Malaiyappan vs. The District Manager

Facts

The petitioners, TASMAC Supervisors, are challenging orders dated May 21, 2020, issued by the District Manager, TASMAC, Karur District. The orders directed them to pay additional amounts as shortage amounts, citing the TASMAC Code of Prevention and Detection of Fraudulent Acts in Tamilnadu State Marketing Corporation Limited-2014 (Code 2014) Rule 7.I.XIV. The petitioners argued that on March 23, 2020, due to an emergent instruction to close TASMAC shops at 6:00 PM and the subsequent national lockdown announced on March 23, 2020, they were unable to accurately calculate sales and deposit amounts. They provided approximate figures and later, after shifting stock, disclosed correct particulars. However, the respondent demanded payment of shortage amounts and imposed penalties, including GST, without prior notice or an opportunity for personal hearing. The petitioners had already paid initial amounts demanded, including interest and OST.

Held

The Court held that the impugned orders imposing a fine amount of Rs.1,39,600/-, Rs.3,40,383/-, and Rs.4,89,087/- respectively, with GST, under Rule 2(c)(ii) of the Code of Prevention and Detection of Fraudulent Acts in TASMAC, were invalid. The Court found that Code 6(n) mandates that before imposing any punishment after charges are proved, the delinquent must be given an opportunity to make a representation against the proposed punishment. This opportunity for personal hearing was not followed by the authorities. The respondent directly imposed the punishment, directing payment within three days and threatening disciplinary action if not complied with. The Court emphasized that the respondent was supposed to provide an opportunity of hearing before passing any order of recovery. Therefore, the impugned orders were set aside. The Court directed the respondent to issue fresh show-cause notices to the petitioners as per the Rules, providing an opportunity of hearing, and then initiate appropriate proceedings.

Key Issues

1. Whether the impugned orders imposing shortage amounts and penalties, including GST, under the TASMAC Code 2014 are valid without providing the petitioners an opportunity for personal hearing, as mandated by Code 6(n)? Petitioner's arguments: The petitioners contended that the respondent passed the impugned orders imposing penalty and shortage amounts without giving them any prior notice or an opportunity for personal hearing, which is contrary to the principles of natural justice and the specific provisions of the TASMAC Code 2014. They argued that the circumstances arising from the lockdown on March 23, 2020, led to difficulties in accurate sales calculation and timely deposit, and the subsequent demands were made arbitrarily. Respondent's arguments: The respondent argued that only a penalty has been imposed, and the shortage amounts were paid by the petitioners voluntarily. They claimed that the penalty amount was to be paid within three days to a specific TASMAC account, after which the respondent would consider and pass appropriate orders. They asserted that the imposition of penalty was in accordance with prevailing rules.