Assistant Collector of Central Excise
Chandan Nagar, West B Vs. Dunlop India Ltd. & Ors [1984] INSC 222 (30
November 1984)
REDDY, O. CHINNAPPA (J) REDDY, O. CHINNAPPA
(J) SEN, A.P. (J) VENKATARAMIAH, E.S. (J)
CITATION: 1985 AIR 330 1985 SCR (2) 190 1985
SCC (1) 260 1984 SCALE (2)819
CITATOR INFO :
F 1985 SC1289 (10) R 1986 SC 614 (5,6) RF
1988 SC2010 (12)
ACT:
Constitution of India 1950 Articles 226 and
141 Interim orders in writ petition-Grant OF-Situations and circumstances-What
are-Matters involving public revenue-Not sufficient showing a prima facie
case-Furnishing of bank guarantee not a circumstance-Balance of convenience to
be in favour of grant of interim order-Likelihood of prejudice to public
interest to be shown.
Supreme Court decisions binding on all
courts-Judgment per incuriam Principle of-High Court not entitled to disregard
judgment of Supreme Court labeling It per incuriam.
HEADNOTE:
The Government of India by a notification
dated April 6,1984, exempted tyres from a certain percentage of Excise Duty to
the extent that the manufacturers had not availed themselves of the exemption
granted under certain other earlier notifications.
The Customs and Excise Department was of the
view that the Respondent-company who was a manufacturer of Tyres, Tubes and
various other rubber products was not entitled to the aforesaid exemption as it
had cleared the goods earlier without paying Central Excise Duty but on
furnishing Bank Guarantees under various interim-orders of courts.
The Company claimed the benefit of exemption
to the tune of about Rs. 6 crores and filed a Writ Petition in the- High Court
and sought an interim order restraining the Central Excise authorities from the
levy and collection of excise duty. The High Court held that a prima facie case
had been made out in favour of the company and by an interim order allowed the
benefit of the exemption to the tune of about Rs. 2 crores and directed that
the goods be released on furnishing a Bank Guarantee.
In the Department's appeal, the Division
Bench confirmed the above order with a slight modification to the effect that
the Collector of Central Excise could encash 30 per cent of the Bank Guarantee.
Allowing the appeals by the Department, this
Court,
HELD: 1. The orders of the Single Judge as
well as the Division Bench are wholly unsustainable and should never have been
made, Even assuming the 191 company had established a prima facie case, it was
not a sufficient justification A for granting the said interim orders. There
was no question of any balance of convenience being in favour of the
respondent-Company, it was certainly in favour of the Government of India.
[201B-C] 2. Governments are not run on mere Bank Guarantees.
Very often some courts act as if furnishing a
Bank Guarantee would meet the ends of justice. No Governmental business, for
that matter no business of any kind can be run on mere Bank Guarantees. Liquid
cash is necessary for the running of a Government as indeed any enterprise.
[201C]
3. Where matters of public revenue are
concerned, it is of utmost importance that interim orders are not to be granted
merely because prima facie case has been shown. More is required. The balance
of convenience must be clearly in favour of the making of an interim order and
there should not be the slightest indication of a likelihood of prejudice to
the public interest. [201D1
4. Article 226 is not meant to short circuit
or circumvent statutory procedures. It is only where statutory remedies are
entirely ill-suited to meet the demands of extraordinary situations, as for
instance where the very vires of the statute is in question or where private or
public wrongs are so inextricably mixed up and the prevention of public injury
and the vindication of public justice require it, that recourse may be had to
Art. 226.
The Court must also have good and sufficient
reason to by- pass the alternative remedy provided by statute. Matters
involving the revenue where statutory remedies are available are not such
matters. The vast majority of the petitions under Art. 226 are filed solely for
the purpose of obtaining interim orders and thereafter to prolong the
proceedings by one device or the other. This practice needs to be strongly
discouraged. [194F-H; 195A] E
5. There are, cases which demand that interim
orders should be made in the interests of justice. Where gross violations of
the law and injustices are about to be, or are perpetrated, it is the bounden
duty of the court to intervene and give appropriate interim relief. In cases
where denial of interim relief may lead to public mischief, grave irreparable
private injury, or shake a citizen's faith in the impartiality of public
administration, a court may well be justified in granting interim relief
against public authority.
Samarias Trading Company Pvt. Ltd. v. S.
Samuel and Ors., [1985] 2 S.C.R. 24, Siliguri Municipality v. Amalendu Das,
[1981] 2 SCC 436, Titaghur Paper Mills Co. Ltd. v. State of Orissa, [1983] 2
SCC 433, Union of India v. Oswal Woollen Mills Ltd., [1984] 2 SCC 646 and Union
of India v. Jain Shudh Vanaspati Ltd., C.A. No. 11450 of 1983; referred to.
6. In India, under Art. 141, the law declared
by the Supreme Court shall be binding on all courts and under Art.
144 all authorities civil and judicial shall
act in aid of the Supreme Court. [200B]
7. In the hierarchical system of Courts which
exists in our country it is 192 necessary for each lower tier, including the
High Courts to accept loyally the decisions of the higher tiers. The better
wisdom of the Court below must yield to the higher wisdom of the Court above.
[199E-F]
8. The label per incuriam is relevant only to
the right of an appellate court to decline to follow one of its own previous
decisions, not to its right to disregard a decision of a higher appellate court
or to the right of a judge of the High Court to disregard a decision of the
Supreme Court.
[199H; 200A] Cassel and Co. Ltd. v. Broome,
[1972] A C. 1027 and Rookes v. Barnard, [1964] A.C. 1129, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 4742-43 of 1984.
a Appeal by Special leave from the Judgment
and order dated the 9th August, 1984 of the Calcutta High Court in FMAT No.
2139 of 1984 and 2023 of 1984.
K. Parasaran, Attorney General, V. J.
Francis, Chandrasekharan, N.M. Popli and Miss Savitha Sharma for the Appellant.
F. S. Nariman, D. N. Gupta and Harish Salve
for the Respondent.
The Judgment of the Court was delivered by
CHlNNAPPA REDDY, J. It is indeed a great pity-and, we wish we did not have to
say it but we are afraid;we will be signally failing in our duty if we do not
do so -some courts, of late, appear to have developed an unwarranted tendency
to grant interim orders-interim orders with a great potential for public
mischief-for the mere asking. We feel greatly disturbed. We find it more distressing
that such interim orders, often ex-parte and non-speaking, are made even by the
High Courts while entertaining writ petitions under Art. 226 of the
Constitution, and in the Calcutta High Court, on oral application too. Recently
in Samaries Trading Company Pvt. Ltd. v. S. Samuel & Ors(l). we had
occasion to condemn and prohibit this practice of entertaining oral
applications under Art. 226 and passing interim orders thereon. In several
other cases, Siliguri Municipality v. Amelendu Das(2), Titagur Paper Mills Co.
Ltd. State of Orissa,(3) Union (1) [1985] 2 S.C R. 24.
(2) [1983] 2 S.C.C 436 (3) [1983] 2 S.C.C 433
193 Of India v. Oswal Woollen Mills Ltd(l)., Union of India v. Jain Shubh A
Vanaspati Ltd.(a), this Court was forced to point out how wrong it was to make
interim orders so soon as an application was but presented, when a second
thought (or a second's thought) would expose the impairment of the public
interest and often enough the existence of a suitable alternative remedy.
Despite the fact that we have set our 8 face against interfering with interim
orders passed by the High Courts and made it practically a rigid rule not to so
interfere, we were constrained to interfere in those cases.
In Siliguri Municipality v. Amalendu Das,
(supra) A. P. Sen and M. P. Thakkar, JJ. had to deal with an interlocutory
order passed by the Calcutta High Court restraining the Siliguri Municipality
from recovering a graduated consolidate rate on the annual value of buildings
in terms of the amended provisions of the Bengal Municipal Act. We reiterate
the following observations made therein:
"We are constrained to make the
observations which follows as we do feel dismayed at the tendency on the part
of some of the High Courts to grant interlocutory orders for the mere asking.
Normally, the High Court should not, as a rule, in proceedings under Article
226 of the Constitution grant any stay of recovery of tax save under very
exceptional circumstances. The grant to stay in such matters, should be an
exception and not a rule.
"It is needless to stress that a levy or
impost does not become bad as soon as a writ petition is instituted in order to
assail the validity of the levy. So also there is no warrant for presuming the
levy to be bad at the very threshold of the proceedings. The only consideration
at that juncture is to ensure that no prejudice is occasioned to the rate
payers in case they ultimately succeed at the conclusion of the proceedings.
This object can be attained by requiring the body or authority levying the
impost to give an undertaking to refund or adjust against future dues, the levy
of tax or rate or a part thereof, as the case may be, in the event of the
entire levy or a part thereof being ultimately held (l) [1984l 1.2 S.C.C. 646 t
(2) C, A. No. 11420 of 1983 194 to be invalid by the court without obliging the
tax- payers to institute a civil suit in order to claim the amount already
recovered from them. On the other hand, the Court cannot be unmindful of the
need to protect the authority levying the tax, for, at that stage the Court has
to proceed on the hypothesis that the challenge may or may not succeed. The
Court has to show awareness of the fact that in a case like the present a
municipality cannot function or meet its financial obligations if its source of
revenue is blocked by an interim order restraining the municipality from
recovering the taxes as per the impugned provision. And that the municipality
has to maintain essential civic services like water supply, street lighting and
public streets etc., apart from cunning public institutions like schools,
dispensaries, libraries etc. What is more, supplies have to be purchased and
salaries have to paid. The grant of an interlocutory order of This nature would
paralyze the administration and dislocate the entire working of the
municipality. It seems that these serious ramifications of the matter were lost
sight of while making the impugned order".
In Titaghur Paper Mills Co. Ltd. v. S/ate of
Orissa A. P. Sen E. S. Venkataramiah and R. B. Misra, JJ. held that where the
statute itself provided the petitioners with an efficacious alternative remedy
by way of an appeal to the Prescribed Authority, a second appeal to the
Tribunal and thereafter to have the case stated to the High Court, it was not
for the High Court to exercise its extra ordinary jurisdiction under Art. 226
of the Constitution ignoring as it were, the complete statuary machinery. That
it has become necessary, even now, to as to repeat this admonition is indeed a
matter of tragic concern to us. Article 226 is not meant to short circuit of
circumvent statutory procedures.
It is only were statutory remedies are
entirely ill-suited to meet the demands of extraordinary situations, as for
instance where the very vires of thee statute is in question or where private
or public wrongs are so inextricably mixed up and the prevention of public
injury and the vindication of public justice require it that recourse may be
had to Art. 226 of the Constitution. But then the Court must have good and sufficient
reason to by-pass the alternative remedy provided by statute. Surely matters
involving the revenue where statutory remedies are available are not such
matters.
We can also take judicial notice of the fact
that the vast 195 majority of the petitions under Art. 226 o the Constitution
are filed . solely for the purpose of obtaining interim orders and there after
prolong the proceedings by one device or the other. The practice certainly
needs to be strongly couraged.
In Union of India v. Oswal Woollen Mills
Ltd., we had occasion to consider an interim order passed by the Calcutta High
Court in regard to a matter no part of the cause of action relating to which
appeared to arise within the jurisdiction of the Calcutta High Court. In that
case the interim order practically granted the very prayers in the writ
petition. We were forced to observe, "It is obvious that the interim order
is of a drastic character with a great potential for mischief.
The principal prayer in the writ petition is
the challenge to the order made or proposed to be made under Clause 8 of the
Import Control order. The interim order in terms of prayers (j) and (k) has the
effect of practically allowing the writ petition at the stage of admission
without hearing the opposite parties. While we do not wish to say that a
drastic interim order may never be passed without hearing the opposite parties
even if the circumstances justify it, we are very firmly of the opinion that a
statutory order such as the one made in the present case under Clause 8-B of
the Import Control order ought not to have been stayed without at least hearing
those that made the order.
Such a stay may lead to devastating
consequences leaving no way of undoing the mischief. Where a plentitude of
power is given under a statute, designed to meet a dire situation, it is no
answer to say that the very nature of the power and the consequences which may
ensue is itself a sufficient justification for the grant of a stay of that
order, unless, of course, there are sufficient circumstances to justify a
strong Prima facie inference that the order was made in abuse of the power
conferred by the statute. A statutory order such as the one under Clause 8-B
purports to be made in the public interest and unless there are even stronger
grounds of public interest an expert interim order will not be justified. The
only appropriate order to make in such cases is to issue notice to the
respondent and make it returnable within a short period. This should
particularly be so where the offices of the principals respondents and relevant
records 196 lie outside the ordinary jurisdiction of the court. To grant
interim relief straightaway and leave it to the respondents to move the court
to vacate the interim order may jeopardise the public interest. It is notorious
how if an interim order is once made by a court, parties employ every device
and tactic to ward off the final hearing of the application. It is, therefore,
necessary for the courts to be circumspect in the matter of granting interim
relief, more particularly so where the interim relief is directed against
orders or actions of public officials acting in discharge of their public duty
and in exercise of statutory powers. On the facts and circumstance of the
present case, we are satisfied that no interim relief should have been granted
by the High Court in the terms in which it was done", We repeat and
deprecate the practice of granting interim order which practically give the
principal relief sought in the petition for no better reason than that a prima
facie case has been made out, without being concerned about the balance of
convenience, the public interest and a host of other relevant considerations.
Regarding the practice of some clever litigants of resorting to filing writ
petitions in the far-away courts having doubtful jurisdiction, we had this to
observe:
"..... Having regard to the fact that
the registered office of the Company is at Ludhiana and the principal
respondents against whom the primary relief is sought are at New Delhi, one
would have expected the writ petition to be filed either in the High Court of
Punjab and Haryana or p in the Delhi High Court. The writ petitioners however,
have chosen the Calcutta High Court as the forum perhaps because one of the
interlocutory reliefs which is sought is in respect of a consignment of beef
tallow which has arrived at the Calcutta Port. An inevitable result of the
filing of writ petitions elsewhere than at the place where the concerned
offices and the relevant records are located is to delay prompt return and
contest. We do not desire to probe further into the question whether the writ
petition was filed by design or accident in the Calcutta High Court when the
office of the Company is in the State of Punjab and all the principal respondents
are in Delhi. But we do feel disturbed that such writ petitions are often
deliberately 197 filed in distant High Courts, as part of a manoeuvre in a A
legal battle, so as to render it difficult for the officials at Delhi to move
applications to vacate stay where it becomes necessary to file such
applications".
In Union of India v. Jain Shudha Banaspati
Ltd.
(supra), Chandrachud, CJ., A. P. Sen, R. N.
Misra, JJ.
allowed an appeal against an interim order
making the following observations:
"After hearing learned counsel for the
rival parties, we are of the opinion that the interim order passed by the High
Court on November 29, 1983 is not warranted since it virtually grants to the
respondents a substantial part of the relief claimed by them in their writ
petition. Accordingly, we set aside the said order".
We have come across cases where the
collection of public revenue has been seriously jeopardised and budgets of
Governments and Local Authorities affirmatively prejudiced to the point of
precariousness consequent upon interim orders made by courts. In fact instances
have come to our knowledge where Governments have been forced to explore
further sources for raising revenue, sources which they would rather well leave
alone in the public interest, because of the stays granted by courts. We have
come across cases where an entire Service is left in a stay of flutter and
unrest because of interim orders passed by courts, leaving the work they are
supposed to do in a state of suspended animation. We have come across cases
where buses and lorries are being run under orders of court though they were
either denied permits or their permits had been canceled or suspended by
Transport Authorities. We have come across cases where liquor shops are being
run under interim orders of court. We have come across cases where the
collection of monthly rentals payable by Excise Contractors has been stayed
with the result that at the and of the year the contractor has paid nothing but
made his profits from the shop and walked out. We have come across cases where
dealers in food grains and essential commodities have been allowed to take back
the stocks seized from them as if to permit them to continue to indulge in the
very practices which were to be prevented by the seizure. We have come across
cases where land reform and important welfare legislations have been stayed by
courts. Incalculable harm has been done by such interim orders. All this is not
to say that interim orders may never be 198 made against public authorities. There
are, of course, cases which demand that interim orders should be made in the
interests of justice. Where gross violations of the law and injustices are
perpetrated or are about to be perpetrated, it is the bounden duty of the court
to intervene and give appropriate interim relief. In cases where denial of
interim relief may lead to public mischief, grave irreparable private injury or
shake a citizen's faith in the impartiality of public administration, a Court
may well be justified in granting interim relief against public authority. But
since the law presumes that public authorities function properly and bonafide
with due regard to the public interest, a court must be circumspect in granting
interim orders of far reaching dimensions or orders causing administrative,
burdensome inconvenience or orders preventing collection of public revenue for
no better reason than that the parties have come to the Court alleging
prejudice, inconvenience or harm and that a prima facie case has been shown.
There can be and there are no hard and fast rules. But prudence, discretion and
circumspection are called for. There are several other vital considerations
apart from the existence of a prima facia case. There is the question of
balance of convenience. There is the question of irreparable injury. There is
the question of the public interest There are many such factors worthy of
consideration. We often wonder why in the case indirect taxation where the
burden has already been passed on to the consumer, any interim relief should at
all be given to the manufacturer, dealer and the like ! There is just one more
thing that we wish to say. In Siliguri v. Amalendu Das, the Court was put to
the necessity of pointing out the following:
"We will be failing in our duty if we do
not advert to feature which causes us dismay and distress. On a previous
occasion, a Division Bench had vacated an interim order passed by a learned
single Judge on similar facts in a similar situation. Even so when a similar
matter giving rise to the present appeal came up again, the same learned judge
whose order had been reversed earlier, granted a non-speaking interlocutory
order of the aforesaid nature. This order was in turn confirmed by a Division
Bench without a speaking order articulating reasons for granting a stay when
the earlier Bench had vacated the stay. We 199 mean no disrespect to the High
Court in emphasizing the necessity for self-imposed discipline in such matters
in obeisance to such weighty institutional considerations like the need to maintain
decorum and comity. So also we mean no disrespect to the High Court in
stressing the need for self-discipline on the part of the High Court in passing
interim orders without entering into the question of amplitude and width of the
powers of the High Court to grant interim relief.
The main purpose of passing an interim order
is to evolve a workable formula or a workable arrangement to the extent called
for by the demands of the situation keeping in mind the presumption regarding
the constitutionality of the legislation and the vulnerability of the
challenge, only in order that no irreparable injury is occasioned. The Court
has therefore to strike a delicate balance after considering the pros and cons
of the matter lest larger public interest is not jeopardized and institutional
embarrassment is eschewed".
We desire to add and as was said in Cassel
and Co. Ltd.
v. Broome(l) we hope it will never be
necessary for us to say so again that 'in the hierarchical system of Courts'
which exists in our country, 'it is necessary for each lower tier', including
the High Court, 'to accept loyally the decisions of the higher tiers'. "It
is inevitable in a hierarchical system of Courts that there are decisions 11 of
the Supreme appellate tribunal which do not attract the unanimous approval of
all members of the judiciary...............
But the judicial system only works if someone
is allowed to have the last word and that last word, once spoken, is loyally
accepted"(2). The better wisdom of the Court below must yield to the
higher wisdom of the Court above. That is the strength of the hierarchical
judicial system. In Cassel v. Broome, commenting on the Court of Appeal's
comment that Rookes v. Barnard(3) was rendered per incuriam Lord Diplock
observed,- "The Court of Appeal found themselves able to disregard the
decision of this House in Rookes v. Barnard by applying to it the label per
incuriam That label is relevant only to the right of an appellate court to
decline to (1) [1972] AC 1027 (2) (See observations of Lord Hailsham and Lord
Dipock in Broome v. Cassell).
(3) [1984] A.C. 1129.
200 follow one of its own previous decisions,
not to its right to disregard a decision of a higher appellate court or to the
right of a judge of the High Court to disregard a decision of the Court of
Appeal." It is needless to add that in India under Act. 141 of the
Constitution the law declared by the Supreme Court shall be binding on all
courts within the territory of India and under Art. 144 all authorities, civil
and judicial in the territory of India shall act in aid of the Supreme Court.
Now coming to the facts of the present case,
the respondent, Dunlop India Limited is a manufacturer of types, tubes and
various other rubber products. By a notification dated April 6, 1984 issued by
the Government of India, Ministry of Finance (Department of Revenue) in
exercise of the powers conferred by Rule 8 (1) of the Central Excise Rules,
1944, types, falling under item No. 16 of the First Schedule to the Central
Excise and Salt Act, 1944, were exempt from a certain percentage of excise duty
to the extent that the manufacturers had not availed themselves of the
exemption granted under certain other earlier notifications The Department was
of the view that the Company was not entitled to the exemption as it had
cleared the goods earlier without paying central excise duty, but on furnishing
Bank Guarantees under various interim orders of courts. The Company claimed the
benefit of the exemption to the tune of Rs. 6.05 crores and filed a writ petition
in the Calcutta High Court and sought an interim order restraining the central
excise authorities from the levy and collection of excise duty. The learned
single judge took the view that a prima facie case had been made out in favour
of the Company and by an interim order allowed the benefit of the exemption to
the tune of Rs. two crores ninety three lakhs and eighty five thousand for
which amount the company was directed to furnish a Bank Guarantee, that is to
say, the goods were directed to be released on the Bank Guarantee being
furnished. An appeal was preferred by the Assistant Collector of Central Excise
under clause 10 of the Letters Patent and a Division Bench of the Calcutta High
Court confirmed the order of the learned single Judge, but made a slight
modification in that the Collector of Central Excise was given the liberty to
en-cash 30% of the Bank Guarantee.
The Assistant Collector of Central Excise has
preferred this appeal by special leaue. By our interim order dated November 15,
1984, we vacated the orders granted by the learned single Judge 201 as well as
by the Division Bench. We gave two weeks' time to the A respondent Company to
file a counter No. counter has, however been filed. Shri F.S. Nariman, learned
counsel, however appeared for the respondent. We do not have the slightest
doubt that the orders of the learned single judge as well as Division Bench are
wholly unsustainable and should never been made. Even assuming that the company
had established a prima facie case, about which we do not express any opinion,
we do not think that it was sufficient justification for granting the interim
orders as was done by High Court. There was no question of any balance of
convenience being in favour of the respondent-Company. The balance of convenience
was certainly in favour of the Government of India. Governments are not run on
mere Bank Guarantees. We notice that very often some courts act as if
furnishing a Bank Guarantee would meet the ends of justice.
No governmental business or for that matter
no business of any kind can be run on mere Bank Guarantees. Liquid cash is
necessary for the running of a Government as indeed any other enterprise. We
consider that where matters of public revenue are concerned, it is of utmost
importance to reales that interim orders ought not to be granted merely because
a prima facie case has been shown. More is required. The balance of convenience
must be clearly in favour of the making of an interim order and there should
not be the slightest indication of a likelihood of prejudice to the public
interest. We are very sorry to remark that these considerations have not been
borne in mind by the High Court and interim order of this magnitude had been
granted for the mere asking. The appeal is allowed with costs. E N.V.K. Appeal
allowed.
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