare  Cess  Act,  1996  (Act
28/96) (hereinafter referred to as ‘the Cess Act’) in the following  factual
premise.  Their  agreements  or  contracts  for  construction  of   projects
belonging to departments  and  instrumentalities  of  Government  of  Madhya
Pradesh were finalized and work  orders  were  issued  to  contractors  (the
appellants) between December 2002 to March 2003. Since  the  Madhya  Pradesh
Building  and  Other  Construction  Workers’  Welfare   Board   (hereinafter
referred to as  ‘the  Board’)  came  to  be  constituted  only  on  9.4.2003
followed by gazette publication on 10.4.2003, there could  be  no  provision
in the contracts as to who shall bear the burden of paying  cess  under  the
Cess Act. On that as well as several other  grounds  the  appellants,  being
aggrieved with the demand of cess made upon them, challenged such demand  by
preferring writ petitions which have been dismissed by the  impugned  common
judgment  dated  21.6.2004  of  the  Division  Bench  following  an  earlier
judgment dated 17.3.2004 in LPA no. 169 of 2003.
The impugned judgment exhibits more than one ground to assail the demand  of
cess but before us the appellants have given up the other grounds  and  have
confined  their  challenge  on  the  ground  that   the   Assistant   Labour
Commissioner (ALC) in his letter to the  Chief  Engineer  of  the  concerned
project at Jabalpur had communicated that cess is  to  be  recovered  w.e.f.
1.4.2003. He also reminded the Chief Engineer that it was  expected  of  him
that he will “definitely stipulate the condition of payment of  1%  cess  in
each tender with effect from  above  date.”  On  the  basis  of  above,  the
submission on behalf of appellants is that no cess could be levied  for  the
tenders,  contracts  and  work  orders  for  construction  that  came   into
existence  before  the  Board  was  constituted  on  9/10.4.2003.   As   per
submissions of Mr. Sunil Gupta, learned Senior Advocate for the  appellants,
the cost of construction triggers the charging of cess under  Section  3  of
the Cess Act.  Such cost stands ascertained and determined when contract  is
executed and work order issued. This  cost  cannot  be  split  up  into  two
components, one for the pre-Board and the other for  the  later  period  for
levying cess on the cost incurred in the latter period only.
It is also the case of the appellants that if demand  of  cess  is  made  on
construction works undertaken or even contemplated on account  of  issue  of
work order before the constitution of the  Board,  then  such  demand  would
amount to making the Cess Act operate  retrospectively  and  that  would  be
unwarranted, illegal and unjust.
In view of such limited issues, it is not necessary for us  to  consider  at
length the factual details. Only some relevant dates and facts  have  to  be
noted  to  support  our  reasons  for  not  agreeing  with   the   aforesaid
contentions advanced on behalf of the appellants.
The  Union  of  India  was  evidently  concerned  with  the  sad  plight  of
construction workers  belonging  to  unorganized  sector.  With  a  view  to
regulate  employment  and  conditions  of  service  of  Building  and  other
construction workers and to  reduce  their  exploitation  by  providing  for
welfare  measures  related  to  their  safety,  health  etc,   the   Central
Government  promulgated  The  Building  and  Other   Construction   Workers’
(Regulation of Employment and  Conditions  of  Service)  Ordinance  1995  on
3.11.1995. It was succeeded by other Ordinances  bearing  nos.  3/96,  15/96
and 25/96. The last Ordinance dated 20.6.1996 was followed by  the  Building
and Other Construction Workers’ (Regulation of Employment and Conditions  of
Service) Act, 1996 (Act 27/96) (hereinafter referred to as ‘the BOCW  Act’).
It was published in the gazette on 19.8.1996  but  as  provided  by  Section
1(3), it was effective from 1.3.1996. For its effective working, a  cess  or
fee was necessary. For  that  the  Parliament  enacted  the  Cess  Act  (Act
28/96).
The Cess Act was published in the gazette on 19.8.1996. Under  Section  1(3)
it was enforced from still an earlier date, i.e, 3.11.1995. Under this  Act,
the Central Government framed The Building and Other  Construction  Workers’
Welfare Cess Rules, 1998 (hereinafter referred  to  as  ‘the  Rules’)  which
came into force on publication in the official gazette dated  26.3.1998.  As
noted earlier the Madhya Pradesh  Government  constituted  the  Board  after
considerable delay  by  a  notification  dated  9.4.2003  published  in  the
official gazette dated 10.4.2003.
It is relevant to note that the constitutionality of the Cess Act and  Rules
framed thereunder was challenged  before  the  High  Court  of  Delhi  which
upheld it. The matter came to this Court and by  judgment  in  the  case  of
Dewan Chand Builders and Contractors vs. Union of India & Ors.  reported  in
(2012) 1 SCC 101, this Court also dismissed the challenge and held that  the
levy is in fact a “fee” and not a “tax”.
The appellants have based their contention  noted  earlier  on  the  premise
that the cess chargeable under the Cess  Act  is  a  fee  and  therefore  it
cannot be levied from a retrospective  date  when  there  was  no  Board  to
render any service.  Mr.  Sunil  Gupta,  learned  senior  advocate  for  the
appellants placed reliance upon judgments of  this  Court  in  the  case  of
Khazan Chand & Ors. vs. State of Jammu and Kashmir & Ors, (1984) 2 SCC  456,
M/s Ujagar Prints & Ors. (II) vs. Union of India & Ors., (1989)  3  SCC  488
and Union of India & Ors. vs. Bombay Tyre International Ltd. & Ors.,  (1984)
1 SCC 467 to highlight  that  a  statute  for  compulsory  levy  or  tax  is
required to have provisions for charging of the levy/tax, for the  machinery
to make the assessment and lastly, provisions for  collection  or  recovery.
He also relied upon judgment in the case of Shyam  Sunder  &  Ors.  vs.  Ram
Kumar & Anr., (2001) 8 SCC 24 to buttress the well  established  proposition
of law that retrospective operation is not to be given  to  a  statute  when
the effect is to adversely affect existing right or obligation, (matters  of
procedure being an  exception)  unless  retrospective  operation  cannot  be
avoided on account of express language or necessary intendment flowing  from
the enactment.
Counsel for the State of Madhya Pradesh and other  respondents  pointed  out
that after the Union of India through a notification  bearing  SO  no.  2899
dated 26.9.1996 specified the rate of cess as 1% of  cost  of  construction,
the liability of  concerned  employers  under  the  Cess  Act  became  fully
ascertainable on the basis of Section 3 of the Cess Act  which  provides  as
follows:
“3 . Levy and collection of cess.—(1) There shall be levied and collected  a
cess for the  purposes  of  the  Building  and  Other  Construction  Workers
(Regulation of Employment and Conditions of  Service)  Act,  1996,  at  such
rate not exceeding two per cent, but not less than  one  per  cent,  of  the
cost of construction incurred by an  employer,  as  the  Central  Government
may, by notification in the Official Gazette, from time to time specify.

(2) The cess levied under sub-section (1)  shall  be  collected  from  every
employer in such manner and at such time, including deduction at  source  in
relation to a building or other construction work of a Government  or  of  a
public sector undertaking or advance collection through  a  local  authority
where an approval of such building or other construction work by such  local
authority is required, as may be prescribed.

(3) The proceeds of the cess collected under sub-section (2) shall  be  paid
by the local authority or the State Government collecting the  cess  to  the
Board after deducting the cost of collection of such cess not exceeding  one
per cent, of the amount collected.

(4) Notwithstanding anything contained in  sub-section  (1)  or  sub-section
(2), the cess leviable under this Act including  payment  of  such  cess  in
advance may, subject to final assessment to  be  made,  be  collected  at  a
uniform rate or rates as may be prescribed on the basis of  the  quantum  of
the building or other construction work involved.”

11.   He highlighted the  provisions  in  the  Cess  Act  and  Rules  framed
thereunder such as Rules 3, 4, 5 & 7 providing for levy of cess;  time   and
manner of collection; transfer of the proceeds of the  cess  to  the  Board;
and assessment of the cess, to support  his  contention  that  there  is  no
basis under the  law  to  support  the  plea  of  the  appellants  that  the
contracts or work orders finalized before constitution  of   Board  must  be
made immune from levy of cess on the ground that cost of  construction  must
always be treated  as  a  single  entity  and  therefore  incapable  of  two
divisions, one pertaining to pre-Board period  and  the  other  relating  to
after the constitution of the Board. He supported  the  views  of  the  High
Court that there can be no estoppel against statute and  hence,  even  if  a
contract or work order does not provide for payment of recovery of  cess  by
the contractor or the principal,  the  statute  providing  for  cess  cannot
become ineffective. It is also the stand of the  respondents  that  had  the
cess been a tax, the liability to pay the same  would  be  coterminous  with
the entire cost, if construction was after coming into  force  of  the  Cess
Act but since it has been held to be  a  fee,  the  respondents  have  acted
reasonably and effected its levy by raising demands only to cover such  cost
of construction which coincides with and begins  from  the  constitution  of
the Board.
12.   Although learned senior  counsel  for  the  appellants  had  taken  us
through the entire scheme of the Main Act as well as the Cess Act  and  also
the Rules framed thereunder, but nothing helps the appellants’ case  and  in
view of limited issues arising from determination, we do not feel  persuaded
to go into details of the Cess Act and the Rules unnecessarily.  We  are  of
the considered view that after the Cess Act and the Rules came  into  effect
and the Board was constituted, with the notification specifying the rate  of
cess to be levied upon the cost of construction  incurred  by  the  employer
already in place, the respondents were duty bound to  collect  the  cess  by
raising the demands in respect of the on going  construction  works  if  the
workers in such construction activities were  eligible  for  benefits  under
the BOCW Act. The  fact  that  the  task  of  registering  the  workers  and
providing  them  the  benefit  may  take  sometime,  would  not  affect  the
liability to pay the levy as per the  Cess  Act.  Any  other  interpretation
would defeat the rights of the workers whose  protection  is  the  principal
aim or primary concern and objective of the BOCW Act as  well  as  the  Cess
Act. The Cess is a fee for  service  and  hence,  its  calculation,  as  per
settled law is not to be strictly in accordance with quid pro quo  rule  and
does not require any mathematical exactitude. The scheme of  the  BOCW  Act,
the Cess Act and the Rules warrant that the lawfully imposable  cess  should
be imposed, collected and put in the statutory welfare  fund  without  delay
so that the benefits may flow to the eligible workers at the  earliest.  The
scheme of the BOCW Act or the Cess Act does not warrant that unless all  the
workers are already registered or the welfare fund is duly credited  or  the
welfare measures are made available, no cess can be levied. In  other  words
the service to the workers is not required to be a condition  precedent  for
the levy of the cess. The rendering of welfare services  can  reasonably  be
undertaken only after the cess is levied,  collected  and  credited  to  the
welfare fund.
13.   We also find no merit in other submission advanced on  behalf  of  the
appellants that there is legal impediment in charging levy on  the  cost  of
construction incurred by the employer from a particular  period  on  account
of constitution of Board from a particular date or  for  any  other  reason.
This argument is fallacious. Such beneficial measures  for  the  welfare  of
workers are applicable even to the  construction  activity  which  may  have
commenced before coming into force of the BOCW Act  and  the  Cess  Act,  if
they are subsequently covered by the provisions of these Acts. There can  be
no legal obstacle in ignoring the  construction  cost  incurred  before  the
cess became leviable by distinguishing it  from  the  cost  of  construction
incurred later, from a date when the Board is available  to  render  service
to the Building and other construction workers. Levy of cess in these  facts
and circumstances cannot be faulted for any reason. Demand of  cess  in  the
given facts cannot amount to retrospective  application  of  the  Cess  Act.
Hence the appeals must fail.
14.    Before  parting  with  the  judgment,  it  is  made  clear  that  the
appellants did not press their contention that if cess  is  found  leviable,
its liability should be borne by the principal, i.e,  Government  of  Madhya
Pradesh. They have sought liberty that  they  be  permitted  to  raise  such
contention in an  appropriate  proceeding,  in  accordance  with  law.  This
liberty is granted.
15.   The appeals are dismissed but without  costs.  If  any  dues  of  cess
payable by the appellants to the respondents has remained unpaid on  account
of interim orders, all such lawful dues should be paid by the appellants  as
per law at the earliest and in any case within eight weeks.


                       …………………………………….J.
                       [VIKRAMAJIT SEN]


                       ……………………………………..J.
                             [SHIVA KIRTI SINGH]
New Delhi.
August 24, 2015
-----------------------
11

whether the definition of 'transaction value', as contained in Section 4 of the Act read with Rule 6 of the Rules, would encompass this benefit as amounting to additional consideration. Our conclusion is that it would come within the ambit of additional consideration indirectly flowing from the buyers to the assessee. Therefore, the instant case is more akin to the decision in Re Soames[7]. At this stage, we would like to recall the following findings arrived at by the Commissioner, which are not upset by the Tribunal in the impugned decision or even disputed by the assessee: (a) The assessee had supplied goods to a particular type of buyers at much lower price than the price charged from the general buyers in the normal course of trade as it had obtained the facility of invalidating of advance licences from such buyers and procured imported raw material (duty free)against such licences for manufacturing of finished goods. It is, therefore, alleged that the assessee and the buyers had mutuality of interest in the business of each other and there was a flow back and the price was not the sole consideration for sale in these cases in accordance with the provisions of Section 4(1)(a) of the Act. (b) Therefore, they were related persons in terms of provisions of the erstwhile Section 4(4)(c), presently Section 4(3)(b)(iv) of the Act. (c) It is observed that para 7.7 of the EXIM Policy on Advance Release Order speaks of mutuality of interest as the assessee had procured duty free imported raw materials against invalidation of advance licence of the consignees and in turn it sold the finished goods to the said consignees at lower prices as compared to other normal buyers. Thus, the price was not the only consideration. (d) Once the advance licence is invalidated, the said clearance to the buyers who were earlier holding the said licences need not be treated as deemed export and rightly the assessee had cleared the said goods to such buyers on payment of excise duty, but at lower value than the clearance made to the normal buyers. Thus, the assessee appeared to have derived double benefits in these transactions, i.e. (i) enhanced sale and paid less duty on lower value; and (ii) imported duty free raw materials. (e) In this case, the right to procure duty free imported raw material is being transferred to supplier by the buyer. This indicates the flow back of additional considerations from the buyer of the said goods to the seller, which is the assessee. On the facts of this case, we are of the opinion that the Commissioner has rightly come to the conclusion with regard to the fact that additional monetary consideration, in addition to the price being paid for the goods, i.e. transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement, is a consideration, the monetary value of which has to be considered under the provisions of the Rules, i.e. Rule 6 thereof. Thus, we do not see any reason to deviate from the decision rendered by this Court in IFGL's[8] case. Before we part with, one more aspect to which our attention was drawn by Mr. Lakshmikumaran needs to be addressed. Referring to another judgment of this Court in Commissioner of Central Excise, Bangalore v. Mazagon Dock Ltd.[9], a vain attempt was made to show that this judgment was contrary to the decision rendered by this Court in IFGL's[10] case. We do not find it to be so. Interestingly, the Hon'ble Judges {S.N. Variava and Dr. AR Lakshmanan, JJ.} who comprised the Bench that decided IFGL's case were the same who rendered the judgment in Mazagon Dock Ltd.'s case. Another pertinent factor which is to be taken note of is that the two decisions were rendered within a short gap of a fortnight. The decision in Mazagon Dock Ltd. was rendered on July 28, 2005 whereas IFGL's case was decided on August 09, 2005. Thus, at the time of pronouncing of the judgment in IFGL's case, the same very Bench was conscious of its judgment given immediately before in Mazagon Dock Ltd. A reading of the judgment in Mazagon Dock Ltd.'s case would reveal that in the said case subsidy of 20% was received by the assessee therein from the Government, which was sought to be included by the Revenue as 'additional consideration' to arrive at the transaction value for the purpose of central excise. The Court held that this subsidy was not received from the buyer either directly or indirectly and, therefore, could not be included in the price of goods qua purpose of excise. On the facts of that case, the Court found that the respondent in the said case had entered into contract with Oil & Natural Gas Corporation Limited (ONGC) for manufacture and supply of jack-up rigs. For such a contract, as per the policy of the Government, 20% subsidy was to be received from the Government and 10% from ONGC. As far as 10% subsidy received from ONGC is concerned, the same was also to be includible in the transaction value as additional consideration flowing from the buyer. However, 20% subsidy from the Government was under the Government's own scheme with no role of ONGC (buyer in the said case). Obviously, it could not be said that this subsidy had any flow from the ONGC either directly or indirectly. The said judgment, therefore, has no bearing on the present matter. In view of the foregoing, we are of the considered opinion that this case is squarely covered by the judgment of this Court in IFGL's[11] case. We, thus, allow this appeal, set aside the decision of the Tribunal and restore the order passed by the Commissioner. In the facts and circumstances of this case, there shall be no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  1834 OF 2006


|COMMISSIONER OF CENTRAL EXCISE,            |                             |
|NAGPUR-I                                   |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|M/S. INDORAMA SYNTHETICS (I) LTD.          |.....RESPONDENT(S)           |



                               J U D G M E N T


A.K. SIKRI, J.
                 The respondent (hereinafter referred to as the  'assessee')
is engaged in the manufacture of polyester chips,  polyester  staple  fibre,
polyester filament yarn and other goods.  It had been clearing the  same  on
payment of central excise duty.  The period involved in this appeal is 1999-
2002.  During this period, the goods that were cleared as  'deemed  exports'
to advance licence holders were  at  a  price  lower  than  what  was  being
charged to the other buyers who did not hold an  advance  licence.   As  per
the Commissioner of Central Excise, Nagpur-I  (hereinafter  referred  to  as
the 'Revenue'), it found that the  reason  for  selling  the  goods  to  the
aforesaid particular class  of  buyers  at  a  lesser  price  was  that  the
assessee  had  received  'additional  consideration'  and,  therefore,   its
inclusion was  necessitated  having  regard  to  the  formula  provided  for
arriving at the 'transaction value' contained in the statutory scheme.

We would narrate the details of purported 'additional  consideration'  at  a
later point of time at an appropriate stage.   However,  we  may  point  out
here that on surrender of advance licence with  the  aforesaid  buyers,  the
assessee could receive drawback  from  the  Government/Director  General  of
Foreign Trade (DGFT) as per the Export-Import (EXIM)  Policy  and  this  was
stated to be the additional consideration.  Suffice it to point out at  this
juncture that the Revenue issued five separate  show  cause  notices  asking
the  assessee  to  pay  the  differential  duty  as  the   said   additional
consideration was to be included while arriving at the  'transaction  value'
of the said goods in terms of Section 4 of  the  Central  Excise  Act,  1944
(hereinafter referred to as the 'Act') read  with  Rule  6  of  the  Central
Excise Valuation (Determination of Price of  Excisable  Goods)  Rules,  2000
(hereinafter referred to as  the  'Rules').   The  assessee  challenged  the
stand of the Revenue by filing replies.  After  examining  the  matter,  the
Commissioner took the  view  that  price  was  not  the  sole  consideration
flowing from the buyer to the assessee.  Not  only  such  buyers,  who  were
sold the goods at a lower price, were  'related  persons',  even  the  goods
were sold at depressed price.  Therefore,  the  Commissioner  confirmed  the
demand of differential duty as mentioned in the show cause notices and  also
levied penalties and interest.  The assessee challenged  the  order  of  the
Commissioner by filing  appeal  before  the  Custom  Excise  &  Service  Tax
Appellate  Tribunal  (for  short,  the  'Tribunal')  taking  the  plea  that
'additional consideration' under Section 4 of the Act  refers  only  to  the
additional consideration flowing from the buyer to the assessee and  in  the
present case no such additional consideration flew from the advance  licence
buyers  of  the  'deemed  exports'.   The  Tribunal,  in  arriving  at  this
conclusion, relied upon its own decision in the case  of  IFGL  Refractories
Ltd. v. Commissioner of Central Excise,  Bhubaneswar-II[1]  wherein  it  was
held that statutory benefits allowed  by  statutory  authorities  cannot  be
considered as additional consideration flowing to a  manufacturer  from  the
buyer.  In the opinion of the Tribunal, the drawback was received  from  the
Government and not from the buyers and, therefore, such drawback  could  not
be treated as additional  consideration  for  the  purpose  of  arriving  at
'transaction value' as per the definition thereof under  Section  4  of  the
Act.

Pertinently, the decision of the Tribunal in IFGL's  case  stands  overruled
by this Court in Commissioner of Central Excise, Bhubaneswar –  II  v.  IFGL
Refractories Ltd.[2]   In  the  said  case,  this  Court  has  held  such  a
consideration, namely, duty drawback, to be the  'additional  consideration'
inasmuch as the benefit of duty drawback accruing  to  the  seller  was  the
result of surrender of advance licence by the buyers.   The  discussion  and
the rationale which goes into forming the aforesaid opinion is contained  in
para 9 of the judgment, which reads as under:
“9.  Ultimately it was agreed that M/s.  Visakhapatnam  will  surrender  its
advance licences and in lieu thereof the respondents will  get  the  advance
intermediate  licences.   Thus,  without  the  advance  licences   of   M/s.
Visakhapatnam Steel Plant, being made  available  to  the  respondents,  the
prices would have been as were quoted earlier.  It is only  because  of  the
advance licences being surrendered by M/s. Visakhapatnam Steel Plant and  in
lieu thereof advance intermediate  licences  being  made  available  to  the
respondents  that  the  respondents   could   offer   lower   prices.    The
surrendering of licences by M/s. Visakhapatnam Steel Plant and as  a  result
thereof the respondents getting the licences had  nothing  to  do  with  any
Import and Export Policy.  It was directly a matter of contract between  the
two parties.  This resulted in additional consideration by way  of  “advance
intermediate licence” flowing from M/s. Visakhapatnam  Steel  Plant  to  the
respondents.  The value received therefrom is includible in the price.   The
Tribunal was wrong in stating that such an arrangement can never  be  placed
upon the platform of additional consideration.  In so stating  the  Tribunal
has ignored and/or lost sight of the fact that it was in  pursuance  of  the
contract of sale between the respondents and M/s. Visakhapatnam Steel  Plant
that the licences were made available to the respondents.   The  Export  and
Import Policy had nothing to do with the arrangements/contract  under  which
the licences  flowed  from  the  buyer  to  the  seller.   At  the  cost  of
repetition it must  be  mentioned  that  had  the  respondents  had  advance
intermediate licence on their own  i.e.  without  M/s.  Visakhapatnam  Steel
Plant having to surrender its licences for the  purposes  of  the  contract,
then the reasoning of the Tribunal may have  been  correct.   But  here,  in
pursuance of the contract of sale, there is directly a  flow  of  additional
consideration from the buyer to the seller.  The value  thereof  has  to  be
added to the price.  We are thus unable to accept the broad submission  that
where parties take advantage of policies of the Government and the  benefits
flowing therefrom, then such benefit cannot be said  to  be  an  “additional
consideration”.

In a matter  like  this,  this  Court  could  simply  follow  the  aforesaid
judgment and set aside the order of  the  Tribunal,  allowing  this  appeal.
However, Mr. V. Lakshmikumaran, learned counsel appearing for the  assessee,
made a fervent and passionate plea  that  the  aforesaid  judgment  of  this
Court in IFGL's[3] case  needs  re-consideration.   He,  thus,  pleaded  for
referring the matter to a larger Bench.  Detailed and elaborate  submissions
were made in this direction  which  were  stoutly  refuted  by  the  learned
counsel for the Revenue.  We may  immediately  record  that  the  assessee's
counsel has not succeeded in persuading us to refer the matter to  a  larger
Bench.  Hereinafter, we record our reasons for taking this view.   For  this
purpose, we may first state at this  stage  the  mechanism  that  goes  into
getting the benefit of duty drawback in the kitty of the assessee.

As mentioned above, the assessee had been selling polyester staple fiber  to
two classes of domestic buyers, in addition to exporting  the  same  in  the
international market.  One of the category of  domestic  buyers  were  those
who were having advance licence and the  other  category  without  any  such
licence.  The assessee had issued two different price lists.   Those  buyers
who had advance licence but agreed  to  surrender  the  said  licence,  were
offered price of ?37.50 per kg.  Other category, with no such licence,  were
sold the goods at ?50 per  kg.   As  per  the  assessee,  it  was  exporting
polyester staple fiber during the relevant period at  an  average  price  of
?36 per kg against its own advance licence for exports.

Advance licence is issued under the EXIM Policy.  The holder of the  advance
licence could procure imported raw material against  the  said  licence  for
manufacture of finished goods. However,  as per para 7.7 of the EXIM  Policy
1997-2002, the advance licence holder  intending  to  source  the  materials
from indigenous source in lieu of direct import had  the  option  to  source
them against advance release orders denominated in  foreign  exchange/Indian
rupees.  In such a case, the  licence  was  to  be  invalidated  for  direct
import and permission in the form of ARO was  to  be  issued  entitling  the
supplier of the goods the benefits of deemed export.  Para 10.2 of the  EXIM
Policy laid down the  categories  of  supply  which  would  be  recorded  as
'deemed exports' under the policy.  The first such clause  (a)  was  'supply
of goods against advance licence/DFRC under the  duty  exemption/  remission
scheme.  Under para  10.3,  benefits  for  deemed  exports  were  specified.
Advance licence for intermediate supply/deemed export was specified  as  one
of the benefits for deemed exports.

The  advance   licence   holder   category   buyers   got   their   licences
invalidated/surrendered.  Thereafter, DGFT issued licence in favour  of  the
assessee  herein  permitting  it  to  procure  the  goods  duty  free   from
indigenous manufacturers and on the supply of this material to such  buyers,
treating the same as 'deemed exports', thereby earning the benefits of  duty
drawback.  Para 7.11 of the EXIM Policy  facilitated  this  process  and  it
reads as under:
“7.11   Advance Licence for Intermediate Supplies  –   The  Advance  Licence
for intermediate supply shall  be  considered  by  the  licensing  authority
concerned.  The Advance Licence for  intermediate  supply  shall  be  issued
after making the licence invalid for direct import of items to  be  supplied
by the intermediate manufacture.  In such cases, a copy of the  invalidation
letter will be given to the licence holder and copy thereof will be sent  to
the intermediate  supplier  as  well  as  the  licensing  authority  of  the
intermediate  supplier  as  well  as  the   licensing   authority   of   the
intermediate supplier.  The licencee in such case has an  option  either  to
supply the intermediate product to holder of Advance  Licence  for  physical
exports/deemed exports or to export directly.”

The aforesaid narratives would demonstrate that the assessee could  get  the
duty drawback and it could happen when advance licence  holder  category  of
buyers got their  advance  licences  invalidated  thereby  surrendering  the
benefits accrued under such advance licence.  Issue for consideration is  as
to whether it would constitute 'additional consideration'  received  by  the
assessee as per the definition of 'transaction value' contained  in  Section
4 of the Act read with Rule 6 of the Rules.  We, therefore, shall  reproduce
the relevant portion of the provisions of Section 4  which  existed  at  the
material time, which read as under:
“4.  Valuation of excisable goods  for  purposes  of  charging  of  duty  of
excise. –  (1) Where under this Act, the duty of  excise  is  chargeable  on
any excisable goods with reference to their value, then, on each removal  of
the goods, such value shall –

(a)  in a case where the goods are sold by the  assessee,  for  delivery  at
the time and place of the removal, the assessee and the buyer of  the  goods
are not related and the price is the sole consideration  for  the  sale,  be
the transaction value.

                          xx          xx         xx

(d) “transaction value” means the price actually paid  or  payable  for  the
goods, when sold, and includes in addition to the amount charged  as  price,
any amount that the buyer is  liable  to  pay  to,  or  on  behalf  of,  the
assessee, by reason of, or in connection with the sale, whether  payable  at
the time of the sale or at any other time, including, but  not  limited  to,
any amount charged for, or to make provision for, advertising or  publicity,
marketing and selling  organization  expenses,  storage,  outward  handling,
servicing, warranty, commission or any other matter; but  does  not  include
the amount of duty of excise, sales tax and other taxes,  if  any,  actually
paid or actually payable on such goods.”


As is clear from the reading of the aforesaid provision, the duty of  excise
is chargeable on the excisable goods with reference to  the  value  of  such
goods.  Generally, the price of the goods, i.e.  the  price  at  which  such
goods are ordinarily sold by the assessee to a buyer is to be the  value  of
the goods.  This value is  called  the  'transaction  value'.   The  Central
Government has also framed  the  Rules  which,  inter  alia,  lay  down  the
provisions for determination of value.  Rule 6 thereof, with  which  we  are
specifically concerned, reads as under:
“RULE 6.  Where the excisable goods are sold in the circumstances  specified
in clause (a) of sub section  (1)  of  section  4  of  the  Act  except  the
circumstance where the price is not the sole  consideration  for  sale,  the
value of such goods shall be deemed to be the aggregate of such  transaction
value and the amount of money value of any additional consideration  flowing
directly or indirectly from the buyer to the assessee.

Explanation. - For removal of  doubts,  it  is  hereby  clarified  that  the
value, apportioned as appropriate, of  the  following  goods  and  services,
whether supplied directly or indirectly by the buyer free of  charge  or  at
reduced cost for use in connection with the  production  and  sale  of  such
goods, to the extent that such value has not  been  included  in  the  price
actually paid or payable, shall be treated to be the amount of  money  value
of additional consideration flowing directly or indirectly  from  the  buyer
to the  assessee  in  relation  to  sale  of  the  goods  being  valued  and
aggregated accordingly, namely:

(i)  value of materials, components, parts and similar  items  relatable  to
such goods;

(ii)  value of tools, dies, moulds, drawings, blue  prints,  technical  maps
and charts and similar items used in the production of such goods;

(iii)  value of material consumed, including  packaging  materials,  in  the
production of such goods;

(iv)  value of engineering, development, art work,  design  work  and  plans
and sketches undertaken elsewhere than in  the  factory  of  production  and
necessary for the production of such goods.”


Even when these goods are sold  by  the  assessee  at  different  prices  to
different classes of buyers (not being related persons), each such price  is
to be deemed to be the normal price of such goods in relation to each  class
of buyers.  However, as per the definition of 'transaction value'  contained
in this very section, i.e. Section 4(3)(d), certain charges can be added  to
the  price  at  which  the  goods   are   actually   sold,   under   certain
circumstances.  These include the provision for  advertising  or  publicity,
marketing and selling  organization  expenses,  storage,  outward  handling,
servicing, warranty commission  etc.   In  the  present  case,  we  are  not
concerned with this aspect.  However, Rule 6 of the Rules specifies that  if
the goods are sold in the circumstances specified  in  clause  (a)  of  sub-
section (1) of Section 4, then the value of such goods shall  be  deemed  to
be the aggregate of such transaction value plus the 'amount of  money  value
of any additional consideration flowing  directly  or  indirectly  from  the
buyer to the assessee'.  The implication of this Rule is that  any  form  of
additional consideration  which  flows  from  the  buyer  to  the  assessee,
monitory value thereof is to be included while arriving at  the  transaction
value.  It is not necessary that such  an  additional  consideration  is  to
flow directly and even indirect consideration is includible.  It is in  this
context we have to examine as to whether the consideration in  the  form  of
drawback, which accrued in favour of the assessee, could be  connected  with
the buyer.  To put it otherwise, though the immediate  source  of  the  duty
drawback is the Government, whether its flow  can  be  traced  back  to  the
buyer?  If it is so, it ay become a case of  indirect  consideration  coming
from the buyer and can be added to the transaction value.

In the case of IFGL[4], this Court has given the answer in  the  affirmative
to the aforesaid  issue.   It  is  also  conceded  by  the  learned  counsel
appearing for the assessee that the said judgment  was  rendered  on  almost
identical fact situation.  That is why the endeavour of  Mr.  Lakshmikumaran
is to impress upon us to take a different view.  He sought to discredit  the
opinion of the Court in the said case by arguing that  the  advance  licence
for intermediate supply was granted by the DGFT to the  assessee  under  the
EXIM Policy and it had nothing to do with the buyer.  He  conceded  that  it
could happen only after buyers got their advance licences invalidated.   But
his explanation was that it was not necessary that such a licence  could  be
issued to the assessee merely because the advance licence in favour  of  the
buyer was invalidated.  He emphasized that DGFT could still refuse to  issue
the advance licence for intermediate supply to the assessee.

This argument does not convince us at all.  Fact remains that  the  issuance
of advance licence for intermediate supply to the assessee  was  facilitated
as a result of surrender of advance licence in favour or the  buyer  by  the
buyer.  Thus, getting the licence invalidated for direct import of items  in
favour of the buyer was the  trigger  point  for  issuance  of  the  advance
licence for intermediate supply in favour of the assessee.   Possibility  of
refusal on the part of DGFT to issue licence in favour of  the  assessee  is
only in the realm of conjecture.  Fact is that the assessee got the  licence
and it became possible only on account of  sacrifice  made  by  the  buyers.
Further, what is important is that the buyers  got  their  advance  licences
for direct import in their favour  invalidated  with  the  sole  purpose  of
purchasing the polyester staple fiber from the  assessee  at  lesser  price,
i.e. ?37.50 per kg.  Therefore, the argument of the  assessee  that  benefit
in the form of imports without payment of duty flows to  the  assessee  only
pursuant to and based on licence issued by DGFT to  the  assessee  and  does
not flow from the invalidation letter received by the customer from DGFT  is
too ingenuous an argument to be accepted.

Another argument which was advanced by the learned counsel for the  assessee
was that discounted  price  is  charged  from  the  advance  licence  holder
category of buyers by the assessee because of  saving  in  customs  duty  on
inputs due to statutory notification with consequent reduction  in  cost  of
production and, therefore, it is not a consideration flowing from  a  buyer.
In this  behalf,  the  submission  was  that  the  customs  duty,  otherwise
leviable on the inputs  going  into  the  manufacture  of  polyester  staple
fiber, is exempted by the  statutory  notification  issued  by  the  Central
Government, being Notification No. 31/1997-CUS, and it  is  because  of  the
benefit availed by the assessee under this Notification that it is  able  to
effect supply of polyester staple fiber on discounted price to  an  ultimate
exporter  holding  advance  licence.   Therefore,  the  additional  discount
offered to  a  customer,  who  is  the  exporter,  is  never  an  additional
consideration.

The aforesaid argument of the learned counsel for the  assessee  may  appear
to be impressive, when taken in isolation i.e. without having regard to  all
the attending facts.  However, when the argument is tested keeping  in  view
the entirety of the circumstances, as  already  taken  note  of  above,  the
hollowness of this argument  stands  exposed,  inasmuch  as,  this  argument
glosses over the fundamental fact that the assessee had  been  able  to  get
the benefit of Notification No. 31/1997-CUS based on licence issued by  DGFT
in its favour and the raison d'etre for issuance  of  said  licence  by  the
DGFT to the assessee was invalidation of the advance licence by the  buyers.
 Therefore, the source or gangotri from where  the  benefit  has  ultimately
reached the assessee is the advance licences which were held by  the  buyers
and their act of invalidation made it possible to flow down the  benefit  so
as to reach the stream of the assessee.

Yet another argument  which  was  raised  by  Mr.  Lakshmikumaran  was  that
carving out this category of buyers, namely, those who are/were the  holders
of advance licence, to be eligible for purchase at a  discounted  price  was
only a 'condition for  sale  of  goods'  put  forth  by  the  assessee.   He
submitted that 'it was not a consideration for sale of  goods'.   He,  thus,
drew distinction between condition for sale and consideration  for  sale  of
goods and in support of this  submission  referred  to  the  celebrated  and
classic judgment of the English Court in Thomas v. Thomas[5]. This  judgment
has been analysed by Chitty on Contracts (31st Edition – Volume I)  and  Mr.
Lakshmikumaran made the said analysis as part of his submission.   That  was
a case where a testator, shortly before his death, expressed a  desire  that
his widow should, during her life, have the house  in  which  he  lived,  or
£100.  After his death, his executors  'in  consideration  of  such  desire'
promised to convey the house to the widow during her life or for so long  as
she should continue a  window,  'provided  nevertheless  and  it  is  hereby
further agreed' that she should pay £1 per annum towards  the  ground  rent,
and keep the house in repair.  In an action by the widow for breach of  this
promise, the consideration for it was stated to be the  widow's  promise  to
pay and repair.  An objection that the declaration omitted to state part  of
the consideration, viz. the testator's desire, was rejected.   Patteson,  J.
said: 'Motive is not  the  same  thing  with  consideration.   Consideration
means something which is of value in the eye of  the  law  moving  from  the
plaintiff'.  Commenting upon the aforesaid remarks, Chitty observes:
“This remark should not be misunderstood:  a  common  motive  for  making  a
promise  is  the  desire  to  obtain  the  consideration;  and  an  act   or
forbearance on the part of the promisee may (unless the  court  is  prepared
to “invent” a consideration)  fail  to  constitute  consideration  precisely
because it was not the promisor's motive to secure  it.   What  Patteson  J.
meant was that a motive  for  promising  did  not  amount  to  consideration
unless two further requirements were satisfied,  viz:  (i)  that  the  thing
secured in exchange for the promise was “of some value in  the  eye  of  the
law”; and (ii) that it moved from the plaintiff.  Consideration  and  motive
are not opposites; the former concept is a subdivision of the  latter.   The
consideration for a promise is  (unless  the  consideration  is  nominal  or
invented) always a motive for promising; but a motive for making  a  promise
is not necessarily consideration for it in law.  Thus the testator's  desire
in Thomas v. Thomas was a motive for the executors' promise but not part  of
the consideration for it.   The  widow's  promise  to  pay  and  repair  was
another  motive  for  the  executors'  promise  and   did   constitute   the
consideration for that promise.”

From this very  judgment,  Chitty  also  explains  the  distinction  between
consideration and condition.  According to him, the plaintiff's remaining  a
widow was not part of the consideration but a condition of  her  entitlement
to enforce the executor's promise. This  case  is  contrasted  with  another
judgment in Re Soames[6]. The discussion in this behalf reads as under:
“On the other hand, in Re Soames A promised £3,000 to B if B would set up  a
school in the running of which A was to have an active part.   It  was  held
that, by establishing the school,  B  had  provided  consideration  for  A's
promise.  It seems that the distinction between consideration and  condition
depends, in such cases, on whether “a reasonable  man  would  or  would  not
understand that the performance of the condition was requested as the  price
or exchange for the promise.”  In Thomas v. Thomas  the  executors  had  not
requested the plaintiff to remain a widow; while in Re Soames a  request  by
A that B should establish the school could be inferred  from  A's  expressed
intention to participate in its management.   This  distinction  is  further
illustrated by Carlill  v.  Carbolic  Smoke  Ball  Co.  where  the  claimant
provided consideration for the defendants' promise by using the  smoke-ball;
but her catching influenza was a condition of  her  entitlement  to  enforce
that promise.”


We are afraid, such a distinction between consideration  and  condition,  as
sought to be drawn by the learned counsel for the assessee, would not  apply
to the instant case.  It was possible if the transaction between the  buyers
and the assessee was seen in isolation. However, in  the  present  case,  it
needs to be emphasized at the cost of repetition that the  resultant  effect
of invalidating the advance licence by the buyer  was  issuance  of  licence
for intermediate supply in favour of  the  assessee  and  the  said  licence
enured certain benefits in favour of the assessee.  In the present case,  on
these facts, we  have  to  simply  see  as  to  whether  the  definition  of
'transaction value', as contained in Section 4 of the Act read with  Rule  6
of the Rules, would  encompass  this  benefit  as  amounting  to  additional
consideration.  Our conclusion is that it would come  within  the  ambit  of
additional  consideration  indirectly  flowing  from  the  buyers   to   the
assessee.  Therefore, the instant case is more akin to the  decision  in  Re
Soames[7].

At this stage, we would like to recall the following findings arrived at  by
the Commissioner, which are not  upset  by  the  Tribunal  in  the  impugned
decision or even disputed by the assessee:

(a)  The assessee had supplied goods to a particular type of buyers at  much
lower price than the price charged from the general  buyers  in  the  normal
course of trade as it had obtained the facility of invalidating  of  advance
licences from such buyers and procured imported  raw  material  (duty  free)
against  such  licences  for  manufacturing  of  finished  goods.   It   is,
therefore, alleged that  the  assessee  and  the  buyers  had  mutuality  of
interest in the business of each other and there was a  flow  back  and  the
price was not the sole consideration for sale in these cases  in  accordance
with the provisions of Section 4(1)(a) of the Act.

(b)  Therefore, they were related persons in  terms  of  provisions  of  the
erstwhile Section 4(4)(c), presently Section 4(3)(b)(iv) of the Act.

(c)  It is observed that para 7.7 of the  EXIM  Policy  on  Advance  Release
Order speaks of mutuality of interest as  the  assessee  had  procured  duty
free imported raw materials against invalidation of advance licence  of  the
consignees and in turn it sold the finished goods to the said consignees  at
lower prices as compared to other normal buyers.  Thus, the  price  was  not
the only consideration.

(d)  Once the advance licence is invalidated,  the  said  clearance  to  the
buyers who were earlier holding the said licences need  not  be  treated  as
deemed export and rightly the assessee had cleared the said  goods  to  such
buyers on payment of excise duty, but at  lower  value  than  the  clearance
made to the normal buyers.  Thus, the  assessee  appeared  to  have  derived
double benefits in these transactions, i.e. (i) enhanced sale and paid  less
duty on lower value; and (ii) imported duty free raw materials.

(e)  In this case, the right to procure duty free imported raw  material  is
being transferred to supplier by the buyer.  This indicates  the  flow  back
of additional considerations from  the  buyer  of  the  said  goods  to  the
seller, which is the assessee.

On the facts of this case, we are of the opinion that the  Commissioner  has
rightly come to the conclusion with  regard  to  the  fact  that  additional
monetary consideration, in addition to the price being paid for  the  goods,
i.e. transfer of advance import licence in  favour  of  the  seller  by  the
buyer enabling the seller of the goods to effect duty  free  import  of  the
raw materials and bringing down the cost  of  production/procurement,  is  a
consideration, the monetary value of which has to be  considered  under  the
provisions of the Rules, i.e. Rule 6 thereof.

Thus, we do not see any reason to deviate  from  the  decision  rendered  by
this Court in IFGL's[8] case.

Before we part with, one more aspect to which our  attention  was  drawn  by
Mr. Lakshmikumaran needs to be addressed.  Referring to another judgment  of
this Court in Commissioner of Central  Excise,  Bangalore  v.  Mazagon  Dock
Ltd.[9], a vain attempt was made to show that this judgment was contrary  to
the decision rendered by this Court in IFGL's[10] case. We do  not  find  it
to be so. Interestingly,  the  Hon'ble  Judges  {S.N.  Variava  and  Dr.  AR
Lakshmanan, JJ.} who comprised the Bench that decided IFGL's case  were  the
same who rendered  the  judgment  in  Mazagon  Dock  Ltd.'s  case.   Another
pertinent factor which is to be taken note of  is  that  the  two  decisions
were rendered within a short gap of a fortnight.  The  decision  in  Mazagon
Dock Ltd. was rendered on July 28, 2005 whereas IFGL's case was  decided  on
August 09, 2005.  Thus, at the  time  of  pronouncing  of  the  judgment  in
IFGL's case, the same  very  Bench  was  conscious  of  its  judgment  given
immediately before in Mazagon Dock Ltd.

A reading of the judgment in Mazagon Dock Ltd.'s case would reveal  that  in
the said case subsidy of 20% was received by the assessee therein  from  the
Government, which was sought to be included by the  Revenue  as  'additional
consideration' to arrive  at  the  transaction  value  for  the  purpose  of
central excise.  The Court held that this subsidy was not received from  the
buyer either directly or indirectly and, therefore, could  not  be  included
in the price of goods qua purpose of excise.  On the  facts  of  that  case,
the Court found that the respondent  in  the  said  case  had  entered  into
contract with Oil & Natural Gas Corporation Limited (ONGC)  for  manufacture
and supply of jack-up rigs.  For such a contract, as per the policy  of  the
Government, 20% subsidy was to be received from the Government and 10%  from
ONGC.  As far as 10% subsidy received from ONGC is concerned, the  same  was
also to be includible in the transaction value as  additional  consideration
flowing from the buyer.  However, 20% subsidy from the Government was  under
the Government's own scheme with no role of ONGC (buyer in the  said  case).
Obviously, it could not be said that this subsidy  had  any  flow  from  the
ONGC either directly or indirectly.  The said judgment,  therefore,  has  no
bearing on the present matter.

In view of the foregoing, we are of the considered opinion  that  this  case
is squarely covered by the judgment of this Court in IFGL's[11]  case.   We,
thus, allow this appeal, set aside the decision of the Tribunal and  restore
the order passed by the Commissioner.  In the  facts  and  circumstances  of
this case, there shall be no order as to costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                     (ROHINTON FALI NARIMAN)

NEW DELHI;
AUGUST 21, 2015.

-----------------------
[1]
      2001 (134) ELT 230
[2]   (2005) 6 SCC 713
[3]   Note 2 above
[4]   Note 2 above
[5]   (1842) 2 QB 851
[6]   (1897) 13 TLR 439
[7]   Note 6 above.
[8]   Note 2 above
[9]   2005 (187) ELT 3 (SC) :: 2005 (127) ECR 268 (SC)
[10]  Note 2 above
[11]  Note 2 above

appellant being denied of the promotional benefit, even though the order of the respondent No. 4 was set aside by the judgment and decree in Civil Suit no. 70 of 2001. The action of respondent No. 4 in denying the promotional benefit to the appellant is tainted with malafides. It can further be observed from the record that it was respondent no.7 who had filed the reply on behalf of all the respondents in the writ petition proceedings before the High Court. It is important to note at this stage that respondent No. 7 happens to be an officer junior to the appellant, who was promoted to the post in question. The non-filing of written statement by respondent No. 4 traversing the allegations of malafide against him proves the malafide intention on part of the respondent No. 4. Therefore, there was no justification for the respondent No. 4 in denying the promotional benefit to the post of Battalion Commander to the appellant and. The learned senior counsel on behalf of the appellant has rightly placed reliance on the case of Sukhdev Singh (supra), wherein this Court has lucidly laid down the law pertaining to communication of ACR. It was held that if the ACR of the officer concerned is to be used for the purpose of denying promotion, then all such ACRs were required to be communicated to him, to enable him to make a representation against his adverse entries made in the ACRs. As per the record submitted by the respondents, the appellant was given grade ‘A+’ for the year 2001-2002, but only 1 mark was assigned. According to the executive Instructions, the grade ‘A+’ is to be assigned 4 marks. Accordingly, if 4 marks are assigned for the ACR of the appellant for the period 2001-2002, then he would have scored 12 marks at the time of consideration for promotion in the year 2003, whereas admittedly, the appellant was required to achieve only 10 marks in order to be promoted to the post of Battallion Commander. Hence, if the calculation of marks made by the respondents on the various aspects in the ACR of the appellant is believed to be true, then also he has achieved the required benchmark. The action of the respondent No. 4 in deliberately ignoring the claim of the appellant is vitiated in law as the same is contrary to the Rules and records of ACR for the relevant period and Instructions issued by the State Government laying down certain guiding principles. Therefore, the order of denial of promotion to the appellant, which has been affirmed by the High Court in its judgment and order passed in the Writ Petition and Review Application is liable to be set aside. For the reasons stated supra, we pass the following order:- We set aside the impugned judgment and order passed by the High Court in both the Civil Writ Petition and the Review Application and also the order of denying the promotional benefit by the respondents-Department to the post of the Battalion Commander from the year 2001-2002; Further, we direct the respondent Nos. 1 to 5 to reconsider the claim of the appellant in the light of our findings and reasons recorded on the contentious factual and legal aspects so that he could get higher post of Battalion Commander notionally to get pensionary benefits as he has been prematurely retired from service on 31.7.2007; and The said direction shall be complied with within 8 weeks from the date of the receipt of the copy of this order and extend all the consequential benefits for the purpose of fixing his pensionary benefits and other monetary benefits for which he is legally entitled to and submit the compliance report to this Court. The appeal is allowed in the above said terms with cost of Rs.10,000/- payable to the appellant by respondent Nos. 1 to 4.

                         IN THE SUPREME COURT OF INDIA
                          CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 6532   OF 2015
                (Arising out of S.L.P. (C) NO. 1640 of 2014)

DALJIT SINGH GREWAL                   ………… APPELLANT

                                     Vs.

STATE OF PUNJAB & ORS.             ………… RESPONDENTS


                               J U D G M E N T


V. GOPALA GOWDA, J.


      Leave granted.
This appeal is directed  against  the  impugned  judgment  and  order  dated
27.08.2013 passed by the High Court of Punjab &  Haryana  at  Chandigarh  in
Review Application No. 208 of 2013 (O&M) in Civil Writ Petition No. 5643  of
2004 whereby the High Court did not find any merit in  the  application  and
dismissed the same.

The brief facts of the case are mentioned   below :-

The  appellant  joined  the  Punjab  Home  Guards  Department  as   District
Commander in the year  1993  after  being  selected  through  Punjab  Public
Service Commission under the Punjab Home Guard  Class-II  Rules,  1988.  The
work of the appellant was appreciated by  the  ADGP,  Railways  when  a  big
tragedy on the railway tracks was averted as a result of  his  efforts.  His
work and conduct was considered as excellent. The  dispute  in  the  instant
case arose when he received a letter dated 28.06.2000,  wherein  the  Annual
Confidential Report (ACR) for the period 1.07.1999 to 31.03.2000  rated  his
performance as ‘average’. The D.G.P-cum-Commandant General had  written  the
following remarks:
“An mediocre officer, whose performance was  barely  satisfactory.  His  own
officers  intrigue  and  directly  make  unfounded  allegations.  This  work
environment, he has not been able to change.”


The said assessment of his performance by the Deputy Commandant General-cum-
Deputy Director, Civil Defence and the D.G.P-cum- Commandant  General,  Home
Guards & Director Civil Defence led the appellant to place a  representation
dated 07.07.2000 before the  DGP-cum-Commandant  General,  Home  Guards  and
Director Civil Defence, Punjab- respondent No.5, requesting  the  supply  of
documents on the basis of which his conduct  and  diligence  was  graded  as
‘average’. But no  satisfactory  response  was  received  by  the  appellant
despite having been  made  reminder  representations  dated  18.08.2000  and
25.08.2000 for supply of the said  documents.  On  29.12.2000,  Instructions
were issued  by  the  Department  of  Personnel,  State  Government,  Punjab
whereby a ‘benchmark system’ was introduced for  promotion  to  Group-A  and
Group-B posts.

On 15.03.2001, the appellant submitted  a  detailed  representation  to  the
Secretary, Personnel,  Punjab,  Civil  Secretariat-respondent  No.3  herein,
requesting him to re-consider the said Instructions on the ground  that  the
same were violative of principles of natural justice. He also stated in  the
representation that the recording of adverse entries  in  the  ACR  must  be
conveyed to the concerned officers so as to enable  them  to  improve  their
work accordingly. On 07.05.2001, the appellant received a  letter  from  the
Under Secretary, Department of Home Affairs and Justice, informing him  that
his representations dated 18.08.2000 and 25.08.2000 to  the  Government  had
been considered and rejected.

The appellant  again  made  a  representation  on  31.05.2001  to  the  then
Principal Secretary, Department of Home and  Justice,  requesting  that  the
adverse remarks made in his ACR for the year 1999-2000 be expunged  so  that
he could be promoted to the post of Battalion Commander.

On 30.06.2001, the appellant became eligible for promotion to  the  post  of
Battalion Commander after completion of 8 years of  service  as  per  Punjab
Home Guard Class-I Rules, 1988. Rule 8(2) of the  Rules  provides  that  the
District Commanders  having 8 years of experience are entitled to  promotion
to the post of Battalion Commander on the basis of  seniority-cum-merit  and
that no person could claim promotion on the basis of seniority alone.

Ultimately, having received no satisfactory  response  from  the  respondent
Nos. 3 to 5 despite making  several  representations,  the  appellant  filed
Civil Suit No. 70 of 2001 before the Civil  Judge  (Sr.  Div.),  challenging
the adverse entries made in his ACR for the year 1999-2000.

Meanwhile, the representation of the appellant was  rejected  by  respondent
No. 4 by way of a non-speaking order on 08.08.2001.

By letter No.4/6/2000-3PPI/13720 dated 06.09.2001, the  government  modified
its earlier Instructions dated 29.12.2000, whereby the benchmark system  was
introduced for  promotion  to  the  Group-A  and  Group-B  posts  which  was
approved and  published  by  the  Government  of  Punjab  on  18.12.2001.  A
conscious policy  decision  was  taken  to  set  up  Departmental  Promotion
Committees for considering cases  of  eligible  officers  for  promotion  to
Class-I and Class-II (Group ‘A’ and Group  ‘B’)  posts,   which  inter  alia
reads thus:-

“……a…
 ……b…

|NO. OF VACANCIES |NORMAL ZONE         |ZONE FOR            |
|                 |                    |CONSIDERATION  SC/ST|
|1                |5                   |5                   |
|2                |8                   |10                  |
|3                |10                  |15                  |
|4                |12                  |20                  |
|                 |Twice the number of |5 times number of   |
|                 |vacancies plus  4   |vacancies           |

               xxx         xxx          xxx

(c) It has been decided to retain the  numbering  system  of  evaluation  of
ACRs as contained in the instructions dated 29.12.2000 which is as under:-

|Outstanding                 |4 MARKS                   |
|Very good                   |3 MARKS                   |
|Good                        |2 MARKS                   |
|Average                     |1 MARK                    |

ACRs for the last 5 years are to be taken into consideration for  promotion.
The criteria for promotions will be as under:-

1….

2. For  promotion  to  posts  falling  in  Group  ‘A’  other  than  Head  of
Department, the minimum bench mark will  be  Very  Good  with  at  least  12
marks. Amongst those meeting this criteria, there would be supersession.

3. In the case of promotion to posts falling in Group ‘B’ the minimum  bench
mark will be “Good” and there  would  be  no  supersession  i.e.  promotions
would be made strictly on seniority-cum-merit.

     XXX             XXX                XXX..”


By the judgment and order dated 15.03.2002, the  Civil  Judge,  (Sr.  Div.),
Patiala in Civil Suit No. 70 of 2001 decreed  the  suit  in  favour  of  the
appellant. The adverse remarks recorded against the  appellant  in  the  ACR
for the period 01.04.1999 to 31.03.2000 were expunged and all  consequential
benefits were granted to the appellant.

Since no appeal was filed by the respondents against the said  judgment  and
decree  of  the  Civil  Judge  (Sr.  Divn.),  the  appellant  requested  the
respondents  vide  representation  dated  08.05.2002  to  consider  him  for
promotion to the post of Battalion  Commander.  Thereafter,  despite  having
submitted representations dated 10.05.2002 and 20.06.2002 to the  respondent
No. 4, no action was taken to implement the decree passed in favour  of  the
appellant.

In the meanwhile, the Division Bench  of  High  Court  passed  an  order  on
14.01.2003 in CWP No. 4491 of 2001 and CWP No. 11011 of 2001 (filed by  some
other petitioners, who had also challenged  Instructions  dated  29.12.2000)
issuing direction to the  State  Government  for  considering  the  case  of
petitioners therein, by ignoring the Instructions dated 29.12.2000.

Two more representations were  made  by  the  appellant  on  31.03.2003  and
09.04.2003 to respondent No. 4, but no action was taken.

Once again, having found that his performance was shown as ‘average’ in  the
ACR for the  period  01.04.2001  to  31.03.2002  which  was  graded  by  the
respondent  No.4,  the  appellant  submitted   another   representation   on
16.04.2003 for upgrading his ACR for the period 1999-2000 and  2001-2002  as
his controlling officer i.e. Division Commander has awarded  him  “A”  Grade
and Review Authority i.e. Deputy Commandant General also  awarded  him  “+A”
which entries were accepted by the final authority i.e. Commandant  General,
Home Guard-respondent No. 5. He also mentioned in  the  representation  that
he was shocked to find that his ACR for the period 2001-2002 was  downgraded
by  respondent  No.  4  without  assigning  any  reason  or   affording   an
opportunity of being heard. As per the  departmental  procedure,  Rules  and
Instructions, the then Principal Secretary, Home who has not seen  the  work
and conduct of the appellant, could not have downgraded his  performance  by
making an adverse entry in his ACR. However, no action  was  taken  on  this
representation made by him.

As per the Instructions dated 06.09.2001, at least 12  marks  were  required
for promotion to the post of Battalion  Commander.  The  appellant  was  not
considered for promotion even after having a decree passed in his favour  by
the Civil Court which was deliberately not placed  before  the  Departmental
Promotion Committee (hereinafter “the DPC”) for its  consideration.  Due  to
the adverse remarks in the ACR for the year 2001-2002,  the  appellant  fell
short of this benchmark.

The appellant again made representations dated 10.09.2003 and 15.09.2003  to
the respondent No. 4 for implementing the judgment and decree passed by  the
Civil Judge (Sr. Div.) in his favour and requested them to  promote  him  to
the post of Battalion Commander. He also got a legal notice  issued  to  the
respondents on 06.10.2003. The respondents deliberately ignored the  request
of the appellant by placing reliance on the Instructions referred  to  supra
and the non-upgraded ACRs for the year 1999-2000, 2000-2001  and  2001-2002,
though the suit was decreed in his favour.

On 16.02.2004, the appellant issued a legal notice to the respondent Nos.  4
and 5 for upgrading the ACR for  the  period  2001-2002  from  ‘Average’  to
‘Excellent’.

A similar issue  arose  for  consideration  of  promotion  and  quashing  of
Instructions  regarding  the  benchmark  method  introduced  by  the   State
Government, Department of Personnel in the case  of  Balbir  Singh  Bedi  v.
State of Punjab & Ors.[1], wherein this Court upheld  the  validity  of  the
executive Instructions dated 29.12.2000 and 06.09.2001, holding  that  these
Instructions are nothing but a codification of  directions  issued  by  this
Court regarding promotions and the  criteria  of  seniority-cum-merit  in  a
catena cases.

The appellant made a complaint on 11.03.2004 to the respondent no.4  seeking
that action be taken against the persons who were tampering with  the  ACR’s
to harm the service career of the appellant.

Ultimately, the appellant filed CWP No. 5643 of 2004 before the  High  Court
challenging the legality and validity of the Instructions and  orders  dated
02.05.2003 and 30.01.2004. The said petition was dismissed by  the  Division
Bench of the High Court on 02.04.2004.

Meanwhile, the appellant was supplied certain documents under  the  RTI  Act
which had material effect on the merits of his  case.  The  appellant  filed
SLP (C) No. 14964 of  2004  against  the  order  of  the  High  Court  dated
02.04.2004. This Court granted leave in  the  said  SLP  and  the  same  was
converted into Civil Appeal No. 5192 of 2004 and was directed  to  be  heard
along with the case of Balbir Singh Bedi referred to  supra.  The  case  was
dismissed, but the appellant was granted liberty by this  Court  to  file  a
Review Petition before the High Court.

The appellant approached the High Court after being granted liberty by  this
Court in the above referred case and a Review Application No.  208  of  2013
was filed for recall of order dated 02.04.2004. The High Court having  found
no merit in the Review Application dismissed the same vide its  order  dated
27.08.2013. On the issue of the performance of the  appellant  being  graded
as ‘average’, the High Court observed that though it was  not  clear  as  to
whether the adverse entries in the ACR  for  the  period  of  01.04.2001  to
31.03.2002 were conveyed to  the  appellant,  yet  it  was  clear  from  his
representations that the contents of the reports were in his  knowledge  and
he had specifically represented against  its  downgrading.  The  High  Court
further held that the appellant could not contend  that  the  adverse  ACR’s
were made behind his back. Hence, the present appeal  is  filed  questioning
the correctness of the action of the respondents in not giving promotion  to
the appellant to the post of Battalion Commander though he was entitled  for
the same and  also  challenged  the  judgment  and  orders  passed  in  writ
petition and also review petition.

Mr. Rakesh Kumar Khanna, learned senior counsel appearing on behalf  of  the
appellant has contended that the High Court erred in not complying with  the
observations made by this Court in Civil Appeal No. 5192  of  2004,  wherein
this Court directed that the additional documents obtained by the  appellant
under the RTI Act were to  be  considered  by  the  High  Court.  Thus,  the
appellant withdrew the Civil Appeal No.5192  of  2004  and  filed  a  Review
Application before  the  High  Court  in  order  to  produce  the  documents
obtained by him so that the same could be considered by the High  Court  and
pass appropriate orders.

It is also contended by the learned  senior  counsel  that  the  High  Court
failed to consider the representation  dated  16.04.2003  submitted  by  the
appellant to the  respondent  No.  4,  wherein  he  had  requested  for  the
implementation of the judgment and decree dated  15.03.2002  passed  in  the
Civil Suit No. 70 of 2001.

It is further contended by the learned  senior  counsel  on  behalf  of  the
appellant that the High Court  should  have  taken  into  consideration  the
latest judgment of this Court rendered in  the  case  of  Sukhdev  Singh  v.
Union of India[2] wherein it was held that all the ACRs whether poor,  fair,
average,  good  or  very  good,  must   be   apprised   to   the   concerned
employee/officer within the  stipulated  time  so  that  he/  she  can  take
suitable action if he/she is aggrieved by the same. While on the  one  hand,
the High Court presumed that the appellant had knowledge of the  downgrading
in his ACR, at the same time it was also observed  that  it  was  not  clear
whether the downgrading was conveyed to the appellant.
It is further contended by the learned senior counsel  appearing  on  behalf
of the appellant that the High Court should have  considered  the  law  laid
down in the case of Gurdial Singh Fiji v. State of Punjab[3],  wherein  this
Court has specifically held that the adverse remarks made in the ACR  cannot
be acted upon by the Authority to deny promotion to a post unless they  have
been communicated to the concerned person.

It is further contended by the learned senior counsel  that  the  respondent
No. 4 could not have downgraded his ACR and that too without  conveying  the
same to him, as he had not personally seen the work of the appellant.  There
should have been some reason for the respondents to make adverse entries  in
his ACR’s for the relevant periods by changing the original entries made  by
the Reporting Authority-respondent No. 5. The adverse entries  made  in  the
ACR’s of the appellant for the relevant periods  were  not  communicated  to
him. If there were any adverse entries in the ACR’s, the  same  should  have
been  communicated  to  the  appellant  to  enable  him   to   improve   his
shortcomings or submit a representation against the adverse entries. It  was
further contended by the learned senior counsel that the favourable  entries
recorded in the  ACR’s  for  the  relevant  periods  were  deliberately  not
produced before the Selection Committee or DPC by the  respondents  so  that
the appellant would not be considered for  promotion  and  promoted  to  the
promotional post, which aspect of the matter should  have  been  taken  into
consideration by the High Court while  passing  the  impugned  judgment  and
order in the writ petition and also  in  the  order  passed  in  the  review
application.

On the other hand,  Mr.  Nikhil  Nayyar,  the  learned  Additional  Advocate
General appearing on behalf of the respondent Nos. 1 to  5,  has  sought  to
justify the impugned judgment and order contending that the  same  is  legal
and justifiable on facts and also in law.  Therefore,  the  High  Court  has
rightly  dismissed  the  Writ  Petition  and  Review  Application   of   the
appellant. Hence, the same does not warrant interference by this Court.

It is further contended by the learned Additional Advocate General that  the
DPC considered the ACRs of the past five years of the appellant and  on  the
basis of final marks obtained by him for the relevant ACRs,  his  claim  was
not considered by the DPC for promotion as he failed to meet  the  benchmark
criteria laid down as  per  Instructions  dated  29.12.2000  and  06.09.2001
issued by the respondent No. 3. Further, even the  Head  of  the  Department
did  not  issue  the  requisite  integrity  certificate  in  favour  of  the
appellant.

It was further contended by the learned Additional Advocate General that  in
an earlier round of litigation before this Court in a  similar  matter  i.e.
Balbir Singh Bedi (supra), this  Court  upheld  the  validity  of  benchmark
Instructions dated 29.12.2000 and 06.09.2001  issued  for  consideration  of
eligible officers for promotion to the posts of Class I and II viz. Group  A
and Group B and therefore, the same cannot be ignored. Thus,  the  appellant
cannot be promoted to the post of Battalion Commander.

Further, it was contended by the learned Additional  Advocate  General  that
there were no adverse remarks in the ACRs of  the  appellant  for  the  year
2000-2001 and 2001-2002, which were required to be apprised to  him  and  he
was also aware of his adverse ACRs for the years  1999-2000.  Therefore,  it
was rightly held by the High Court that the contents of those  reports  were
within his knowledge. Therefore, there is no error of law committed  by  the
High Court.

It is further contended by the learned Additional Advocate General  that  it
was not right on the part of the appellant to request the respondent  No.  4
to upgrade his ACRs and consequently to promote him to the promotional  post
retrospectively,  which  is  impermissible  in  law.  In  support   of   his
submission he placed reliance on the case of Dev Dutt v. Union  of  India  &
Ors.[4], wherein this Court had directed the appellant  therein  to  make  a
representation before the concerned authorities to consider  his  claim  for
promotion retrospectively.

After hearing the learned counsel for both the parties and  considering  the
facts and rival legal  contentions  urged  by  them  including  the  written
submissions submitted by the learned counsel for the parties and on  perusal
of record, we  pass  the  following  order  in  this  appeal  on  merits  by
assigning the reasons as mentioned herein below.

The promotion of the appellant to the post of Battalion Commander  from  the
post of District Commandant is governed by Rule  8(1)(2)(i)  of  the  Rules.
The aforesaid rule contemplates that 75% of the  promotional  posts  of  the
Battalion Commander be filled up by promotion amongst the  Battalion  second
in command. The legal requirement for promotion to  the  post  of  Battalion
Commander is that the claimant  should  have  been  working  as  a  District
Commandant for a  period  of  8  years  and  the  appointment  to  the  said
promotional post shall be made by the Competent Authority on  seniority-cum-
merit basis. No person shall be entitled to claim promotion on the basis  of
seniority alone. As per the Punjab State Government Instructions  issued  on
06.09.2001, certain guidelines have been laid down for DPC to  consider  the
cases of promotion to the post of Class-I and  Class-II  namely,  group  ‘A’
and ‘B’ posts.  As  per  the  said  guidelines,  an  eligible  candidate  is
promoted on the basis of the seniority-cum-merit criteria,  where  merit  is
determined on  the  basis  of  benchmark  awarded  to  the  various  aspects
contained in the ACR of the officer, wherein marks are awarded against  such
entries made in the ACRs of the officers concerned for the relevant period.

Further, as per the records obtained by the appellant from  the  respondents
under the RTI Act at the time of his claim for  promotion  to  the  post  of
Battalion Commander was first considered,  his  ACRs  from  year  1996  were
considered.  The  Instructions  dated   29.12.2000   would   be   applicable
prospectively to the ACRs of the appellant for relevant periods  which  were
prepared  after  those  Instructions   were   issued.   According   to   the
Instructions, officers obtaining 0-14 marks out  of  a  total  of  20  marks
would be graded over  all  ‘Good’.  Thus,  the  appellant  was  entitled  to
promotion as he had been awarded 10 marks as per the proceedings of DPC.

The High Court in the impugned judgment  further  observed  that  the  final
reporting authority had downgraded the appellant  as  an  ‘average’  officer
for the above relevant period.  As  per  the  executive  Instructions  dated
10.01.1985 issued by the State Government, the  Commandant  General  is  the
final Authority for the rank of  the  District  Commander.  That  being  the
factual position, the downgrading of the performance  of  the  appellant  in
his ACR for the above relevant period by the respondent No. 4 was not  valid
as the same was done without  any  authority  and  competence.  The  adverse
entries in the ACR have deprived the appellant of his right of promotion  to
the post in question and therefore, the said adverse  entries  in  the  ACRs
against the appellant are not legal and valid. The ACR for the period  2000-
2001 is extracted hereunder:
|Integrity                                     |Correct                 |
|Conduct                                       |Very Good               |
|Health and Activeness                         |Very Good               |
|Personality and Initiative                    |Very Good               |
|Knowledge and Intelligence                    |Very Good               |
|Dependability/ reliability                    |Fully Dependable        |
|Power to Command                              |Very Good               |
|Efficiency in Parade                          |Correct                 |
|Moral courage and efficiency to expose corrupt|Very Good               |
|subordinates                                  |                        |
|Impartiality                                  |Impartial               |
|Knowledge of English                          |Very Good               |
|Knowledge of Punjabi and  Hindi and to make   |Very Good               |
|drafts in these languages                     |                        |
|Knowledge of Civil rules and regulations, Home|Very Good               |
|Guard Act, administration instructions and    |                        |
|circulars                                     |                        |
|Behaviour and to work with  each other        |Very Good               |
|Defect, if any, whether brought to his notice |Not Applicable          |
|Whether fit for promotion                     |At his own term         |
|Whether he disposes his work in Punjabi       |Yes                     |
|General Remarks                               |He is very good and     |
|                                              |responsible officer     |



  A perusal of the ACR for the period  2000-2001  reveals  that  though  the
general remarks stated that  “He  is  very  good  and  responsible  officer”
respondent No. 4 had  given  a  grade  which  read,  “I  agree.  An  average
officer”. The said entry shows that he had agreed to all the remarks of  the
ACR given in respect of columns 1 to 18  for  that  year  by  the  Competent
Accepting Authority, but he further stated assessed the  officer  to  be  an
‘average’ officer without assigning any reason  whatsoever  apart  from  his
competence to make such adverse entries. The overall grading of the  ACR  is
based upon the observations  made  by  the  Reporting  Authority,  Reviewing
Authority and final Accepting Authority. As per  the  entries  made  by  the
respondent No. 4, he had agreed to the  overall  grading  as  given  by  the
Accepting Authority. In such a  case,  he  could  not  have  downgraded  the
overall grading in  the  ACR  by  using  the  words  “an  average  officer”.
Further, if the comments made on 20.05.2004 by the respondent No. 4  on  the
ACR for the year 2000-2001 are being sought to justify the stand  of  denial
of  promotion  to  the  appellant  to  the  post  in  question,   then   the
clarification needs to take effect from that date, i.e 20.05.2004.  In  such
a case, the appellant was to be assigned 3 marks  as  per  the  instructions
for the year 2003, when he was ignored  for  the  promotion  for  the  first
time.

A perusal of the copy of the ACR for the period 2003-2004  reflects  a  true
picture of the injustice that has been perpetrated  against  the  appellant.
The ACR has been written by Mr. Tejinder Singh, respondent  No.  4  who  was
the Reporting Authority as the Divisional Commandant. The very same  officer
was also the Reviewing Authority as Deputy Commandant General. Further,  the
same officer also happened to  be  the  Final  Accepting  Authority  as  the
Commandant General, as is evident from his  comment  dated  30.09.2004.  The
fact that in the said year also the performance of the  appellant  had  been
graded  as  ‘average’  clearly  reveals  the  malafide  intention   of   the
respondent nos.1-4 in deliberately denying the promotion  to  the  appellant
to the post in  question.  According  to  the  respondents  themselves,  the
executive Instructions dated 06.09.2001 have  not  been  superseded  by  any
other Instructions or rules framed by  the  competent  authority.  If  these
illegal downgrading entries in the ACR for the relevant period are  ignored,
then the appellant would attain 14 marks.  As  per  the  Instructions  dated
06.09.2001, 12 marks were required for promotion to  the  post  as  per  the
benchmark fixed.

Further, the adverse remarks for  the  period  1999-2000  were  conveyed  to
appellant vide communication dated 28.06.2000 by the  D.G.P-cum-  Commandant
General. The representations dated 18.08.2000 and  25.08.2000  made  by  the
appellant against the same were submitted to  respondent  No.  4.  The  said
representation was rejected on 07.05.2001. The appellant had challenged  the
same by filing Civil Suit No. 70 of 2001, wherein the respondent No.  4  was
impleaded as defendant No. 3. The civil suit was decreed  on  15.03.2002  in
favour of the appellant. The said judgment and decree passed  in  favour  of
the appellant has not been implemented by  the  respondent  Nos.  4  and  5,
despite having attained finality, which clearly reflects the fact  that  the
respondent No.4 was not fair in considering him for promotion  to  the  post
of Battalion Commander as provided under Rule 8(2) of the  Rules.  According
to the Rules, the appointment to the  promotional  post  shall  be  made  on
seniority-cum-merit basis. As per the ACRs placed on record,  the  appellant
has fulfilled the aforesaid requirement of seniority-cum-merit  by  securing
14 marks, as per the Instructions in relation to all aspects entered in  the
ACR. The strong reliance  placed  upon  the  adverse  remarks  made  by  the
respondent No.4, who has made the same without assigning  any  reasons,  has
resulted in the appellant being denied  of  the  promotional  benefit,  even
though the order of the respondent No. 4 was set aside by the  judgment  and
decree in Civil Suit no. 70 of 2001. The  action  of  respondent  No.  4  in
denying the promotional benefit to the appellant is tainted with  malafides.
It can further be observed from the record that it was respondent  no.7  who
had filed the reply on behalf of all the respondents in  the  writ  petition
proceedings before the High Court. It is important to  note  at  this  stage
that respondent No. 7 happens to be an officer junior to the appellant,  who
was promoted to the post in question. The non-filing  of  written  statement
by respondent No. 4 traversing  the  allegations  of  malafide  against  him
proves the malafide intention on part of the respondent  No.  4.  Therefore,
there was  no  justification  for  the  respondent  No.  4  in  denying  the
promotional benefit to the post of  Battalion  Commander  to  the  appellant
and. The learned senior counsel on  behalf  of  the  appellant  has  rightly
placed reliance on the case of Sukhdev Singh  (supra),  wherein  this  Court
has lucidly laid down the law pertaining to communication  of  ACR.  It  was
held that if the ACR of the officer concerned is to be used for the  purpose
of denying promotion, then all such ACRs were required  to  be  communicated
to him, to enable him to make a representation against his  adverse  entries
made in the ACRs.

As per the record submitted by the  respondents,  the  appellant  was  given
grade ‘A+’ for the year 2001-2002, but only 1 mark was  assigned.  According
to the executive Instructions, the grade ‘A+’ is to  be  assigned  4  marks.
Accordingly, if 4 marks are assigned for the ACR of the  appellant  for  the
period 2001-2002, then he  would  have  scored  12  marks  at  the  time  of
consideration for promotion  in  the  year  2003,  whereas  admittedly,  the
appellant was required to achieve only 10 marks in order to be  promoted  to
the post of Battallion Commander. Hence, if the calculation  of  marks  made
by the respondents on the various aspects in the ACR  of  the  appellant  is
believed to be true, then also he has achieved the required  benchmark.  The
action of the respondent No. 4 in deliberately ignoring  the  claim  of  the
appellant is vitiated in law as the  same  is  contrary  to  the  Rules  and
records of ACR for the relevant period and Instructions issued by the  State
Government laying down certain guiding principles.

Therefore, the order of denial of promotion  to  the  appellant,  which  has
been affirmed by the High Court in its judgment  and  order  passed  in  the
Writ Petition and Review Application is liable to be set aside.

 For the reasons stated supra, we pass the following order:-

We set aside the impugned judgment and order passed by  the  High  Court  in
both the Civil Writ Petition and the Review Application and also  the  order
of denying the promotional benefit  by  the  respondents-Department  to  the
post of the Battalion Commander from the year 2001-2002;

Further, we direct  the respondent Nos. 1 to 5  to reconsider the  claim  of
the appellant in the light of our  findings  and  reasons  recorded  on  the
contentious factual and legal aspects so that he could get  higher  post  of
Battalion Commander notionally to get pensionary benefits as  he   has  been
prematurely retired from service on 31.7.2007; and

The said direction shall be complied with within 8 weeks from  the  date  of
the receipt of the copy of this  order  and  extend  all  the  consequential
benefits for the  purpose  of  fixing  his  pensionary  benefits  and  other
monetary benefits for which  he  is  legally  entitled  to  and  submit  the
compliance report to this Court.


 The appeal is allowed in the above said  terms  with  cost  of  Rs.10,000/-
payable to the appellant by respondent Nos. 1 to 4.


                                                ……………………………………………………………………J.
                        [V.GOPALA GOWDA]




                                                ……………………………………………………………………J.
                        [S.A. BOBDE]

New Delhi,
August 21, 2015
-----------------------
[1]     (2013) 11 SCC 746
[2]     2013 (9) SCC 566
[3]     AIR 1979 SC 1622
[4]    (2008) 8 SCC 725

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|REPORTABLE           |