whether an application for amendment of Form 7 could be entertained after 30th June, 1979. This Court answered the issue in the affirmative but again the question whether an amendment could be made in the application in Form 7 after the decision of the Tribunal was not the subject matter of discussion.= This was clearly impermissible and was an attempt to do so something in an indirect manner which could not have been done by him directly.= In our opinion, the Tribunal having adjudicated upon the application, it could only correct clerical or arithmetical errors as permitted by Section 48-A of the Act. The amendment sought by Narayanappa was not in the nature of a clerical or arithmetical errorWhat he sought was not only a change in the survey number but also a change in the village and also a change in the area of the land for which occupancy rights were claimed. This was clearly beyond the ambit of a clerical or arithmetical error. That apart, the order of the Tribunal passed on 24th April, 1981 had attained finality since Narayanappa did not challenge its correctness before any forum. Therefore, the proposed amendment sought by Narayanappa was not in the nature of an amendment to the original application in Form 7 but a fresh claim made by him for a different parcel of land after the cut- off date of 30th June, 1979. In other words Narayanappa sought to circumvent the provisions of the Act by making a fresh claim after the cut- off date by styling it as an amendment to the original application in Form -This was clearly impermissible and was an attempt to do so something in an indirect manner which could not have been done by him directly

                                                                  REPORTABLE
                         IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                       CIVIL APPEAL NO. 7343  OF 2016
                (Arising out of S.L.P.(C) No. 18550 of 2013)
Narayanappa (D) By Lrs.                        .…Appellants
 Versus
B.S. Ramaswamy (D) By Lrs. & Ors.        ….Respondents

                               J U D G M E N T
Madan B. Lokur, J.
Leave granted.
2.  The question in this appeal is whether the High  Court  was  correct  in
holding  that  the  appellant  Narayanappa   (represented   by   his   legal
representatives) was not entitled to claim occupancy rights in the  land  in
question under of the provisions of the Karnataka Land  Reforms  Act,  1961.
In our opinion, the question is required to be answered in the  affirmative,
and we do so.
3.  On the enactment of the Karnataka Land Reforms  Act,  1961  (hereinafter
referred to as ‘the Act’) all tenanted lands on the appointed date  that  is
1st March, 1974 vested with the State Government free of  all  encumbrances.
However, tenants in possession of land on the appointed date  were  entitled
to seek registration of their  occupancy  rights  over  the  land  in  their
possession.  The Land Reforms  Tribunal  (hereinafter  ‘the  Tribunal’)  was
constituted to look into such claims, the last date  for  filing  the  claim
being 30th June, 1979.
4.  On 31st December, 1974 the appellant Narayanappa (now deceased)  claimed
occupancy right by filing an application in Form 7 under the Karnataka  Land
Reforms Rules, 1974 and invoking the provisions of Section 48-A of the  Act.
 In the application, Narayanappa claimed  occupancy  rights  in  respect  of
land  bearing  Survey  No.  93  measuring  4  acres  20  guntas  in  village
Chalamakunte in Devanahalli taluka.  In the application/Form  the  landlords
were shown to be H. Kempaiah and B.S. Ramaswamy.
5.  When Ramaswamy received notice of  the  application  from  the  Tribunal
with regard to the claim made by Narayanappa, he made an endorsement on  the
notice that he is not the  owner  of  the  land  and  therefore  he  has  no
interest in it.
6.  When the application was heard by the Tribunal, Narayanappa’s claim  was
verified and it was held that since he was not  a  tenant  in  the  land  in
question but was a kathedar, the question of granting  occupancy  rights  in
his favour did not arise.  Accordingly, the  Tribunal  passed  an  order  on
24th April, 1981 rejecting the  application/Form  7  filed  by  Narayanappa.
The impugned judgment and order passed by the High Court  records  that  the
order dated 24th April, 1981 was not challenged and has  attained  finality.

7.  On 5th February, 1982  well  after  the  cut-off  date  for  filing  the
application/Form  claiming  occupancy  rights,  Narayanappa  moved  for   an
amendment in Form  7.   Through  the  proposed  amendment,  he  now  claimed
occupancy  rights  in  Survey  No.  134  in  hamlet   Yediyur   in   village
Mahadevakodigehalli in Devanahalli taluka.  According to Narayanappa he  was
illiterate, the Form had  been filled up by someone on his behalf and  since
he was not able to understand its contents, a bona fide error had been  made
in not making a claim at the appropriate time in respect of Survey No.  134.
 At this stage, it may be mentioned that the claim made  by  Narayanappa  in
respect of Survey No. 93 was for  4  acres  20  guntas  of  land  while  the
proposed amendment in respect of Survey No. 134 was for 8 acres 01 gunta  of
land.
8.  When Ramaswamy  came  to  know  of  the  proposed  amendment  sought  in
Narayanappa’s application, he raised an objection  but  by  an  order  dated
20th August, 1982 the Tribunal accepted  the  application  and  thereby  the
proposed amendment, while rejecting the objections raised by Ramaswamy.
9.  Feeling aggrieved by the order passed by the Tribunal  Ramaswamy  (Dead)
by Lrs. preferred a writ petition in the Karnataka  High  Court  being  W.P.
No. 30929 of 2001  (KLRA).   The  learned  Single  Judge  hearing  the  writ
petition dismissed it by a judgment and order dated 18th  June,  2009.   The
learned Single Judge relied primarily on the provisions of  sub-Section  (3)
of Section 48-A of the Act to the effect that the Tribunal was empowered  to
permit an amendment in the application filed in Form 7.  It  was  held  that
the Tribunal was not only entitled to permit the amendment but  in  view  of
sub-Section (6) it was empowered to  suo  motu  rectify  any  error  in  the
application.
10. The relevant extract of Section 48-A of the Act reads as follows:-
“48-A. Enquiry by the Tribunal, etc. –  (1)  Every  person  entitled  to  be
registered as an occupant under Section 45 may make an  application  to  the
Tribunal in this behalf.  Every such application shall, save as provided  in
this Act, be made before the expiry of a period of six months from the  date
of the commencement of Section 1 of the Karnataka Land  Reforms  (Amendment)
Act, 1978.
(2)xxx xxx xxx
(3) The form of the application, the form of  the  notices,  the  manner  of
publishing or serving the notices and all other matters connected  therewith
shall be such as  may  be  prescribed.   The  Tribunal  may  for  valid  and
sufficient reasons permit the tenant to amend the application.
(4)   xxx xxx xxx
(5)    xxx xxx xxx
(5-A)  xxx xxx xxx
(6)  The order of the Tribunal under this section shall  be  final  and  the
Tribunal shall send a copy of every order passed by it to the Tahsildar  and
the parties concerned:
Provided that the Tribunal may, on the application of any  of  the  parties,
for reasons to be recorded in writing, correct any clerical or  arithmetical
mistakes in any order passed by it:
Provided further that the Tribunal may on its own or on the  application  of
any of the parties, for reasons to  be  recorded  in  writing,  correct  the
extent of land in any order passed by it after  causing  actual  measurement
and after giving an opportunity of being heard to the concerned parties.
(7) xxx xxx xxx
(8)  xxx xxx xxx

11. Feeling aggrieved, Ramaswamy preferred  Writ  Appeal  No.  469  of  2010
(KLRA) before the Division Bench  of  the  Karnataka  High  Court.   By  the
impugned judgment and order dated 7th November, 2012  the  writ  appeal  was
allowed by the High Court. Feeling aggrieved, Narayanappa (now deceased  and
represented by his legal representatives) has preferred the present appeal.
12. In allowing the writ appeal, the High Court took into consideration  the
provisions of Section 48-A  of  the  Act  as  well  as  the  second  proviso
inserted in sub-Section (6) of Section 48-A  of  the  Act  which  came  into
force on 20th October, 1995 and which was  apparently  relied  upon  by  the
learned Single Judge without any specific reference to it.
13. Be that as it may, the High Court  considered  several  decisions  cited
before it and held that an  amendment  application  has  necessarily  to  be
filed before the Tribunal adjudicates on the application.  It was held  that
once the application in Form 7 is disposed of by the Tribunal, the  question
of its amendment would not arise since there was no application  before  the
Tribunal.  It was further held, on a reading of Section  48-A  of  the  Act,
that the Tribunal could rectify clerical or  arithmetical  mistakes  in  its
order but  that  thereafter  it  could  not  make  any  corrections  in  the
application in Form 7.
14. With reference to the various decisions cited before it, the High  Court
concluded that they relied  on  a  proposed  amendment  to  the  application
during the pendency of the proceedings before the  Tribunal.   As  such  the
cited  decisions  were  not  applicable  to   the   facts   of   the   case.
Consequently, the Division Bench of the High Court allowed the  writ  appeal
and set aside the order passed by the learned Single Judge as  well  as  the
order passed by the Land Reforms Tribunal.
15. Learned counsel for Narayanappa  was  not  able  to  cite  any  decision
before  us  to  the  effect  that  an  application  for  amendment  of   the
application in Form7 could be moved by a claimant after the disposal of  the
application by the Tribunal.   However,  reference  was  made  to  Hanumappa
(Dead) by Lrs. v. Seethabai & Ors.[1] wherein  an  amendment  in  the  order
passed by the Tribunal was permitted by this Court even though there  was  a
lapse of about 11 years in moving the application for amendment.
16. In that decision, instead of granting occupancy  rights  in  respect  of
Survey No. 45, the Tribunal had  granted  occupancy  rights  in  respect  of
Survey No. 54.  This Court held that this  was  an  obvious  clerical  error
that needed to be corrected.  Clearly, that decision has no  application  to
the facts of the present appeal.
17. Reference was also made by learned counsel for Narayanappa  to  Honnamma
& Ors.  v.  Nanjundaiah  &  Ors.[2]  to  contend  that  an  application  for
amendment of Form  7  was  permissible.   With  the  assistance  of  learned
counsel we have gone through the decision and find that  the  question  that
arose was whether the Tribunal could permit an amendment  of  Form  7  after
the  cut-off  date  of  30th  June,  1979  the  last  date  for  filing  the
application under Form 7.  This Court held that it was permissible to  amend
the application in Form 7 even after the cut-off date. The issue whether  an
amendment could be carried out in the application after the decision of  the
Tribunal was not under consideration  in  this  Court.  The  cited  decision
therefore does not render any assistance to Narayanappa.
18. Reference was also made to Syed Beary (Dead) By  Lrs.  v.  Dennis  Lewis
(Dead) by Lrs. & Ors.[3] where the same issue had arisen namely  whether  an
application for amendment of Form 7 could be entertained  after  30th  June,
1979.  This Court answered the  issue  in  the  affirmative  but  again  the
question whether an amendment could be made in the  application  in  Form  7
after  the  decision  of  the  Tribunal  was  not  the  subject  matter   of
discussion.
19. In our opinion, the Tribunal having adjudicated  upon  the  application,
it could only correct  clerical  or  arithmetical  errors  as  permitted  by
Section 48-A of the Act.  The amendment sought by  Narayanappa  was  not  in
the nature of a clerical or arithmetical error.   What  he  sought  was  not
only a change in the survey number but also a  change  in  the  village  and
also a change in the area of  the  land  for  which  occupancy  rights  were
claimed.  This was clearly beyond the ambit of a  clerical  or  arithmetical
error.  That apart, the order of the Tribunal passed  on  24th  April,  1981
had attained finality since Narayanappa did not  challenge  its  correctness
before any forum. Therefore, the proposed amendment  sought  by  Narayanappa
was not in the nature of an amendment to the original application in Form  7
but a fresh claim made by him for a different parcel of land after the  cut-
off date  of  30th  June,  1979.   In  other  words  Narayanappa  sought  to
circumvent the provisions of the Act by making a fresh claim after the  cut-
off date by styling it as an amendment to the original application  in  Form
7.  This was clearly impermissible and was an attempt to do so something  in
an indirect manner which could not have been done by him directly.
20. In view of the above, we find no reason to interfere with  the  judgment
and order passed by the Division Bench of the  High  Court  and  accordingly
dismiss the appeal.


                                        ……....………………….J

  (Madan B. Lokur)



                                                       ……….………………….J     New
Delhi;                                        (R.K. Agrawal)
August 8, 2016




-----------------------
[1]  Civil Appeal No.1737 of 1999 decided on 28th July, 2004.
[2]  (2008) 12 SCC 338
[3]  (2007) 15 SCC 629

whether the respondent/assessee is entitled to avail the benefit of Notification No. 21/2002-Cus dated 01.03.2002 read with Notification No. 66/2004-Cus dated 09.07.2004 for import of crude palm oil (non-edible grade) which is not used in the manufacture of Industrial Fatty Acid whereas the assessee is using the same for manufacturing the refined edible oil.= whether exemption from tax/duty of a particular notification is available to assessee or not, the same has to be examined in terms of the said notification i.e. whether the stipulations and conditions mentioned in the said notification are fulfilled by an assessee to claim the benefit of the notification. Notification No. 21/2002 dated 01.03.2002, as amended by Notification No. 66/2004 dated 09.07.2004 is a general exemption notification which enlist number of products that are given full or partial exemption from payment of custom duty or additional duty.=The precise description of the goods which qualify for exemption from payment of custom duty is as under: “(A) [All goods], other than edible grade, having Free Fatty Acid (FFA) 20 per cent or more and falling under heading 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514 or 1515, for the manufacture of [soaps, industrial fatty acids and fatty alcohol]. (B) [All goods], other than edible grade, having Free Fatty Acid (FFA) 20 per cent or more and falling under heading 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514 or 1515.” In order to qualify for exemption, the goods should meet the following criteria: (i) First requirement is that such goods should be other than edible grade which means this entry exempts non-edible goods. (ii) Second condition is that such goods should be having Free Fatty Acid 20% or more falling under chapter heading mentioned therein which includes 1511. (iii) Such goods should be used for the manufacture of soaps, industrial fatty acids and fatty alcohol. (iv) This entry further stipulates that it has to satisfy Condition No. 5 mentioned in Annexure to the said notification. Condition No. 5 reads as under: “5. If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.” = In the instant case, crude palm oil which was imported was used for making edible products like refined oil/Vanaspati. In the process of said manufacture, 25% of fatty (palm) was produced and 75% was oil which was edible. Thus, when the main manufacturing activity relates to edible product which is 75%. If in the process 25% of fatty (palm) emerges as a by-product it cannot be said that first requirement of exemption notification is satisfied in the instant case. Even if Industrial Fatty Acid is to be treated as separate manufacturing activity and it is non- edible, the same is only to the extent of 25%. That, according to us, would not satisfy the requirement of the exemption notification in question. ; Whether notification is time barred ? = At the outset, we have to keep in mind Rule 8 of the Rules which does not prescribe any period of limitation. No doubt, in such an eventuality, as held by this Court in Bhatinda District Co-op Milk P. Union Ltd. (supra), the show cause notice has to be issued within a reasonable period. However, for this purpose, provisions of Section 28 cannot be resorted to to state that it has to be within a period of 6 months. The question has to be decided keeping in view the facts of each case and to examine whether the period in question is reasonable or not.- it is only through intelligence collected by DRI, Gandhidharn Regional Unit that it came to be revealed that the assessee had imported crude palm oil but it had no facility in manufacturing soap/Industrial Fatty Acid and was using the said imported crude palm oil for making edible products like refined oil/Vanaspati. At the time of import, the importer only gives declaration. It is the actual use, which event takes place much after the import, from where it can be gathered as to where the import is made for the purpose for which it was done. As soon as the aforesaid information was gathered by DRI, show cause notice was issued. Therefore, we are of the opinion that show cause notice had been issued within a reasonable period and it cannot be treated as time barred.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 3302 OF 2008


|COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD  |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|M/S GUJARAT AMBUJA EXPORTS LIMITED         |.....RESPONDENT(S)           |

                               J U D G M E N T


A.K. SIKRI, J.

                 The issue involved in the present  appeal  is  whether  the
respondent/assessee is entitled to avail the  benefit  of  Notification  No.
21/2002-Cus dated 01.03.2002 read with Notification  No.  66/2004-Cus  dated
09.07.2004 for import of crude palm oil  (non-edible  grade)  which  is  not
used in the manufacture of Industrial Fatty Acid  whereas  the  assessee  is
using the same for manufacturing the refined edible oil.

This issue has arisen in the following factual background:
             The  assessee  is  the  manufacturer  of  refined  edible  oil,
Vanaspati, cotton yarn,  starch,  cattle  feed,  wheat  floor  etc.   It  is
registered with Kadi Division of the Central Excise.  From April, 2002,  the
assessee engaged itself in refining of  various  edible  oils.   During  the
course of refining, it used to get Palm  Fatty  Acid  Distillate  as  a  by-
product which was classified under Chapter Heading No. 38231900 and  cleared
it duty free claiming the  benefit  of  Notification  No.  1175/75-CE  dated
30.04.1975.  During  the  period  September,  2003  to  January,  2004,  the
assessee imported 1990.031 metric tons of crude  palm  oil.   At  that  time
crude palm oil having  Free  Fatty  Acid  (FFA)  20  percent,  or  more  was
eligible for concessional rate of duty under  Notification  No.  21/2002-Cus
dated 01.03.2002.  No condition was attached to avail that exemption.

We are not concerned with this import in the present appeal.  Thereafter  on
16.01.2004, Notification No. 21/2002-Cus dated  01.03.2002  was  amended  by
Notification No. 20/2004-Cus dated 16.01.2004 wherein  the  words  “for  the
manufacture of soap” were inserted in the original notification.

The assessee imported 8435.816 metric tons of  crude  palm  oil  (industrial
grade) valued at Rs.17,15,88,508/-  and  cleared  the  same  on  payment  of
customs duty of Rs. 3,47,95,453/- (@20% basic +  2%  education  cess)  under
Notification No. 21/2002-Cus dated 01.03.2002  read  with  Notification  No.
66/2004-Cus dated 09.07.2004 during the  period  12.09.2004  to  12.08.2005.
As per the said notification, crude oil (non-edible oil) could  be  imported
by paying customs duty @20% only when the said crude oil is to  be  used  in
the manufacture of soap or Industrial  Fatty  Acid.   The  assessee  in  the
present case have been manufacturing refined edible  oil  out  of  the  said
crude oil.  The assessee did not have facilities for saponification and  fat
splitting  in  their  factory.   The  manufacturing  process   is   one   of
distillation.  As a result of this process, a  product  called  “Palm  Fatty
Acid  Distillate”  emerges.   The  assessee  after  the  processing  of  the
imported  8435.816  metric  tons  of  crude  oil  (non-edible   grade)   has
manufactured 2219.895 metric tons of palm fatty acid distillate  (industrial
grade) i.e. approximately 25% and approximately 70% as refined palm oil.

Having regard to the aforesaid facts, the appellant/Revenue was of the  view
that the assessee was not  entitled  to  the  benefit  of  Notification  No.
21/2002 read with Notification No. 66/2004.  The  Department,  thus,  issued
show cause notice to the assessee demanding custom duty in the  sum  of  Rs.
7,89,89,868/- under para 8 of Customs (Import of goods at concessional  rate
of duty  for  manufacture  of  excisable  goods)  Rules,  1996  (hereinafter
referred to as the 'Rules') as well as interest under Section  28AB  of  the
Customs Act, 1962 (hereinafter referred to  as  the  'Act').   In  the  show
cause notice the  Department  also  proposed  imposition  of  penalty  under
Section 112/114A of the Act.

The case set up by the Department in the said  show  cause  notice  was  two
fold, i.e.
(i)   the Palm Fatty Acid Distillate (PFAD)  manufactured  by  the  assessee
was not Industrial Fatty Acid; and
(ii)  even if Palm Fatty Acid was to be taken as Industrial Fatty Acid,  the
benefit of the aforesaid two notifications  was  not  available  to  such  a
product as the assessee is using the same for  the  manufacture  of  refined
edible oil and Vanaspati.

In order to support the contention that PFAD was not Industrial Fatty  Acid,
the Department relied upon the following material:
(i)   The Department has  relied  upon  the  test  report  of  the  Chemical
Examiner, Visakhapatnam Dr. T.A. Sreenivasa Rao, which is reproduced below:
                 “Report : The sample is in the form  of  pale  yellow  soft
solid mass.  It is a by product of physical refining of  palm  oil.   It  is
Palm Fatty Acid Distillate.”
                 For arriving at the aforesaid opinion, Dr.  Rao  had  given
detailed  technical  report,  relying,  inter  alia,  upon   the   available
literature and the test conducted on the said product.
(ii)   A  sample  was  also  sent   to   Shri   Narendra   Kumar,   Chemical
Examiner, Customs House Laboratory, Kandla who has given his test report  as
under:
            “The sample is in the form of pale cream soft mass.  It has  the
characteristics of palm fatty acid having FFA (as palmitic acid) = 87.1%  by
wt & Acid value 190.87”
(iii) The Department also collected the evidence in the form  of  statements
from various customers of the assessee including M/s Godrej Industries  Ltd.
and M/s Aquagel Chemicals Pvt. Ltd.  These customers had  deposed  that  the
PFAD bought  by  them  from  M/s  GAEL  had  to  undergo  extensive  further
processing before  it  was  converted  into  fatty  acid.   Shri  Murali  S.
Mukerjee, DGM, M/s Godrej Industries  Ltd.  deposed  that  Industrial  Fatty
Acids were used in soaps  and  industrial  surfactants,  personal  care  and
cosmetics,  rubber  and  tyres,  plastic,  coating   and   links,   textiles
auxiliaries, fabric care and lubricants and greases  etc.   On  being  asked
about the process involved in converting Palm Fatty Acid  Distillate  (PFAD)
to stearic acid, he stated that  firstly  the  Palm  Fatty  Acid  Distillate
(PFAD) was fed to oil pre-treatment plant for  improvement  on  clarity  and
for removal of sediments and particles if any; the  treated  PFAD  was  then
fed to fat splitting plant; in fat splitting plant,  unconverted  glycerides
present in PFAD were converted into free fatty acids (crude fatty acid)  and
glycerine at a designed pressure; in the second step, crude fatty  acid  was
hydrogenated with hydrogen in presence of nickel catalyst; in  hydrogenation
reaction all the double and triple bonds were converted  into  single  bond;
the hydrogen required for  hydrogenation  reaction  was  produced  by  steam
reforming of natural gas; after hydrogenation reaction catalyst was  removed
by filtration in leaft type filter and  colour  was  improved  by  bleaching
with the activated  carbon  and  diatomite  earth  in  a  bleacher,  finally
filtered and bleached hard fatty acid was  homogenized  and  flaked  as  un-
distilled stearic acid; in case  of  distilled  stearic  acid,  hydrogenated
fatty acid was distilled in distillation plant and distillate  produced  was
homogenized and flaked as distilled stearic acid; PFAD  could  be  used  for
the manufacturing of different types of fatty acid (stearic acid  and  fatty
alcohol); PFAD could also be used for the manufacture of soaps.
            To the same effect was the  statement  of  Shri  Mallikarjun  G.
Rane, Production Manager of M/s Aquagel Chemicals Pvt. Ltd.

The assessee submitted its reply/defence, refuting  the  averments  made  in
the show cause notice.  It relied upon the following HSN  Explanatory  Notes
to argue that the product was in fact Industrial Fatty Acid.
            “28.23 – INDUSTRIAL MONOCARBOXYLIC  FATTY  ACIDS;  ACID  0  FROM
REFINING; INDUSTRIAL FATTY ALCOHOLS.
                 Industrial  monocarboxylic  fatty  acids;  acid  oils  from
refining... 3823.19-Other....”
            It was also submitted that there was no allegation in  the  show
cause notice that the product PFAD is not covered by heading  28.23  of  the
HSN which lists Industrial Fatty  Acids  and,  therefore,  PFAD  had  to  be
considered as Industrial Fatty Acids.

The Adjudicating Authority considered the aforesaid  respective  contentions
of the Revenue as well as the assessee.   He,  however,  brushed  aside  the
contention  of  the  assessee  based  on  HSN  Explanatory  Notes  with  the
observations that though it was a settled principle that in  the  matter  of
tariff classification, HSN is a  reliable  guide  and  is  generally  to  be
followed but when it comes to the application of a notification, the HSN  is
to be consulted only  for  guides.   In  the  opinion  of  the  Adjudicating
Authority,  since  the  assessee  was  claiming  the  benefit  of  exemption
notification it was to be examined as to whether  assessee  was  covered  by
the said Notification No. 20/2002.  According to him, in order to  ascertain
the meaning of the term “Industrial Fatty Acid”, the proper test  was  trade
parlance and the normal meaning which a knowledgeable  person  would  attach
to the term and not necessarily what is laid down in the  HSN.   Thereafter,
the Adjudicating Authority discussed the statements of  the  representatives
of the two customers as mentioned above,  on  the  basis  of  which  it  was
concluded that in technical and trade parlance, it cannot be said that  PFAD
is the same as Palm Fatty Acid and, therefore, it could not be called as  an
Industrial Fatty Acid.  The Adjudicating Authority further  held  that  this
was supported even by HSN Explanatory Notes 28.23  wherein  it  states  that
“Industrial monocarboxylic fatty acids are  generally  manufactured  by  the
saponification or hydrolysis of natural fats or oils”.

Thereafter, the Adjudicating Authority discussed the  second  aspect  raised
in the show cause notice  on  the  premise  and  presumption  that  PFAD  is
Industrial Fatty Acid.  On facts, it was held that crude palm  oil  imported
by the assessee was not used for the manufacture of Industrial  Fatty  Acid,
as the admitted fact was that as a result of the  manufacturing  process  of
the assessee, approximately 75% of the product is  refined  edible  oil  and
only 25% is PFAD (by quantity).  View taken by  the  Adjudicating  Authority
was that when the notification lays down the condition that the  crude  palm
oil must be used by Industrial Fatty Acid, it means that  its  use  must  be
substantive and not nominal.  In other words, at least the  crude  palm  oil
should be primarily used for  the  manufacture  of  Industrial  Fatty  Acid,
which was admittedly not the case.

In nutshell, on the aforesaid basis, Adjudicating  Authority  confirmed  the
demand raised in the show cause notice by holding that the assessee did  not
fulfill the conditions contained in the exemption notification.

The assessee preferred an appeal  against  the  order  of  the  Adjudicating
Authority.  Said appeal has been decided by the Custom  Excise  and  Service
Tax Appellate Tribunal (hereinafter referred  to  as  the  'Tribunal')  vide
impugned judgment.  A reading of the judgment of the Tribunal would  reflect
that it has  gone  by  the  HSN  Explanatory  Notes  which  stipulates  that
Industrial monocarboxylic fatty acids are 'generally'  manufactured  by  the
saponification or hydrolysis of natural fats or oils.  Picking up  the  word
'generally' from the  said  language  in  HSN,  the  Tribunal  came  to  the
conclusion that process of saponification or hydrolysis of natural  fats  or
oils may be a process  generally  employed  but  that  was  not  the  'only'
process to obtain  Industrial  Fatty  Acid  as  the  expression  'generally'
cannot be equated with  'only'  or  'specifically'  or  'exclusively'.   The
Tribunal held that as per HSN Explanatory Notes, the fatty acids  distillate
are also covered  by  the  said  chapter  and,  therefore,  benefit  of  the
notification was available to the assessee.
            Insofar as second issue raised by the Revenue in the show  cause
notice is concerned, the Tribunal again  differed  with  the  order  of  the
Commissioner/Adjudicating  Authority   on   the   ground   that   when   the
notification stipulates that imported  crude  palm  oil  must  be  used  for
Industrial Fatty Acid it does not mean that yield of Industrial  Fatty  Acid
should be to the extent of 100% and even when it was to the  extent  of  25%
that would suffice as  the  notification  nowhere  mentions  any  percentage
yield of Industrial Fatty Acid.
            On the basis  of  the  aforesaid  reasoning,  the  Tribunal  has
allowed the appeal of the assessee and set aside the  order  passed  by  the
Commissioner.

Feeling aggrieved by that order, present appeal is filed by the  Department.
 Mr. K. Radhakrishna, learned senior counsel appearing for  the  Department,
heavily relied upon reasoning adopted by the Commissioner on  the  basis  of
which it was  held  that  assessee  was  not  entitled  to  the  benefit  of
exemption.  Neat submission made by Mr. Radhakrishna was that  there  was  a
patent error committed by the  Tribunal  in  relying  upon  HSN  Explanatory
Notes, little realising that the matter did not  pertain  to  classification
but exemption of a notification and in order to qualify for  exemption  from
payment of the import duty under the said notification,  the  focus  of  the
Tribunal should have been as to  whether  the  assessee  has  fulfilled  the
conditions  of  the  said  notification.   He   submitted   that   exemption
notifications were to be construed very strictly and in  the  instant  case,
the assessee  has  failed  to  fulfill  the  conditions  laid  down  in  the
notifications.

Mr. Lakshmikumaran, learned counsel appearing for  the  respondent/assessee,
on the other hand, submitted that the reliance placed  by  the  Tribunal  on
HSN  Explanatory  Notes  was  perfectly  justified  and  stressed  upon  the
reasoning that was adopted by the Tribunal  in  this  behalf.   His  further
submission was that there are various methods/processes that may be used  to
produce Industrial  Fatty  Acids  like  hydrolysis,  saponification,  vacuum
distillation, splitting, etc.  Any of such  processes  may  be  used  by  an
importer intending to avail the benefit under Sr.  No.  30  of  Notification
No. 21/2002-Cus.  The description for Sr. No. 30 during the relevant  period
did not specify any specific process to be followed by the importers,  which
implies that the  importers  were  free  to  choose  any  of  the  different
processes available.  In this regard, amendment  made  to  Notification  No.
21/2002-Cus  vide  Notification  No.   11/2006-Cus   dated   01.03.2006   is
important.  For the first time, an  entry  (S.  No.  30(A))  was  introduced
which also mentioned that the importer must have the facility for  splitting
of oils.  He argued that it was, in  a  sense,  built-in  condition  of  the
process (splitting of oil) that must be  employed  to  obtain  fatty  acids.
However, even then clause B of S. No. 30 of the  Notification  continued  to
exist as such.  In other words, after  the  amendment,  the  requirement  of
splitting of oils, does not  exist  in  Clause  B,  which  is  identical  to
Clause A prior to amendment covering the  respondents.   According  to  him,
the 2006 amendment makes it clear that prior to such  amendment  clause  (a)
of Sr. No. 30 covered all the process that are possible for  manufacture  of
Industrial Fatty Acids.
            On the second issue, Mr.  Lakshmikumaran  again  maintained  the
stand of the assessee which was taken before the Authorities below,  namely,
it is not possible to obtain 100% PFAD by  distilling  the  crude  palm  oil
(non-edible grade) and,  therefore,  due  to  technological  necessity,  the
assessee could not  be  denied  the  benefit  of  exemption.   It  was  also
submitted that merely because the proportion of PFAD is 25%, would not  mean
that PFAD is a by-product.  He submitted that the assessee  was  engaged  in
manufacture  of  PFAD  and  refined  palm  oil.   PFAD  is  sold   to   soap
manufacturers and refined palm oil is used to manufacture Vanaspati.

In addition, the learned counsel also submitted that in any case the  entire
demand is time barred inasmuch as Rule 8 provides for recovery  of  duty  in
cases where the goods imported  are  not  used  for  intended  purpose.   He
accepted that Rule 8 does not mention any specific time within which a  show
cause notice must be issued.  However, his submission was  that  this  Court
in the case of State of Punjab v. Bhatinda  District  Co-op  Milk  P.  Union
Ltd.[1] has held that where no period of  limitation  has  been  prescribed,
statutory authority must  exercise  its  jurisdiction  within  a  reasonable
period. Referring to Section 28 of the Act, he  submitted  that  since  that
Section prescribes 6 months  for  cases  where  there  is  no  collusion  or
willful mis-statement or suppression of facts, period of 6 months should  be
treated as reasonable period of limitation.  On that basis, the  show  cause
notice  which  was  issued  on  24.03.2006  for  the  period  12.09.2004  to
12.08.2005 was time barred, submitted the learned counsel.

We have considered the respective submissions of  learned  counsel  for  the
parties.

At the outset, we would like to  remark  that  the  learned  senior  counsel
appearing for the Revenue is right in his submission that  present  case  is
not a case for classification of goods but relates to the  admissibility  of
exemption notification.  When the question arises as  to  whether  exemption
from tax/duty of a particular notification is available to assessee or  not,
the same has to be examined in terms of the said notification  i.e.  whether
the stipulations and conditions  mentioned  in  the  said  notification  are
fulfilled  by  an  assessee  to  claim  the  benefit  of  the  notification.
Notification No. 21/2002 dated 01.03.2002, as amended  by  Notification  No.
66/2004 dated 09.07.2004 is a general exemption  notification  which  enlist
number of products that are given full or partial exemption from payment  of
custom duty or additional duty.  At Sr. No.  29  of  this  notification  are
edible oils falling under certain headings  of  Chapter  15.   In  contrast,
goods mentioned at Sr. No. 30 (with which we are concerned)  talks  of  non-
edible goods having a Free Fatty  Acid.   The  precise  description  of  the
goods which qualify for exemption from payment of custom duty is as under:
“(A) [All goods], other than edible grade, having Free Fatty Acid  (FFA)  20
per cent or more and falling under heading 1507,  1508,  1509,  1510,  1511,
1512, 1513, 1514 or 1515, for the manufacture of  [soaps,  industrial  fatty
acids and fatty alcohol].

(B)  [All goods], other than edible grade, having Free Fatty Acid  (FFA)  20
per cent or more and falling under heading 1507,  1508,  1509,  1510,  1511,
1512, 1513, 1514 or 1515.”


In order to qualify for exemption,  the  goods  should  meet  the  following
criteria:
(i)   First requirement is that such  goods  should  be  other  than  edible
grade which means this entry exempts non-edible goods.
(ii)  Second condition is that such goods should be having Free  Fatty  Acid
20% or more falling under chapter heading mentioned therein  which  includes
1511.
(iii) Such goods should be used for the  manufacture  of  soaps,  industrial
fatty acids and fatty alcohol.
(iv)  This entry further stipulates that it has to satisfy Condition  No.  5
mentioned in Annexure to the said notification.  Condition No.  5  reads  as
under:
“5.  If the importer follows the procedure set out in  the  Customs  (Import
of Goods at Concessional Rate of Duty for Manufacture  of  Excisable  Goods)
Rules, 1996.”

In the instant case, crude palm oil which was imported was used  for  making
edible  products  like  refined  oil/Vanaspati.   In  the  process  of  said
manufacture, 25% of fatty (palm) was produced and  75%  was  oil  which  was
edible.  Thus, when  the  main  manufacturing  activity  relates  to  edible
product which is 75%.  If in the process 25% of fatty (palm)  emerges  as  a
by-product  it  cannot  be  said  that  first   requirement   of   exemption
notification is satisfied in the instant case.   Even  if  Industrial  Fatty
Acid is to be treated as separate manufacturing  activity  and  it  is  non-
edible, the same is only to the extent  of  25%.   That,  according  to  us,
would  not  satisfy  the  requirement  of  the  exemption  notification   in
question.

We are in agreement with the reasoning adopted by the Commissioner that  HSN
Explanatory  Notes,  in  case  where  exemption  notification  was   to   be
construed, would only serve as guide and is not used to interpret the  same.
 Even here, we find that the HSN  in  question  categorically  mentions  the
product which are included by the said  heading  and  specifically  mentions
'fatty acid distillate' as under:
“Fatty acid  distillate,  obtained  from  fats  and  oils  which  have  been
subjected to vacuum distillation in the presence  of  steam  as  part  of  a
refining process.  Fatty acid distillate is characterised  by  a  high  free
fatty acid (ffa) content.”

It,  thus,  categorically  stipulates  that   Fatty   Acid   Distillate   is
characterised by high free fatty acid which  cannot  be  25%.   So  the  by-
product is rightly discarded by the Commissioner as not  coming  within  the
nomenclature of PFAD.  Contrary reasons which are  given  by  the  Tribunal,
thus, do not appeal to this Court.  In this view of the matter, reliance  on
subsequent notification of 2006 is of no relevance.

Insofar as contention of the assessee  that  the  impugned  notification  is
time barred, it is difficult to accept the same in the facts of the  present
case.  At the outset, we have to keep in mind Rule  8  of  the  Rules  which
does not  prescribe  any  period  of  limitation.   No  doubt,  in  such  an
eventuality, as held by this Court in Bhatinda District Co-op Milk P.  Union
Ltd. (supra), the show cause notice has to be  issued  within  a  reasonable
period. However, for this  purpose,  provisions  of  Section  28  cannot  be
resorted to to state that it has to be within a  period  of  6  months.  The
question has to be decided keeping in view the facts of  each  case  and  to
examine whether the period  in  question  is  reasonable  or  not.   In  the
instant case, we find that it is  only  through  intelligence  collected  by
DRI, Gandhidharn Regional  Unit  that  it  came  to  be  revealed  that  the
assessee  had  imported  crude  palm  oil  but  it  had   no   facility   in
manufacturing soap/Industrial Fatty Acid and was  using  the  said  imported
crude palm oil for making edible products like  refined  oil/Vanaspati.   At
the time of import, the importer only gives declaration.  It is  the  actual
use, which event takes place much after the import, from  where  it  can  be
gathered as to where the import is made for the purpose  for  which  it  was
done.  As soon as the aforesaid information was gathered by DRI, show  cause
notice was issued.  Therefore, we are of the opinion that show cause  notice
had been issued within a reasonable period and it cannot be treated as  time
barred.

For the foregoing reasons, we allow this appeal with  cost  thereby  setting
aside the order of the Tribunal  and  restoring  the  order  passed  by  the
Commissioner/Adjudicating Authority.


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



                             .............................................J.
                                                               (N.V. RAMANA)

NEW DELHI;
AUGUST  08, 2016.
-----------------------
[1]   2007 (217) ELT 325 (SC)

whether the claim of the respondents, a group of twenty one employees of PEPSU Roadways that in spite of transfer of that department to the Corporation they continue to be actually Government servants and therefore entitled to retiral benefits instead of CPF is acceptable or not. = we are constrained to hold that the respondents had accepted to continue as employees of Corporation pursuant to order of merger/transfer of PEPSU Roadways with effect from 16.10.1956 and on completing their service under the Corporation and reaching the age of retirement they were entitled to receive only the benefits of CPF and gratuity as admissible to them under then prevailing regulations of the Corporation. Since they accepted those retiral benefits there is no relationship left between the Corporation and the respondents and in such a situation further claim against the Corporation that it should treat the respondents to be Government servants and adjust their retiral benefits accordingly was totally untenable and wrongly allowed by the High Court. The impugned judgment of the High Court granting relief to the respondents is therefore set aside.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 4703 of 2009

PEPSU Road Transport Corporation, Patiala          …..Appellants
Through its Managing Director & Anr.

      Versus

S. K. Sharma & Ors.                                …..Respondents




                               J U D G M E N T


SHIVA KIRTI SINGH, J.

This  appeal  by  special  leave  assails  the  judgment  and  order   dated
24.04.2006 passed by a Division Bench of High Court of  Punjab  and  Haryana
dismissing LPA No. 700 of 2002 preferred by  the  appellants  and  affirming
the judgment of learned Single Judge dated 11.01.2002 whereby Writ  Petition
bearing CWP No. 11908 of 1992 preferred  by  some  of  the  respondents  was
allowed. Some had preferred to file  suits  and  Civil  Appeals  which  were
dismissed.  Their Regular Second Appeal No. 430 of 1995 was tagged with  the
above writ petition and was allowed by the  same  common  judgment  enabling
all the 21 respondents to refund a  part  of  CPF  (Govt.  Contribution)  or
agree for adjustment, to obtain pensionary benefits.
The respondents filed the writ petition in  1992  claiming  that  they  were
appointed originally in a department of PEPSU described as  PEPSU  Roadways,
between January 1955 and September 1956. It is not in dispute  that  in  the
PEPSU Roadways the respondents’ appointment was only  on   temporary  basis.
PEPSU Roadways lost its utility due to  creation  of  PEPSU  Road  Transport
Corporation  (hereinafter  referred  to  as  the  ‘Corporation’).  Copy   of
notification dated 07.01.1956 available on  record  shows  that  Corporation
was created by this notification under the provisions of the Road  Transport
Corporation Act, 1950  enforced  with  effect  from  10.08.1954.  The  State
Government through the Chief Secretary  issued  a  letter  dated  16.10.1956
informing the General Manager, PEPSU Roadways, Patiala  (with  reference  to
PEPSU Roadways’  communication  dated  14.10.1956)  that  His  Highness  the
Rajpramukh had ordered the transfer of PEPSU  Roadways  to  the  PEPSU  Road
Transport Corporation (with effect  from  15.10.1956  forenoon)  on  various
terms and conditions in respect to evaluation of the  assets  of  the  PEPSU
Roadways as well as sharing the burden for payment of the employees  of  the
Corporation. The letter indicates that  the  Corporation  was  requested  to
draw up the agreement required by clause (h) of sub-section (2)  of  Section
19 of the Road Transport Corporation Act, 1950 and forward the same  to  the
Government  for  approval  and  signatures.  On  account   of   the   States
Reorganization Act the merger of State of PEPSU with  the  State  of  Punjab
became effective from 01.11.1956. Through an Order no. 61  dated  30.11.1956
the Corporation admitted  that  PEPSU  Roadways  stood  taken  over  by  the
Corporation from 16.10.1956 (before  noon),  so  the  services  of  all  the
temporary employees stood transferred to the Corporation  with  effect  from
16.10.1956 on the prevailing terms and conditions till the approval  of  new
terms and conditions by the Corporation. The  respondents  never  challenged
this  declaration,  got  promotions  etc.  and  continued   to   serve   the
Corporation till they all retired between  1989  and  1991.  It  is  not  in
dispute that PEPSU Road Transport Corporation Regulations which  was  framed
in 1957 provided  for  Contributory  Provident  Fund  (CPF).  There  was  no
provision  for  grant  of  pension.   Much  after  the  retirement  of   the
respondents, only with effect from 15.06.1992 the  Corporation  framed  PRTC
Employees Pension/Gratuity and  General  Provident  Fund  Regulations,  1992
(hereinafter described as ‘Regulations of 1992’). Under  these  Regulations,
for the first time pension was introduced in the Corporation.
Soon after the enforcement of Regulations of 1992 the  respondents  who  had
already received their retiral benefits under  the  1957  Regulations  filed
the writ petition at hand. Originally the grievance of  the  respondents  in
the writ petition was as to why the Regulations of 1992 have not  been  made
retrospective but through an  amendment  in  1998,  the  writ  petition  was
substantially amended so as to claim that they continued to be employees  of
the State  in  the  department  of  PEPSU  Roadways  till  PEPSU  State  was
reorganized and from 01.11.1956, the  date  of  reorganization  they  became
employees of  State  of  Punjab  with  right  to  pension  as  available  to
Government servants. The Single Judge  allowed  the  writ  petition  on  the
premise that the respondents had simply been  transferred  from  the  parent
department to serve in the Corporation and therefore they  continued  to  be
Government servants because there was no order passed for  their  absorption
in the Corporation. The Letters Patent Appeal preferred  by  the  appellants
was dismissed by the judgment and order  dated  24.04.2006  which  is  under
challenge in this appeal.
It is  significant  to  note  that  the  letter  of  Chief  Secretary  dated
16.10.1956 informing the General Manager, PEPSU  Roadways  of   Government’s
decision on the subject of transfer of PEPSU  Roadways  to  the  Corporation
was not placed before the High Court by the  writ  petitioners  although  it
finds a specific mention in Order no. 61  dated  30.11.1956  passed  by  the
General  Manager,  PEPSU  Road  Transport  Corporation.  Hence  this  Court,
apparently in the larger interest of  justice,  by  order  dated  20.08.2015
permitted the appellants to place on record the consent of  the  respondents
and necessary documents to show that the respondents accepted transfer  from
PEPSU Roadways to the  Corporation.  The  additional  fresh  documents  were
filed after service upon the respondents who were granted  accommodation  on
that ground on 24.11.2015. The  additional  documents  were  filed  with  an
affidavit on behalf of appellants  and   include  a  copy  of  letter  dated
16.10.1956. The  respondents  have  not  objected  to  the  correctness  and
authenticity of the additional documents  and  hence  those  documents  have
been taken on record and used by learned senior counsel for  the  appellants
in support of his contentions.
On behalf of the appellants learned senior counsel Mr. Rakesh Dwivedi  first
took us through the letter dated 16.10.1956 and also  the  subsequent  order
dated 30.11.1956.  He  showed  by  way  of  illustration  that  one  of  the
respondents Mr. O.P. Trehan through letter dated  01.03.1965  had  opted  to
serve the Corporation. He also placed reliance on order dated 02.06.1986  of
the Corporation by which Mr. S.K. Sharma, another  respondent  was  promoted
as Sr. Depot Manager which he accepted. That order clearly  stipulated  that
he will be governed by the rules in force and those  that  may  subsequently
be framed for the officers of the Corporation. Before advancing  submissions
in respect of issues of law, Mr. Dwivedi  emphasised  that  being  temporary
employees of PEPSU Roadways till  15.10.1956,  the  respondents  under  then
prevailing service rules of  the  State  Government  were  not  entitled  to
pension as temporary  employees   even  till  their  department  i.e,  PEPSU
Roadways was merged with the Corporation   by  the  decision  of  the  State
Government.  Therefore, it is contended that  they  have  not  suffered  any
adverse consequences on account of  merger;  rather  they  became  permanent
employees of the Corporation, obtained promotions and on retirement  availed
all the lawfully  admissible  benefits  of  CPF  and  gratuity  without  any
protest and demur.
On behalf of appellants Mr. Dwivedi has advanced the following submissions:
 The relevant Department, PEPSU Roadways itself ceased to  exist  and  be  a
Department and was merged with the Corporation  totally  and  completely  by
16.10.1956. The Department merged along with the posts, assets,  liabilities
and the respondent employees. There was no  protest  or  challenge  to  such
merger by way of transfer of the entire Department to the Corporation.
 The word “transfer” is not used in the Government’s decision  evidenced  by
letter dated 16.10.1956 in the narrow sense of  “transfer  and  posting”  to
another post or place. Rather, it connotes transfer as merger of the  entire
Department with assets, liabilities, posts  and  employees  including  their
service and hence there was no occasion or need for any order of  absorption
in respect of the respondents.
 Since the transfer/merger of the Department was complete  much  before  the
date 01.11.1956 when PEPSU State merged with the State of Punjab  under  the
States Reorganization Act, the  respondents  cannot  claim  to  have  become
employees  of  State  of  Punjab  by  virtue  of  Section  115   of   States
Reorganization Act. This provision  could  have  helped  them  only  if  the
Department-PEPSU Roadways could have existed till 01.11.1956 or if they  had
been simply deputed  to  work  in  the  Corporation  under  usual  terms  of
deputation while retaining their lien on posts  available  under  the  State
Government.
Learned senior counsel for the  appellants  elaborated  his  submissions  by
contending that the High Court erred in relying  upon  various  sub-sections
and provisos to Section 115 of the States Reorganization Act and such  error
was on account of failure to appreciate that the respondents ceased to  have
for them any post in the Government due to complete transfer/merger  of  the
PEPSU Roadways with the Corporation much  before  01.11.1956.  It  was  also
contended that the  High  Court  failed  to  appreciate  that  as  temporary
employees with very little service to their  credit,  the  respondents  were
not put to any disadvantage on  account  of  transfer/merger  because  being
temporary employees in 1955  and  1956,  they  were  then  not  entitled  to
pension  under  the   PEPSU   Services   Regulations   governing   pensions,
particularly sub-rule (a) of Rule 1.2 in Chapter 1  which  contains  general
rules relating to pensions for  superior  and  inferior  service.  The  rule
reads thus:
“Cases in which claims to pension are inadmissible
1.2         In the following cases no claim to pension is admitted:-

(a)   When a Government servant is holding an  appointment  of  a  temporary
nature or is paid for definite work done for the  Government  without  being
permanently employed.”

Lastly, it was contended on behalf of appellants that the High Court  should
not have entertained the  writ  petition  in  1992  or  allowed  substantial
amendments in 1998 to permit claims made belatedly after decades  and  after
superannuation from the service of the Corporation. Such claims should  have
been rejected on the ground of delay. In support of this plea  reliance  was
placed upon judgment in  the  case  of  PEPSU  Road  Transport  Corporation,
Patiala v. Mangal Singh and Ors.[1]   In  this  case  the  respondents  were
still in service as the employees of  the  appellant  Corporation  when  the
Regulations of 1992 introduced a pension scheme but they  did  not  exercise
option for pension within the stipulated time. Moreover, they  also  availed
of retiral benefits arising out of CPF and  gratuity  without  any  protest.
This Court held that the respondents on account of failure  on  their  part,
could not claim benefit under the pension scheme.  Particular  reliance  was
placed upon the following observations at the end of paragraph 35;
“…..On the receipt of CPF amount,  the  relationship  between  employee  and
employer ceases  to  exist  without  leaving  any  further  legal  right  or
obligation qua each other.”

      Since most of the respondents in that  case  also  had  retired  after
serving for several years since the enforcement of Regulations of  1992  and
had advanced claim for pension after accepting CPF etc.,  in  para  52  this
Court counted the delay of  about  eight  years  from  the  introduction  of
pension scheme in 1992 and held such delay was unreasonable. On  that  basis
it has been urged on behalf of appellants that  through  amendment  made  in
1998 the respondents gave up their claim for pension under  the  Regulations
of 1992 and instead claimed  pensionary  rights  by  indirectly  mounting  a
challenge to the decision of the State Government evident from letter  dated
16.10.1956, merging PEPSU Roadways with  the  Corporation.  Their  claim  of
being in the employment of State and to have suffered the effect  of  States
Reorganization Act and merger of PEPSU State with the  State  of  Punjab  on
01.11.1956 was clearly a claim made after unusual delay of  several  decades
and the High Court should not have condoned such delay.
In reply, Mr. S.K. Sharma  learned  counsel  for  the  respondents  advanced
arguments in support of the impugned judgment. As per his submissions,  even
after the transfer of Roadways Department  to  the  Corporation,  there  was
legal necessity of issuing formal orders showing absorption  of  respondents
as employees of Corporation under a valid resolution of the Corporation.  He
relied upon  findings  of  the  High  Court  that  there  was  no  order  or
resolution for such  absorption.  On  behalf  of  respondents  reliance  was
placed upon judgment in the case of  Vice  Chancellor,  Utkal  University  &
Ors. v. S.K. Ghosh & Ors.[2], to support the proposition  that  a  corporate
body like University acts through formal resolution arrived at in  a  proper
manner by  the  competent  body.  The  facts  of  this  case  were  entirely
different.  The  appellant  before  this  Court  was  Vice-Chancellor  of  a
University who was aggrieved by the High  Court  judgment  interfering  with
the cancellation of an examination through  resolutions  of  the  University
Syndicate. The High Court invalidated the  resolution  for  want  of  proper
notice vide agenda for the meeting as well  as  lack  of  justification  for
cancellation of the examination. This Court reversed  the  judgment  of  the
High Court on both counts. The ratio of  the  judgment  does  not  help  the
respondents.
Respondents next relied upon judgment in the case  of  State  of  Punjab  v.
Nirmal Singh.[3] In this case State of  Punjab  was  aggrieved  by  impugned
judgment of the High Court whereby  minor  punishment  imposed  upon  Nirmal
Singh was set  aside.  This  Court  allowed  the  appeal  and  reversed  the
judgment of the High Court on a finding that there was no requirement  under
the rule to grant a personal hearing for imposition of a minor  penalty  and
that the High Court had  erred  in  treating  the  order  of  the  competent
authority as a non-speaking order.  This  case  also  is  not  relevant  for
deciding the controversy at hand.
To meet the allegation of delay, reliance was placed upon S.R.  Bhanrale  v.
Union of India and Ors.[4] The appellant in that case retired as an  officer
in the Department of Telecommunications, Government of  India  and  received
pension immediately on retirement.  For no good reasons  his  other  retiral
benefits and claims remained unsettled in spite of several  representations.
After serving the notice under Section 80 CPC and approximately after  three
years he moved the Central Administrative Tribunal.  While  the  matter  was
pending with this Court, upon directions of the  Department,  the  appellant
was paid some of the benefits. At the stage of  final  hearing,  this  Court
considered the circumstances and observed that in the facts of the case  the
Union of India was not justified in raising the bar  of  limitation  against
the dues of the appellant. It cannot be  claimed  by  way  of  general  rule
simply on the basis of aforesaid judgment that in all  cases  of  claim  for
pension, the plea of delay or limitation cannot  be  considered  by  a  writ
court. Only where the retiral benefits have been wrongly  withheld  and  not
paid despite numerous representations and as  observed  in  para  4  of  the
aforesaid judgment the delay is not of  decade  or  so  the  Court  may  not
appreciate a plea of limitation raised by the  Government.  In  the  present
case admission or declaration made by the Corporation on 30.11.1956  through
Order no. 61 that services  of  the  respondents,  i.e.,  of  all  temporary
employees stood transferred to the Corporation with effect  from  16.10.1956
and shall be governed by the new terms and conditions as and  when  approved
by the Corporation was within the knowledge  of  the  respondents  and  they
accepted such orders of the Government and the Corporation  from  1956  till
their retirement and even thereafter till the enforcement of Regulations  of
1992 which led to filing of writ petition by  them  in  1992.   Clearly  the
respondents acquiesced to the entire situation and accepted their status  as
employees of the Corporation leading  to  admissible  retiral  benefits.  In
such circumstances, the aforesaid judgment cannot help the respondents.  The
appellant Corporation was fully justified in raising the plea of  delay  and
latches. The High Court erred in ignoring  such  plea  when  the  delay  was
quite unusual. We find no material to satisfactorily explain such delay.
Appearing for some of the respondents, further reply  was  advanced  by  Mr.
M.K. Dua, Advocate. He contended that  as  per  Section  11  of  the  States
Reorganization Act, the merger of PEPSU with Punjab State  was  effected  on
01.11.1956 and therefore from such date, by virtue of Section 115(1) of  the
States Reorganization Act the respondents were rightly treated by  the  High
Court to have acquired the status of Government  servant  in  the  successor
State of Punjab. He referred to  pleadings  in  the  writ  petition  to  the
effect that in 1956 the respondents  were  transferred  to  the  Corporation
without being given any opportunity of exercising option. It was also  urged
that in reply the other side did not controvert such a plea  nor  there  was
any reply to the claim that the respondents were not issued with any  formal
order of absorption. He relied upon judgment of  this  Court  in  Fertilizer
Corporation of India Ltd. v. Union of  India  &  Ors.[5]  in  support  of  a
proposition that unless the absorbing body/authority  issues  an  order  for
absorption of a Government officer in its  service  on  a  permanent  basis,
mere correspondence or any order of notification  issued  by  others  cannot
confer benefits of absorption on such Government officer. It  would  suffice
to note that the claim of absorption  made  by  an  individual  officer  was
being denied by the absorbing body  and  the  proposition  noted  above  was
mooted by the Court in the  facts  where  such  individual  claim  is  being
denied by the concerned organization. The facts  in  the  present  case  are
entirely different. In support of same proposition of law reliance has  been
placed upon Mysore State Road Transport Corporation v. A.  Krishna  Rao  and
Anr.[6] In Mysore State R.T.C. case  the  concerned  employee  of  Bangalore
Transport Company Ltd. by virtue of statutory provisions became employee  of
the State. Thereafter there was no  order  of  transfer  or  merger  of  the
concerned  department  with  the  subsequently   formed   Corporation.   The
Corporation was directed to take over only those  employees  who  opted  for
its service. Since the concerned respondent-  employee  was  not  given  any
notice of option it was held that he could not claim to be  an  employee  of
the Corporation.
Respondents have placed  reliance  also  upon  case  of  National  Insurance
Company Ltd. v. Kirpal Singh[7] to contend that since provision for  payment
of pension is beneficial  in  nature,  the  provision  ought  to  receive  a
liberal interpretation so as to serve the object of the  pension  scheme  as
well as any special scheme like a voluntary retirement scheme. On facts  the
said judgment dealt with  the  provisions  of  Voluntary  Retirement  Scheme
which required interpretation. The present case  does  not  raise  any  such
issue as to interpretation of any pension scheme. Reliance was  also  placed
upon case of S.K. Rattan v. Union  of  India  &  Ors.[8]  Para  13  of  that
judgment contains the reasons indicated by this Court for  holding  that  by
sheer transfer of an employee  from  an  institution  like  CBI  to  another
organization,  the  officer  cannot  be  made  to  suffer  in  his   service
conditions without framing  appropriate  rules  under  Article  309  of  the
Constitution as  it  would  amount  to  discrimination  for  no  justifiable
reasons. In that case, the submission on behalf of the Union of  India  were
not accepted because this Court found that till  the  officer  retired  from
service, no separate service rules had been framed for the officers  of  the
organization where he was transferred but in the  case  at  hand  the  PEPSU
Road Transport Corporation Regulations providing for CPF has been framed  as
back as in 1957. The said judgment is therefore of no help  to  respondents.
Reliance placed upon State of Haryana &  Ors.  v.  Amar  Nath  Bansal[9]  is
equally misconceived because in that case there  was  no  dispute  that  the
respondent was an employee of the State of  PEPSU  and,  therefore,  on  and
from the appointed date he became amenable to  Punjab  Service  Rules  under
which he was rightly retired  at  the  prescribed  age.  In  reply,  learned
senior counsel for the appellants has rightly taken a  stand  that  most  of
the cases noted above on which respondents have placed  reliance  relate  to
individual employees who had been transferred on deputation and,  therefore,
are clearly distinguishable. They can have no  application  to  the  present
matter because  prior  to  01.11.1956  the  respondents  had  ceased  to  be
Government servants under the PEPSU State with effect  from  16.10.1956  and
had become servants of the Corporation.
Further reply of the appellants is that respondents chose not  to  challenge
or resist the decision of the PEPSU  State  whereby  the  entire  department
where they were working as temporary employee was by  transfer  merged  with
the Corporation. They chose this course because they had no  right  to  post
held by them and could have been out of  employment.  Since  the  department
itself ceased to exist there were no posts on which  the  respondents  could
claim lien and in absence of any such post or lien they cannot claim  to  be
Government employee of PEPSU State till 01.11.1956, the date of  the  merger
of PEPSU State with Punjab. By placing reliance upon Section 34 of the  Road
Transport Corporation Act,  1950,  it  has  been  urged  on  behalf  of  the
appellants that the  State  Government  has  statutory  power  to  give  the
Corporation  general  instructions  including  directions  relating  to  the
recruitment, conditions of service and wages to be  paid  to  the  employees
etc. The Corporation is saddled with a statutory obligation  not  to  depart
from such general instructions. Therefore, the  letter  of  Chief  Secretary
dated 16.10.1956 containing direction of the State  Government  was  binding
upon  the  appellant-Corporation  and  as  a  result  without  need  of  any
individual orders of absorption the entire establishment of the  transferred
department had to be taken over by the Corporation. The  absorption  of  the
employees in law was complete on 16.10.1956 due to such  order  of  transfer
and amalgamation. The Corporation had no  option  to  seek  options  and  to
issue orders of absorption as per its discretion or  will.  The  respondents
being temporary employees had the option either to quit the service  of  the
Corporation or challenge the orders or directions of  the  State  Government
but they chose to do neither.
By relying upon paragraph 54 of the unamended writ petition  learned  senior
counsel for the appellants  submitted  that  in  fact  the  respondents  had
admitted in  their  initial  stand  that  PEPSU  Roadways  merged  with  the
Corporation on 16.10.1956.  A  perusal  of  said  paragraph  54  shows  that
respondents accepted the aforesaid facts and  their  only  stand  was  since
“they did not give any option  to  the  effect  they  would  not  claim  any
pensionary benefits”, they will  remain  Government  employees  entitled  to
pensionary benefits.
The main controversy in this case is whether the claim of  the  respondents,
a group of twenty one employees of PEPSU Roadways that in spite of  transfer
of  that  department  to  the  Corporation  they  continue  to  be  actually
Government servants and therefore entitled to retiral  benefits  instead  of
CPF is acceptable or not. In this controversy,  a  judgment  of  this  Court
though rendered  in  slightly  different  factual  matrix  is  substantially
relevant and helpful. In D.R.  Gurushantappa  v.  Abdul  Khuddus  Anwar  and
Ors.[10]  an  issue  arose  in  the  context  of  election  of  the   Mysore
Legislative Assembly as to whether the  respondent  was  holding  office  of
profit under  the  Government.  The  respondent  no.  1  of  that  case  was
initially a Government  servant  but  subsequently  the  Government  concern
where he was working was taken  over  by  a  company  registered  under  the
Indian Companies Act, 1956. The shares of the company were  fully  owned  by
the Government but after the Government undertaking was taken  over  by  the
company, the employees were no longer governed by the Mysore Civil  Services
Regulations, their conditions of  service  came  to  be  determined  by  the
standing orders of the company. The first contention against respondent  no.
1 was that since he was initially  a  Government  servant,  even  after  the
concern was taken over by the  company  he  would  continue  to  be  in  the
service of the Government. While dealing with this  issue  in  paragraph  3,
this Court rejected the contention in the following words:
“3. So far as the first point is concerned, reliance is placed primarily  on
the circumstance that, when the concern was taken over by the  Company  from
the Government there were no specific agreements terminating the  Government
service of Respondent 1,  or  bringing  into  existence  a  relationship  of
master and servant between the Company and Respondent 1. That  circumstance,
by itself, cannot lead to the conclusion that Respondent 1 continued  to  be
in government service. When the undertaking was taken over  by  the  Company
as a going concern, the employees  working  in  the  undertaking  were  also
taken over and since, in law, the Company has to be  treated  as  an  entity
distinct and separate from the Government, the employees,  as  a  result  of
the transfer of the undertaking, became employees of the Company and  ceased
to be employees of the Government.”

In the facts of the case, we have no hesitation to hold that the High  Court
erred in allowing the writ petition and second  appeal  of  the  respondents
and  in  dismissing  the  Letters  Patent  Appeal  of  the  appellants.  The
judgments on which the  respondents  have  relied  upon  for  advancing  the
submission that they cannot lose the status of  a  Government  servant  till
they are absorbed in the Corporation after offering an option in  favour  of
such absorption is entirely misconceived and inapplicable in  the  facts  of
the present case. The stand of the respondents could  have  been  acceptable
had there been no decision of the PEPSU State as evidenced by the letter  of
Chief Secretary dated 16.10.1956 which finds mention and reiteration by  way
of admission by the Corporation in order dated 30.11.1956. There can  be  no
such belated  challenge  to  the  decision  of  PEPSU  State  whereby  PEPSU
Roadways, one of the departments came into and merged with  the  Corporation
lock,  stock  and  barrel  before  the  merger  of  PEPSU  with  Punjab   on
01.11.1956. Hence, the provisions of the States  Reorganization  Act  ceased
to have any significance in the matter because the respondents ceased to  be
employees of State Government of PEPSU prior to  01.11.1956.  They  accepted
such merger and alteration of their service conditions without any  protest.
Since 1957, under the Regulations of the Corporation they  participated  and
contributed to the scheme of CPF and obtained  the  benefits  of  retirement
from the Corporation between 1985 and 1991 without  any  protest.  The  High
Court clearly erred in ignoring such conduct of the respondents, the  effect
of the Chief Secretary’s letter  dated  16.10.1956  containing  decision  of
PEPSU State and its acceptance by the Corporation  reflected  by  the  order
dated 30.11.1956. The High Court further erred in relying upon law which  is
applicable when there is no merger of Government concern  with  the  private
concern but only individual employees are transferred on  deputation  or  on
foreign  service  to  other  organizations/services.   The  ordinary   rules
providing for asking of option or issuance of letters of  absorption  depend
upon  nature  of  stipulations  which  may  get  attracted  to  a  case   of
deputation.  There  may  be  similar  stipulations  in  case  of  merger  by
transfer. But if there are no such stipulations like  in  the  present  case
then the transferee concern like the Corporation has no  obligation  to  ask
for options and to issue letters of  options  to  individual  employees  who
become employees of the transferee organization simply by  virtue  of  order
and action of transfer of the whole concern leading to merger. No  doubt  in
case of any hardship, the affected employees have the option to protest  and
challenge either the merger itself or any adverse stipulation.  However,  if
the employees choose to accept the transition  of  their  service  from  one
concern to another and acquiesce then after  decades  and  especially  after
their retirement they cannot be permitted to turn  back  and  challenge  the
entire developments after a gap of decades.
On the basis of laws and facts discussed above, we are constrained  to  hold
that the respondents had accepted to continue as  employees  of  Corporation
pursuant to order of merger/transfer of  PEPSU  Roadways  with  effect  from
16.10.1956 and  on  completing  their  service  under  the  Corporation  and
reaching the age of retirement  they  were  entitled  to  receive  only  the
benefits of CPF and gratuity as admissible to  them  under  then  prevailing
regulations of the Corporation. Since they accepted those  retiral  benefits
there is no relationship left between the Corporation  and  the  respondents
and in such a situation  further  claim  against  the  Corporation  that  it
should treat the respondents to be  Government  servants  and  adjust  their
retiral benefits accordingly was totally untenable and  wrongly  allowed  by
the High Court. The impugned judgment of the High Court granting  relief  to
the respondents is therefore set aside.  The  second  appeal  and  the  writ
petition  of  the  respondents  shall  stand  dismissed.  This   appeal   is
accordingly allowed but the parties are left to bear their own costs.

                       ……………………………………..J.
                       [SHIVA KIRTI SINGH]


.…………………………………….J.
                             [R. BANUMATHI]


New Delhi.
August 8, 2016.

-----------------------
[1]
      [2] (2011) 11 SCC 702
[3]
      [4] AIR 1954 SC 217
[5]
      [6] (2007) 8 SCC 108
[7]
      [8] (1996) 10 SCC 172
[9]
      [10] (1996) 3 SCC 325
[11]
      [12] 1973(1) SLR 1080
[13]
      [14] (2014) 5 SCC 189
[15]
      [16] (2014) 4 SCC 144
[17]
      [18] (1997) 10 SCC 700
[19]
      [20] 1969 (1) SCC 466