APHC010119972017 IN THE HIGH COURT OF ANDHRA PRADESH Monday the second The Honourable Ms. Between: Gurram Srinivasulu The State of Andhra Pradesh Counsel for the petitioner: 1. V.Nitesh Counsel for the respondents: G.P. for Forests (A.P.) The Court made the following: IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) second day of March two thousand and twenty six Present The Honourable Ms. Justice B.S.Bhanumathi W.P.No.9197 of 2017 and The State of Andhra Pradesh and others ...Respondents Counsel for the petitioner: Counsel for the respondents: The Court made the following: IN THE HIGH COURT OF ANDHRA PRADESH [3311] two thousand and twenty six ...Petitioner Respondents 2 W.P.No.9197 of 2017 O R D E R: This writ petition is filed under Article 226 of the Constitution of India to declare the action of the Regional Vigilance and Enforcement Officer, Ananthapuramu / respondent No.5 in conducting inspection of the saw mill of the petitioner on 30.10.2015 and 31.10.2015 and not considering the explanation submitted on 21.11.2015 to the notice issued by the respondent No.5 on 07.11.2015 and consequential action (issuing notices) of the District Forest Officer, Ananthapuramu / respondent No.4 on 19.03.2016 and 30.08.2016 imposing exorbitant penalty and insisting on its payment without the authority and further action of the respondents in not considering the appeals filed by the petitioner on 03.11.2016 and 02.02.2017 to the Conservator of Forests, Ananthapuramu Forest Circle and Principal Chief Conservator of Forests, Agathavarappadu / respondents Nos.3 and 2 respectively as illegal; set aside the same and; direct the respondents to accord permission to conduct business as was earlier granted to the petitioner. 02. The pleaded case of the petitioner, briefly stated, is as follows: The petitioner is running business in the field of timber for more than 48 years under the name and style M/s. New Ganesh Saw Mill and has gained reputation in and around Ananthapuramu District. Due to advanced age of the petitioner, he could not personally go to the business premises regularly. The petitioner underwent open heart surgery in August, 2015. The business rivals developed eye-sore and, in association with some local political leaders, instigated the respondent No.5 to conduct raid. The workers employed in the mill do not know the conditions of licence. The registers were not properly maintained by the staff, but the sale and stock in trade were maintained with the aid of computer. On 30.10.2015 and the next date, the respondent No.5 got inspection of the premises of the petitioner done through his subordinates and found some irregularities. A notice vide Rc.No.194/NR/FRO/E/15 was caused to be served by the forest department on the petitioner on 07.11.2015, 3 W.P.No.9197 of 2017 without furnishing any report or basis, directing to submit explanation for the allegation of variation in stock of Nallamaddi logs to a tune of 23.195 C.M.T. and Vegi logs less by 2.542 C.M.T. and teak stock less by 0.270 C.M.T., non- maintenance of Form-IIIA and IIIB registers, non-renewal of licence by the Ananthapuramu Municipality and using high power motor of 1 H.P. against licence for use of 0.5 H.P. motor. The petitioner submitted a detailed explanation on 21.11.2015 answering each and every charge. The difference in the stock in trade was assessed only on the basis of the accounts maintained in the computer. But, the sale of the timber had not been entered manually in the concerned registers due to immobility of the petitioner during the period August, 2015 to October, 2015 due to illness. The Form-IIIA and IIIB registers were being submitted to the concerned authority on the 10th day of January every year. The petitioner could not produce the renewed licence, as it was not issued though the required fee had been paid along with an application for renewal of the licence submitted. The security amount was deposited with the department on 24.03.2015 itself. Compounding fee was paid on 18.02.2014 for use of 1 H.P. motor. The petitioner requested to drop further course of action while undertaking to pay penalty for the variation in the stock. The respondent No.5 has no authority or power to conduct any inspection of saw mills as per the A.P. Saw Mill (Regulation) Rules, 1969 (in short “A.P.S.M.(R) Rules, 1969”). The petitioner was served with the notice dated 19.03.2016 and directing him to pay penalty of Rs.25,51,450/- for the alleged variations, without any prior communication or order, though the respondent No.4 has no such power and as per Rule 9 (2) of the A.P.S.M.(R) Rules, 1969, if any variation in the stock is found, the same shall be limited to the security deposit. Therefore, imposition of penalty beyond the amount of security deposit is ex facie arbitrary. For any variation in accounting procedure, penalty up to the value of security deposit of Rs.5,000/- only can be imposed. Hence, imposition of compounding fee of Rs. Rs.25,51,450/- consisting of one unit of the value of forest produce along with four times of it is illegal. Therefore, imposition of high amount of penalty runs contrary to the 4 W.P.No.9197 of 2017 executive instructions issued in this regard and also the law declared by this High Court in W.P.No.18940 of 2003. There is no case registered against the petitioner alleging violation or commission of offence. After grant of necessary permit for sale of timber, the petitioner was under the impression that further action by the respondent No.4 was dropped. Without passing any order on the explanations submitted by the petitioner, the notice dated 30.08.2016 was issued. Once a notice is issued and an explanation is submitted, the concerned authority is expected to pass an order even if no appeal is provided under the statute as held by the Supreme Court in Mardia Chemicals Vs. Union of India1. The petitioner submitted an appeal to the respondent No.3 bringing it to the notice about the illegality committed by the respondents Nos.4 and 5 in conducting the inspection without authority. Under these circumstances, the writ petition was filed. 03. The respondent No.4 filed a counter on behalf of the respondent No.2 with the averments briefly as follows: The licence of the petitioner dated 31.03.2015 was valid up to 31.12.2017. The Regional V & E Officer, along with Forest Section Officer, Ananthapuramu Range, inspected the saw mill of the petitioner on 30.10.2015 and 31.10.2015 and noticed the irregularities (mentioned already in the petition) and furnished the detailed enquiry report, along with the enclosures, to the D.F.O., Ananthapuramu, with instructions to collect penalty of Rs.25,51,450/- from the petitioner and furnished realisation particulars vide Rc.No.194/NR/FRO/E/2015, dated 20.02.2016. The licence permitted utilization of 1 vertical cutting saw of 10 H.P. motor and 1 horizontal cutting saw of 15 H.P. motor, but the owner of the mill was using extra two 0.5 H.P. motors (total 1 H.P.) for grinding. Taking into consideration the lapses, explanation was called for vide notice Rc.No. 194/NR/FRO/E/15, dt. 07.11.2015. He submitted explanation dt. 21.11.2015 admitting lapses and requesting to condone the lapses as first mistake and further undertaking to 1 (2004)4 SCC 311 5 W.P.No.9197 of 2017 pay less amount of compounding fee. In view of the explanation, penalty was imposed and notices were issued on 19.03.2016, 30.08.2016 and 31.10.2016, out of which the first two were acknowledged. A case for offence was registered by the F.R.O., Ananthapuramu vide O.R.No.77/2015-16. But, the petitioner did not remit the compounding fee, though he agreed to pay nominal compounding fee. He submitted a representation to the Chief Conservator of Forest, Ananthapuramu to set aside the notice issued by the D.F.O., Ananthapuramu. As the case is not finalized by the D.F.O., the representation was rejected through order dated 08.03.2017 by C.C.F., Ananthapuramu. Due to the lapses by the licence holder and for not responding to the notices, a show cause notice vide Rc.No.3018/1994/G6, dated 22.03.2017 was issued to him to submit explanation why the licence shall not be cancelled, fixing the date for enquiry on 07.04.2017. The petitioner acknowledged its receipt on 23.03.2017. Irrespective of age of the petitioner, there is responsibility on him to properly maintain the business transactions. The petitioner admitted that he is not regularly monitoring the business due to his old age. In case of any unavoidable circumstances, the licencee must take all precautions in dealing with the transactions. It is incorrect that the respondent No.5 has no authority to conduct inspection. As per the A.P.S.M.(R) Rules, 1969, the forest officials / police officials / inspecting authorities are empowered to conduct inspection and point out irregularities. The petitioner submitted a representation dated 03.11.2016, but not an appeal to the respondent No.3, against the order for compounding offence issued by the respondent No.4 / D.F.O vide Rc.No.3018/1994/G6, dated 30.08.2016. However, the representation was duly rejected vide Rc.No.104220/16/M4, dated 18.03.2017. It is incorrect that the petitioner was not given any reasonable opportunity before imposition of penalty. A notice vide DFO.Rc.No.3018/1994/G6, dated 19.03.2016, 30.08.2016 and 31.10.2016 were issued to the petitioner duly intimating irregularities and directing the petitioner to remit the penalized amount within three days from the date of receipt of notice, failing which further action would 6 W.P.No.9197 of 2017 be taken as per law. Though the petitioner received the notices, he failed to comply the same. The petition is liable to be dismissed. 04. The learned counsel for the petitioner submitted that the notice was issued alleging that the stock of Nallamaddi timber was excess, whereas in the counter of the respondent No.2, it was stated that the said timber was less. He further submitted that at the most, penalty of Rs.500/- can be imposed for improper maintenance of the registers if the variation is more than 5% as per Rule 7(2) of the A.P.S.M.(R) Rules, 1969, but no amount of penalty can be imposed under Section 59(1)(ii) of the A.P. Forest Act, 1967 (in short “A.P.F. Act, 1967”) as the stock physically available is not more than the book balance. He further submitted that the D.F.O. imposed penalty without independently making inspection, but relied on the report of the V. & E. Officer who has no authority, except under A.P. Forest Produce Transit Rules, 1970, to conduct inspection of the premises of the saw mill. In this regard, he further submitted that as per Rule 7 of the A.P.S.M.(R) Rules, 1969, all officers of the Forest Department of and above the rank of a Forester shall have power to enter into any saw mill for the purpose of inspection and securing compliance with these Rules, whereas the notice dated 07.11.2015 does not indicate that V. & E. Officers were accompanied by the forest officials as required under the Rule 8, but in the subsequent notice dated 19.03.2016, it was mentioned as though V. & E. officers inspected along with forest officials and that the inspection report does not disclose that the Vigilance Officers who inspected hold designated rank of forester and above. With regard to the allegation of violation of the licence regarding use of 1 H.P. motor, he submitted that in explanation itself it was mentioned that no licence is required for use of machinery with less than 2 H.P. motor as per G.O.Ms.No.9210/For-III/2001-3 Environment, Forest, Science and Technology (Forest-III), Department, dated 18.07.2002 and therefore, no amount of penalty can be imposed even under Rule 11(3) of the A.P. Forest Produce (Storage and Depot) Rules, 1989 (in short “A.P.F.P.(S.& D.) Rules, 1989”) which enables D.F.O. to impose penalty not exceeding Rs.10,000/- or upto the extent of the security deposit. He 7 W.P.No.9197 of 2017 further submitted that no further investigation was made to find out the stock which is said to be less. 05. The learned Assistant Government Pleader for Forests submitted that the variation was admitted by the petitioner and pleaded to reduce the amount to Rs.10,00,000/- vide letter dated 07.04.2017 written on his letter head of the saw mill. She further submitted that after considering all the explanation of the petitioner, penalty was fixed for less stock in variation with the recorded stock. She further submitted that as per G.O.Ms.No.504, General Administration (Vigilance and Enforcement-A) Department, dated 25.11.1997, the V. & E. Department is an agency competent to conduct inspection. It is also further submitted that the representation dated 07.04.2017 given by the petitioner, pending the writ petition, for reducing the amount of penalty is still pending for consideration. 06. In view thereof, the learned counsel for the petitioner requested to dispose of the writ petition directing the concerned to treat the amount in security deposit as the amount of penalty to be paid. 07. The licencing authority, in the impugned first notice of penalty dated 19.03.2016, stated that when the officer of the Regional V. & E. department, with the assistance of the forest department searched the saw mill, Sri New Ganesh Saw Mill and Timber Depot, there were irregularities (i) Nallamaddi timber 23.19 qm. was excess 5% more (than the record) attracting recovery of compounding fee, (ii) negligence in maintaining Form- III(A) and Form- III(B) registers in violation of Rule 7(1) of the A.P.S.M.(R) Rules, 1969, and (iii) failed to maintain conversion registers, and therefore, the petitioner has to pay penalty of Rs.25,51,450/- i.e., one unit value of the forest produce @ Rs.5,10,290/- plus five times of it as per the A.P.S.M.(R) Rules, 1969; A. P. Forest Offences (Compounding and Prosecution) Rules, 1969 (in short “A.P.F.O.(C.& P.) Rules, 1969); and the A.P.F.P.(S.& D.) Rules, 1989; without specifying any exact provision thereunder. In the next notice of penalty, dt. 30.08.2016 also specific provision of law was referred. 8 W.P.No.9197 of 2017 08. Rule 6A(1) of the A.P.S.M.(R) Rules, 1969 [which were superseded by the A. P. Wood Based Industries (Establishment and Regulation) Rules, 2018 w.e.f. 11.05.2018] as are applicable to the date of inspection i.e., on 30.10.2015, requires a register in the prescribed form to be maintained by every saw mill for accounting fully and properly the timber received in the saw mill and disposed of, to be produced for inspection along with permits / invoices in original in the licenced premises before any inspecting authority empowered in this behalf, at any time. Therefore, the main allegation of the difference in the stock as per the ground balance and the book balance is a contravention / violation of this rule. 09. The A.P.S.M.(R) Rules, 1969 were framed in exercise of powers under Section 68(2)(b) of the A.P.F. Act, 1967. Rule 9 of the A.P.S.M.(R) Rules, 1969 deals with any contravention / violation of the provisions of the A.P.F. Act, 1967 or any rules made thereunder. Rule 9 (1) of these rules enables the licencing authority to revoke the licence granted under these rules where there is a reason to believe that a licencee is operating a saw mill in contravention of the provisions of the A.P.F. Act, 1967 or any rules made thereunder. Rule 9(2)(a) of these rules enables the licencing authority to seize and confiscate the forest produce, plant, machinery etc., for any violation of the provisions of the A.P.F. Act, 1967 or any rules made thereunder. The authority has resorted neither to revoke the licence nor to seize the properties of the subject saw mill for the violation of Rule 6A(1). In such a case, Rule 9(2)(b) of these rules enables the licencing authority, for any such violation, to impose penalty of a sum upto the limit of available security deposit, if the authority does not proceed under Rule 9(1) or 9(2)(a). In the present case, since the authority proceeded to impose penalty only, it is squarely covered by Rule 9(2)(b) and thereby, the amount of penalty cannot cross the limit imposed therein. Rule 9(2)(c) of the A.P.S.M.(R) Rules, 1969 specifies the time within which penalty shall be paid and also for adjustment of the amount of penalty against the amount in security deposit. 9 W.P.No.9197 of 2017 10. The A.P.F.P.(S.& D.) Rules, 1989 have application to depots within the State of A. P., except those established by the government departments and government undertakings. The petitioner is running business in the field of timber under the name and style M/s. New Ganesh Saw Mill and Timber Depot. Rule 3(2) states that if the saw mill and forest produce depot are in the name of same person and in the same premises, they will be treated as one unit and a common licence granted under the A.P.S.M.(R) Rules, 1969 shall be deemed to be licence granted under these rules. Application of the A.P.F.P.(S.& D.) Rules, 1989 to the petitioner is not disputed. 11. Rule 5 of the A.P.F.P.(S.&D.) Rules, 1989 stipulates that the licencee shall, on being required to do so by the Divisional Forest Officer, and before the issue of licence, make a deposit in favour of Divisional Forest Officer a minimum of Rs.500/- but not exceeding Rs.5,000/- as security deposit towards due observance of the provisions of the A.P.F. Act, 1967 and the rules made thereunder. (w.e.f. 30.12.1991, “Rs.500/- but not exceeding Rs.5,000/-” have substituted for “Rs.2,000/- but not exceeding Rs.10,000/-”) Admittedly, the amount of penalty indicated in the impugned order is far exceeding the amount in deposit of security. 12. Rule 8 of the A.P.F.P.(S.& D.) Rules, 1989 mandates - (1) All transactions involving receipt, storage and disposal shall be recorded in two separate registers in the proforma prescribed in Form-3A and 3-B separately. (2) Every licence holder shall submit annually, an abstract of the proforma to the Divisional Forest Officer, before the 30th of April of every year, failing which he shall be liable to pay a penalty of not less than Rs.50/- but not exceeding Rs.500/- for every month of default which shall be levied by the Divisional Forest Officer. In the event of non-payment of the penalty so levied it shall be adjusted from the security deposit and the security deposit shall be replenished to original amount within 30 days, failing which the depot licence shall stand temporarily suspended till the security deposit is replenished, to its original amount. 10 W.P.No.9197 of 2017 (3) In case of common licence for the saw mill and the depot, the accounts of receipt and disposal should be maintained in the register prescribed under the A.P.S.M.(R) Rules, 1969. Obviously, the penalty was not imposed under this provision. 13. That apart, Rule 11(1) and (2) of the A.P.F.P.(S.& D.) Rules, 1989, provides for revocation of the licence granted under these Rules or seize and confiscate forest produce, machinery, etc., for contravention of provisions of the A.P.F. Act, 1967 or any Rule made thereunder, notwithstanding in the other Rules in the same Rules. Rule 11(3) empowers, if action is not proposed under Rule 11(1) and (2), to impose penalty not exceeding a sum of Rs.10,000/- or upto the extent of the security deposit. This provision was also not invoked. 14. Section 59(1)(ii) of the A.P.F. Act, 1967 confers power to compound offences, other than offences under Sections 52 or 55 of the Act, by accepting compensation for a sum of money which shall not, in any case, be less than the value of the forest produce, or more than four (4) times such value as estimated by such Forest Officer, in addition to the value of the forest produce, where such offence involves any forest produce which in the opinion of the Forest Officer may be released, but as per Section 59(1)(iii), if the Forest Officer opines that the forest produce should be retained by the Government, the sum of money of compensation shall not, in any case, be less than the value of the forest produce, or more than 4 times such value as estimated by such Forest Officer. It is obvious that in the impugned notice, the licencing authority imposed penalty of Rs.25,51,450/- by calculating the value of the deficit stock of 23,195 qm plus four times its value. 15. First of all, compounding is not permitted for all offences under the A.P.F. Act, 1967 as is clear from Section 59(1)(ii), but is limited to the offences mentioned therein. Further, the notices are silent of the specific provisions of the A.P.F. Act, 1967, in respect of which offence the compounding was 11 W.P.No.9197 of 2017 proposed. In fact, it is not compounding, but, penalty which was imposed in the impugned notices dated 19.03.2016 and 30.08.2016. 16. Compounding an offence is different from imposing penalty. The A.P. F.O.(C.& P) Rules, 1969, were made under Section 68 of the A.P.F. Act, 1967. Rule 3(1) says that when a forest offence is booked in Form-A, it shall be dealt with in the manner provided in the other Rules thereunder. There is no reference of any offence booked in Form-A against the petitioner in the notice dt.07.11.2015 or in the impugned notices dt. 19.03.2026 and 30.08.2016. Moreover, as per Rule 5 thereof, the proposal for compounding should emanate from the accused and submit written undertaking in that regard in Form-D. There was no such proposal from the petitioner. The explanation dt.21.11.2015 does not fulfill the statutory requirement of offer / proposal in the prescribed form, i.e., Form-D. Then, Rule 6 says that the amount under Section 59 of the A.P.F. Act, 1967 to be fixed and the officer specified therein may accept such amount. Thus, it is very clear that the amount calculated at the rate of one unit of value of the forest produce and four times its value as per Section 59(1)(ii) of the A.P.F. Act, 1967 is permissible only for fixing the amount for compounding a forest offence under that Act or any Rule thereunder, but not for fixing the amount of penalty. 17. In the present case, under the garb of penalty, the amount was wrongly calculated as per the method applicable to fix the amount for compounding an offence. The amount fixed is far exceeding the amount that can be imposed as penalty as discussed above. Therefore, the notices dt. 19.03.2026 and 30.08.2016 impugned in this writ petition are illegal and liable to be set aside to the extent of the amount specified therein. The petitioner is not absolved from the liability to pay the amount of penalty as per law. 18. Rule 9(2)(b) of the A.P.S.M.(R) Rules, 1969 states that an appeal against imposition of penalty thereunder shall Iie with the Conservator of Forests having territorial jurisdiction over the area and the decision thereon shall be final. Since the writ petitioner challenged the jurisdiction of the V. & E. 12 W.P.No.9197 of 2017 Department and also the legality of imposing the penalty violating the provisions of law, a writ petition can also be filed. 19. Rule 10 of the A.P.F.P.(S.& D.) Rules, 1989 and Rule 7 of the A.P.S.M.(R) Rules, 1969 enable the authorities stated in it to enter into a depot. They state – “All Officers of Forest Department of and above the rank of a Forester shall have the power to enter into any depot for the purpose of inspection and securing compliance with these rules.” Here the respondents have not mentioned the status of the officers who accompanied the V. & E. at the time of the inspection of the mill. G.O.Ms.No.504, General Administration (Vigilance and Enforcement-A) Department, dated 25.11.1997 conferred jurisdiction to and powers on the V. & E. Department throughout the State of Andhra Pradesh in respect of matters to which the executive authority of the state extends and to all the departments of the government etc. Therefore, the inspection is not illegal. 20. In the result, the writ petition is allowed modifying the amount in notices dated 19.03.2016 and 30.08.2016 impugned in the writ petition by limiting the amount of penalty to the amount in security deposit which shall be adjusted against such payment. There shall be no order as to costs. Pending miscellaneous applications, if any, shall stand closed. ______________________ JUSTICE B.S.BHANUMATHI Dated: 02.03.2026 NSM/PNV