Shri K Nagaraj Proprietor vs. Pavan Kumar Malapati
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The State, through the District Collector and Fertilizer Inspector, appealed an order dated December 14, 2021, passed by a Single Judge in W.P. No. 104417/2021. The respondent, the proprietor of Sri Lakshmi Fertilizers and Pesticides, had filed the writ petition. The Single Judge's order quashed an order by the Deputy Commissioner dated October 27, 2021, passed under Section 6C of the Essential Commodities Act, 1955. The order directed the Fertilizer Inspector to return confiscated fertilizer to the petitioner and allowed the petitioner to correct an "inadvertent error" in Form-A1 filed under the Fertilizer (Control) Order, 1985. The State's appeal arises from the non-compliance with this direction, leading to contempt proceedings initiated by the petitioner. The confiscated fertilizer amounted to 88.21 tonnes in 1861 bags, seized on August 11, 2021.
Held
The Court held that the terms and conditions in the Memorandum of Intimation are mandatory. It found that the writ court's view that these terms were not imposition and therefore not mandatory could not be sustained. The Court reasoned that a failure to mention the complete address or file an amendment application for the godown address falls under Clause 31(1)(b) of the Control Order. However, it also acknowledged mitigating circumstances, including the recent appointment of notified authorities under the Control Order. The Court opined that the writ court was justified in directing the return of confiscated fertilizer to the petitioner, considering these mitigating factors and the possibility of disposing of stock if proceedings under Clause 31 of the Control Order were initiated. The writ appeal was allowed in part, modifying the impugned order to direct the release of 1086 bags of confiscated fertilizers within one week of the petitioner's representation. The contempt proceedings were dropped.
Key Issues
1. Whether the terms and conditions in the Memorandum of Intimation filed under Clause 8(2) of the Fertilizer (Control) Order, 1985, are mandatory, and if the writ court's view that they are not imposition and thus not mandatory, can be sustained? The petitioner argued that the error in the godown address was inadvertent and that they had applied for correction. They also contended that the authorities appointed under the Control Order were only recently appointed. The State argued that the terms and conditions of the Memorandum of Intimation are mandatory and that failure to report changes in godown premises constitutes a contravention. They relied on Clause 31(1)(b) of the Control Order. The State also argued that proceedings under Section 6A of the EC Act were justified. The court had to decide if the writ court was justified in quashing the Deputy Commissioner's order and directing the return of confiscated fertilizer, considering the alleged contravention of the Control Order and the provisions of the EC Act.
Sections Cited
Section 6C, Section 6A, Clause 8[2], Clause 8[3], Clause 31(1)(a), Clause 31(1)(b), Clause 32, Clause 32A, Clause 28(3), Clause 34, Clause 26A
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Read from the judgment's own cause title. This page is filed under one of them.
Cause title — parties, addresses and appearances
JUDGMENT
The State, through its Officers, has filed this writ appeal calling in question the order dated 14.12.2021 in W.P. No.104417/2021. The respondent, who has filed the said writ petition, has initiated the contempt proceedings in C.C.C.NO.100044/2022 against the incumbent District Collector and Fertilizer Inspector and Agricultural Officer, Bellari and another alleging deliberate disobedience of the writ Court’s order dated 14.12.2021. The writ appeal and the contempt proceedings are directed to be tagged by the order dated 03.03.2022 but notice is not yet issued in the contempt proceedings. However, the learned counsels for the parties, who are aware of the respective proceedings, are heard with their consent for disposal of both the writ appeal and the contempt proceedings. The parties, for easy reference, are referred to as they are arrayed in the writ petition.
The writ Court by the impugned order dated 14.12.2021 has quashed the Deputy Commissioner’s order dated 27.10.2021 under Section 6C of the Essential Commodities Act, 1955 [for short, the E C Act’] directing the Fertilizer Inspector and Agricultural Officer [the second respondent] to return ‘confiscated fertilizer1’ to the petitioner with permission to the petitioner to correct “an inadvertent error” in Form-A1 filed with the second respondent under Clause 8[2] of the Fertilizer [Control] Order, 1985 [for short, ‘the Control Order’]. The respondents have not complied with the direction to return to the petitioner the confiscated fertilizer and hence, the petitioner has commenced contempt proceedings.
The petitioner has filed Memorandum of Intimation in Form A1 as contemplated under Clause 8[2] of the Control Order for the purposes of authorisation to carry on business as a retail dealer of 1 The 88.21 tonnes of fertilizer seized on 11.08.2021 and stocked in 1861 bags.
- 5 - fertilizers. It is undisputed that when Memorandum of Intimation is filed accordingly, there shall be deemed issuance of authorisation letter for the purposes of the Control Order because of the provisions of Clause 8 [3] thereof. The petitioner has filed such Memorandum of Authorisation, which has resulted in deemed “authorisation letter”, at the first instance in the year 2009, and there are subsequently renewals of authorisation letter in terms of the relevant provisions of the Control Order therefor. The petitioner, for the latest renewal, has filed necessary application and the second respondent has issued acknowledgment in Form A2, as per the Annexure-C to the writ petition, for a period of five years from 20.03.2021 to 19.03.2026. 4. The petitioner in the Memorandum of Intimation has furnished No. 01, Bhavivingappa Street Main Road, Mokha post, Ballari District and taluk as both the Sale Address and Storage Address. However, the petitioner, for the purposes of GST registration has - 6 - furnished three address: The details of these addresses are as follows2: Address of Principal Place of Business 1. # 01, Bhaviningappa Street Main Road, Mokha post, Ballari District and taluk Additional Places of Business:
Shop No. 21, Opp. Bus Stand, Main Road, Moka, Ballari, Karnataka
Shop No. 150, W No. 02, Opp Police Station, Moka Ballari, Karnataka
The petitioner, for the previous renewal in the year 2018, has filed application in Form No.A1 for renewal of the authorisation [Annexure-E], and in this application he has mentioned Sale Address and Godown [Storage] Address in Column No.3 thereof as Sri Sai Laxmi Fertilizers and Pesticides, Main Road Moka with further information that the Godown is opposite to Corporation Bank, Moka.
2 A copy of the VAT Registration Certificate is produced as Annexure – D to the writ petition.
The second respondent has issued show cause notice to the appellant [as per Annexure-F] informing the petitioner that his premises in No. 201, Opp. to Union Bank of India, Moka is inspected 11.08.2021 and it is ascertained that he has changed the Godown premises without getting the Certificate of Registration amended to indicate the change in the Godown. The petitioner is also informed that if he does not offer just explanation within seven days, the authorisation letter will be cancelled.
However, it is not disputed even before this Court that the address referred to by the petitioner in application for renewal of Intimation in Form No. A1 in 2018 [as per Annexure – E] and the place where search is conducted on 11.08.2021 are the same, and in this regard it is submitted that the reference to the Corporation Bank, Moka in Annexure – E must be read as reference to the Union Bank of India, Moka, Bellary because of the merger of the former with the latter.
After issuance of show cause notice [as per Annexure – F], the petitioner has filed application for correction in the application in Form A1 on 13.8.2022, remitting the requisites fees, to show the Godown Address as “Shop opposite Union Bank of India, Moka, Bellary”. This request for amendment is accepted by the authorities3. The controversy is because the show cause notice as per Annexure – F is followed by show cause notice dated 23.08.2021 [as per Annexure – G] under Section 6A of the E C Act for confiscation of the Confiscated Fertilizer. Thereafter, the juri ictional Deputy Commissioner [the first respondent] has passed the impugned order dated 27.10.2021 under Section 6[C] of the E C Act directing confiscation of the Confiscated Fertilizer seized at the time of the inspection on 11.08.2021. 3 The respondents have referred to this application in Para 4 of the Objection Statement to the writ petition.
The petitioner’s prayer as against the Deputy Commissioner’s impugned order dated 27.10.2021 in the writ petition is allowed quashing the said order directing the Fertilizer Inspector and Agricultural Officer [the second respondent] to return Confiscated fertilizer. The writ Court has considered the petitioner’s grievance against the Deputy Commissioner’s impugned order dated 27.10.2021 in the light of the following question:
Whether the Fertilizer Inspector under the Control Order possesses the power to confiscate a dealer’s stock of fertilizers on the ground that the dealer had not informed the Inspector about the change of Godown attached to the sale depot.
The writ Court referring to the provisions of Clause 7 & 8 of the Control Order has opined that when a person intends to sell fertilizers, he is basically required only to intimate the notified authority about his intention to sell the fertilizers and the notified authority does not examine the suitability of his candidature or - 10 - the resources for procuring fertilizers; therefore, any condition mentioned in the Memorandum of Intimation, cannot amount to an imposition and any contravention of such conditions cannot be construed as contravention of the Control Order. The writ Court has concluded that the Fertilizer Inspector and Agriculture Officer [the second respondent] did not possess the power to seize the fertilizer.
The writ Court has also opined that power of confiscation is a drastic measure and there cannot be confiscation for a minor contravention such as not notifying the change in the Godown address. The writ Court has premised its directions to return Confiscated Fertilizer in its reading of the provisions of Clause 31 of the Control Order which enables permission to sell fertilizers stocked by a person who is found guilty of contravening the provisions of the Control Order or the terms and conditions of Memorandum of Intimation.
Sri. G.K.Hiregoudar, the learned Additional Government Advocate, submits that the conditions in the Memorandum of Intimation as contemplated under Clause 8 of the Control Order are mandatory and contravention of those conditions would tantamount to contravention of the Control Order. The Fertilizer Inspector is invested with the power to seize the fertilizer stored in contravention of such terms and conditions. He argues that the writ Court’s findings that the terms and conditions are not impositions and the Fertilizer Office is not invested with the power to whittle down not only the scheme under the Control Order but the juri iction under the EC Act undermining the very control regime of fertilizers as an essential commodity.
Sri. G.K.Hiregoudar argues that the provisions of the Control Order which are issued by the Central Government in exercise of the power conferred under Section 3 of the E C Act have the statutory backing and must be strictly complied with, and non- compliance must invite action, amongst others, for - 12 - confiscation as contemplated under the Control Order and the EC Act.
Sri. G.K.Hiregoudar, on the provisions of the Control Order on authorisation letter, relies upon the provisions of Clause 7 of the Control Order to emphasize that no person shall sell, or offer, or carry on the business of selling fertilizer at any place as a wholesale dealer or retail dealer except under and in accordance with Clause 8 of the Control Order. Every manufacturer, or an importer, or a wholesale dealer or a retail dealer, must file Memorandum of Intimation in the prescribed form [Form No. A1] with the prescribed fee as contemplated under Clause 8(2) of the Control Order, and the notified authority, on receipt of the Memorandum of intimation, shall issue an acknowledgement in the prescribed form [Form No.A2] which will be deemed to be an authorisation letter to the concerned person for the purposes of the Control Order.
Sri G.K.Hiregoudar, on the renewal of authorisation letter and the consequence of breach of the conditions as contained in the Memorandum of Intimation, draws this Court’s attention to the provisions of Clause 10 and 11 of the Control Order which contemplate three years as the initial period of validity for every authorisation letter with provisions for subsequent renewal and the provisions of Clauses 26, 27, 28 and 31 of the Control Order. He canvasses that the mandatory nature of the terms and conditions appended to the Memorandum of Intimation is reinforced with the aforesaid provisions providing for appointment of Fertilizer Inspectors with specific powers to inspect and seize fertilizers under circumstances mentioned in Clause 28, and the appointment of Notified Authorities who is invested with the power under Clause 31 to suspend authorisation letter or debar a dealer if there is violation of the terms and conditions appended to the Memorandum of Intimation.
Sri G.K.Hiregoudar argues that the petitioner, as is obvious even from the averments in the memorandum of writ petition, has not furnished the address of the premises where the inspection is conducted as either the Sale Address or the Godown Address when he filed application for renewal of the authorisation letter. In which event, there is undeniable violation of the Memorandum of Intimation and therefore of the provisions of the Control Order. As such, the Deputy Commissioner’s impugned confiscation order is justified. Sri.G.K.Hiregoudar thus, endeavors to persuade this Court to set aside the writ Court’s finding that the terms and conditions of the Memorandum of Intimation would not tantamount to impositions and that the second respondent did not have juri iction to seize the Confiscated Fertilizer which was stored in premises other than the premises mentioned in the Memorandum of Intimation filed by the petitioner.
Per contra Sri. Ajay Nandalike, the learned counsel for the respondent, submits that even if there
- 15 - could be any allegation of contravention of the terms and conditions of the Control Order or the Memorandum of Intimation, the notified authority could initiate action either for cancellation or suspension of authorisation letter, and even debarring of the dealer under the provisions of clause 31 of the Control Order but after an enquiry. Therefore, the notified authority, who is the second respondent, should have initiated action under Clause 31 of the Control Order, subject to extending an opportunity of hearing.
However, the second respondent, without conducting any enquiry as provided under Clause 31 of the Control Order, has filed a report with the first respondent who has assumed juri iction under the provisions of Section 6A of the EC Act to direct confiscation.
Sri. Ajay Nandalike argues that this would be impermissible given the scheme of the Control Order, especially because proviso to clause 31(1) of the Control Order stipulates that while debarring or canceling the authorisation/registration, the notified authority could
- 16 - allow the dealer, who is in contravention of the terms and conditions of the Memorandum of Intimation, a period of 30 days to dispose of the balance stock of fertilizers and only if the dealer is unable to clear the stock within the 30 days period, there can be confiscation.
Thus, the thrust of Sri. Ajay Nandalike’s position is that if this Court is of the opinion that the terms and conditions of the Memorandum of Intimation are mandatory and therefore impositions that must be adhered to and the failure to adhere would be a reason for initiation of appropriate proceedings, the initiation of proceedings under Section 6A of the EC Act and subsequent impugned confiscation order dated 27.10.2021 is an extreme and a drastic action denying relief under Clause 31 of the Control Order. He contends that if an enquiry as contemplated under Clause 31 of the Control Order was held even leading to suspension or cancellation or debarment, there could be directions to dispose of Confiscated Fertilizer within a - 17 - period of 30 days and confiscation only if the confiscated fertilizer is not disposed of accordingly; the petitioner could also have availed the right of appeal against any adjudication for cancellation/ debarring/ suspension of letter of authorisation in terms of Clause 32A of the Control Order.
Sri. Ajay Nandalike argues that therefore, the impugned order dated 27.10.2021 is an arbitrary exercise of juri iction, and when the writ Court’s order dated 14.12.2021 is examined from this perspective, the respondents cannot be aggrieved by the writ Court’s direction to release the confiscated fertilizer.
This Court must at this stage record that both Sri.G.K.Hiregoudar and Sri.Ajay Nandalike are unanimous in their submissions that the State Government must, in view of the provisions of Section 26A of the Control Order, appoint by notification in the official gazette Notified Authorities for the purposes of Clause 31 of the Control Order defining the local limits
- 18 - for each of the notified authorities. For complete submissions, Sri.G.K.Hiregoudar was called upon to place the copies of notifications issued by the State under Section 26A of the Control Order, and these have been placed on record on different dates. The details of the notifications are as follows:
[a] Notification – III dated 03.10.2016 in No.AGD 134 AMS 2016. This notification is issued appointing certain designated officers for purposes of issuing acknowledgement to wholesale dealers for the whole of the State, for Districts and for Talukas.
[b] Notification – III dated 04.09.20214 in No.AGRI – ACT / 195 / 2020: This notification is issued under Clause 26A of the Control Order specifying the Commissioner for Agriculture, Bengaluru as the appellate authority under clause 32A of the Control Order.
4 On the same day another notification is issued under Clause 26A of the Control Order appointing Notified Authorities for the purpose of issuing acknowledgment for different categories of persons, including Retail Dealers
- 19 - [c] Notification dated 15.09.2022: This notification is issued, superseding the earlier notification dated 04.09.2021, under clause 26A of the Control Order appointing certain specified officers as the notified authorities for the purposes of exercise of powers prescribed under the Control Order.
It is obvious from these notifications that the notified authorities for the purposes of Clause 31 of the Control Order with specific juri ictions are appointed only in the month of September 2022 though for the purposes of Clause 8 the notified authorities are appointed way back in the year 2016. 21. In the light of the rival submissions and the facts and circumstances of the case, the following questions will have to be considered by this Court:
a) Whether the terms and conditions in the Memorandum of Intimation in Form No. A1 filed under Clause 8(2) of the Control Order are mandatory, and if mandatory, whether
- 20 - contravention of these terms and conditions justifies immediate initiation of proceedings under Section 6A of the EC Act or should there be, at the first instance, proceedings under Clause 31 of the Control Order.
b) Whether the writ Court has erred in directing the second respondent, in the peculiarities of this case, to release the confiscated fertilizer to the petitioner on the ground that the failure to inform the change in the Godown address cannot be a serious violation.
The question whether a statutory provision is mandatory, as against being mere directory, depends upon the intent of the law-maker, and such intention has to be gathered not only from the text of the statute but also by considering its nature, its design and the consequence which would follow from construing it in one way or the other. This proposition is explained by the Hon’ble Supreme Court in May George v. Special Tahsildar & Ors5 in expositing thus:
5(2010) 13 SCC 98
- 21 - The law on this issue can be summarised to the effect that in order to declare a provision mandatory, the test to be applied is as to whether non-compliance of the provision could render entire proceedings invalid or not. Whether the provision is mandatory or directory, depends upon the intent of Legislature and not upon the language for which the intent is clothed. The issue is to be examined having regard to the context, subject matter and object of the statutory provisions in question. The Court may find out as what would be the consequence which would flow from construing it in one way or the other and as to whether the Statute provides for a contingency of the non-compliance of the provisions and as to whether the non- compliance is visited by small penalty or serious consequence would flow therefrom and as to whether a particular interpretation would defeat or frustrate the legislation and if the provision is mandatory, the act done in breach thereof will be invalid6. 6 This proposition is reiterated by reference by the Constitutional Bench in Indore Development Authority v. Manoharlal and others reported in (2020) 8 SCC 129. 23. The Control Order is issued in exercise of the power under Section 3 of the EC Act which provides inter alia for orders by the Central Government to regulate production, supply and distribution of “essential commodity” by license, permits or otherwise. The provisions of clause 7 of the Control Order [which is part of Chapter IV of the Control Order under the heading “Authorisation or Registration of Dealers”] read as under:
Registration of Industrial dealers and authorisation of other dealers:
No person shall sell, offer for sale or carry on the business of selling of fertilizer at any place as wholesale dealer or retail dealer except under and in accordance with clause 8: PROVIDED that a State Government may, if it considers it necessary or expedient, by notification in the Official Gazette, exempt from the provisions of this clause any person selling fertilizer to farmers in such areas and subject to such conditions as may be specified in that notification.
The stipulation is categorical that even a Retail Dealer shall not sell or offer for sale or carry on the business of selling the fertilizer except under and in accordance with - 23 - the provisions of Clause 8 of the Control Order. This is a positive condition contemplated in exercise of the statutory powers and therefore, a statutory requirement as part of the regime to regulate supply of fertilizer.
If the provisions of Clause 8(1) of the Control Order state that every Industrial Dealer shall obtain a Certificate of Registration on filing an application in Form A with payment of a prescribed fee and Certificate of Source, a Retail Dealer must file with the concerned the notified authority a Memorandum of Intimation [in Form No.A1], and again with payment of a prescribed fee and Certificate of Source. On receipt of such Memorandum of Intimation, the notified authority shall issue an acknowledgment in Form No. A2. The provisions of Clause 8 of the Control Order material for the present purpose reads as under:
Application for intimation or registration [1] Every person intending to sell or offer for sale or carrying on the business of selling of fertilizer as Industrial Dealer shall obtain a certificate of registration from the controller by making an application in Form A together with the fee
- 24 - prescribed under clause 36 and a Certificate of source in Form O. [2] Every person including a manufacturer, an importer, a pool handling agency, wholesaler and a retail dealer intending to sell or offer for sale or carrying on the business of selling of fertilizer shall make a Memorandum of Intimation to the Notified Authority, in Form A1 duly filled in, in duplicate, together with the fee prescribed under clause 36 and certificate of source in Form O.
Significantly, the provisions of Clause 8(3) of the Control Order stipulate that the acknowledgment shall be deemed to be an authorisation letter7 issued to the retail dealer for the purposes of the order. These provisions read as under: (3) On receipt of a Memorandum of Intimation, complete in all respects, the Notified Authority shall issue an acknowledgement of receipt in Form A2 and it shall be deemed to be an authorisation letter granted and the concerned person as authorised dealer for the purposes of this Order.
7 As regards Certificate of Registration for Industrial Dealers, clause 9 of the Control Order states that the controller [as defined under clause 2[e] of the Control Order], shall not grant Certificate of Registration for any of the reasons mentioned therein.
This Court must next consider the terms and conditions that must be part of the Memorandum of Intimation to be filed in Form A1 in terms of clause 8[2] of the Control Order. These conditions include inter alia the declaration by the Retail Dealer that he will comply with the provisions of the control Order and the notifications issued thereunder from time to time8 and inform the notified authority about the change in the premises of sale depot and godown attached to the sale depot9. If the aforesaid are the provisions of the Clauses 7 and 8 of the Control Order on the bar against selling or offering to sell fertilizer except in accordance with the provisions of the Control Order, the requirement of filing of Memorandum of Intimation, issuance of Acknowledgment, deemed authorisation letter and the 8 The relevant term in the Memorandum of Intimation this regard reads as – “I shall comply with the provisions of the Fertilizer (Control) Order, 1985 and the notifications issued thereunder for the time being in force”.
9 The relevant term in the Memorandum of Intimation this regard reads as – “I shall comply with the provisions of the Fertilizer (Control) Order, 1985 and the notifications issued thereunder for the time being in force”.
- 26 - terms and conditions to operate as a Retail Dealer in fertilizer, the provisions of Clauses 10 and 11 contemplate renewal of authorisation letter and renewal after the expiry period.
There are also other provisions of the Control Order which provide for appointment of Notified Authority, Fertilizer Officer and an appellate authority. The Fertilizer Officer, under Clause 28 of the Control Order, is invested with the juri iction inter alia to enter upon and search any premises where any fertilizer is manufactured/imported or stored or exhibited for sale if the officer has reason to believe that any fertilizer has been or is being manufactured/imported, sold, offered for sale, stored, exhibited for sale or distributed contrary to the provisions of this Order. A notified Authority, under Clause 31 of the Control Order, may suspend the authorisation letter if any term or condition of the Memorandum of Intimation is contravened, and, as argued by Sri Ajay Nandalike, while either suspending
- 27 - or canceling the authorisation letter, may allow thirty days to dispose of the stock held by him.
Further, the notified authority [or the registering authority or the controller in case of Industrial Dealer and Manufacturer/Importer] must record a brief statement of reason for ordering cancellation or suspension. There is an appeal as against this order to the appellate Authority under Clause 32 or 32 A depending on whether the allocation of the subject fertilizer is by either the State or the Central Government. Thus, the Control Order insofar as a Retail Dealer, as also an Industrial Dealer/a Manufacturer/an Importer, bring in regulations with details on procedure and consequences if there is contravention of the terms and conditions of the Memorandum of Intimation such as suspension/cancellation and debarment of a dealer.
In the light of the scheme under the Control Order which prohibits a Retail Dealer from conducting
- 28 - business except in accordance with its provisions, and which provides for appointment of officers, who are vested with the power of search and seizure to ensure that the retail business is conducted without contravening the terms and conditions [that are part of the declarations to abide, and suspension/cancellation /debarment of authorisation letter] with the provision for appeal if there is suspension or cancellation or debarment because of contravention, this Court must opine that the terms and conditions that are filed as part of Memorandum of Intimation are mandatory, and therefore, the writ Court’s view that the terms and conditions cannot be imposition thereby indicating that it would not be mandatory cannot be sustained.
On the question whether there could be immediate action under the provisions of the EC Act or should there be proceedings under Clause 31 of the Control order in the event a Fertilizer Officer has reasons to believe that fertilizer is either being sold or being offered for sale in contravention of the terms and - 29 - conditions of the Memorandum of Intimation, this Court, at the very outset, must reiterate that the Central government has issued the Control Order in exercise of the enabling powers under section 3 of the EC Act and as such, the Control Order is a subordinate regulation.
It is trite that as between the Act and the subordinate regulation thereunder, the latter is intended to supplement the former and not supplant the same, and both the Act and the subordinate regulation must be read harmoniously to ensure that the object of the Act is achieved. As regards the first proposition, this Court must refer to the exposition by the Hon’ble Supreme Court in Nedurimilli Janardhan Reddy v. Progressive Democratic Students’ Union10 that ‘the Rules are not, as indeed they cannot be, to supplant the Act but to supplement the same’. The afore question must be necessarily answered in the backdrop of these settled propositions and the material provisions of the Control Order which would be Clauses 28 and 31 as 10 (1994) 4 SCC 506
- 30 - these provisions provide respectively for procedure to ensure that there is compliance with the Control Order [and therefore, terms and conditions of the Memorandum of Intimation] and consequences if there is contravention.
The provisions of Clause 28 of the Control Order empower a Fertilizer Officer to draw samples and to search and seize fertilizers as also books of accounts and other documents relating to manufacture, storage of sale of fertilizers11 but with the mandate that in cases where there is seizure, he/she must forthwith report the fact of seizure to the collector. This clause further provides that on the report being filed by the conduct, the provisions of sections 6A, 6B, 6C, 6D and 6E of the EC Act shall apply as regards the custody, disposal and confiscation of seized fertilizer The relevant provision in this regard would be Clause 28(3) which reads as under: (3) Where any fertilizer is seized by an inspector under this clause, he shall forthwith report the 11 Clause 28 (1)
- 31 - fact of such seizure to the collector whereupon the provisions of sections 6A, 6B, 6C, 6D and 6E of the Act, shall apply to the custody, disposal and confiscation of such fertilizers.
This Court must opine that with these provisions it cannot be gainsaid that the confiscation of “seized fertilizer”12 in accordance with the provisions of the EC Act would be a possible course of action. As such, this Court cannot frown upon initiation of proceedings under section 6A of the EC Act for confiscation and subsequent disposal of the “seized fertilizer”, but the exercise of this juri iction must be tempered by the courses and remedies available under the provisions of the Control Order as these provisions, under certain circumstances contemplate, as against confiscation, suspension or cancellation of the authorisation letter, or debarment of the dealer with recourse to an appellate remedy against orders in that regard.
12 The fertilizer seized by the Fertilizer Officer in exercise of the power under Clause 28 of the Control Order.
The notified authority, under clause 31 of the Control Order, after extending opportunity of hearing to authorized dealer [or a holder of certificate of registration or certificate of manufacture or other certificate granted under the Control Order], may suspend the authorisation letter or certificate or debar the concerned if it is of the opinion that the authorisation letter or certificates have been obtained by willful suppression of materials or misrepresentation of relevant particulars, or if the provisions of the Control Order or the terms and conditions of Memorandum of Intimation are contravened. Further, the notified authority may, while passing orders for either suspending or canceling authorisation letter/certificates or debarring a dealer, permit the concerned to dispose of the subject stock of fertilizers allowing a period of 30 days for the same; if the concerned does not dispose of the stock within such time, the same shall be confiscated. The provisions of Clause 31 of the Control Order in this regard read as under:
- 33 - Suspension, Cancellation or Debarment. (1). A Notified Authority, registering authority, or as the case may be, the controller may, after giving the authorized dealer or the holder of certificate of registration or certificate of manufacture or any other certificate granted under this Order, an opportunity of being heard, suspend such authorisation letter or certificate or debar the dealer from carrying on the business of fertilizer on one or more of the following grounds, namely:- a. that the authorisation letter or certificate of registration or certificate of manufacture, as the case may be, has been obtained by wilful suppression of material facts or by misrepresentation of relevant particulars: b. that any of the provisions of this Order or any terms and condition of the Memorandum of Intimation or certificate of registration or the certificate of manufacture, as the case may be, has been contravened or not fulfilled: Provided that while debarring from carrying on the business of fertiliser or canceling the certificate, the dealer or the certificate holder thereof may be allowed for a period of thirty days to dispose of the balance stock of fertilizers, if any, held by him: Provided further that the stock of fertilizer lying with the dealer after the expiry of the said period of thirty days shall be confiscated.
If there is any order for suspension or cancellation or debarment as aforesaid, an appeal is provided for again such order before the appellate authority under Clause 32 or 32 A of the Control Order
- 34 - based on whether the fertilizer allocation is by the Central government or the State government. If the allocation is by the Central government, the remedy would be under clause 32, and if the allocation is filed the state government, the appellant would be under clause 32A.
These provisions enable ensuring compliances and consequences in the event there is infraction or contravention of particular kind with necessary remedial recourse.
This Court is of the considered opinion that a harmonious reading of the aforesaid provisions and the overarching objective of the EC Act and juri iction thereunder, must be that in cases where the notified authority is of opinion that the concerned is guilty of [a] willfully suppressing of material facts or misrepresenting relevant particulars, or [b] if there is contravention of the terms and conditions that are part of the Memorandum of Intimation and/ or violation of the Control Order that would be similar nature, unlike in other graver circumstances, must simultaneously with filing of report
- 35 - on facts as contemplated under Clause 28 (3) of the Control Order, initiate proceedings for suspension or cancellation our debarment. Presently, there cannot be any impediment in this regard because notified authorities are appointed.
As such, the first question is answered holding that the terms and conditions that are filed as part of Memorandum of Intimation are mandatory, and therefore, the writ Court’s view that the terms and conditions are not imposition indicating it will not be mandatory cannot be sustained. If there is willful suppression/ misrepresentation or contravention as contemplated under Clause 31 (1) (a) or (b) of the Control Order, the concerned notified authority must simultaneously with filing a report as contemplated under Clause 28(3) of the Control Order must initiate proceedings for suspension or cancellation or debarment. However, if upon receipt of a report from the notified authority under clause 28 (3) of the Control Order, the concerned is of the view that there must be - 36 - proceedings under section 6A of the EC Act because the contraventions are beyond the aforesaid two circumstances or even otherwise graver, such proceedings must be initiated with the closure of the proceedings initiated under Clause 31 of the Control Order.
One of the terms and conditions of the Memorandum of Intimation that a declarant [a retailer dealer] agrees to is that he shall “from time to time report to the notified authority and informed about change in the premises of sale depot and godowns attached to sale depot”, and clause 34 of the Control Order provides for an application to amend entries in authorisation letter. In the present case, the petitioner has not filed this application before the date of inspection but has filed the same later and it is accepted. In the last application for renewal of the authorisation letter, the petitioner has mentioned the Godown address as being within the immediate vicinity of the then Corporation Bank branch situated on the main road of Moka. The inspection
- 37 - report is also that the inspected petitioner’s premise is in the immediate vicinity of this branch but because of the merger, shown as Union Bank branch. The failure to mention complete address or file amendment application to show complete address, must necessarily fall under Clause 31(1)(b) of the Control Order and as such initiation under Section 6A of the EC Act would be, as opined by the writ Court, a drastic and unjustified measure.
This Court is also of the considered view that there are mitigating circumstances, and they must inure to the petitioner’s advantage, especially when it is brought on record that [in terms of the notifications placed before this Court vide the notification dated 15.09.20 22 in No. AGRI –ACT/195/2020] the Notified authorities are appointed under Clause 26A of the Control Order only recently.
In the aforesaid circumstances, as also the fact that if there were proceedings under Clause 31 of the Control Order, the petitioner could have been permitted to dispose of the - 38 - stock, this Court must opine that the writ court is justified in directing the second respondent to return the confiscated fertilizer to the petitioner. ORDER
[i] The writ appeal is allowed in part, and the impugned order dated 14/12/2021 in W.P.No.104417/2021 is modified in the afore terms directing the appellants to release confiscated 1086 bags of fertilizers to the respondent within one week from the date of receipt of a representation from the petitioner.
[ii] The petitioner is reserved liberty to file representation for release of the above said confiscated fertilizers bags within fifteen days from the date of receipt of the certified copy of this order.
- 39 - [iii] The contempt proceedings stand dropped subject to all just liberty. JUDGE JUDGE
KMS/VB List No.: 1 Sl No.: 24
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.