Page 1 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.

2)Section 11C of the Act reads as under:

“11C. Power not to recover duty of excise not levied or short-

Page 2 levied as a result of general practice.-

(1) Notwithstanding anything contained in this Act, if the

Central Government is satisfied-

(a) that a practice was, or is, generally prevalent regarding

levy of duty of excise (including non- levy thereof) on any

excisable goods; and

(b) that such goods were, or are, liable-

(i)to duty of excise, in cases where according to the

said practice the duty was not, or is not being,

levied, or

(ii)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.]

(2) 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."

3)A bare perusal of the aforesaid provision would indicate that if certain

conditions mentioned therein are satisfied, the Central Government may

Page 3 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.

4)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.

5)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

Page 4 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.

6)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.

Page 5 7)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.

8)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

Page 6 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.

9)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

Page 7 raising demand of excise.

10)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.

11)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.

12)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

Page 8 before the High Court of Bombay and the matter is still pending there.

13)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.

14)Fact of the matter is that after thorough consideration, the Finance

Page 9 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.

15)Submission of Mr. S. Ganesh, senior advocate, and Mr. Prashant

Page 10 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

Page 11 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.”

16)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.

17)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

Page 12 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

Page 13 Blackburn observed in the said decision that enabling words

were always compulsory where the words were to effectuate

a legal right.”

18)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

Page 14 Suresh Chand Gautam v. State of Uttar Pradesh & Ors.

7

on this very

aspect.

19)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

Page 15 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.

20)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.

21)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

Page 16 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.

22)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

Page 17 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.

23)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?

Page 18 We have bestowed our serious consideration that this case

deserves to the issues involved.

QUESTION NO. 1

24)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

Page 19 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.

25)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

Page 20 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.

26)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

Page 21 practice of non-levy of duty.

27)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

Page 22 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.”

28)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.

29)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

Page 23 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.

30)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.

Page 24 It is entirely different from judicial review of a legislative action.

31)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.

32)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

Page 25 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.

Page 26 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".”

33)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

Page 27 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.

34)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

Page 28 Act to bring the Act into force, keeping in view the facts

brought on record and the consistent view of this Court.”

35)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.

36)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

Page 29 considerations, or where it is not guided by any norms which are

relevant to the object to be achieved.

37)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

Page 30 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.

38)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.

39)As a result, this appeal is found to be bereft of any merit and is,

accordingly, dismissed.

.............................................J.

(A.K. SIKRI)

Page 31 .............................................J.

(ASHOK BHUSHAN)

NEW DELHI;

APRIL 24, 2017.