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PETITIONER: TRAVANCORE RAYON LTD.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 28/10/1969

BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S.

CITATION:  1971 AIR  862            1970 SCR  (3)  40  1969 SCC  (3) 183  CITATOR INFO :  E          1977 SC 567  (23,24)  RF         1988 SC1737  (82)  RF         1990 SC1984  (28)

ACT: Speaking  Order-Central  Excise and Salt Act, 1944,  s.  36- Revisional  jurisdiction of Central Government-Necessitv  of speaking    order    while    rejecting     application-oral hearing--When advisable.

HEADNOTE: The  appellant  company was assessed to excise duty  on  the consumption  of  "nitro-cellulose lacquer" produced  by  it. The  company denied that the chemical compound Produced  and utilised  by  it  was "nitrocellulose  lacquer"  within  the meaning  of  the  Central Excise and Salt  Act,  1944.   The Assistant  Collector  of Customs confirmed  the  assessment. The  Collector  of Customs, in appeal, gave  the  company  a personal  hearing  and  rejected the company’s  claim  by  a detailed order.  Against this order the company invoked  the revisional  jurisdiction of the Central Government under  s. 36 of the Act.  The petition was entertained but no personal hearing was girven to the company.  The Government  rejected the petition by an order which read :               "The   Government  of  India  have   carefully               considered    the   points   made    by    the               applicant(s),  but  see no  justification  for               interfering  with  the order in  appeal.   The               revision application is accordingly rejected." The Company appealed to this Court. HELD  : The case must be remanded to the Central  Government to be disposed of according to law. (i)The  Central  Government is by a. 36  invested  with  the judicial  power  of the State.  A party who  approaches  the Government in exercise of a statutory right for adjudication of  a  dispute  is entitled to know at  least  the  official designation  of  the person who has considered  the  matter, what was considered by him, and the reasons for recording  a decision  against  him.  To enable the High  Court  or  this Court  to exercise its constitutional powers, not  only  the decision, but an adequate disclosure of materials justifying

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an inference that there has been a judicial consideration of the dispute by an authority competent in that behalf in  the light  of  the  claim  made  by  the  aggrieved  party,   is necessary.  The Court insists upon disclosure of reasons  in support  of the order on two grounds : one, that  the  party aggrieved  in  a proceeding before the High  Court  or  this Court  has the opportunity to demonstrate that  the  reasons which  persuaded  the  authority to  reject  his  case  were erroneous, the other, that the obligation to record  reasons operates as a deterrent against possible arbitrary action by the  executive authority invested with the  judicial  power. [43 E-H; 46 D] Madhya  Pradesh Industries Ltd. v. Union of India, [1966]  1 S.C.R. 466 held overruled by Bhagat Raja v. Union of  India, [1967] 3 S.C.R. 302. State of Madhya Pradesh & Anr. v. Seth Narsinghdas  Jankidas Mehta, C.A. No. 621 dated 29-4-69, State of Gujarat v. Patel Raghav  Natha & Ors. [1970] 1 S.C.R. 335 and Prag Das U  mar Yaishva  v. Union of India, C.A. No. 723 of 1965 decided  on 21-4-69- referred to. In  this case the communication from the Central  Government gave no reasons in support of the order; it did not disclose the "points" which                              41 were considered, who considered the points, and the  reasons for rejecting them [46 B] (ii) Where   complex  and  difficult   questions   requiring familiarity with technical problems, as in the present case, are raised, it would conduce better administration and  mote satisfactory  disposal of the grievances of the citizens  if personal hearing is given. [43 B-D]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2252  of 1966. Appeal by special leave from the order No. 543 of 1966 dated July  16,  1966  of the Government  of  India,  Ministry  of Finance, New Delhi in Central Excise Revision Application. S.   Mohan  Kumaramangalam,  Soli J. Sorabji, A.  K.  Varma, Ravinder Narain, J. B. Dadachanji, and O. C. Mathur, for the appellant. V.   A. Seyid Muhammad and S. P. Nayar, for the respondents. B.   R. Agarwala, for intervener No. 1. Soli  J.  Sorabji, Ravinder Narain and j.  B.Danchanji,  for entervener No. 2. The Judgment of the Court was delivered by Shah, J. The appellant Company is engaged in the  production of  cellulose film.  The Central Excise  Inspector  reported that  the  appellant Company was producing  in  its  factory nitro-cellulose  acquer  falling under tariff  Item  No.  22 (iii)  (i)  No. 14 (iii) (i) of the First  Schedule  to  the Central Excise & Salt Act, 1944, read with the Finance  Act, 1955];  without  obtaining  a  central  excise  licence   as required  by the rules and was also  removing  nitroillulose lacquer  for  "internal use" without payment of  duty.   The appellant Company denied that the chemical compound utilised by to render plain film moisture-proof was  "nitro-cellulose lacquer"  within  the meaning of the Central Excise  &  Salt Act, 1944. The Deputy Superintendent of Central Excise, determined that the  appellant  Company was liable to pay,  for  the  period between March 1, 1955 and September 19, 1962, Rs.  4,88,797- 34  as  cise  duty on  the  consumption  of  nitro-cellulose

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lacquer  proceed by the Company.  The Deputy  Superintendent issued  a mand notice, but the appellant Company  failed  to pay the duty. The  Assistant Collector of Customs required  the  appellant company  to show cause why penalty should not be imposed  on it the failing to obtain a licence for production of  nitro- cellulose  licquer.   The appellant Company  contended  that what was proceed by it was not nitro-cellulose lacquer.  The Assistant  Colloctor rejected the contention  and  confirmed the order of assessment and imposed a penalty of Rs. 25/-. In appeal to the Collector, the appellant Company raised a range number of contentions-including the following 170-4 42               (1)   that  nitro-cellulose lacquer  which  is               clear  as well as pigmented falls  within  the               purview  of Item 14 of the First  Schedule  to               the Central Excise & Salt Act, 1944, and  that               clear  and  white,  or  murky  and   pigmented               lacquer is not subject to duty;,               (2)   that a certificate of test issued by the               Silk Mills Research Association, Bombay showed               that the nitro-cellulose lacquer content of  a               sample of surface-coating compound produced by               the  appellant  Company was only 4.7%  and  it               could   not  be   considered   nitro-cellulose               lacquer within the meaning of the Act; and               (3)   that  the  failure to levy duty  on  the               product  from  1955 to 1962 was proof  of  the               fact that the Excise Department was itself  of               the view that the product was not excisable. The.    Collector   of  Customs   consulted   the   Chemical Examination  and was of the view that the opinion  expressed by  the  Silk Mills Research Association,  Bombay,  was  not correct.  In considering the, question about the reason  for not  levying  duty for nearly several years,  the  Collector thought  it  necessary  to  give  a  fresh  hearing  to  the appellant Company.  Additional arguments were advance at the second hearing.  After considering the arguments advanced by the  appellant Company the Collector wrote a detailed  judg- ment  setting out the "points" on which he held against  the claim  of  the  appellant Company, and  expressed  the  view that the appellant Company was not right in contending  that only  that  chemical which is "clear  and  pigmented"  falls within the purview of Item 14 of the First Schedule. Against the order dismissing the appeal, the appellant  Com- pany  moved a petition invoking the revisional  jurisdiction of the Central Government under s. 36 of the Central  Excise &  Salt  Act  1944.  The petition was  entertained,  but  no -personal  hearing was given to the appellant  Company.   By order  dated  July  11  1966,  communicated  by  the   Joint Secretary  to the Government of India, Ministry of  Finance, the petition was rejected.  The order read :               "The   Government  of  India  have   carefully               considered    the   points   made    by    the               applicant(s),  but  see no  justification  for               interfering  with  the order in  appeal.   The               revision     application    is     accordingly               -rejected." Against  the  order passed by the  Central  Government  this appeal preferred with special leave.                              43 The question raised before the Collector of Customs was of a complicated nature and for its proper appreciation  required familiarity  with  the  chemical  composition  and  physical

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properties  of nitro-cellulose lacquer and of the  substance produced  by  the  appellant  Company.   The  Collector   in deciding  the  appeal wrote an order running into  18  typed pages.  There were before the Collector conflicting opinions of  the  Chemical  Examiner  and  the  Silk  Mills  Research Association,  Bombay.   The  Collector  gave  two   personal hearings to the appellant Company.  No personal hearing  was given  by the Government of India to the  appellant  Company even though the matter raised complex questions.  It is true that the rules do not require that personal hearing shall be given,  but  if  in  appropriate  cases  where  complex  and difficult  questions  requiring familiarity  with  technical problems  are  raised, personal hearing is given,  it  would conduce  to  better  administration  and  more  satisfactory disposal of the grievances of citizens.  The order does  not disclose  the  name or designation of the authority  of  the Government  of India who considered "the points made by  the applicants", and it is impossible to say whether the officer was amiliar with the subject-matter so that he could  decide the dispute without elucidation a.-id merely on a perusal of the papers.  The form in which the order was communicated is apparently a printed form.  There is a bare assertion by the Joint   Secretary  to  the  Government  of  India   in   his communication  that the Government of India  had  "carefully considered the points made by the applicant(s)".  ’there  is no  evidence as to who considered the "points" and what  was considered.  The Central Government is by s.36 invested with the  judicial power of the State Orders involving  important disputes are brought before the Government.  The orders made by  the  Central Government are subject to  appeal  to  this Court  under Art. 136 of the Constitution.  It would be  im- possible for this Court, exercising jurisdiction under  Art. 136,  to decide the dispute without a speaking order of  the authority,.  setting  out  the nature  of  the  dispute  the arguments  in support thereof raised by the aggrieved  party and  reasonably  disclosing. that the  matter  received  due consideration  by  the  authority competent  to  decide  the dispute.   Exercise  of the right to appeal  to  this  Court would  be futile, if the authority chooses not  be  disclose the  reasons  in support of the decision reached by  it.   A party  who  at  broaches the Government  in  exercise  of  a statutory right for Adjudication of a dispute is entitled to know at least the official designation of the person who has considered  the matter, what was considered by him, and  the reasons’  for recording a decision against him.   To  enable the High Court or this Court to exercise its  constitutional powers, not only the decision, but an adequate disclosure of materials  justifying  an inference that there  has  been  a judicial  consideration  of  the dispute,  by  an  authority competent in 44 that behalf in the light of the claim made by the  aggrieved party, is necessary.  If the Officer acting on behalf of the Government  chooses to give no reasons, the right of  appeal will be devoid of any substance. Dr.  Seyid  Muhammad appearing for the Union of  India  con- tended  that  where  the Central  Government  dismisses  the petition,  it  is not obliged to give any reasons,  for,  it must  be  assumed  that the Government  had  accepted  every reason  given  by  the  Collector,  and  by  dismissing  the petition the Officer acting on behalf of the Government must be  deemed  to have incorporated the reasons  given  by  the Collector  in  the judgment.  Counsel relies in  support  of this  contention  on the decision of this  Court  in  Madhya Pradesh Industries Ltd. v. Union of India and Others(1).  In

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that case, Bachawat, J., on behalf of himself and Mudholkar, J.,  refused to accept the contention that the order  passed by the Government of India rejecting a. revision application under the Mineral Concession Rules was liable to be quashed, because it did not give any reasons.  Bachawat, J., observed at p. 477               "There is a vital difference between the order               of reversal by the appellate authority in that               case for no reason whatsoever and the order of               affirmance  by the revising authority  in  the               present  case.  Having stated that  there  was               novalid ground for interference, the  revising               authority   was  not  bound  to  give   fuller               reasons.  It  is impossible to  say  that  the               impugned  order was arbitrary, or  that  there               was   no   proper  trial   of   the   revision               application."               On the other hand, Subba Rao, J., observed  at               p. 472               "The  least a tribunal can do is to;  disclose               its   mind.   The  compulsion  of   disclosure               guarantees  consideration.  The  condition  to               give  reasons introduces clarity and  excludes               or  at  any rate minimizes  arbitrariness;  it               gives  satisfaction to the party against  whom               the  order  is made: and it  also  enables  an               appellate  or  supervisory court to  keep  the               tribunals within bounds.  A reasoned order  is               a desirable condition of judicial disposal.               "The  conception  of  exercise  of  revisional               jurisdiction   and  the  manner  of   disposal               provided in r. 55 of the Rules are  indicative               of  the scope, and nature of the  Government’s               jurisdiction.  If tribunals can make  order,-,               without giving reasons, the said power in  the               hands  of unscrupulous or  dishonest  officers               may turn out to be a               (1)   [1966] 1 S.C.R. 466.               45               weapon for abuse of power.  But if reasons for               an  order are given, it will be  an  effective               restraint on such abuse, as the orders, if  it               discloses   extraneous  or   irrelevant   con-               siderations  ,  will be  subject  to  judicial               scrutiny  and  correction.  A  speaking  order               will  at its best be a reasonable and  at  its               worst  be  at  least a  plausible  one.   Tile               public  should  not be deprived of  this  only               safeguard.               cannot be expected to change from function  to               function  or  from  act  to  act.   So  it  is               essential  that  some  restrictions  shall  be               imposed on tribunals in the matter of  passing               orders  affecting the rights of  parties;  and               the  ,least they should do is to give  reasons               for   their  orders.......   Ordinarily,   the               appellate  or revisional tribunal  shall  give               its  own reasons succinctly; but in a case  of               affirmance  where the original tribunal  gives               adequate  reasons, the appellate tribunal  may               dismiss  the  appeal or the revision,  as  the               case  may  be, agreeing  with  those  reasons.               What  is  essential is that reasons  shall  be               given  by an appellate or revisional  tribunal               expressly  or by reference to those  given  by

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             the  original  tribunal.  The nature  and  the               elaboration of the reasons necessarily  depend               upon the facts of each case." In  a later judgment Bhagat Raja v. The Union of  India  and Others(1),  the Constitution Bench of this Court  in  effect overruled  the  judgment of the majority in  Madhya  Pradesh Industries Ltd’s case(1).  The Court held that the decisions of tribunals in India are subject to, the supervisory powers of the High Court under Art. 227 of the Constitution and  of appellate  powers  of this Court under Art. 136.   The  High Court  and  this  Court  would  be,  placed  under  a  great disadvantage  if no reasons are given and the.  revision  is dismissed  by  the  use of the single,  word  ’rejected’  or ’dismissed’.  The Court in that case held that the order  of the  Central  Government  in appeal, did  not  set  out  any reasons  of  its.  own and on that account  set  aside  that order.  In our view, the majority judgment of this Court  in Madhya  Pradesh Industries Ltd’s case(1) has been  overruled by this Court in Bhagat Raja’s. case(1). In later decisions of this Court it was held that where  the Central  Government  exercising power in revision  gives  no reasons, the. order will be regarded as void : see State  of Madhya  Pradesh  and Another v.  Seth  Narsinghdas  Jankidas Mehta;(3); The State of (1)  [1967]  3. S.C.R. 302. (2) [1966] 1 S.C.R  46 (3)  C.A. No. 621 of 1966 decided on April 29, 1969. 46 Gujarat  v. Patel Raghav Natha and Others(1); and  Prag  Das Umar Vaishya v. The Union of India and Others (2). In  this case the communication from the Central  Government gave  no  reasons in support of the order  :  the  appellant Company  is merely intimated thereby that the Government  of India  did not see any reasons to interfere "with the  order in  appeal".   The  communication  does  not  disclose   the "points"   which  were  considered,  and  the  reasons   for rejecting them.  This is a totally unsatisfactory method  of disposal of a case in exercise of the judicial power  vested in  the ,Central Government.  Necessity to  give  sufficient reasons which disclose proper appreciation of the problem to be solved, and the mental process by which the conclusion is reached,  in cases where a non-judicial authority  exercises judicial  functions,  is obvious.  When  judicial  power  is exercised  by an authority normally performing executive  or administrative  functions,  this Court would require  to  be satisfied  that  the  decision has been  reached  after  due consideration of the merits of the dispute, uninfluenced  by extraneous  considerations  of policy  or  expediency.   The Court  insists upon disclosure of reasons in support of  the order  on two grounds : one, that the party aggrieved  in  a proceeding  before  the  High Court or this  Court  has  the opportunity to demonstrate that the reasons which  persuaded the  authority  to  reject his case were  ,erroneous  :  the other,, that the obligation to record reasons operates as  a deterrent   against   possible  arbitrary  action   by   the ,executive authority invested with the judicial power. The  appeal is allowed and the order passed by  the  Central Government  is  set aside.  The -case is  ’remanded  to  the Central Government with the direction that it be disposed of according to law.  In this case, we are of the view,  having regard to the -complicated and technical questions involved, that  the Central Government may be well-advised to give  an oral  hearing to the appellant Company.  The Union of  India will pay the costs of this appeal to the appellant Company. Y.P.

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Appeal allowed. (1) C.A. ND. 723 of 1965 decided on April 21, 1969 (2) C.A. No. 687 of 1965 on August 17, 1967, 47