Madhya Pradesh High Court

Narmada Prasad Upadhyay vs Commercial Taxes Department on 10 August, 2023

Author: Vijay Kumar Shukla

                                                   1


                           IN THE HIGH COURT OF MADHYA PRADESH
                                         AT INDORE
                                                  BEFORE
                                 HON'BLE SHRI JUSTICE VIJAY KUMAR SHUKLA
                                         ON THE 10th OF AUGUST, 2023
                                         WRIT PETITION No. 253 of 2015

                           BETWEEN:-

                           NARMADA      PRASAD      UPADHYAY     S/O
                           BRIJMOHAN UPADHYAYA, AGED ABOUT 63 YEARS,
                           OCCUPATION: MEMBER M.P. VANIJYIK KAR
                           APPELLATE BOARD, 85 INDRA GANDHI NAGAR,
                           KESHAR BAG ROAD, INDORE (MADHYA PRADESH)



                                                                          .....PETITIONER
                           (BY SHRI SUNIL JAIN - SR. ADVOCATE WITH SHRI
                           KUSHAGRA JAIN AND SHRI VISMITH UPADHYAY -
                           ADVOCATES)

                           AND

                           1.    STATE OF MADHYA PRADESH THROUGH
                                 PRINCIPAL SECRETARY, COMMERCIAL TAX
                                 DEPARTMENT,    GOVT.   OF   MADHYA
                                 PRADESH, VALLABH BHAWAN, BHOPAL
                                 (MADHYA PRADESH)




                           2.    MADHYA     PRADESH   VANIJAYIK  KAR
                                 APPELLATE    BOARD    THROUGH    ITS
                                 REGISTRAR, BHOPAL (MADHYA PRADESH)




                           3.    CHAIRMAN M.P. VANIJAYIK KAR APPELLATE
                                 BOARD, BHOPAL (MADHYA PRADESH)




Signature Not Verified
Signed by: VARGHESE
MATHEW
Signing time: 11-08-2023
20:06:43
                                                           2


                           4.    COMMISSIONER,    COMMERCIAL     TAX
                                 DEPATMENT,       MOTI      BUNGLOW,
                                 COMMISSIONERATE    CAMPUS,   INDORE
                                 (MADHYA PRADESH)




                           5.    ACCOUNTANT GENERAL OF M.P. LEKHA
                                 BHAWAN, GWALIOR (MADHYA PRADESH)



                                                                                         .....RESPONDENTS
                           (MS.BHARTI LAKKAD - G.A. FOR RESPONDENT NO.1 AND
                           NONE FOR OTHER RESPONDENTS)
                                 This petition coming on for hearing this day, the court passed the

                           following:

                                                        ORDER

The instant petition is filed under Articles 226/227 of the

Constitution of India challenging the orders dated 30.12.2014 passed by

the State government and also the letter dated 30.12.2014 addressed

to the Registrar - respondent No.2 as well as the orders dated

31.12.2014 and order dated 2.1.2015 passed by the respondent No.2

whereby the respondents have treated the petitioner as retired with effect

from 31.1.2012 and sought recovery to the tune of Rs.22,92,290/- and

also seeking interest on the alleged recovered amount vide Annexure

P/3-A.

2. Facts of the case are that the petitioner was working as

Director, Commercial Tax. He was offered the post of Member,

Madhya Pradesh Vanijyik Kar Appellate Board (hereinafter referred to

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as the "Board"). The petitioner accepted the said offer on the condition

that he is unable to accept the offer on the existing terms and service

conditions and he will accept the said offer if he is granted higher pay

scale and band value (Annexure P/6).

3. The petitioner was appointed as Sales Tax Officer in

September, 1975. He was promoted as Regional Assistant

Commissioner in the year 1984 and further promoted as Dy.

Commissioner, Commercial Tax in the year 1997. He was further

promoted to the post of Addl. Commissioner, Commercial Tax in the

year 2004 and in the year 2009 he was promoted to the post of Director,

Commercial Tax. It is pleaded that Director is the highest post in the

hierarchy of departmental officers of the Commercial Tax

Department. He performed his duties on the said post upto 13.1.2010.

Thereafter a proposal was made for appointment on the post of

Accountant Member in the Board by the Government. The petitioner

submitted a short representation to Director, Commercial Tax making a

request that if the salary hike in comparison to salary of his then posting

as Director is made available and higher and better service conditions

are provided to him, then he would be in a condition to consider the

same. It is pleaded that the government accepted the offer of the

petitioner and selected him for the post of Member by Committee

formed for this purpose. It is asseverated that the government assured

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that his request would be accepted and he was promised for providing

the scale of the Secretary to the Government of Madhya Pradesh and

was further promised to provide higher and better service conditions.

Thereafter by order dated 6.1.2010 the State government appointed him

as Member of the Board under the provisions of the VAT Act and VAT

Rules. The petitioner joined as Member of the Board on 13.1.2010. It

is stated that no service condition was fixed by the government

specifically, however, the pay scale of the Secretary was given to the

petitioner as per the amended Rule 4 of the VAT Rules which was made

effective from 13.8.2010. The petitioner submitted a representation on

18.8.2010 Annexure P/10 and sought pay scale of the Secretary to the

Government of Madhya Pradesh as per Rule 4 of the VAT Rules 2006

with effect from 13.8.2010. The government accepted the

representation and granted him the pay scale of the Secretary of the

government of Madhya Pradesh. On 7.2.2011 an order was issued by

the government by which the petitioner has been directed to be retired

with effect from 14.1.2010 when the petitioner has taken over the charge

as Member of the Board. The petitioner pointed out that his age of

superannuation is 31.1.2012 and not 14.1.2010 then the order dated

24.2.2012 was issued whereby the order dated 7.2.2011 was modified

and it was directed that the petitioner shall be treated as "deemed

retired". Copy of the order dated 24.2.2012 is placed as Annexure P/12.

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4. Prior to amended Rules, the age of superannuation of the

Board Member was 62 years but under the amended Rule 4(5) the

retirement age was enhanced to 63 years. By order dated 11.3.2013 the

petitioner was given the benefit of the enhanced age of superannuation

and he continued upto age of 63 years as Member of the Board i.e.

13.2.2015. The petitioner was also given annual increment when he

attained the age of 61 years. The State government also replied to the

Registrar of the Board that the petitioner shall be given the benefits as

per the amended provisions. Lateron for subsequent year the said

benefit was not given and petitioner preferred the representation to the

Chairman of the Board. According to the petitioner, he was entitled for

the said benefit in terms of the Rule 4(6)(8) of the VAT Rules. The

service conditions of the petitioner has been distinctly described

wherein the service condition of the accountant Member from the State

Taxation Service was given the benefit of the pay scale and pensionary

benefits as per the Members of State Taxation service in view of Rule

4(6)(8) of the VAT Rules. According to the petitioner he is entitled to

get all the salary and benefits till the age of 63 years as Members of the

State Taxation Service with all increments and other related benefits

whereas respondents have treated him retired with effect from

31.1.2012 (age of superannuation in the department) and after this

period according to the respondents the petitioner is entitled to get the

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benefit of salary to the post of Secretary of the State Government and is

only entitled for pay minus pension as per Sub Rule 4(6) and Rule 4(8)

and VAT Rules.

5. The petitioner also relied upon the various note sheets

obtained under Right to Information Act to show that the State

government has categorically opined in favour of the petitioner based

upon service conditions of the Member of the M.P. Public Service

Commission. It is stated that the petitioner is serving the appellate board

as a Member since January 2010 and retired from the said post in

January 2015, however, by the impugned order the respondents are

treating him retired on completion of 60 years and after that remaining

three years as Member of the Board he will be having entitlement of pay

minus pension only.

6. By the impugned orders Annexure P/1, P/1-A, P/2, P/3 and

P/3-A the respondents have treated the petitioner as retired with effect

from 31.1.2012 and sought recovery to the tune of Rs.22,92,290/-. It is

urged that the aforesaid orders are based on erroneous interpretation of

Rule 4 of VAT Rules and, therefore, they are liable to be quashed.

7. Per contra, the respondents have denied the claim of the

petitioner and supported the impugned orders and argued that the order

is based on proper interpretation of Rule 4 of VAT Rules. It is also

stated that there is no document to show that the respondents have

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extended oral assurance to the petitioner to grant higher benefits than

the post of Director, State Taxation Service. It is contended that sub-

rule 6 to Rule 4 of VAT Rules, 2006 clearly provides that the monthly

salary and allowances payable to an officer to the rank of Secretary to

the State government shall be admissible as monthly salary in respect of

Member of the Appellate Board. The petitioner was posted and holding

the post of Member of the Board meaning thereby the salary and

allowances is as admissible to the officer of the rank of the Secretary.

It is further stated that as per Sub Rule 8 of Rule 4, a Member of the

State Taxation Service on being appointed as Member of the Board shall

be deemed to have retired from service on the day when he assumes

charge of the Member. His subsequent service shall be counted as his

service in the M.P. State Taxation Service for pension and retiral

benefits payable to him. Since the petitioner was granted the benefits

of M.P. State Taxation Service till his date of superannuation i.e.

31.1.2012 erroneously because he was entitled only for salary

admissible to the officer of the rank of Secretary. The petitioner was

not entitled for the said benefits and, therefore, same is recoverably in

the light of the judgment passed in the case of Chandi Prasad Uniyal

(2012) 8 SCC 417. There is no illegality in the impugned orders and

the petition is liable to be dismissed.

8. I have heard the learned counsel for parties.

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9. Facts which have emerged are that the petitioner was working

as Director in Commercial Tax Department. He was offered the post of

Member, Commercial Tax Appellate Board. He submitted letter dated

26.9.2009 in response to the offer and requested that if the salary hike

in comparison to the salary of the then posting as Director is made

available and higher and better conditions are provided to him, then he

would be in a position to consider the same. According to him, he was

orally assured by the highest authorities of the government about

acceptance of his request and he was also promised for providing the

scale of the Secretary to the government of Madhya Pradesh. He was

appointed Member by the State government by order dated 6.1.2010.

Admittedly, no written order was issued by the State government

accepting his conditional offer for appointment. The petitioner joined

as Member of the Board on 13.1.2010. The petitioner was granted the

pay scale of the Secretary with effect from 13.8.2010. The petitioner

was granted pay scale of the Secretary of the government of Madhya

Pradesh. The respondents passed an order on 7.2.2011 whereby the

petitioner has been directed to be retired with effect from 14.1.2010, the

date when the petitioner has taken over the charge as Member of the

Board. The said order was issued on 7.2.2011. The petitioner was

treated to be "deemed retired" from the said date. The retirement age

of the Board Member was 62 years. By the amendment the age was

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enhanced to 63 years and the petitioner was granted the benefit of the

enhanced age of superannuation by order dated 11.3.2013. By order

dated 7.10.2013 State government apprised the Registrar of the Board

that the petitioner be given benefits subsequently. According to the

respondents the petitioner has to be treated retired with effect from the

date he assumed the charge of the Member i.e. 14.1.2010 in view of sub

rule 8 of Rule 8 and as per proviso to sub rule 6 of Rule 4 since he has

already retired from M.P. State Taxation Services he shall draw monthly

salary and allowance payable to the Secretary less monthly pension

being paid to him. Thus, after assuming the charge of the Member of

the Board, the petitioner was entitled only for the salary and allowance

payable to the Secretary less pension. Counsel for State relied on the

provisions of sub rule 8 and sub rule 6 of Rule 4 of VAT Rules. It is

argued that since the benefits have been wrongly paid to the petitioner

after his deemed retirement i.e. 14.1.2010 the said amount has to be

recovered by calculating it as salary and allowance of the Secretary less

monthly pension.

10. Counsel for petitioner also relied on sub rule 8 of Rule 4 and

submitted that after assuming the charge of the Member, his subsequent

service as Member shall be counted as service in M.P. State Taxation

Service for pension and retiral benefits under the Rules applicable to

him. The provision to Rule 6 would not apply to him because he was

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a serving Member on the date of the appointment and not retired from

the State Taxation Service.

11. To appreciate the rival submissions, it is relevant to consider

the relevant provisions of the VAT Act and the amended and

unamended provisions of Rule 4 of VAT Rules.

12. The appointment of Member of the Board is governed by the

provisions of Value Added Tax Act, 2002 (hereinafter referred as "VAT

Act") and the Rules called Value Added Tax Rules 2006 (hereinafter

referred as the "Rules 2006"). The appellate Board is constituted u/S.4

of VAT Act. Sub-section 8 of Section 4 provides for appointment of

Accountant Member. The relevant provision of sub-section 8 of Section

8 is reproduced as under:-

"(8) Accountant members shall be the person who has been in practice of Accountancy in State Tax/Commercial Tax/Value Added Tax, as a Chartered Accountant for at least ten years, or who has been a member of the Madhya Pradesh State Taxation Service and has held the post of the Madhya Pradesh State Taxation Service and has held the post of Additional Commissioner or equivalent or a higher post for at least three years. At least one accountant member shall be a serving or retired member of Madhya Pradesh State Taxation Service."

13. The relevant provisions of unamended Rule 4 reads as under:-

"9. Rule 4 substituted by Noti. No.67, dt.13.8.10 w.e.f. 13.8.10.

Earlier to substitution Rule 4 read as under:

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(i) The Appellate Board shall consist of a Chairman and such number of members as may be appointed by the State Government.

(2) (a) The Chairman of the Appellate Board shall be a serving or retired member of the Indian Administrative Service of the Madhya Pradesh Cadre, who has held the post of Principal Secretary or equivalent in the Government of Madhya Pradesh for at least three years.

(b) At least one member of the Appellate Board shall be an advocate within the meaning of the Advocates Act, 1961 (No. 25 of 1961) or a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 (No. 38 of 1949), who has experience of at least ten years of practice in Sales Tax, Commercial Tax or Income Tax.

(c) At least one member of the Appellate Board shall be a serving or retired Officer of the rank of Additional Commissioner of Commercial Tax Department.

*(2A)(a) The Chairman of the Appellate Board referred to in sub-rule (2) shall be appointed by the State Government on the recommendation of a selection committee consisting of the following officials, namely:

(i) Chief Secretary, Government of Madhya Pradesh - Chairman

(ii) Principal Secretary, Government of Madhya Pradesh Law and Legislative Affairs Department -- Member

(iii) Principal Secretary, Government of Madhya Pradesh General Administration Department - Member

(iv) Principal Secretary, Government of Madhya Pradesh Commercial Taxes Department - Member Secretary

(b) The selection shall be made in accordance with the manner and procedure as may be decided by the selection committee.

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(2B)(a) The members of the Appellate Board referred to in sub-rule (2) shall be appointed by the State Government on the recommendation of a selection committee consisting of the following officials, namely:

(i) Chief Secretary, Government of Madhya Pradesh -- Chairman

(ii) Chairman Appellate Board -- Member

(iii) Principal Secretary, Government of Madhya Pradesh Law and Legislative Affairs Department - Member

(iv) Principal Secretary, Government of Madhya Pradesh General Administration Department -- Member

(v) Principal Secretary, Government of Madhya Pradesh Commercial Taxes Department -- Member Secretary

(b) The selection shall be made in accordance with the manner and procedure as may be decided by the selection committee.

(3) The salaries, allowances and other conditions of service of the Chairman and members of Appellate Board shall be such as the State Government may, by order, specify.

14. The relevant provisions of amended Rule 4 of VAT

Rules reads as under:-

"(1) The Appellate Board shall consist of a Chairman and such number of members as may be appointed by the State Government.

(1-A) The provisions of this rule shall mutatis mutandis apply to an additional member appointed under sub- section (3-A) of Section 4.

(2) The Chairman of the Appellate Board referred to in sub-rule (1) shall be appointed by the Government.

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(3)(a) The members of the Appellate Board referred to in sub-rule (1) shall be appointed by the Government on the recommendation of a selection committee consisting of the following:

(i) Chief Secretary, Government of Madhya Pradesh -

                                     - Chairman

                                   (ii)    Chairman, Appellate Board -- Member

                                   (iii)    Principal Secretary, Government of Madhya

Pradesh, Law and Legislative Affairs Department -- Member

(iv) Principal Secretary, Government of Madhya Pradesh Commercial Taxes Department -- Member Secretary

(b) The selection shall be made in accordance with the manner and procedure as may be decided by the selection committee.

(4) The Chairman of the Board shall draw monthly salary and allowances payable to the Chief Secretary less the monthly pension being paid to him."

15. The appointment of Member of the Board is governed by the

provisions of Value Added Tax Act, 2002 (hereinafter referred as "VAT

Act") and the Rules called Value Added Tax Rules 2006 (hereinafter

referred as the "Rules 2006"). The appellate Board is constituted u/S.4

of VAT Act. Sub-section 8 of Section 4 provides for appointment of

Accountant Member. The relevant provision of sub-section 8 of Section

8 is reproduced as under:-

"(8) Accountant members shall be the person who has been in practice of Accountancy in State Tax/Commercial Tax/Value Added Tax, as a Chartered Accountant for at

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least ten years, or who has been a member of the Madhya Pradesh State Taxation Service and has held the post of the Madhya Pradesh State Taxation Service and has held the post of Additional Commissioner or equivalent or a higher post for at least three years. At least one accountant member shall be a serving or retired member of Madhya Pradesh State Taxation Service."

16. From perusal of the provisions of sub section 8 of Section 4,

it is provided that atleast one Accountant Member shall be serving or

retired Member of M.P. State Taxation Service. Thus, a retired

Member of M.P. State Taxation Service was eligible to be appointed as

Member of the Board. Admittedly, the petitioner was serving as

Director of State Taxation Service on the date of his appointment as

Member. On the date of his appointment, in the existing Rule 4(2)©, it

is provided that atleast one Member of the Appellate Board shall be a

serving or retired officer of the rank of Additional Commissioner of

Commercial Tax Department. Thus, both the provisions provided for

appointment of a serving Member of the State Taxation Service as

Member of the Board. As per sub Rule 3 of unamended provisions of

Rule 4 it was provided that the salaries, allowances and other conditions

of service of Chairman and Members of the appellate Board shall be

such as State government may by order specified. On specific query,

counsel for petitioner submitted that the State did not pass any order

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regarding his salary, allowance and other conditions of service till

substitution of Rule 4 with effect from 13.8.2010.

17. To resolve the controversy involved in the present case, the

sub Rules 6 and 8 has to be read together and they have to be interpreted

harmoniously. Amended sub Rule 6 of Rule 4 provides that a Member

of the Board who was/is not a Member of the M.P. Higher Judicial

Service, shall draw monthly salary and allowances payable to an Officer

of the rank of the Secretary to the State Government. Proviso provides

that if the Member has already retired from the M.P. State Taxation

Services before his appointment as Member of the Board, he shall draw

monthly salary and allowance payable to the Secretary less monthly

pension being paid to him. The entire emphasis of the counsel for the

State government is on proviso to sub Rule 6 of Rule 4 that since the

petitioner stood "deemed retired" with effect from 14.1.2010, therefore,

by virtue of Sub Rule 8 he was entitled only for salary and allowances

minus pension and not the salary and allowance of the Secretary with

pension. The Sub Rule 8 provides that a serving Member of M.P. State

Taxation Service on being appointed as a Member of the Board shall be

deemed to have retired from the service on the date he assumes the

charge of the Member, but his subsequent service as Member shall be

counted as his service in the M.P. State Taxation Service for pension

and retirement benefits under the Rules applicable to him.

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18. On reading Sub Rule 6 and 8 harmoniously it is crystal clear

that a Member who is not retired and is serving in M.P. State Taxation

Service shall be treated to have deemed retired from the date he

assumes the charge of Member but his subsequent service as Member

shall be counted as his service in the M.P. State Taxation Service for

pension and retiral benefits under the Rules applicable to him. Since

the petitioner was serving as Member on the date of appointment,

proviso to Sub Rule 6 shall not be applicable to him as it is applicable

to those who have already retired before appointment. Words "already"

and "before" used in the proviso to Sub Rule 6 make it clear the

intention of the proviso to Sub Rule 6. His services shall be governed

under the later part of Sub Rule 8 and his servicer as a Member shall be

counted as service in M.P. State Taxation Service for pension and retiral

benefits under the Rules applicable to him. The petitioner has initially

submitted a representation before his appointment as Member of the

Board and submitted conditional offer that he would accept the

assignment only when he is provided higher and better service

conditions. The respondent State did not pass any order and appointed

him as Member on 6.1.2010. They did not decide the terms and

conditions of the petitioner even as per amended Sub Rule 3 of Rule 4.

Both the parties could not file any order specifying any general order or

specific order in regard to the petitioner by the State government

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regarding services, allowances and other conditions of service. The

conduct of the respondents of not specifying the salaries, allowance and

other conditions by general or special order in terms of Sub Rule 3 of

Rule 4 unamended leads to draw a presumption that the respondents

accepted the conditional offer of the petitioner regarding grant of higher

and better conditions.

19. From bare perusal of Sub Rule 6 Sub Rule 8 of amended

Rule 4, it is crystal clear that proviso to Sub Rule 6 would not apply to

the petitioner because it applies to the Members who have "already"

retired "before" appointment as Member of the Board. The petitioner

was serving on the date of appointment as Member. As per Sub Rule 6

he was entitled to get the salary and allowance payable to an officer of

the rank of the Secretary to the State government which was later

granted by the respondents. Since the petitioner was serving Member

and was not a retired Member of a State Taxation Service, his

subsequent service as Member has to be counted as his service in the

M.P. State Taxation Service for pension and retirement benefits under

the Rules applicable to the State Taxation Services. The respondents

passed the order of deemed retirement by order dated 7.2.2011. The

said order was further rectified by the respondents directing that instead

of retired, he shall be treated as deemed retired on 14.1.2010. The

petitioner was granted all benefits till his retirement as Member i.e.

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13.2.2015. He was granted the benefit of age enhancement of

superannuation age.

20. Thus, on conjoint reading and harmonious construction of

Sub Rule 6 Sub Rule 8 of Rule 4, it is held that proviso to Sub Rule 6

of Rule 4 would not apply to the petitioner who was notionally retired

with effect from 14.1.2010 under Sub Rule 8 but his subsequent service

till his completion of tenure as Member i.e. 13.2.2015 shall be governed

by them Rules applicable to the Member of M.P. State Taxation Service

for pension and retiral benefits.

21. The argument of learned counsel for State that since the

petitioner was retired by deemed retirement under Sub Rule 8, therefore,

proviso would apply, is repelled. The provisions of Sub Section 8 of

can be appointed as Member of the Board. Admittedly, petitioner was

serving as Director of State Taxation Services on the date of

appointment as Member, he was not retired Member of State Taxation

Services, therefore, in view of above interpretation, proviso is not

applicable. The subsequent service of the petitioner has to be counted

as his service in M.P. State Taxation Service for pension and retirement

benefits under the Rules.

22. The respondents have also passed order of recovery on the

ground that the petitioner was wrongly paid salary and allowances with

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pension of the post of Secretary to the State government after "deemed

retirement" is not sustainable in view of the judgment passed by the

Apex in the light of the judgment passed by the Apex Court in the case

of Sahibram Vs. State of Haryana & Ors. (1995) Supplementary 1 SCC

18, Syed Abdul Qadir & Ors. Vs. State of Bihar (2009) 3 SCC 475, State

of Punjab & Ors. Vs. Rafiq Masih (2015) 4 SCC 334 and also the latest

judgment passed by the Apex Court in the case of Thomas Daniel Vs.

State of Kerala 2022 SCC Online SC 536. In this case, the Apex Court

held that:-

"If the excess amount was not paid on account of any misrepresentation or fraud of the employee or if such excess payment was made by the employer by applying a wrong principle for calculating the pay/allowance or on the basis of a particular interpretation of rule/order which is subsequently found to be erroneous, such excess payment of emoluments or allowances are no0t recoverable. This relief against the recovery is granted not because of any right of the employees but in equity, exercising judicial discretion to provide relief to the employees from the hardship that will be caused if the recovery is ordered"

23. The petitioner also argued that the impugned orders have

been passed without any notice or opportunity of hearing to the

petitioner. It is argued that as per the doctrine of legitimate expectation,

the essence of fair play in administrative action also is necessary. The

State cannot act unfairly. In support of this submission, he placed

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reliance on the judgment passed in the case of National Buildings

Construction Corporation Vs. Raghunanthan & Ors. (1998) 7 SCC 66,

24. In view of the above discussion and interpretation of

unamended and amended Rule 4 of VAT Rules, the impugned orders

are unsustainable and are quashed. The respondents are directed to

count subsequent services of the petitioner as Member in the M.P. State