# M/s P.N.C. Construction Co.Ltd v. State of U.P. through Secretary and others

- **Citation:** (2002) 1 ILRA 272
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2002-03-14
- **Case number:** Civil Misc. Writ Petition No. 741 of 2001
- **Bench:** S.K. Sen, C.J. S.Rafat Alam
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-p-n-c-construction-co-ltd-v-state-of-u-p-through-secretary-and-others-39776
- **Pages:** 7

## Headnote

Constitution of India, Article 226/22 -
Writ Petition maintainability - order
proceeding found totally illegal - writ
petition - held maintainable.

Held - Para 15

The contention of the learned Standing
Counsel that at this stage only notice has
been issued and, therefore, this petition
does not lie at this stage is also of no
substance for the reason that it is well
settled legal position that this court can
entertain the writ petition and may pass
appropriate order. Since we have already
concluded in the forgoing paragraphs of
this judgment that the impugned notice
is without jurisdiction, this Court can
entertain
the
writ
petition
while
exercising its jurisdiction under Articles
226/227 of the Constitution of India and
the petitioner cannot be relegated to the
jurisdiction of the assessing authority to
1All] M/s P.N.C. Construction Co.Ltd. V. State of U.P. through Secretary and others
273
show cause and explain the position
before him.

## Text

INDIAN LAW REPORTS ALLAHABAD SERIES [2002
272
held. We are of the opinion for the
reasons given above that the said G.O. is
only directory and not mandatory in
nature.

(Delivered by Hon'ble M. Katju, J.)

1. The petitioner has challenged a
vigilance enquiry. In our opinion no writ
lies against a vigilance enquiry, since
such enquiry doses not give rise to any
cause of action against which the
petitioner can be aggrieved.

2. Learned counsel for the petitioner
has submitted that on the same charges
the petitioner was exonerated in a
disciplinary
enquiry
and
hence
subsequently a vigilance enquiry cannot
be held. We do not agree with this
submission. A vigilance enquiry is only is
the nature of a preliminary enquiry and
hence
the
petitioner
can
have
no
grievance as a preliminary enquiry is only
for the subjective satisfaction of the
employer. It is possible that some fresh
evidence or material may have become
available to the department implicating
the petitioner in some misconduct that
may not have been available earlier.
Hence there is no absolute bar to holding
of a fresh enquiry, even assuming that he
was exonerated earlier, provided there is
some fresh material. Learned counsel for
the petitioner has relied on the G.O. dated
20/12/65 in support of his submission that
after an employee has been exonerated in
an enquiry a fresh enquiry or a vigilance
enquiry cannot be held. We are of the
opinion for the reasons given above that
the said G.O. is only directory and not
mandatory in nature.

3. The with petition is dismissed.
---------

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD MARCH 14, 2002

BEFORE
THE HON'BLE S.K. SEN, C.J.
THE HON'BLE S.RAFAT ALAM, J.

Civil Misc. Writ Petition No. 741 of 2001

M/s
P.N.C.
Construction
Company
Limited

...Petitioner
Versus
State
of
U.P.
through
Institutional
Finance Secretary, U.P., Lucknow and
others

 ...Respondents

Counsel for the Petitioner:
Sri Bharat Ji Agarwal
Sri P.K. Misra
Sri Piyush Agrawal

Counsel for the Respondents:
Mr. Kesarwani
Dr. R.G. Padia
S.C.

Constitution of India, Article 226/22 -
Writ Petition maintainability - order
proceeding found totally illegal - writ
petition - held maintainable.

Held - Para 15

The contention of the learned Standing
Counsel that at this stage only notice has
been issued and, therefore, this petition
does not lie at this stage is also of no
substance for the reason that it is well
settled legal position that this court can
entertain the writ petition and may pass
appropriate order. Since we have already
concluded in the forgoing paragraphs of
this judgment that the impugned notice
is without jurisdiction, this Court can
entertain
the
writ
petition
while
exercising its jurisdiction under Articles
226/227 of the Constitution of India and
the petitioner cannot be relegated to the
jurisdiction of the assessing authority to
1All] M/s P.N.C. Construction Co.Ltd. V. State of U.P. through Secretary and others
273
show cause and explain the position
before him.

(Delivered by Hon'ble S.R. Alam-J.)

1. This petition under Article 226 of
the Constitution is directed against the
notice dated 09.05.2001 issued by the
Trade Tax Officer. Sector 14, Agra
calling upon the petitioner to appear
before him on 16.05.2001 and to file
written reply as to why the recognition
certificate issued under sub Section (2)
Section 4-B of U.P. Trade Tax Act
(hereinafter referred to as the Act) be not
cancelled.

2. We have heard Shri Bharat Ji
Agarwal,
learned
senior
counsel
appearing
for
the
petitioner.
Mr.
Kesarwani, Learned Standing Counsel
appearing for respondents no. 1 to 3 and
Dr. R.G. Padia, learned counsel appearing
for respondents no. 4 & 5.

3. It appears that the petitioner is a
public limited company incorporated
under Indian Companies Act, 1956 and
registered under the U.P. and Central
Sales Tax Act. It entered into a contract
with National Highway Authority of
India, New Delhi for the construction of
4/6 lane of national highways of north,
south, east and west of the Agra Gwalior
section NH-3 and for laning of 24 kms To
41 kms of Agra Bholpur section of NH-3
in the State of U.P. besides that work of
maintenance and repair of NH-2-U.P.-3 in
the State of U.P. was also given. It was
also awarded work by the Construction
Division,
Agra
and
Mathura
for
strengthening and widening the road and
maintenance and repairs of certain roads.
It applied for grant of recognition
certificate under section 4-B of the Act
for the purchase of raw material for
manufacture of hot mix material in its hot
mix plant. The Trade Tax Officer rejected
the request of the petitioner against which
an appeal was preferred before the Deputy
Commissioner (Appeals), Trade Tax,
which was also dismissed vide order
24.04.1997. The aggrieved petitioner
thereafter preferred second appeal no. 75
of 1997 before the Trade Tax Tribunal,
Agra. The learned Trade Tax Tribunal,
Agra having heard the parties found that
the hot mix material is manufactured by
the appellant-petitioner in the hot mix
plant from cement, sand grits, bitumen
etc. for the construction of roads. It is also
found that for manufacturing hot mix
material recognition certificate is granted
to M/s National Highway Construction
Company, Mathura and M/s Oriental
Construction Engineers Ltd., Mathura.
The learned Tribunal, therefore, allowed
the appeal and directed the assessing
authority to grant recognition certificate
for the purchase of raw material against
Form 3-B at a concessional rate of tax.
Consequently,
the
Trade
Tax
Officer/Assessing
authority
issued
recognition certificate in favour of the
petitioner for the purchase of bitumen,
furnace oil. H.S.D. and lubricant. The
petitioner thereafter pursuant to the
recognition certificate purchased various
raw materials against Form 3-B. The
Commissioner, Trade Tax U.P., however,
issued circular on 17.01.2001 intimating
that the purchase of the materials, which
are used in the construction of road,
cannot be made against Form 3-B. It was
followed
by
another
circular
dated
23.02.2001
to
the
effect
that
the
recognition
certificate
issued
under
Section 4-B of the Act to the dealer with
regard to purchase of bitumen, chemical
compound and grits against Form 3-B
INDIAN LAW REPORTS ALLAHABAD SERIES [2002
274
should be reviewed by the issuing
authority. Pursuant to the aforesaid
circular
the
impugned
notice
date
19.05.2001 is issued as to why the same
should not be cancelled.

4. Shri Bharatji Agarwal, learned
counsel for the petitioner contended that
the goods used in execution of works
contract like construction of buildings or
construction of roads amounts to sale of
goods and, therefore, requisite declaration
forms can be given for the purchase of
raw material in respect of such contracts.
It is further argued that the revenue did
not challenge the order of the learned
Trade Tax Tribunal passed in second
appeal preferred by the petitioner by filing
revision as provided under Section 11 (1)
of the Act and, therefore, order of the
Tribunal
dated
19.07.1997
attained
finality and the recognition certificate
granted pursuant thereto cannot not now
be cancelled on the basis of the circular
issued by the Commissioner, Trade Tax.
It is also submitted that the petitioner has
accepted the contract keeping in view the
cost of purchase of bitumen and other
materials against Form 3-B as it holds a
valid recognition certificate under Section
4-B (2) of the Act and now if the
recognition certificate is cancelled in that
event he will have to purchase raw
materials such as bitumen etc, by paying
tax at the rate of 20% rendering whole
contract in viable and it may be
compelled to stop the construction.

5. On the other hand, Shri
Kesarwani, Learned Standing Counsel
opposed the writ petition and submitted
that the impugned order is merely a notice
calling upon the petitioner to show cause
and therefore, this petition is premature
and the appropriate remedy available to
the petitioner is to raise all the contentions
before the Assessing Authority. He,
however, contended that the goods
manufactured by the petitioner cannot be
sold either in the State or in the course of
interstate trade as provided under sub
Section (2) of Section 4-B of the Act nor
the final product of the petitioner is for
sale hence the benefit of Section 4-B of
the Act is not available to the petitioner.
In short the submission is that the goods
manufactured by the petitioner is not
intended to be sold and, therefore, benefit
of Section 4-B cannot be extended to the
petitioner and the impugned notices for
cancellation of recognition certificate has
rightly been issued.

6.

We
have
considered
the
submissions
made
on
both
sides,
Admittedly;
the
petitioner
is
manufacturing hot mix materials out of
different raw materials purchased against
Form 3-B issued to the petitioner in
pursuance of the recognition certificate
granted under Section 4-B (2) of the Act.
It is also not disputed in the counter
affidavit filed by the department that the
hot mix materials manufactured by the
petitioner is used in carrying on the works
of
the
construction,
repairing
and
maintenance of roads.

7. The scope of tax on sale and
purchase of goods is enlarged after the
new definition introduced in clause 29-A
of Article 366 of the Constitution.
Accordingly, Section 3-F was inserted by
U.P. Act No. 25 of 1985 in the U.P. Trade
Tax Act providing for levy of tax on
transfer of property in goods (whether as
goods or in some other form) involved in
the execution of work contract. The
definition of sale given in the Act was
1All] M/s P.N.C. Construction Co.Ltd. V. State of U.P. through Secretary and others
275
also substituted and defined in clause (h)
of Section 2 as under:

2(h) "sale" with its grammatical
variations and cognate expressions, means
any transfer of property in goods
(otherwise than by way of a mortgage,
hypothecation, charge or pledge) for cash
or deferred payment or other valuable
consideration, and includes-

(i) a transfer, otherwise than in
pursuance of a contract, of property in
goods for cash, deferred payment or other
valuable consideration;

(ii) a transfer of property in goods
(whether as goods or in some other form)
involved in the execution of a works
contract;

(iii) the delivery of goods on hirepurchase or any system or payment by
instalments;

(iv) a transfer of the right to use any
goods for any purpose (whether or not for
a specified period) for cash, deferred
payment or other valuable consideration;

(v) the supply of goods by any
unincorporated association or body of
persons to a member thereof for cash,
deferred payment or other valuable
consideration; and

(vi) the supply, by way of or as part
of any service or in any other manner
whatsoever, of goods, being food or any
other article for human consumption or
any drink (whether or not intoxicating)
where such supply or service is for cash,
deferred payment or other valuable
consideration;]"

8. Therefore, the goods used in
execution of work contract are deemed to
be sold, 'Goods' is defined in Section 2
(d) of the Act in the following terms;

"goods" means every kind or class of
movable
property
and
includes
all
materials
commodities
and
articles
involved in the execution of a works
contract, and growing crops grass, trees
and thing attached to or fastened to
anything permanently attached to the
earth which under the contract of sale are
agreed to be served but does not include
actionable
claims,
stocks,
shares,
securities or postal stationery sold by the
Postal Department."

'Manufacture' is also defined under
Section 2 (c-1) of the Act which is as
under:

"manufacture"
means
producing,
making, mining, collecting, extracting,
altering,
ornamenting,
finishing
or
otherwise processing, treating or adopting
any goods; but does not include such
manufacture or manufacturing processes
as may be prescribed."

9. In the case in hand, the activity of
petitioner is to manufacture hot mix
material from different raw materials such
as bitumen, concrete, grits, chemicals etc.
in its hot mix plant. For the purpose the
petitioner has got four hot mix plants and
after processing the raw materials in the
hot mix plant, the produce which comes
out is entirely different product than those
used as raw materials in the process of
manufacturing and is known as hot mix
material which is used in the construction
of roads or its repairing. The Trade Tax
Tribunal in its order dated 19.07.1997
found that the petitioner manufactures hot
INDIAN LAW REPORTS ALLAHABAD SERIES [2002
276
mix material in hot mix plants by using
different materials and it is used in the
construction of roads which amounts to
sale under the definition of sale given in
the Act and thus, the petitioner satisfies
the condition laid down in Section 4-B (2)
of the Act for grant of recognition
certificate.

10. In paragraphs 4,7,10 and 16 of
the writ petition, it has specifically been
pleaded that the hot mix material
manufactured by the petitioner is used in
the repair, maintenance and construction
of roads in the execution of work contract
and this has not been specifically denied
in the counter affidavit filed on behalf of
the department. The stand taken in the
counter affidavit, in short, is that the
goods manufactured by the petitioner, i.e.,
hot mix materials is not intended to be
sold, hence the benefit of Section 4-B of
the Act is not available to him, which
cannot be accepted in view of the legal
position that the goods used in execution
of work contract are deemed to be sold.
Therefore, looking to the activities of the
petitioner which is not specifically denied
even before this Court in the counter
affidavit, we are of the view that the
petitioner fulfils the requirement of law
for availing the benefit of section 4-B of
the Act.

11. The recognition certificate under
Section 4-B (ii) of the Act was granted to
the petitioner pursuant to the order of the
learned
Trade
Tax
Tribunal
dated
19.07.1997 in Second Appeal No. 75 of
1997 for the purchase of raw material
against Form 3-B with effect from 1st of
March, 1997, i.e. from the date of
application and respondents did not
challenge the order of the learned Trade
Tax Tribunal by preferring revision under
Section 11 of the Act, thus it became final
and binding on the parties.

12. It is well settled legal position
that the Revenue Officers are bound by
the decision of the appellate authority.
The Trade Tax Tribunal being appellate
authority. The Trade Tax Tribunal being
appellate authority, its order is binding
upon the assessing Authority and the
revenue
who
functions
under
the
jurisdiction of the Tribunal. The Apex
Court in the case of Union of India and
others
Versus
Kamlakshi
Finance
Corporation Limited reported in AIR
1992 SC page 711 held that the principles
of judicial discipline require that the order
of the appellate authorities should be
followed unreservedly, by the subordinate
authorities and if this healthy rule is not
followed the result will only be undue
harassment to assessees and chaos in
administration of tax laws.

13. The Apex Court in the case of
Authorised Officers (Land Reforms) Vs.
M.M. Krishnamurthy Chetty, reported in
1998 Vol. 9 SCC 138, held that it is well
settled that even order which may not be
strictly legal, become final and are
binding between the parties if they are not
challenged before the superior court.
Similar view was again reiterated by the
Apex Court in the case of V. S Charati
Vs. Hussein Nhanu Jamadar (Dead) by
LRS, reported in 1999 vol. 1 SCC 273
and in para 9 of that judgement it was
observed that a decision simply because it
may be wrong would not thereupon
become a nullity it would continue to
blind the parties unless set aside.
Therefore, the respondents having not
challenged the order of the learned Sales
Tax Tribunal dated 19.07.1997 is bound
by the same.
1All] M/s P.N.C. Construction Co.Ltd. V. State of U.P. through Secretary and others
277

14. Beside that from a perusal of the
impugned notice dated 09.05.2001, it is
apparent
that
the
proceeding
for
cancellation of recognition certificate is
being initiated on account of two circulars
dated 07.01.2001 and 23.02.2001 issued
by the Commissioner of Trade Tax, U.P.,
Lucknow. There is no allegation in the
notice that the petitioner has violated any
terms or conditions of the recognition
certificate or it is being misused, nor it is
alleged that the raw materials purchased
on the basis of recognition certificate are
not being utilized in the construction of
road pursuant to the work, contract. Had it
been the case where it has been found that
the assesses or the petitioner has misused
the recognition certificate or not used the
raw material purchased against Form 3-B
for the purpose it has been issued, in that
event, the assessing authority or the
competent authority could have initiated
proceeding for cancellation of recognition
certificate. But merely on the basis of the
aforesaid two circulars issued by the
Commissioner of Trade Tax much after
the grant of recognition certificate, which
in our view, cannot be enforced with
retrospective effect, it does not justify
initiation of proceedings for cancellation
of the recognition certificate granted
pursuant to the order of the Sales Tax
Tribunal which was never challenged by
the department by filing revision under
Section 11 of the Act and thus, the order
of the learned Tribunal became final and
binding on the parties and now it is not
open for the revenue to sit over the
judgment on the basis of aforesaid two
circulars. By not filing revision against
the order of the learned Tribunal, it would
be deemed that the revenue has accepted
the order and now it cannot turn around to
nullify the order which they could have
very
well
assailed
in
appropriate
proceeding provided under the Act itself.
In that view of the matter, the order of the
learned Tribunal is binding on the revenue
and the impugned notice is without
jurisdiction.

15. The contention of the learned
Standing Counsel that at this stage only
notice has been issued and, therefore, this
petition does not lie at this stage is also of
no substance for the reason that it is well
settled legal position that where the order
or
proceeding
is
wholly
without
jurisdiction, this court can entertain the
writ
petition
while
exercising
its
jurisdiction under Articles 226/227 of the
Constitution of India and the petitioner
cannot be relegated to the jurisdiction of
the assessing authority to show cause and
explain the position before him, specially
when the statement of facts averred in the
writ petition is not denied so far as it
relates to the activities of the petitioner,
and also in the absence of any allegation
regarding misuse of the recognition
certificate. That apart, the assessing
authority, i.e. Trade Tax Officer, Sector
14,
Agra
respondent
no.
3
being
subordinate to the Commissioner of Trade
Tax, is bound by the circulars and,
therefore, asking the petitioner to give
show cause pursuant to the notice would
be illusory and an empty formality.

16. Learned Standing Counsel
pointed out that in Writ Petition No. 970
of 2001 - M/s Khattar & Co., Pvt. Ltd.
Vs. State of U.P. & others, this Court
against
the
order
of
Assistant
Commissioner
(Assessment-9),
Trade
Tax, Agra, cancelling the certificate
issued under Section 4-B of the Act,
refused to entertain the writ petition and
directed
that
petitioner
to
exhaust
alternative remedy by way of appeal
INDIAN LAW REPORTS ALLAHABAD SERIES [2002
278
provided under Section 9 of the Act. The
record of writ petition no. 970 of 2001,
was also placed before us along with the
instant writ petition. A perusal of the
record shows that in the case that writ
petition was preferred against the final
order dated 30.07.2001 cancelling the
recognition certificate. It further appears
that earlier that notice was issued under
Rule 25-Ka (9) to show cause as to why
the recognition certificate should not be
cancelled for violating the provision of
section 4-B of the Act, pursuant to which
show cause was filed before the assessing
authority and thereafter, by a reasoned
order dated 30.07.2001, the recognition
certificate was cancelled. Since in that
case final order was passed, therefore, this
Court directed to exhaust the statutory
remedy of appeal, whereas in the casein
hand, there is no allegation of violation of
any
terms
and
conditions
of
the
recognition certificate or of the provisions
contained in Section 4-B of the Act nor
there is any allegation of misuse of
recognition certificate or of Form 3-B and
the petitioner approached this Court
immediately after issuance of notice
instead of submitting to the jurisdiction of
the assessing authority. Therefore, the
case of the present petitioner cannot be
equated with that of writ petition no. 970
of 2001.

17. In view of the discussions made
above the writ petition succeeds and is
allowed. The impugned notice dated
09.05.2001 and the proceeding initiated
pursuant thereto, are quashed. There shall,
however, be no order as to costs.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABD 14.03.2002

BEFORE
THE HON'BLE S.K. SEN, C.J.
THE HON'BLE S.RAFAT ALAM, J.

Special Appeal No. 71 of 2001

Keshav Prasad Lal

...Appellant
Versus
State of U.P. and others ...Respondents.

Counsel for the Appellant:
Smt. Poonam Srivastava

Counsel for the Respondents:
Sri Umesh Kumar Pandey
S.C.

U.P. Consolidation Lekhpal Service Rules
1978 - Section 24- Retirement where
the Rules is silent - Provision of
Government
servant
Rule
applicable
after
the
revision
of
pay
Scale
-
considering the qualification, nature of
work, the Lekhpals are much qualified
and doing ministerial work - they are
class III employees - retirement at the
age of 58 held proper.

Held - Para 13

The
functions
and
duties
of
Consolidation
Lekhpal
is
almost
of
ministerial nature such as to collect
agricultural statistic in respect of Kharib
and rabi crops every year during the
period the village remains under the
consolidation
operation,
to
prepare
statement in CH forms 7 regarding the
amount of land revenue payable on new
holdings and also to prepare revised
annual
register
in
Ch
form
II
incorporating all the orders relating to
rights and liabilities in respect of the
land etc. which are of clerical nature.
Besides
that
qualification
for
appointment to the post of Consolidation
Lekhpal is high school, with a training