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PETITIONER: ORIENT PAPER MILLS LTD.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 03/05/1968

BENCH: HEGDE, K.S. BENCH: 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 autho- rities  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

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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.

JUDGMENT: 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

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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

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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  che- mically  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

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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  Tribu- nal(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

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             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  Legis-               lature  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.

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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 admi- 252 nistrative   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

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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. 2Sup.  C. /.68- 254