Orient Paper Mills Ltd. Vs. Union of
India [1968] INSC 147 (3 May 1968)
03/05/1968 HEGDE, K.S.
HEGDE, K.S.
SHELAT, J.M.
CITATION: 1969 AIR 48 1969 SCR (1) 245
CITATOR INFO :
R 1970 SC1498 (4) F 1988 SC2223 (14)
ACT:
Quasi-Judicial Power-exercise of-necessity
for deciding matters independently of directions given by others.
Appeals and Revisions manner in which
quasi-judicial power to be exercised.
HEADNOTE:
Upto February, 1961 certain "printing
and writing paper" and "packing and wrapping paper" produced by
the appellant Company were subject to exercise duty at the rate of 22 nP.
per kilogram though the former was chargeable
under Item 17(3) and the latter under Item 17(4) of the First Schedule to the Central
Excises and Salt Act, 1944. The Finance Act of 1961 raised the, excise duty
payable under Item 17(4) to 35 nP. per kilogram with effect from March 11 1968
and though for some months the Excise Officer continued to levy duty on certain
"machine glazed paper" popularly known as "M.G. Poster
paper" under Item 17(3) i.e. by regarding it as "printing and writing
paper", subsequently the excise authorities began to treat this paper as
"packing and wrapping paper" and insisted on the appellant paying
duty thereon under Item 17(4). The appellant paid the duty at the rate claimed
under protest and thereafter applied for refund of the excess on the ground
that the duty on that paper should have been levied under Item 17(3). The Assistant
Collector rejected the claim. An appeal to the Collector and a revision to the
Central Government were also rejected. It was clear from the order of the
Collector as well as from the counter affidavit filed on behalf of the
Government that the appeal and the revision were rejected on the ground that
the question was covered by a direction issued by the Central Board of Revenue
to the effect that the paper in question was to be treated as packing and
wrapping paper".
On appeal, to this Court
HELD :The direction given by the Board was
invalid and had vitiated the proceedings before the Collector as well as the
Government. The appeals must therefore be allowed and the orders of the Central
Government as well as the Collector set aside, and the proceedings remitted to
the Collector for deciding the question whether "M.G. Poster paper"
should be assessed as "printing and writing paper" or "packing
or wrapping paper" afresh. [253 A-C] The question whether "M.G.
Poster paper" is "printing and writing paper" or "packing
and wrapping paper" is essentially a question of fact. That had to be
decided by the authorities under the Act. The power exercised by the Collector
and the Central Government was a quasi-judicial power that could not be
controlled by the directions issued by the Board. No authority however high
placed can control the decision of a judicial or a quasi-judicial authority.
There is no provision in the Act empowering
the Board to issue directions to the assessing authorities or the appellate
authorities in the matter of deciding disputes between the persons who are
called upon to pay duty and the department. Although the assessing authorities
as well as the appellate authorities are judges in their own cause, when they
are called upon to decide disputes arising under the Act they must act
independently and impartially. They cannot 246 be said to act independently if
their judgment is controlled by the directions given by others. [249 B-C, F-H]
Aluminium Corporation of India Ltd. v. Union of India, C.A. 635 of 1964 decided
on September 22, 1965; Mahadayal Premchandra v. Commercial Tax Officer,
Calcutta, [1959] S.C.R. 551 and B. Rajagopal Naidu V. State Transport Appellate
Tribunal, [1964] S.C.R. 1;
referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos, 659 to 664 of 1965.
Appeals by special leave from the judgment
and order dated ,October 5, 1963 of the Government of India, Ministry of
Finance, Department of Revenue, New Delhi in Central Excise Revisions
Applications Nos. 720 to 725 of 1963.
S.Ray, R. K. Chaudhury, A. N. Parikh and B,
P. Maheshwari, for the appellant.
Seiyed Mohammad and S. P. Nayyar, for the
respondent.
The Judgment of the Court-was delivered by
Hegde, J. These appeals by special leave arise from the orders made by the Government
of India, Ministry of Finance, Department of Revenue, New Delhi on October 5,
1963, in Central Excise Revision Applications Nos. 720 to 725 of 1963. Herein a
common question of law arises for decision and that is whether "M.G.
Poster paper" manufactured by the appellant company is a printing and
writing paper" chargeable under item 17(3) of the First Schedule to the Central
Excises and Salt Act, 1944 (No. 1 of 1944), hereinafter referred to as the Act
or whether it is "packing and wrapping paper" chargeable under item
17(4) of the aforementioned Schedule.
The appellant is a public limited company
incorporated under the Indian Companies Act, 1913, and an "existing
company" within the meaning of the Indian Companies Act, 1956. It is
carrying on business, inter alia, of manufacturing and sale of various kinds of
paper at its factory at Birjrajnagar in the district of Sambalpur in the State
of Orissa. In particular, it manufactures "packing and wrapping
paper", "printing and writing paper" and "machine glazed
paper", popularly known as "M.G. Poster paper". Upto February
28, 1961,the date on which the Finance Bill of that year was introduced in
Parliament, printing and writing paper" and "packing and wrapping
paper" were subject to excise duty at the rate of 22 nP per kilogram,
though the former was chargeable under item 17 (3) and the latter under item 17
(4) ,of the First Schedule to the Act. The Finance Act of 1961 raised the
excise duty payable under item 17(4) to 35 nP per kilogram with effect from
March 1, 1961. From March 1, 1961, 247 to August 1, 1961, the excise officers
levied duty on "M.G.
Poster paper" under item 17(3) i.e. at
the rate of 22 nP per kilogram. In other words, during that period the excise
authorities treated "M.G. Poster paper" as "printing and writing
paper". Subsequently, the excise authorities began to treat this paper as
"packing and wrapping paper" and insisted on the appellant paying
duty thereon under item 17(4). The appellant paid duty at that rate under
protest and thereafter applied to the Assistant Collector for refund on the
ground that the duty on that paper should have been levied under item 17(3) and
consequently the duty collected was in excess of that leviable under law. The
Assistant Collector rejected that claim. Consequently, the appellant went up in
appeal to the Collector of Central Excise, who rejected its appeal. Then the
matter was taken-up in revision to the Government of India. The Government
declined to interfere with the orders of the Collector.
The orders made by the Collector in the
various appeals and those made by the Government in the revisional applications
are similar in all the cases. Therefore it would be sufficient if we refer only
to those made in one of the cases, viz., in C.A. 659 of 1965.
The contention of the appellant before the
Assistant Collector, the Collector as well as the Central Government was that
"M.G. Poster paper" is a, "printing and writing paper" and
it was considered as such, by the Indian Tariff Board, in the Tariff Commission
Report published in 1959 and in the specifications published by the Indian
Standards Institution. Further it was dealt as "printing and writing
paper" in the annual rate contracts entered into between the appellant and
the Government of India for supply of papers and paper-boards to the
Government. This contention does not appear to have been examined either by the
Collector or by the Central Government. The Collector rejected the appeals of
the appellant with these observations -."The crucial point in appeal is
whether the paper declared as 'M.G. Poster paper' should be assessed as packing
and wrapping paper, other sorts' under tariff item No. 17(4) or as 'printing
and writing paper, other sorts' under tariff item 17(3).
The Central Board of Revenue have already
made it clear that all types of poster paper of whatever colour including white
should not be treated as 'printing and writing paper' but as 'packing and
wrapping paper'. As such, the Poster paper has not been wrongly assessed.
248 I have carefully gone through the
available records of the case. Considering all the facts and circumstances, I
do not find any reason to interfere with the order passed by the A.C. appealed
against Ms order is therefore confirmed." It is seen from his order that
the only ground on which the Collector rejected the appeals of the appellant
was that the question was covered by the direction issued by the Central Board
of Revenue-hereinafter referred to as the Board.
During the pendency of the revision
applications filed before the Central Government, the Collector, in response to
the notice served on him, filed his objections in writing.
In those objections he pleaded primarily two
grounds in opposition to the appellant's claim. They are : (i) that on chemical
examination it was found that "M.G. Poster paper" was "packing
and wrapping paper" and (ii) the direction issued by the Board was binding
on him. As per its order of October 5, 1963, the Government rejected the
revision applications in question with these observations :"The Government
of India have carefully considered all the points raised by the petitioners,
but they regret that they do not find any _justification for interfering with
the order in appeal. The Revision Application is accordingly rejected."
The order in question is by no means a speaking order; it is not possible to
spell out from that order the reasons that persuaded the Government to reject
the revision applications. The best that can be said in favour of the
Government is that it thought that the direction issued by the Board referred
to earlier was decisive of the matter.
That was what was stated in the counter
affidavit filed on behalf of the Government of India in these appeals. The only
other reason that could have influenced the decision of the Government was the
statement of the Collector that on chemical examination it was found that
"M.G. Poster paper" was "packing and wrapping paper". If
the Government had taken into consideration any other facts in deciding the
revision applications they had clearly contravened the principles of natural
justice as the appellant had not been given any opportunity to rebut those
facts.
Now it is conceded that "M.G. Poster
paper" was never chemically examined and the Collector's statement to the
contrary was incorrect. It is not possible to determine whether the incorrect
statement made by the Collector had or had not influenced the Government. It
may be mentioned at this stage that the appellant had specifically complained
to the Government that it had not been supplied with the copy of any report
relating to 249 chemical examination of "M.G. Poster paper", nor was
it given any opportunity to contest the correctness of the facts mentioned in
that report. Undoubtedly during the hearing of the revision applications the
appellant was not informed that the statement made by the Collector regarding
the alleged chemical examination was incorrect, and that statement would not be
taken into consideration in deciding the revision-applications.
This leaves us with the question of the
directions issued by the Board. The question whether "M.G. Poster
paper" is "printing and writing paper" or "packing and
wrapping paper" is essentially a question of fact. That had to be decided
by the authorities under the Act. It was not denied before us that the
Collector and the Central Government while deciding the appeals and the
revision applications respectively functioned as quasi judicial authorities. So
far as the nature of power exercised by the Central Government under S. 36 of
the Act (revisional powers) is concerned, the matter is concluded by the
decision of this Court in Aluminium Corporation of India Ltd. v. Union of
India(1). Therein this Court held that the said power is a quasi judicial
power. There is hardly any doubt that the power exercised by the appellate
authority, i.e. the Collector,, under s' 35 is also a quasi judicial power. He
is designated as an appellate authority; before him there was a lis between the
appellant which had paid the duty and the Revenue; and his order is subject to
revision by the Central Government. Therefore, it is obvious that the power
exercised by him is a quasi judicial power. Dr. Syed Mohammed, appearing for
the respondent, did not contend-and we think rightly-that the power exercised
by the Collector was not a quasi judicial power.
If the, power exercised by the Collector was
a quasi judicial power-as we hold it to be-that power cannot be controlled by
the directions issued by the Board. No authority however high placed can
control the decision of a judicial or a quasi judicial authority. That is the
essence of our judicial system. There is no provision in the Act empowering the
Board to issue directions to the assessing authorities or the appellate
authorities in the matter of deciding disputes between the persons who are
called upon to pay duty and the department. It is true that the assessing
authorities as well as the appellate authorities are judges in their own cause;
yet when they are called upon to decide disputes arising under the Act they
must act independently and impartially. They cannot be said to act
independently if their judgment is controlled by the directions given by
others. Then it is a misnomer to call their orders as their judgments; they
would essentially be the judgments of the authority that gave the directions
and which authority had given those judgments without hearing the aggrieved (1)
C.A. 635 of 1964, decided on September 22, 1965.
250 party. The only provision under which the
Board can issue directions is r. 233 of the Rules framed under the Act.
That rule says that the Board and the
Collectors may issue written instructions providing for any supplemental
matters arising out of these Rules. Under this rule the only instruction that
the Board can issue is that relating to administrative matters; otherwise that
rule will have to be considered as ultra vires s. 35 of the Act.
In Mahadayal Premchandra v. Commercial Tax
Officer, Calcutta(1), this Court held that the Commercial Officer while
assessing certain transactions should not have solicited instructions from the
Assistant Commissioner, nor should he have acted on the basis of those
instructions. It was further held that the instructions given by the Assistant
Commissioner had vitiated the entire proceedings as "the procedure adopted
was, to say the least, unfair and was calculated to undermine the confidence of
the public in the impartial and fair administration of the sales tax
department." In B. Rajagopal Naidu v. State Transport Appellate Tribunal(1),
this Court was called upon to consider the validity of Madras Government Order
No. 1298 dated April 28, 1956 issued under s. 43-A of the Motor Vehicles Act,
1939, whereunder certain directions were given to the Transport Authorities in
the discharge of their quasi judicial functions. The G.O. in question was
struck down by this Court. In the course of the judgment, Gajendragadkar C.J.,
speaking for the Court, observed thus:"In reaching this conclusion, we
have been influenced by certain other considerations which are both relevant
and material. In interpreting s. 43-A, we think, it would be legitimate to
assume that the legislature intended to respect the basic and elementary
postulate of the rule of law, that in exercising their authority and in
discharging their quasi judicial function, the tribunals constituted under the
Act must be left absolutely free to deal with the matter according to their
best judgment. It is of the essence of fair and objective administration of law
that the decision of the Judge or the Tribunal must be absolutely unfettered by
any extraneous guidance by the executive or administrative wing of the State.
If the exercise of discretion conferred on a
quasi judicial tribunal is controlled by any such direction, that forges
fetters on the exercise of quasi judicial authority and the presence of such
fetters would make the exercise of such authority completely inconsistent with
the well-accepted notion of judicial process. It is true that law can regulate
the exercise (1) [1959] S.C.R. 551.
(2) [1964] 7 S.C.R.
251 of judicial powers. It may indicate by
specific provision on what matters the tribunals constituted by it should
adjudicate.
It may by specific provisions lay down the
principles which have to be followed by the tribunals in dealing with the said
matters.
The scope of the jurisdiction of the
tribunals constituted by statute can well be regulated by the statute and
principles for guidance of the said tribunals may also be prescribed subject of
course to the inevitable requirement that these provisions do not contravene
the fundamental rights guaranteed by the Constitution. But what law and the
provisions of law may legitimately do cannot be permitted to be done by
administrative or executive orders. This position is so well established -that
we are reluctant to hold that in enacting s. 43-A the Madras Legislature
intended to confer power on the State Government to invade the domain of the
exercise of judicial power. In fact, if such had been the intention of the
Madras Legislature and had been the true effect of the provisions of s. 43-A,
s. 43-A itself would amount to an unreasonable contravention of fundamental
rights of citizens and may have to be struck down as unconstitutional. That is
why the Madras High Court in' dealing with the validity of s. 43-A had expressly
observed that what S. 43-A purported to do was to clothe the Government with
authority to issue directions of an administrative character and nothing more.
It is somewhat unfortunate that though judicial decisions have always
emphasised this aspect of the matter, occasion did not arise so long to
consider the Palidity of the Government order which on the construction
suggested by the respondent would clearly invade the domain of quasi judicial
administrations.
The rule laid down in the above decisions is
fully applicable to the facts of this case. It is obvious as well as admitted
that both the Collector and the Central Government proceded on the basis that
the direction given by the Board was decisive of the matter. The revision
applications filed before the Government were heard and decided by one of the
members of the Board. He appears to have proceeded on the basis that in view of
the directions given by the Board nothing more need be said as to the point in
dispute. It is regrettable that when administrative officers are entrusted with
quasi judicial functions, often times they are unable to keep aside
administrative considerations while discharging quasi-judicial functions. This
Court as well as the High Courts have repeatedly tried to impress upon them
that their two functions are separate;
while functioning as quasi judicial officers
they should not allow their judgment to be influenced by administrative
considerations or by the instructions or directions given by their superiors.
-In this case both the Collector as well as the Central Government have ignored
the line that demarcates their administrative duties and their judicial
functions.
Dr. Syed Mohammed did not try to justify the
direction given by the Board nor did he contend that direction has any force of
law. On the other hand, his main contention was that the grounds urged before
this Court were riot at all taken before the Collector and the Central
Government and therefore the appellant should not be permitted to take those grounds
in this Court. We do not think that Dr. Syed Mohammed is right in his
contention. Before the Central Government the appellant had definitely
contended that no copy of the report relating to chemical examination of
"M.G. Poster paper" had been given to the appellant and therefore the
same could not have been taken into consideration. At that stage the appellant
could not have known that the statement of the Collector relating to chemical
examination of "M. G. Poster paper" was incorrect. As regards the validity
of the direction given by the Board, it is clear from the notes of argument
maintained by the member of the Board who heard the revision applications that
contention had been taken before him, though not in the form in which it was
presented before this Court. This what we get from the notes maintained by him:"The
matter (as to whether 'M.G. Poster paper' is 'printing and writing paper' or
'packing and wrapping paper') was reexamined in detail, in consultation with
all the concerned authorities, viz., the Ministry of Commerce and Industries,
-the Indian Standards Institution and the Chief Chemist The views of Collectors
of Central Excise as well as those of Collectors were also invited. Ultimately
it was reaffirmed vide the Board's letter No. F. No. 21/36/61/CXIV dated
November 6, 1961, that paper was correctly assessable as packing and wrapping
paper and should continue to be assessed as such. F.M.'s approval was also
secured before confirming this position. This therefore should settle the main issue
regarding the classification of the poster paper." From these notes it is
clear that at any rate the correctness of the direction issued by the Board was
put in issue during the hearing of the revision applications. That apart, we
are clearly of the opinion that even if the question of the legality of the
direction issued by the Board had not been taken before the authorities under
the Act, as that direction completely vitiates the proceedings and makes a
mockery of the judicial process, we think we ought to consider the legality of
that direction. For the reasons 253 already mentioned, we hold that direction
was invalid and the same has vitiated the proceedings before the Collector as
well as the Government.
Both the appellant as well as the Revenue invited
us to decide the case on the basis of the material on record.
Ordinarily this Court does not go into
questions of fact.
That is the duty of the authorities under the
Act. We see no exceptional circumstances in this case requiring us to deviate
from the ordinary rule.
For the reasons mentioned above, these
appeals are allowed and the orders of the Central Government as well as that of
the Collector are set aside, and the proceedings remitted to the Collector for
deciding the question whether "M.G. Poster paper" should be -assessed
as "printing and writing paper" or as "packing and wrapping
paper" afresh. The respondents shall pay the costs of the appellant in all
these appeals;
hearing fee one set.
R. K. P. S. Appeals allowed.
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