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PETITIONER: SUPERINTENDENT (TECH. I) CENTRAL EXCISE  I.D.D.JABALPUR AND

       Vs.

RESPONDENT: PRATAP RAI

DATE OF JUDGMENT26/04/1978

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA SINGH, JASWANT PATHAK, R.S.

CITATION:  1978 AIR 1244            1978 SCR  (3) 729  1978 SCC  (3) 113  CITATOR INFO :  R          1981 SC 858  (4)

ACT: Natural Justice, Principles of-When an order is struck  down by  the  appellate  authority  being  in  violation  of  the principles  of natural justice, there is no  final  decision and  fresh  proceedings can be taken-Interpretation  of  the Appellate  Collector’s orders-Words and  Phrases-Meaning  of "without prejudice" Customs Act, Section 122 and 128.

HEADNOTE: Twenty-three  watches on which no custom duty was paid  were seized from the respondent by the Customs Authorities and in the  adjudication  proceedings  under  section  122  of  the Customs Act, the Assistant Collector of Customs ordered that the  watches which were seized be confiscated and imposed  a penalty of Rs. 250/- on the respondent under Section 112  of the  Act.  In appeal, the Appellate Collector by  his  order dated 22-2-1972 vacated "without prejudice" the order of the Assistant Collector mainly on the ground that the  Assistant Collector  had  not  complied  with  the  rules  of  natural justice.  The department interpreted the order as an implied order of remand and issued a fresh notice to the  respondent on  27-7-1972  and started fresh  adjudication  proceedings. Thereafter, the respondent filed in the High Court of Madhya Pradesh, a writ petition which was allowed.  The notice  and the fresh adjudication proceedings were quashed. Allowing the appeal by special leave, the Court HELD : 1. Where an order passed in appeal vacates the  order of  the  first  tribunal on  purely  technical  grounds  and expressly states that it was being passed without  prejudice which means an order not on the merits of the case, such  an order  does not debar fresh adjudicatory  proceedings  which may  be  justified under the law.  It is necessary  for  the court  interpreting an order of this kind to give  full  and complete  effect to the exact words used by the  authorities and  not to draw a sweeping conclusion merely from the  fact that  no explicit direction has been made by  the  appellate authority. [735 C-D] 2.   (a)  Whenever an order is struck down as invalid  being in  violation of the principles of natural justice there  is

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no  final  decision of the cause and fresh  proceedings  are left open.  All that is done. is that the order assailed  by virtue of its inherent defect is vacated but the proceedings are not terminated.                                          [732 C] (b) In the instant case A  perusal of the order of the Appellate  Authority  clearly shows two important facts : (1) that the Appellant Collector has  not  set aside or vacated the order  of  the  Assistant Collector  on merits but has vacated it only on a  technical infirmity,  namely,  the violation of the rules  of  natural justice  and  that  is  why  the  Appellate  Collector   has advisedly  used the words "without prejudice" in his  order, (2)  that  the Assistant Collector in his order  dated  30th June.  1969  had directed confiscation of  the  watches  and imposed  a  penalty  of  Rs.  250/-  and  if  the  Appellate Collector  intended to set aside this order  completely  and irrevocably then he should have passed a consequential order for  refund of the amount of the penalty and release of  the property  confiscated.   The  fact that no  such  order  was passed  by  the Appellate Collector clearly  shows  that  he never   intended  to  bar  fresh  adjudicatory   proceedings provided they were conducted according to the principles  of natural justice. [731 A, 732 A-C] (ii) The  Appellate  Collector found that the order  of  the Assistant  Collector  suffered  from  a  serious  procedural infirmity, viz., that it was passed without 12-315SCI/78 730 giving  the respondent a proper opportunity of being  heard, and  therefore, it cannot be said that fresh proceedings  by complying  with  the rules of natural justice could  not  be started against the respondent.  The Appellate Collector has clearly  used  the  words  "without  prejudice"  which  also indicate  that the order of the Collector was not final  and irrevocable. [732 G-H, 733 A] M/s  Thimmasamudram  Tobacco Co. v. Assistant  Collector  of Central  Excise, Nellore Dt.  Nellore, A.I.R. 1961 A.P.  324 approved. 3.   (a)  The  implication of the term  "without  prejudice" means (1) that the cause or the matter has not been  decided on merits, (2) that fresh proceedings according to law  were not  barred.  It is true that the Appellate  Collector  does not  say in so many words that the case is remanded  to  the Assistant  Collector  but the tenor and the  spirit  of  the order  clearly shows that what he intended was  that  fresh proceedings  should be started against the respondent  after complying with the rules of natural justice. [733E-F] (b)  A  true  interpretation of the order of  the  Appellate Collector would be that the order of the Assistant Collector was  a nullity having violated the rules of natural  justice and  having been vacated the parties would be  relegated  to the  position  which they occupied before the order  of  the Assistant Collector was passed.  In this view of the  matter the  Assistant Collector had ample jurisdiction  in  issuing the  notice against the respondent in order to  start  fresh adjudicatory proceedings in accordance with law. [733F-G] Collector  of  Central Excise, Madras v. K.  Pulappa  Nadar, A.I.R.  1964 Mad.  III and The Marsden Spg. and Co. Ltd.  v. Shri  L.  V. Pol.  Superintendent of Central  Excise  (Tax), I.L.R.  1965  Guj.  III criticised,  discussed  and  distin- guished.

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 363 of 1978. Appeal  by Special Leave from the Judgment and  Order  dated the  29th November 1976 of the Madhya Pradesh High Court  in M.P. No. 32 of 1973. E.C. Agarwala and Girish Chandra for the Appellant. Naunit Lal and Kailash Vasdev for Respondent. The Judgment of the Court was delivered by FAZAL  ALI,  J.-This  appeal by special  leave  is  directed against the judgment of the Madhya Pradesh High Court  dated 19th  November  1976  by which the High  Court  quashed  the notice  dated  27th  July  1972  issued  by  the   Assistant Collector  of  Customs and also quashed  fresh  adjudication proceedings  started  by  him under the  provisions  of  the Customs Act (hereinafter referred to as the Act). The appeal lies within a very narrow compass and turns  upon the  interpretation  of the order passed  by  the  appellate authority  under section 128 of the Act.  On  27th  February 1969 the respondent Pratap Rai was detrained at Jabalpur  by the  Customs  authorities  while he was  travelling  by  the Bombay Janta Express.  On being searched as many as 23 wrist watches on which no custom duty was paid were recovered from his  person.   Thereafter  adjudication  proceedings   under section 122 of the Act were commenced by the Assistant  Col- lector  of  Customs  which culminated in the  order  of  the Assistant 731 Collector  dated 30th June, 1969 by which the  watches  were seized  and  ordered to be confiscated.  A  penalty  of  Rs. 250/- was levied on the respondent under section 112 of  the Act.  The respondent then carried an appeal to the Appellate Collector under section 128 of the Act against the order  of the  Assistant  Collector.  The Appellate Collector  by  his order  dated  22nd February 1972 vacated the  order  of  the Assistant Collector mainly on the ground that the  Assistant Collector  had  not  complied  with  the  rules  of  natural justice. The fate of this case depends on the interpretation of the order passed by the Appellate Collector. In  order  to  appreciate  the point  in  issue  it  may  be necessary  to ,extract the relevant portion of the order  of the Appellate Collector which runs thus :-               "The adjudication, therefore, suffers for lack               of  principle of natural justice, inasmuch  as               adequate  opportunities were not given to  the               appellant  to defend his case.  1,  therefore,               without  prejudice,  vacate the order  of  the               adjudication    passed   by   the    Assistant               Collector,    Central    Excice,    Jabalpur."               (Emphasis, supplied). The  department  appears to have interpreted  the  aforesaid order as  an implied cider of remand and  issued  a  fresh notice to the respondent on the 27th July, 1972 and  started fresh  adjudication  proceeding  according  to  the  implied direction  of  the  Appellate  Collector.   Thereafter   the respondent filed a writ petition in the High Court of Madhya Pradesh   assailing   the  notice  and  praying   that   the proceedings  started by the Assistant Collector  even  after the  vacation  of the order by the  Appellate  Collector  be quashed.   The plea taken by the respondent appears to  have found favour with the High Court which allowed the petition, quashed   the   notice  as  also  the   fresh   adjudication proceedings.   The appellant obtained special leave of  this Court  against  the order of the High Court and  hence  this appeal before us. The  only  point that was contended before us by Mr.  E.  C.

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Agrawala  appearing  in support of the appeal was  that  the High ’Court has erred in not properly interpreting the order of  the  Appellate  Collector.   According  to  the  learned counsel,  a true and plain interpretation. of the  order  of the  Appellate  Collector would clearly reveal that  he  had merely vacated the order of the Assistant Collector  because it  suffered from a technical infirmity and had  not  barred the  commencement  of fresh adjudicatory  proceedings.   Mr. Naunit  Lal appearing for the respondent  however  submitted that  there  was  no clear direction in  the  order  of  the Appellate Collector from which it could be inferred that  he had  remanded  the  case,  and,  therefore,  there  was   no jurisdiction  in  the Assistant Collector to issue  a  fresh notice   or  start  adjudicatory  proceedings  against   the respondent.  In our opinion, the contention of counsel  for- the  appellants  appears to be sound and  must  prevail.   A perusal  of the order of the Appellate  Collector  extracted above  clearly  shows  two important facts :  (1)  that  the Appellate Collector has not set aside or vacated the order 732 of the Assistant Collector on merits but has vacated it only on a technical infirmity, namely, the violation of the rules of_natural  justice and that is why the Appellate  Collector has advised used the words "without prejudice" in his order, (2)  that  the Assistant Collector in his order  dated  30th June  1969  had  directed confiscation of  the  watches  and imposed  a  penalty  of  Rs.  250/-  and  if  the  Appellate Collector  intended to set aside this order  completely  and irrevocably then he should have passed a consequential order for  refund of the amount of the penalty and release of  the property  confiscated.   The  fact that no  such  order  was passed  by  the Appellate Collector clearly  shows  that  he never   intended  to  bar  fresh  adjudicatory   proceedings provided they were conducted according to the principles  of natural  justice.  It seems to us that whenever an order  is struck down as invalid being in violation of the  principles of  natural justice there is no final decision of the  cause and  fresh  proceedings are left open.  AR that is  done  is that the order assailed by virtue of its inherent defect  is vacated but the proceedings are not terminated. In the case of M/s.  Thimmasamudram Tobacco Co. v. Assistant Collector  of Central Excise, Nellore Dt.  Nellore(2)  while construing the provisions of the Central Excise and Salt Act which  was  almost on identical terms as the Customs  Act  a Division Bench of the Andhra Pradesh High Court observed  as follows :               "Assuming  that  section  35  of  the  Central               Excise  Act  does  not  clothe  the  appellate               authority  with power to remand the matter  to               the  officer whose orders is appealed  against               nothing  stands  in the way of  the  Assistant               Collector  initiating the proceedings  afresh,               when  his order was quashed not on merits  but               on  technical grounds, i.e. for not  following               either  the  procedure  or  the  dictates   of               natural justice.  In a case where the flaw  in               the order appealed against consists of in  the               non-observance of certain procedure or in  not               giving  effect  to  the  maxim  ’audi  alteram               partem’,  it is open to the officer  concerned               to  start  the procedure once against  with  a               view to follow the rules of procedure and  the               principles of natural justice". We find ourselves in complete agreement with the view  taken by  the Andhra Pradesh High Court and the observations  made

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by Reddy, C.J. who spoke for the Court.  It is obvious  that in  the instant case the Appellate Collector found that  the order  of  the Assistant Collector suffered from  a  serious procedural  infirmity,  viz.,  that it  was  passed  without giving  the respondent a proper opportunity of being  heard, and,  therefore, had to be vacated, In  such  circumstances, therefore,  it  cannot  be said that  fresh  proceedings  by complying  with  the rules of natural justice could  not  be started against the respondent.  The Appellate Collector has clearly used the words "without (1)  A.I.R. 1961 A p. 324 733 prejudice  "  which  also indicate that  the  order  of  the Collector was not final and irrevocable.  The term  ’without prejudice  has  been defined in Black’s  Law  Dictionary  as follows :               "Where an offer or admission is made  ’without               prejudice’, or a motion is denied or a bill in               equity  dismissed ’without prejudice’,  it  is               meant  as  a  declaration that  no  rights  or               privileges  of the party concerned are  to  be               considered  as thereby waived or lost,  except               in  so  far as may be  expressly  conceded  or               decided.    See..  also,   Dismissal   without               Prejudice". Similarly,  in  Wharton’s  Law  Lexicon  the  author   while interpreting  the  term  ’without  prejudice’  observed   as follows               "The words import an understanding that if the               negotiation  fails,  nothing that  has  passed               shall be taken advantage of thereafter; so, if               a defendant offer, ’without prejudice’, to pay               half  the claim, the plaintiff must  not  only               rely  on  the  offer as an  admission  of  his               having a right to some payment.               ’The  rule  is that nothing  written  or  said               ’without  prejudice’ can be considered at  the               trial without the consent of both  parties-not               even by a judge in determining whether or  not               there is good cause for depriving a successful               litigant  of  costs  ....  The  word  is  also               frequently   used   without   the    foregoing               implications in statutes and inter parties  to               exclude or save transactions, acts and  rights               from the consequences of a stated  proposition               and so as to mean not affection’, ’saving’  or               ’excepting"’. In short, therefore, the implication of ,he term  ’without, prejudice’  means (1) that the cause or the matter  has  not been decided on merits, (2) that fresh proceedings according to  law  were  not barred.  It is true  that  the  Appellate Collector  does  not say in so many words that the  case  is remanded  to the Assistant Collector but the tenor  and  the spirit of the order clearly shows that what he intended  was that  fresh  proceedings  should  be  started  against   the respondent  after  complying  with  the  rules  of   natural justice.   Thus,  in our view a true interpretation  of  the order of the Appellate Collector would be that the order  of the  Assistant Collector was a nullity having  violated  the rules of natural justice and having been vacated the parties would  be  relegated  to the position  which  they  occupied before the ,order of the Assistant Collector was passed.  In this  view of the matter the Assistant Collector  had  ample jurisdiction  in issuing the notice against the  respondent in   order  to  start  fresh  adjudicatory  proceedings   in

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accordance with law. The  High  Court however strongly relied on  two  decisions, namely, the decision of the Madras High Court in the case of The  Collector  of  Central Excise,  Madras  v.  K.  Palappa Nadar(1) and (1)  A.I.R. 1964 Mad. 111. 734 of  the Gujarat High Court in the case of The  Marsden  Spg. and  Co. Ltd. v. Shri L. V. Pol, Superintendent  of  Central Excise (Tax) In the Madras case (supra) the order impugned ran as follows               "Having regard to all the circumstances of the               case,  the  Central Board  of  Revenue  hereby               directs,  without prejudice to the  merits  of               the case, [italics (here in ’) ours] the order               dated 3rd March, 1956 passed by the  Collector               of Central Excise, Madras shall be vacated".               The  High Court while interpreting  the  order               observed as follows               "After careful consideration of the  arguments               of  the  learned  Advocate  General  for   the               appellant  and also of the respondent, we  are               of  the  opinion that, in the absence  of  any               specific  words  in the order of  the  Central               Board of Revenue, it is not possible to  spell               out  from its terms a precise direction for  a               de  novo enquiry, giving jurisdiction  to  the               Collector, for that purpose". In  our opinion, the interpretation put by the  Madras  High Court  does not appear to be correct and is too  narrow  and does not carry out the object of the Act.  The Central Board of Revenue had merely vacated the order without prejudice to the  merits of the case which clearly meant that the  merits were not decided by it. Secondly, the order impugned in  the Madras case  (supra) does not indicate the ground on  which the  order  was  vacated whereas in  the  instant  case  the Appellate Collector has expressly stated that the order  was vacated  because it violated the rules of  natural  justice. The  reason given by the Appellate Collector in the  instant case  makes  all the difference.   In  these  circumstances, therefore,   the   Madras   case   {supra)   being   clearly distinguishable  as indicated above, we are of  the  opinion that  the  view  taken by the Madras High  Court  is  of  no assistance to the respondent,’ The  case  of The Marsden Spg. & Co. Ltd.  (supra)  is  also clearly  distinguishable.  In that case the impugned,  order was extracted thus :-               "  Having regard to all the facts of the  case               and  taking into account the  contentions  put               forth  by the appellants, I hereby order  that               the  decision  of the  Superintendent  Central               Excise (Tax), Ahmedabad, shall be set aside.               2.    The amounts of excise duty and  penalty               recovered  from  the appellants  in  pursuance               thereof shall be refunded to them".               Construing this order the High Court  observed               as follows               "If  the appellate order merely  annulled  the               original  order without containing  any  other               directions,   there was  no  power  in   the               original   tribunal   to  initiate   de   novo               proceedings and impose a fresh penalty." (1)  I.L.R. [1965] Guj. 111. 735 It  appears that the Gujarat High Court practically  adopted

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the  reasonings  of  the  Madras  High  Court  in  the  case mentioned  above but the order impugned in the Gujarat  case was  clear and explicit and was final and irrevocable.   The order clearly shows that it was passed on the merits of  the case after taking into account the contentions put forth  by the  appellant.   Secondly, the consequential  order,  viz., that  the amount of excise duty and penalty  recovered  from the  appellants  was to be refunded to  them  which  clearly indicated   that  there  was  no  question  of   any   fresh proceedings  being  initiated.  On the other  hand,  in  the instant case such a consequential order is wholly wanting in the judgment of the Appellate Collector.  For these reasons, therefore,  the  Gujarat  case  is  clearly  distinguishable because  the  order in that case was couched in  terms  very different  from the one we have in the instant case.   Thus, on a careful consideration of the facts and circumstances of the present case we are clearly of the opinion that where an order  passed  in  appeal vacates the  order  of  the  first tribunal  on purely technical grounds and  expressly  states that  it was being passed without prejudice which  means  an order not on the merits of the case, such as order does  not debar fresh adjudicatory proceedings which may be  justified under  the law.  It is necessary for the court  interpreting an  order of this kind to give full and complete  effect  to the  exact words used by the authorities and not to  draw  a sweeping  conclusion merely from the fact that  no  explicit direction has been made by the appellate authority.  We  are unable to agree in this case with the High Court that as  no express  words  were  used in the  order  of  the  Appellate Collector remanding the case the Assistant Collector was not justified  in  commencing  fresh  adjudicatory   proceedings against the respondent. For these reasons, therefore, we allow the appeal, set aside the  order of the High Court and dismiss the  writ  petition filed  by the respondent in the High Court and  restore  the fresh  adjudicatory  proceedings started  by  the  Assistant Collector  by virtue of the notice dated 27-7-1972.  In  the peculiar  circumstances of this case we make no order as  to costs. S. R.                           Appeal allowed. 736