M/S. MANGALAM ORGANICS LTD. Vs. UNION OF INDIA
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 1338 of 2017, Judgment Date: Apr 24, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1338 OF 2017
M/S. MANGALAM ORGANICS LTD. .....APPELLANT(S)
VERSUS
UNION OF INDIA .....RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
This appeal arises out of the judgment of the High Court
rendered in the writ petition filed by the appellant, wherein the appellant
wanted the High Court to exercise its powers under Article 226 of the
Constitution of India and issue mandamus to the Central Government
directing the Central Government to issue a notification under Section 11C
of the Central Excise Act, 1944 (hereinafter referred to as the ‘Act’) to
the effect that duty payable by the appellant on goods manufactured by it
shall not be paid.
Section 11C of the Act reads as under:
“11C. Power not to recover duty of excise not levied or short- levied as a
result of general practice.-
Notwithstanding anything contained in this Act, if the Central Government
is satisfied-
that a practice was, or is, generally prevalent regarding levy of duty of
excise (including non- levy thereof) on any excisable goods; and
that such goods were, or are, liable-
to duty of excise, in cases where according to the said practice the duty
was not, or is not being, levied, or
to a higher amount of duty of excise than what was, or is being, levied,
according to the said practice, then, the Central Government may, by
notification in the Official Gazette, direct that the whole of the duty of
excise payable on such goods, or, as the case may be, the duty of excise in
excess of that payable on such goods, but for the said practice, shall not
be required to be paid in respect of the goods on which the duty of excise
was not, or is not being, levied, or was, or is being, short- levied, in
accordance with the said practice.]
Where any notification under sub- section (1) in respect of any goods has
been issued, the whole of the duty of excise paid on such goods or, as the
case may be, the duty of excise paid in excess of that payable on such
goods, which would not have been paid if the said notification had been in
force, shall be dealt with in accordance in force, shall be dealt with in
accordance with the provisions of sub- section (2) of section 11B:
Provided that the person claiming the refund of such duty or, as the case
may be, excess duty, makes an application in this behalf to the Assistant
Collector of Central Excise, in the form referred to in sub- section (1) Of
section 11B, before the expiry of six months from the date of issue of the
said notification."
A bare perusal of the aforesaid provision would indicate that if certain
conditions mentioned therein are satisfied, the Central Government may
issue a notification directing that whole of the duty of excise payable on
such goods, or, as the case may be, the duty of excise in excess of that
payable on such goods, but for the said practice, shall not be required to
be paid. The condition stipulated in the said Section with which the
Central Government is to satisfy itself is that there is/was a generally
prevalent practice according to which the duty was not, or is not being
levied, even when such a duty of excise was otherwise payable on such
excisable goods.
We may point out at this stage itself that the High Court vide impugned
judgment has come to the conclusion that Section 11C of the Act grants a
discretionary power to the Government to issue or not to issue such a
notification. The said provision does not mandate the Government to
necessarily issue such a notification and in the absence of any obligation
on the part of the Government in this behalf, the Courts are precluded from
giving any mandamus to the Central Government to exercise such a power and
issue the notification.
Before we answer the questions posed above and comment upon the correctness
or otherwise of the view taken by the High Court, those seminal and
material facts, which have a bearing on the issue, needs to be stated.
These facts are as follows:
The appellant is in the business of manufacturing Rosin and
Turpentine. Rosin is the resinous constituent of the oleoresin exuded by
various species of Pine Tree i.e. Oleo Pine Resin, known in commerce as
‘crude turpentine’. The separation of the oleoresin into the essential oil
spirit of Turpentine and Rosin is effected by distillation in large kettle
stills. There are two methods of manufacturing Rosin/Turpentine from Oleo
Pine Resin. One method is the vacuum chemical treatment process which uses
power in almost all the processes. The second method, commonly known as
the Bhatti process, is entirely manual except for the use of power to
operate the pump for lifting up the water to the storage tank for the
purpose of condensing. Thus, in the second method, power is used, but is
confined to operating the pump for lifting up the water to the storage tank
for the purpose of condensing. The appellant is using this second method
of manufacturing Rosin/Turpentine.
Insofar as the first method of manufacturing Rosin/Turpentine is concerned,
wherein power is used in all the processes, there is no dispute that it is
treated as a manufacturing process with the aid of power and the units were
manufacturing these products using this methodology or covered by the
provisions of the Act. There are about ten units which are adopting this
method and are paying the excise duty under the Act on the goods so
manufactured.
Majority of the units, i.e. about 300 in number, are using the Bhatti
method whereby use of power is confined to lifting of water to overhead
tanks for condensation of Turpentine vapours collected as liquid Turpentine
in tanks. The Rosin which remains in the kettle is removed in buckets,
usually cooled and dispatched in drums. However, this Court has held in a
case that even this process would be treated as manufacturing process with
the aid of power even when such power is used to a limited extent. That
judgment is reported in Commissioner of Central Excise, Nagpur v. Gurukripa
Resins Private Limited[1] which was rendered on 11.07.2011, which fact
would again be discussed while dealing with the sequence of events leading
to the instant appeal.
What is emphasised at this stage is that it is a common case of the parties
that excise duty on the goods manufactured by the appellant is, otherwise,
payable in law. Insofar as the history of payment of excise on these goods
is concerned, record shows that vide notification No. 179/77-CE dated
18.06.1977, the Central Government had exempted all goods, falling under
Item No.68 of erstwhile First Schedule to the Central Government Excise and
Salt Act (1 of 1944) in or relation to the manufacturing of such goods
where no process is ordinarily carried on with the aid of power, from the
whole of the duty of excise leviable thereon. The Department of Revenue
had issued clarification dated 16.01.1978 to the effect that the aforesaid
notification covers those units which are manufacturing Rosin and
Turpentine oil where no power is used in the manufacture of Rosin but power
is used for drawing water into the tank through which the coils containing
oil vapours pass. This notification was issued in exercise of powers
conferred by sub rule (1) of Rule 8 of the Central Excise Rules, 1944.
However, this notification was superseded by another notification dated
01.03.1986 thereby withdrawing the aforesaid exemption. It was followed by
the Circular dated 27.05.1994 clarifying that all earlier
circulars/instructions/ tariff advices issued prior to March 1986 in the
context of old tariff had been withdrawn.
A show cause notice dated 04.10.2004 was issued to the appellant by the
Excise Department demanding duty of Rs.10,91,99,456/- on the aforesaid
products manufactured by the appellant and cleared during the period
01.04.1999 to 31.08.2003. It was followed by further notices to the same
effect covering the period September-October, 2003 to March, 2004; April,
2004 to November, 2004; and December, 2004 to September, 2005 for the
amount of Rs.50,760/-, Rs.66,44,602/-, Rs.1,01,92,867/- and Rs.81,44,105/-
respectively. One more unit M/s. Gurukripa Resins Pvt. Ltd., Nagpur (for
short ‘Gurukripa’) was also issued similar show cause notices. Case of the
appellant is that out of 300 units using Bhatti method, only these two
units were picked up for raising demand of excise.
Gurukripa had challenged the order of assessment passed in its case by
filing the appeal before the Central Excise and Service Tax Appellate
Tribunal, Mumbai (for short ‘CESTAT’). The said appeal of Gurukripa was
allowed vide judgment dated 14.01.2004. The Department challenged the
order passed by the CESTAT in the case of Gurukripa, in which the Revenue
succeeded as that appeal was allowed by this Court vide its judgment dated
11.07.2011, as pointed out above.
This Court held that the process of lifting of water into the cooling tank
was integrally connected with the manufacture of these goods and hence, if
the power was used for lifting of water, the exemption would not be
available. This Court also held that the TRU’s circular of 1978 was not
applicable since the same stood withdrawn in 1994.
In view of the aforesaid judgment rendered in the case of Gurukripa Resins
Private Limited, appeals filed by the appellant before the CESTAT came to
be dismissed. However, the Tribunal restricted the Department to recover
the dues falling within the period of limitation only, i.e. for a period of
one year. This drastically reduced the demand of excise inasmuch as the
excise demanded for the period from 01.04.1999 to 31.08.2003 became time
barred. Both the Department as well as the appellant have challenged the
said order of the CESTAT before the High Court of Bombay and the matter is
still pending there.
After the judgment of this Court in Gurukripa Resins Private Limited,
several trade associations made representations to the Government with a
request to grant benefit under Section 11C of the Act. On receiving these
representations, the Central Board of Excise and Customs decided to float a
survey to ascertain a general practice during the period from 27.05.1994 to
27.02.2006. Consequently, the survey letter was issued on 14.03.2012. On
the basis of this survey, the Department came to the conclusion that there
was no such practice of non-levying excise duty on these products.
Objections were raised to the finding of the said survey on the ground that
only ten units in the survey were considered as against the total units of
approximately 300. This led to ordering a re-survey vide letter dated
23.01.2013. According to the appellant, this re-survey revealed that
though there were many units across the country which had turnover
exceeding SSI but they were also never levied excise duty during the
aforesaid period, and this phenomenon establishes that there was a general
practice of not demanding excise duty from the units, which were using
Bhatti method. Whether this plea of the appellant is factually correct or
not would be discussed at an appropriate stage.
Fact of the matter is that after thorough consideration, the Finance
Ministry decided on 15.09.2014 not to issue any such notification under
Section 11C of the Act as it was going to benefit only two companies, which
includes the appellant. This decision was communicated by the Department
of Revenue to the All India Manufacturer Organisations vide letter dated
30.09.2014. Challenging the aforesaid decision, the appellant filed writ
petition in the High Court of Delhi with the following prayers:
“(a) Issue a writ of certiorari or any other similar writ or direction for
quashing the decision, communicated vide letter dated 30.09.2014 of the
respondent that the notification under Section 11C of the Central Excise
Act, 1944 cannot be issued for extending the benefits of not requiring to
pay the Central Excise Duty to the units manufacturing Rosin and Turpentine
without the aid of power, except for the purpose of using electricity to
pump, for lifting up water for condensation to overhead tank, for the
period from 27.05.1994 to 28.02.2006, even though the practice of non-levy
on these units for the said period has already been established in a survey
done by the Department;
(b) Issue a writ of mandamus or any other similar writ or direction to the
respondent to issue the notification under Section 11C of the Central
Excise Act, 1944 for extending the benefits of not recovering the Central
Excise Duty from the units manufacturing Rosin and Turpentine without the
aid of power, except for the purpose of using electricity to pump for
lifting up water to overhead tank, for the period from 27.05.1994 to
28.02.2006; and
(c) Pass any other order or direction as the Court may think fit and
proper.”
It is this writ petition which has been dismissed by the High Court
vide impugned judgment dated 16.02.2016.
Submission of Mr. S. Ganesh, senior advocate, and Mr. Prashant Bhushan,
advocate appearing for the appellant, was that it stood established from
the re-survey conducted by the Department itself that there was a general
practice of not demanding excise duty from Bhatti manufacturers, though,
in this survey, only around 125 units could be examined as the Department
could not get full details of the remaining industries and moreover, most
of them were small scale industries availing benefit under SSI exemption.
The learned counsel argued that still this survey indicated that there were
at least 39 units whose turnover exceeded SSI limit but no excise duty was
demanded from those units as well. The appellant relied upon following
noting dated 20.05.2014 of the Commissioner (Central Excise):
“11. ...it is clear that majority of the units were not paying duty during
this period and that show cause notices were issued in respect of 2 units
i.e. M/s. Gurukripa Resins (P) Ltd. and M/s. Dujodwala Industries. In
respect of unregistered units no show cause notices have been reportedly
issued.
......
The reasons for not filing any declaration by unregistered units are not
clear. It could be a case of non-payment of duty or alternatively a belief
by these units that they covered by the TRU clarification of 1978 and hence
do not require registration. The precise reasons for not filing
declaration can only be explained by field formations who are reportedly
not having complete records. However, the fact remains that a number of
unregistered units did not pay the duty even when they had crossed the SSI
limit and the department also did not demand such duty from them. ...This
can, therefore, also be considered as a case of non-levy as well as that of
non-payment...”
The Under Secretary, Central Excise in his noting dated 22.08.2014 has
stated that:
“ ... The re-survey has indicated that there were at least 39 unregistered
units which had turnover more than SSI exemption limit either once or more
than once during 1994-1995 to 2005-06. ...It could be concluded that there
was a practice of non levy of duty.”
Finally, the Member Central Excise also in his noting dated 11.09.2014 has
observed;
“ ... the issue was again examined after conducting a fresh survey. It was
found that though there was a practice of non-levy of duty, issuance of
Section 11 [C] notifications will only benefit two companies, namely, M/s.
Gurukripa Resins Pvt. Ltd., Nagpur and M/s. Dujodwala Industries, Mumbai.
Decision was taken with the approval of the then revenue secretary [p/112
N.S.] That section 11 [C] notification cannot be issued to favour only a
few select industries and it was decided to reject the request.”
It was, thus, argued that there was a specific finding of the Department
itself that there was a prevalent practice of non-levy of duties on units
which manufactured the same products and use power only to pump water to
the cooling tank. It was, thus, argued that conditions mentioned under
Section 11C of the Act for issuing the notification were clearly fulfilled.
Proceeding on the aforesaid basis, submission of the learned counsel for
the appellant was that once conditions of a particular statutory provision
were fulfilled, the Government was obligated to exercise the power with the
issuance of a required notification. It was argued that this power rested
in the Central Government under Section 11C of the Act coupled with the
duty and, therefore, the Central Government was duty bound to exercise the
power once the conditions stipulated therein were fulfilled. In support,
reference was made to the judgment of the Privy Council in Julius v. Lord
Bishop of Oxford & Anr.[2], which was followed by this Court in Ambica
Quarry Works v. State of Gujarat & Ors.[3], where it was explained that the
very nature of the thing empowered to be done may itself impose an
obligation to exercise the power in favour of a particular person. It was
held that this is especially so where the non-exercise of the power may
affect that person’s substantive rights. Para 13 of this judgment was
specifically relied upon which reads as under:
“13. It was submitted by Shri Gobind Das that the said rule was in pari
materia with sub-rule (b) of Rule 18 of Gujarat Minor Mineral Rules, 1966.
Often when a public authority is vested with power, the expression “may”
has been construed as “shall” because power if the conditions for the
exercise are fulfilled is coupled with duty. As observed in Craies on
Statute Law, 7th Edn., p. 229, the expression “may” and “shall” have often
been subject of constant and conflicting interpretation. “May” is a
permissive or enabling expression but there are cases in which for various
reasons as soon as the person who is within the statute is entrusted with
the power, it becomes his duty to exercise it. As early as 1880 the Privy
Council in Julius v. Lord Bishop of Oxford [(1880) 5 AC 214] explained the
position. Earl Cairns, Lord Chancellor speaking for the judicial committee
observed dealing with the expression “it shall be lawful” that these words
confer a faculty or power and they do not of themselves do more than confer
a faculty or power. But the Lord Chancellor explained there may be
something in the nature of the thing empowered to be done, something in the
object for which it is to be done, something in the conditions under which
it is to be done, something in the title of the person or persons for whose
benefit the power is to be exercised, which may couple the power with a
duty, and make it the duty of the person in whom the power is reposed, to
exercise that power when called upon to do so. Whether the power is one
coupled with a duty must depend upon the facts and circumstances of each
case and must be so decided by the courts in each case. Lord Blackburn
observed in the said decision that enabling words were always compulsory
where the words were to effectuate a legal right.”
Learned counsel also drew our attention to the judgment in the case of
Dhampur Sugar Mills Ltd. v. State of U.P. & Ors.[4] wherein the Privy
Council decision in Julius was again referred to about enforcement of the
obligation to which the power is coupled with duty, by issuing order for
that purpose. It was submitted that in the said case, the Court had
directed the Government to constitute an Advisory Council while rejecting
the contention of the Government that it was for the Government to exercise
its discretion. It was also submitted that the same approach and legal
position has been laid down in D.K. Basu v. State of West Bengal & Ors.[5]
where it was held that the power of the State Governments to set up the
State Human Rights Commissions was not a power simpliciter but a power
coupled with the duty to exercise such power, especially so because it
touched the right of affected citizens to access justice, which was a
fundamental right covered by Article 21. The said duty of the State
Government was accordingly enforced by the Court by issuing a mandamus or
direction to set up the Commissions/fill up the vacancies within a time
bound period. Again in Aneesh D. Lawande & Ors. v. State of Goa & Ors.[6],
this Court gave a direction to enforce the obligation which was held to be
annexed to the power conferred on the Government. Reference was also made
to Suresh Chand Gautam v. State of Uttar Pradesh & Ors.[7] on this very
aspect.
Another submission of the counsel for the appellant was that the solitary
reason furnished by the respondent for not exercising its powers under
Section 11C of the Act was that such a notification, if issued, was going
to benefit only two assessees. It was submitted that this could never be a
valid or tenable ground for the Government to refuse such a notification,
more so, in a situation where the demand notices were issued to two
assessees only and other similarly situated persons were spared. Learned
counsel also submitted that the Central Government in the past had issued a
notification under Section 11C of the Act in individual cases i.e. where
the benefit of the Court is to only one identified assessee. On this very
premise, another submission developed by the appellant was that issuance of
notification under the said provision became all the more necessary and
imperative in order to remove discrimination, which situation was created
by the Department by roping in only two assessees and not demanding the
excise duty from other assessees though identically placed. According to
the appellant, non-issuance of the notification resulted in violation of
appellant’s fundamental rights under Article 14 as well as Article 19(1)(g)
of the Constitution. It was, thus, argued that the Government could not
take shelter under the plea that the power under Section 11C of the Act was
a discretionary power and it was amenable to judicial review under Article
226 of the Constitution. Submission was that mandamus of this nature had
been issued earlier. Example of cases titled Choksi Tube Company Ltd. v.
Union of India & Ors.[8] and Union of India & Ors. v. N.S. Rathnam &
Sons[9] were given.
It was also argued that there was no delay whatsoever on the part of the
appellant in filing the writ petition and objection of the respondent to
this effect was untenable. The rejection order of the Minister came only
in September, 2014 and the writ petition was filed shortly thereafter. The
only reason why the appellant was compelled to pay excise duty was that it
could not obtain an interim stay in the writ petition filed by it. It is,
thus, submitted that in the event of the appellant succeeding in the
present case, there should be an order for refund of the amount paid by the
appellant, along with interest thereon at a rate which this Court considers
reasonable.
Countering the aforesaid submissions with equal vehemence and also adopting
the reasoning given by the High Court in the impugned judgment in support
of its conclusion, Mr. A.K. Sanghi, learned senior counsel appearing for
the respondent, submitted that Section 11C of the Act was an enabling
provision which empowered the Central Government to issue a notification in
the Official Gazette for not recovering whole of the excise duty payable on
certain goods or recovering the excise duty lesser than the normal duty
payable. He emphasized the opening words of Section 11C, i.e. ‘power not
to recover duty of excise...’. His argument, thus, was that it is a
provision which empowers the Government to issue such a notification and,
therefore, this power was discretionary in nature. His further submission
was that since waiver of the duty can be by issuance of a notification in
the Official Gazette, such a power was in the nature of subordinate
legislation and as per the settled law, courts refrain from issuing any
mandamus to exercise a statutory function. He further submitted that the
Central Government had, for valid reasons, decided not to issue any such
notification. According to him, reason for not issuing the notification,
namely, that it was to benefit only two parties, was a valid reason and
such a policy decision taken for not exercising power under Section 11C of
the Act was not open to judicial review. Without prejudice to this
argument, his another plea was that the exercise carried out by the
Government, culminating into the aforesaid decision of not exercising the
power, was based on valid and justified grounds, which was rested on valid
considerations and the Court would not substitute its own decision for that
arrived at by the Government.
Dilating on the aforesaid argument, Mr. Sanghi submitted that the most
important events which had to be kept in mind were that the show cause
notices were issued to the appellant as well as Gurukripa and in the case
of Gurukripa the legal position was finally determined by this Court vide
judgment dated 11.07.2011 holding that the process of lifting of water into
cooling tank was integrally connected with the manufacture of the goods
and, hence, if power is used for lifting of water, the exemption would not
be available. The argument of Mr. Sanghi was that once this position was
legally settled, it was not open to the appellant to nullify the effect of
the said judgment by seeking a direction to issue notification under
Section 11C of the Act.
The aforesaid narration makes it clear that three issues arise for
consideration – the first question is as to whether these conditions are
satisfied in the instant case? Secondly, if it is found that the goods
which are excisable goods liable for levy of duty under the Act, but there
has been generally prevalent practice not to demand duty or levy the duty,
or demand lesser duty on such goods, whether it is mandatory on the part of
the Central Government to issue a notification under Section 11C of the Act
requiring that no such duty shall be payable or lesser duty shall be
payable on such goods? Thirdly, if the Government chooses not to exercise
this ‘power’, whether the Court can issue a mandamus to the Central
Government to pass such a notification exercising its power under Section
11C of the Act?
We have bestowed our serious consideration that this case deserves to
the issues involved.
QUESTION NO. 1
It may be remarked in the first instance that, undoubtedly, as far as duty
under the Excise Act on the goods manufactured and cleared for sale by the
appellant is concerned, the same is payable under the provisions of the
Excise Act. It is the appellant’s own case that the legal position in this
behalf, before the judgment dated 11.07.2011 in the case of Gurukripa
Resins Private Limited, was somewhat fluid and uncertain. Those units
manufacturing Rosin and Turpentine by using power in all processes are
concerned, i.e. vacuum chemical treatment process, were admittedly liable
to pay the excise duty and were paying also. However, insofar as the units
adopting Bhatti process (to which category the appellant belongs and
wherein the whole of the process is manual, except for one process, viz.
use of power to operate the pump for lifting up the water to storage tank
for the purpose of condensing) are concerned, whether this process would
amount to manufacturing process or not, was unclear. Moreover, most of
these units which were resorting to Bhatti method were small scale units
and were enjoying the exemption from payment of excise duty on that ground.
Therefore, they were not within the net of revenue in any case. Five
registered units were paying the excise duty. The Department issued show
cause notices to the two units which were registered with it but not paying
the duty, as according to the Revenue, even the use of power for lifting of
water to overhead tanks for condensation of Turpentine vapours collected as
liquid Turpentine in tanks would be manufacturing process and, therefore,
excise duty payable. Others were not registered and were SSI Units. It so
happened that at some point of time, few of them had ceased to be SSI
units. However, the Department remained unaware of that. It was for this
reason that notices could not be issued to the others. When the matter is
looked from the aforesaid angle, it cannot be said that there was a
conscious practice which was generally prevalent not to recover duty of
excise.
No doubt, at the instance of and on the request made by the Association, a
survey was got conducted to find out as to whether there was any general
practice in this behalf or not. The result of the first survey was
unfavourable to the appellant inasmuch as in respect of registered units,
the survey revealed that the general practice of such units not paying duty
was not established. It was noticed that five registered units were paying
duty throughout the period. Two units had not paid duty and show cause
notices were issued to them (these are the appellant and Gurukripa). The
Association of which the appellant was a member, had sent a list of 250
units obtained by it under the Right to Information Act. However, what was
found was that these units were unregistered and presumed to be under SSI
and, therefore, for these reasons, the excise duty was not demanded from
them. From this, it is difficult to draw an inference that there was a
general practice not to demand duty. The Association demanded fresh survey
and request in this behalf was received with the backing of a Minister.
As per the appellant, in the second survey, this general practice stood
established. For this purpose, the appellant is relying upon certain
extracts from the Noting dated 20.05.2014 of the Commissioner (Central
Excise). The said Noting, when read in entirety, does not categorically
admit of any such practice. What it reveals is that in the second survey
it was found that 37 unregistered units had crossed SSI exemption limit at
least once, but they were not paying duty during the period in question.
From this the Director in his note had observed that there was practice of
not paying the duty. However, what is significant is that the Commissioner
(Central Excise) in his Note dated 20.05.2014 specifically stated that he
was not in agreement with the aforesaid conclusion arrived at by the
Director, which was highly debatable. He remarked that despite the
judgment of this Court in Collector of Central Excise, Jaipur v. Rajasthan
State Chemical Works, Deedwana, Rajasthan[10], relevant question was as to
whether there was a practice and non-levy of duty during the relevant
period. This is because Section 11C of the Act comes into play only when
legally the duty is levied but still there is a practice of non-levy of
duty.
What appears to us is that the Department remained under the impression
that those units which were unregistered and because of SSI status exempted
from payment of excise duty were not liable to pay the duty and, therefore,
did not issue any notices to them. Even when 37 unregistered units had
crossed the SSI exemption limit at least once, the Excise Department could
not catch them either because of its negligence or it remained under the
bona fide belief that they were still enjoying the exemption. It is only
during the second survey these facts came to be noticed by the Department.
It has come on record that by that time recovery of duty from them was too
late as these cases had become time barred, meaning thereby, had these
cases been within the limitation period, the Department would have taken
action of recovery even qua them. From this, it cannot be said that there
was a general practice. No doubt, some of the officers have formed an
opinion to the contrary by treating the aforesaid as a case of non-levy of
duty. However, as pointed out above, such a view was termed as debatable.
It is only because of this reason that the matter took a different turn and
was processed on the premise that there was such a practice but still the
benefit of the notification under Section 11C, if issued, would be
available only to two units. This can be seen from paragraph 13 of the
following Noting dated 20.05.2014 of the Commissioner (Central Excise):
“13. In this regard, as pointed out by U.S. at page 97/NS, the benefit of
any 11C Notification will be available only to 2 units. No show cause
notice can be issued to the unregistered units for the period 1994-2006 as
the same is already time barred. Thus, the trade at large is not affected.
In F.No. 52/2/2008-CX.1, a view has earlier been taken that the provisions
of Section 11C are exceptional and are generally applied in an issue
affecting the trade at large. Section 11C is not applied for one or two
individual units to override the judicial decision of the Apex Court
rendered against the individual units.”
When the matter is examined taking into consideration all the facts in
totality, we are of the view that there is no clinching evidence to suggest
the existence of a general practice not to levy excise duty. Under the
impression that it was to be demanded from registered units and five such
registered units were, in fact, paying the duty, show cause notices were
issued to the remaining two units, namely, the appellant and Gurukripa.
That itself negates the argument of existence of general practice of not
levying the duty of excise. It is stated at the cost of repetition that
merely because some unregistered firms which were initially getting the SSI
exemption, but omitted to be covered under the Act on their crossing the
SSI limits, would not, in our opinion, establish any such practice.
In this behalf, it also needs to be highlighted that as far as the
Department is concerned, it had taken a categorical stand that even those
units which are using Bhatti method for manufacture of Turpentine and Rosin
were covered by the Act and that was the reason for issuing of show cause
notices to the two units. This view, which the Department had nurtured
while issuing the notices, has been vindicated in view of the judgment of
this Court in Gurukripa Resins Private Limited. Interestingly, after the
said judgment, even the appellant paid the duty of excise. The entire
effort now is to recover back the said duty by seeking issuance of a
notification under Section 11C of the Act. Such a situation, to our mind,
cannot be countenanced.
QUESTION NOS. 2 & 3
In view of our answer to Question No.1, it may not even be necessary
to deal with these two questions. However, since the Department itself
proceeded on the basis that there was a general practice, we would like to
discuss these issues as well on merits. These can be taken together for
discussion.
Insofar as the argument based on obligation of the Government to issue such
a notification is concerned, a clear distinction is to be made between the
duty to act in an administrative capacity and the power to exercise
statutory function. If a public authority is foisted with any duty to do
an act and fails to discharge that function, mandamus can be issued to the
said authority to perform its duty. However, that is done while exercising
the power of judicial review of an administrative action. It is entirely
different from judicial review of a legislative action.
According to de Smith[11], the following legal consequences flow from the
aforesaid distinction:
(i) If an order is legislative in character, it has to be published in a
certain manner, but it is not necessary if it is of an administrative
nature.
(ii) If an order is legislative in character, the court will not issue a
writ of certiorari to quash it, but if an order is an administrative order
and the authority was required to act judicially, the court can quash it by
issuing a writ of certiorari.
(iii) Generally, subordinate legislation cannot be held invalid for
unreasonableness, unless its unreasonableness is evidence of mala fide or
otherwise shows the abuse of power. But in case of unreasonable
administrative order, the aggrieved party is entitled to a legal remedy.
(iv) Only in most exceptional circumstances can legislative powers be sub-
delegated, but administrative powers can be sub-delegated.
(v) Duty to give reasons applies to administrative orders but not to
legislate orders.
Issuance of a notification under Section 11C of the Act is in the nature of
subordinate legislation. Directing the Government to issue such a
notification would amount to take a policy decision in a particular manner,
which is impermissible. This Court dealt with this aspect recently in the
case of Census Commissioner and Ors. Vs. R. Krishnamurthy[12]. Following
discussion from the said judgment is useful and worth a quote:
“25. Interference with the policy decision and issue of a mandamus to frame
a policy in a particular manner are absolutely different. The Act has
conferred power on the Central Government to issue Notification regarding
the manner in which the census has to be carried out and the Central
Government has issued Notifications, and the competent authority has issued
directions. It is not within the domain of the Court to legislate. The
courts do interpret the law and in such interpretation certain creative
process is involved. The courts have the jurisdiction to declare the law as
unconstitutional. That too, where it is called for. The court may also fill
up the gaps in certain spheres applying the doctrine of constitutional
silence or abeyance. But, the courts are not to plunge into policy making
by adding something to the policy by way of issuing a writ of mandamus.
There the judicial restraint is called for remembering what we have stated
in the beginning. The courts are required to understand the policy
decisions framed by the Executive. If a policy decision or a Notification
is arbitrary, it may invite the frown of Article 14 of the Constitution.
But when the Notification was not under assail and the same is in
consonance with the Act, it is really unfathomable how the High Court could
issue directions as to the manner in which a census would be carried out by
adding certain aspects. It is, in fact, issuance of a direction for framing
a policy in a specific manner.
26. In this context, we may refer to a three-Judge Bench decision in Suresh
Seth v. Commr., Indore Municipal Corporation : (2005) 13 SCC 287 wherein a
prayer was made before this Court to issue directions for appropriate
amendment in the M.P. Municipal Corporation Act, 1956 so that a person may
be debarred from simultaneously holding two elected offices, namely, that
of a Member of the Legislative Assembly and also of a Mayor of a Municipal
Corporation. Repelling the said submission, the Court held:
“In our opinion, this is a matter of policy for the elected representatives
of people to decide and no direction in this regard can be issued by the
Court. That apart this Court cannot issue any direction to the legislature
to make any particular kind of enactment. Under out constitutional scheme
Parliament and Legislative Assemblies exercise sovereign power to enact
laws and no outside power or authority can issue a direction to enact a
particular piece of legislation. In Supreme Court Employees' Welfare Assn.
v. Union of India MANU/SC/0582/1989:(1989) 4 SCC 187 (SCC para 51) it has
been held that no court can direct a legislature to enact a particular law.
Similarly, when an executive authority exercises a legislative power by way
of a subordinate legislation pursuant to the delegated authority of a
legislature, such executive authority cannot be asked to enact a law which
it has been empowered to do under the delegated legislative authority. This
view has been reiterated in State of J & K v. A.R. Zakki
MANU/SC/0293/1992 : 1992 Supp (1) SCC 548. In A.K. Roy v. Union of India
MANU/SC.0051/1981 : (1982) 1 SCC 271 it was held that no mandamus can be
issued to enforce an Act which has been passed by the legislature.”
29. In this context, it is fruitful to refer to the authority in Rusom
Cavasiee Cooper v. Union of India MANU/SC/0011/1970 : (1970) 1 SCC 248,
wherein it has been expressed thus:
“It is again not for this Court to consider the relative merits of the
different political theories or economic policies... This Court has the
power to strike down a law on the ground of want of authority, but the
Court will not sit in appeal over the policy of Parliament in enacting a
law".”
As can be seen from the extracted portion of the said judgment, in Supreme
Court Employees Welfare Association v. Union of India[13], it was
categorically held that no court can direct a legislature to enact a
particular law. Similarly when an executive authority exercises a
legislative power by way of subordinate legislation pursuant to the
delegated authority of a legislature, such executive authority cannot be
asked to enact the law which it has been empowered to do under the
delegated legislative authority.
We may also refer to the judgment of this Court in the case of Common Cause
v. Union of India and Others[14].
In that case, though the legislature had made amendments in the Delhi Rent
Act, it was left to the Government to notify the date of coming into force
the said amendments. Government did not notify any date. A writ was filed
seeking issuance of mandamus to the Government to notify the date, which
was dismissed by the High Court. While approving the said decision in the
aforesaid judgment, the Court referred to various earlier judgments on the
subject. It was held that not only Parliament is empowered to give such a
power to the executive to decide when the Act is to be brought into force,
but also held that mandamus cannot be issued to the Government to notify
the amendments. In the process, the Court also made the following
observations which are relevant in the present context:
“27. From the facts placed before us it cannot be said that Government is
not alive to the problem or is desirous of ignoring the will of the
Parliament. When the legislature itself had vested the power in the Central
Government to notify the date from which the Act would come into force,
then, the Central Government is entitled to take into consideration various
facts including the facts set out above while considering when the Act
should be brought into force or not. No mandamus can be issued to the
Central Government to issue the notification contemplated under
Section 1(3) of the Act to bring the Act into force, keeping in view the
facts brought on record and the consistent view of this Court.”
Various judgements cited by the appellant would have no application in the
instant case as all these judgments pertain to judicial review of
administrative action. In such cases power of the Court to issue mandamus
certainly exists when it is found that a public authority/executive is not
discharging its statutory duty.
The matter can be looked into from another angle as well. When ‘power’ is
given to the Central Government to issue a notification to the effect not
to recover duty of excise or recover lesser duty than what is normally
payable under the Act, for deciding whether to issue such a Notification or
not, there may be various considerations in the mind of the Government.
Merely because conditions laid in the said provisions are satisfied, would
not be a reason to necessarily issue such a notification. It is purely a
policy matter. No doubt, the principle against arbitrariness has been
extended to subordinate legislation as well (See : Indian Express
Newspapers, Bombay v. Union of India[15]). At the same time, the scope of
judicial review in such cases is very limited. Where the statute vests a
discretionary power in an administrative authority, the Court would not
interfere with the exercise of such discretion unless it is made with
oblique end or extraneous purposes or upon extraneous considerations, or
arbitrarily, without applying its mind to the relevant considerations, or
where it is not guided by any norms which are relevant to the object to be
achieved.
In the counter affidavit filed by the respondent, it is categorically
mentioned that the policy of the Government is not to issue the
notification under Section 11C of the Act when it benefits only a few
assesses. It is mentioned that the specific policy of the Government is
that when a large section of trade is affected and any relief is proposed
to be given, a notification under Section11C of the Act is issued. When the
reasons furnished by the Government in not exercising its power to issue
notification under Section 11C of the Act are seen in this perspective,
namely, such a notification, if issued, is going to benefit only two units,
we find them to be valid and justified. While dealing with the challenge
to the constitutional validity of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002, in the
case of Madria Chemicals Ltd. Etc. Etc. v. Union of India and others Etc.
Etc.[16], this Court noted that the legislature came up with the said
legislation as a matter of policy to have speedier legal method to recover
the dues. It was held that such a policy decision of the legislature could
not be faulted with nor was it a matter to be gone into by the courts to
test the legitimacy of such a measure relating to financial policy. As
already pointed out above, it is impermissible for this Court to tinker
with such policy decision more particularly when it is found that the
decision is not irrational and is founded on valid considerations. It has
also to be borne in mind that in the instant case the appellant has already
paid the duty. Section 11C contemplates those situations where duty is not
paid. It does not cover the situation where duty is paid and that is to be
refunded.
Examination of the matter in the aforesaid perspective would provide an
answer to most of the arguments of the appellants. It would neither be a
case of discrimination nor it can be said that the appellants have any
right under Article 14 or Article 19(1)(g) of the Constitution which has
been violated by non-issuance of notification under Section 11C of the Act.
Once the appellant accepts that in law it was liable to pay the duty, even
if some of the units have been able to escape payment of duty for certain
reasons, the appellant cannot say that no duty should be recovered from it
by invoking Article 14 of the Constitution. It is well established that
the equality clause enshrined in Article 14 of the Constitution is a
positive concept and cannot be applied in the negative.
As a result, this appeal is found to be bereft of any merit and is,
accordingly, dismissed.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ASHOK BHUSHAN)
NEW DELHI;
APRIL 24, 2017.
-----------------------
[1]
(2011) 13 SCC 180
[2] 1880 (5) A.C. 214
[3] (1987) 1 SCC 213
[4] (2007) 8 SCC 338
[5] (2015) 8 SCC 744
[6] (2014) 1 SCC 554
[7] (2016) 11 SCC 113
[8] (1997) 11 SCC 179
[9] Civil Appeal No. 1795 of 2005, decided on 29.07.2015
[10] (1991) 4 SCC 473
[11] Judicial Review of Administrative Action
[12] (2015) 2 SCC 796
[13] (1989) 4 SCC 187
[14] (2003) 8 SCC 250
[15] (1985) 1 SCC 641
[16] (2004) 4 SCC 311