# MIS. MANGALAM ORGANICS LTD v. UNION OF INDIA

- **Citation:** [2017] 5 S.C.R. 406
- **Court:** Supreme Court of India
- **Decided:** 2017-04-24
- **Case number:** Civil Appeal No. 1338 of2017
- **Bench:** A. K. Sikri, Ashok Bhushan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-mangalam-organics-ltd-v-union-of-india-32273
- **Pages:** 24

## Headnote

Central Excise Act, 1944:
s.11 C - Central Government empowered to issue notification
to the effect that in view of a prevalent practice duty payable by
asses.see shall not be paid - Non-issuance of such notification -
Can a direction be given by Court- Permissibility of- Held: Issuance
of a notification uls.11 C is in the nature of subordinate legislation
D - Directing the Government to issue such a notification would
amount to taking a policy decision in a particular manner, which is
impermissible - When 'power' is given to Central Government u/
s.11 to issue a notification to the effect not to recover duty of excise
or recover lesser duty than what is normally payable· under the Act,
for deciding whether to issue such a notification or not, there may
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be various considerations in the mind of the Government - It is
purely a policy matter - Merely because conditions laid in the said
provisions are satisfied, would not be a reason to necessarily issue
such a notification - When an executive authority exercises a
F
legislative power by way of subordinate legislation, such executive
authority cannot be asked to· enact the law which it has been
empowered to do under the delegated legislative authority - Further,
on facts as well, there is no clinching evidence to suggesi the
existence of a general practice not to levy excise duty, a condition
to be satisfied before issuance of notification u/s.11 by Central
Government - Plea of Revenue that it is policy of the Government
G not to issue notification uls.11 C when it benefits only a few assessees,
as in the present case, found to be valid and justified -
Administrative law - Subordinate legislation.
s.11 (c) -Appellant paid excise duty - However, claimed refund
of, by seeking issuance of notification uls. JJC - Held: S.JJC
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406
MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
407
contemplates those situations where duty is not paid - It does not
A
cover the situation where duty is paid and that is to be rejimded.
Administrative law - Scope of judicial review - Subordinate.
legislation vis-a-vis administrative action - Distinction between -
Discussed.
Constitution of India - Art. 14 - Violation of - When not -
Plea of appellant that non-issuance of notification u/s. 11 (c) by
Central Government violated its rights u/Art. 14 - Held: If some
units were able to escape payment of excise duty for certain reasons,
the appellant ·cannot say that no duty should be recovered from it
by invoking Art.14 -
It is well established that the equality clause
enshrined in Art. 14 is a positive concept and cannot be applied in
the negative.
·
Dismissing the appeal, the Court
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HELD: 1. When the matter is examined taking into
consideration all the facts in totality, it is clear that there was no · D
clinching evidence to suggest the existence of a general practice
not to levy excise duty. The entire effort of appellant is to recover
back the said duty by seeking issuance of a notification under
Section 11 C of the Act. Such a situation, cannot be countenanced.
[Paras 28, 29] [424-A, E]
E
Commissioner of Central Excise, Nagpur v. Gurukripa
Resins Private Limited (2011) 13 SCC 180 : [2011] 8
SCR 178 - relied on.
2.1 Insofar as the argument based on obligation of the
Government to issue such a notification is concerned, a clear
distinction is to be made between the duty to act in an
administrative capacity and the power to exercise statutor.y
. function. If a public authority is foisted with any duty to do an act
and fails to discharge that function, mandamus can be issued to
the said authority to perform its duty. However, that is done while
exercising the power of judicial review of an administrative action.
It is entirely different from judicial review of a legislative action.
[Para 30] [424-G-H]
2.2 Issuance of a notification under Section llC of the Act
is in the nature of subordinate legislation. Directing the
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[2017] 5 S.C.R.
Government to issue such a

## Text

_Characters 0–39,999 of 57,007. This is a partial read: ask again with offset=39999 for what follows._

[2017] 5 S.C.R. 406
A
Devika Gujral
Matters disposed of.
B
c
MIS. MANGALAM ORGANICS LTD.
v.
UNION OF INDIA
(Civil Appeal No. 1338 of2017)
APRIL 24, 2017
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.)
Central Excise Act, 1944:
s.11 C - Central Government empowered to issue notification
to the effect that in view of a prevalent practice duty payable by
asses.see shall not be paid - Non-issuance of such notification -
Can a direction be given by Court- Permissibility of- Held: Issuance
of a notification uls.11 C is in the nature of subordinate legislation
D - Directing the Government to issue such a notification would
amount to taking a policy decision in a particular manner, which is
impermissible - When 'power' is given to Central Government u/
s.11 to issue a notification to the effect not to recover duty of excise
or recover lesser duty than what is normally payable· under the Act,
for deciding whether to issue such a notification or not, there may
E
be various considerations in the mind of the Government - It is
purely a policy matter - Merely because conditions laid in the said
provisions are satisfied, would not be a reason to necessarily issue
such a notification - When an executive authority exercises a
F
legislative power by way of subordinate legislation, such executive
authority cannot be asked to· enact the law which it has been
empowered to do under the delegated legislative authority - Further,
on facts as well, there is no clinching evidence to suggesi the
existence of a general practice not to levy excise duty, a condition
to be satisfied before issuance of notification u/s.11 by Central
Government - Plea of Revenue that it is policy of the Government
G not to issue notification uls.11 C when it benefits only a few assessees,
as in the present case, found to be valid and justified -
Administrative law - Subordinate legislation.
s.11 (c) -Appellant paid excise duty - However, claimed refund
of, by seeking issuance of notification uls. JJC - Held: S.JJC
H
406
MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
407
contemplates those situations where duty is not paid - It does not
A
cover the situation where duty is paid and that is to be rejimded.
Administrative law - Scope of judicial review - Subordinate.
legislation vis-a-vis administrative action - Distinction between -
Discussed.
Constitution of India - Art. 14 - Violation of - When not -
Plea of appellant that non-issuance of notification u/s. 11 (c) by
Central Government violated its rights u/Art. 14 - Held: If some
units were able to escape payment of excise duty for certain reasons,
the appellant ·cannot say that no duty should be recovered from it
by invoking Art.14 -
It is well established that the equality clause
enshrined in Art. 14 is a positive concept and cannot be applied in
the negative.
·
Dismissing the appeal, the Court
8
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HELD: 1. When the matter is examined taking into
consideration all the facts in totality, it is clear that there was no · D
clinching evidence to suggest the existence of a general practice
not to levy excise duty. The entire effort of appellant is to recover
back the said duty by seeking issuance of a notification under
Section 11 C of the Act. Such a situation, cannot be countenanced.
[Paras 28, 29] [424-A, E]
E
Commissioner of Central Excise, Nagpur v. Gurukripa
Resins Private Limited (2011) 13 SCC 180 : [2011] 8
SCR 178 - relied on.
2.1 Insofar as the argument based on obligation of the
Government to issue such a notification is concerned, a clear
distinction is to be made between the duty to act in an
administrative capacity and the power to exercise statutor.y
. function. If a public authority is foisted with any duty to do an act
and fails to discharge that function, mandamus can be issued to
the said authority to perform its duty. However, that is done while
exercising the power of judicial review of an administrative action.
It is entirely different from judicial review of a legislative action.
[Para 30] [424-G-H]
2.2 Issuance of a notification under Section llC of the Act
is in the nature of subordinate legislation. Directing the
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SUPREME COURT REPORTS
[2017] 5 S.C.R.
Government to issue such a notification would amount to take a
policy decision in a particular manner, which is impermissible.
When 'power' is given to the Central Government to issue a
notification to the effect not to recover duty of excise or recover
lesser duty than what is normally payable under the Act, for
deciding whether to issue such a Notification or not, there may
be various considerations in the mind of the Government. Merely
because conditions laid in the said provisions are satisfied, would
not be a reason to necessarily issue such a notification. It is
purely a policy matter. When an executive authority exercises a
legislative power by way of subordinate legislation pursuant to
the delegated authority of a legislature, such executive authority
cannot be asked to enact the law whichit has been empowered to
do under the delegated legislative auhtority. [Paras 32, 33, 36)
[425-D-E; 428-C-D; 427-C]
2.3 In cases of adminsitrative action the power of the Court
to issue mandamus certainly exists when it is found that a public
authority/executive is not discharging its statutory duty. However,
the scope of judicial review in cases of subordinate legislation is
very limited. Where the statute vests a discretionary power in
an administrative authority, the Court would not interfere with
the exercise of such discretion unless it is made with oblique
end or extraneous purposes or upon extraneous considerations,
or arbitrarily, without applying its mind to the relevant
considerations, or where it is not guided by any norms which are
relevant to the object to be achieved. [Para 35, 36) [428-B, E-F)
Census Commissioner and Ors. v. R. Krishnamurthy
(2015)2 SCC 796: [2014) 11 SCR 463; Supreme Court
Employees Welfare Association v. Union of India (1989)
4 sec 187 : [1989) 3 SCR 488; Common Cause V.
Union of India and Others (2003) 8 SCC 250: [2003)
4 Suppl. SCR 471 - relied on.
Indian Express Newspapers, Bombay v. Union of India
(1985) 1 SCC 641 : [1985) 2 SCR 287 - referred to.
2.4 It is categorical stand of the respondent that the policy
of the Government is not to issue the notification under Section
UC of the Act when it benefits only a few assesses. It is stated
H that the specific policy of the Government is that when a large
MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
409
section of trade is affected and any relief is proposed to be given, A
a notification under SectionllC of the Act is issued. When the
reasons furnished by the Government in not exercising its power
to issue notification under Section UC of the Act are seen in this
perspective, namely, such a notification, if issued, is going to
benefit only two units, the same are found to be valid and justified.
8
[Para 37] [428-F-H]
Madria Chemicals Ltd. Etc. Etc. v. Union of India and
others Etc. Etc. (2004) 4 SCC 311 : (2004] 3 SCR 982
- relied on.
Ambica Quarry Works v. State of Gujarat & Ors. (1987)
1 SCC 213: (1987] 1 SCR 562; Dhampur Sugar Mills
Ltd. v. State of U.P. & Ors. (2007) 8 SCC 338 : (2007]
10 SCR 245; D.K. Basu v. State of West Bengal & Ors.
(2015) 8 SCC 744 : (2015] 7 SCR 814; Aneesh D.
Lawande & Ors. v. State of Goa & Ors. (2014) 1 sec
554 : (2013] 17 SeR 55; Suresh Chand Gautam v. State
of Uttar Pradesh & Ors. (2016) 11 SCC 113 : [2016] 1
SeR 727; Choksi Tube Company Ltd. v. Union of India
& Ors.(1997) 11 sec 179; Union of India & Ors. v.
N.S. Rathnam & Sons [2015] 8 SCR 751 - held
inapplicable.
Julius v. Lord Bishop of Oxford & Am: 1880 (5) A.C.
214 - held inapplicable.
Collector of Central Excise, Jaipur v. Rajasthan State
Chemical Works,Deedwana, Rajasthan (1991) 4 SCC
c
D
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473: [1991] 1 Suppl. SeR 124 - referred to.
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Judicial Review of Administrative Action by de Smith -
referred to.
410
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(20151 7 SCR 814
held inapplicable
Para 18
(2013) 17 SCR 55
held inapplicable Para 18 ·
(2016) 1 SCR 727
held inapplicable Para 18
. (1997) 11 sec 119
held inapplicable Para 19
(2015) 8 SCR 751
held inapplicable Para 19
(1991) 1 Suppl. SCR 124
referred to
Para 26
(2014) 11 SCR 463
relied on
Para 32
[1989) 3 SCR 488
relied on
Para 33
[2003) 4 Suppl. SCR 471
relied on
Para 34
[1985) 2 SCR 287
referred to
Para 36
[2004) 3 SCR 982
relied on
Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1338
of2017.
From the Judgment and Order dated 16.02.2016 of the High Comt
of Delhi at New Delhi in WP (C) No. 2885 of 2015.
S. Ganesh, Sr. Adv., Prashant Bhushan, Roh it Kumar Singh, Advs.
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for the Appellant.
A. K. Sanghi, Sr. Adv., Ms. Sunita Rani Singh, Ritin Rai, B. Krishna
Prasad, Advs. for the Respondent.
The Judgment of the Court was delivered by
A. K. SIKRI, J. I. This appeal arises out of the judgment of the
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High Court rendered in the writ petition filed by the appellant, wherein
the appellant wanted the High Court to exercise its powers under A11icle
226 of the Constitution of India and issue mandamus to the Central
Government directing the Central Government to issue a notification
under Section 11 C of the Central Excise Act, 1944 (hereinafter referred
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to as the 'Act') to the effect that duty payable by the appellant on goods
manufactured by it shall not be paid.
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2. Section 11 C of the Act reads as under:
"I IC. Power not to recover duty of excise not levied or shortlevied as a result of general practice.-
M/S. MANGALAM ORGANICS LTD. v. UNION OF INDIA
411
[A. K. SIKRI, J.)
(I) Notwithstanding anything contained in this Act, if the Central
Government is satisfied-
(a) that a practice was, or is, generally prevalent regarding levy
of duty of excise (including non- levy thereof) on any excisable goods;
and
(b) that such goods were, or are, liable-
(i) to duty of excise, in cases where according to the said practice
the duty was not, or is not being, levied, or
(ii) to a higher amount of duty of excise than what was, or is
heing, levied, according to the said practice, then, the Central Government
may, by notification in the Official Gazette, direct that the whole of the
duty of excise payable on such goods, or, as the case may be, the duty of
excise in excess of that payable on such goods, but for the said practice,
shall not be required to be paid in respect of the goods on which the duty
of excise was not, or is not being, levied, or was, or is being, shortlevied, in accordance with the said practice.]
(2) Where any notification under sub- section (l) in respect of
any goods has been issued, the whole of the duty of excise paid on such
goods or, as the case may be, the duty of excise paid in excess of that
payable on such goods, which would not have been paid if the said
notification had been in force, shall be dealt with in accordance in force,
shall be dealt with in accordance with the provisions of sub- section (2)
of section l IB:
Provided that the person claiming the refund of such duty or, as
the case may be, excess duty, makes an application in this behalf to the
Assistant Collector of Central Excise, in the form referred to in subsection (I) Of section 1 IB, before the expiry of six months from the
date of issue of the said notification."
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3. A bare perusal of the aforesaid provision wou Id indicate that if
certain conditions mentioned therein are satisfied, the Central Govemment
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may issue a notification directing that whole of the duty of excise payable
on such goods, or, as the case may be, the duty of excise in excess of
that payable on such goods, but for the said practice, shall not be required
to be paid. The condition stipulated in the said Section with which the
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Central Government is to satisfy itself is that there is/was a generally
prevalent practice according to which the duty was not, or is not being
levied, even when such a duty of excise was otherwise payable on such
excisable goods.
4. We may point out at this stage itself that the High Court vide
impugned judgment has come to the conclusion that Section 11 C of the
Act grants a discretionary power to the Government to issue or not to
issue such a notification. The said provision does not mandate the
Government to necessarily issue such a notification and in the absence
of any obligation on the part of the Government in this behalf, the Courts
are precluded from giving any mandamus to the Central Government to
exercise such a power and issue the notification.
5. Before we answer the questions posed above and comment
upon the correctness or otherwise of the view taken by the High Court,
those seminal and material facts, which have a bearing on the issue,
needs to be stated. These facts are as follows:
The appellant is in the business of manufacturing Rosin and
Turpentine. Rosin is the resinous constituent of the oleoresin exuded by
various species of Pine Tree i.e. Oleo Pine Resin, known in commerce
as 'crude turpentine'. The separation of the oleoresin into the essential
oil spirit ofTurpentine and Rosin is effected by distillation in large kettle
stills. There are two methods of manufacturing Rosin/Turpentine from
Oleo Pine Resin. One method is the vacuum chemical treatment process
which uses power in almost all the processes. The second method,
commonly known as the Bhatti process, is entirely manual except for
the use of power to operate the pump for lifting up the water to the
storage tank for the purpose of condensing. Thus, in the second method,
power is used, but is confined to operating the pump for lifting up the
water to the storage tank for the purpose of condensing. The appellant
is using this second method of manufacturing Rosin/Turpentine.
6. Insofar as the first method of manufacturing Rosin/Turpentine
is concerned, wherein power is used in all the processes, there is no
dispute that it is treated as a manufacturing process with the aid of
power and the units were manufacturing these products using this
methodology or covered by the provisions of the Act. There are about
ten units which are adopting this method and are paying the excise duty
under the Act on the goods so manufactured.
MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
413
[A. K. SIKRI, J.]
7. Majority of the units, i.e. about 300 in number, are using the
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Bhatti method whereby use of power is confined to lifting of water to
· overhead tanks for condensation ofTurpentine vapours collected as liquid
Turpentine in tanks. The Rosin which remains in the kettle is removed
in buckets, usually cooled and dispatched in drums. However, this Court
has held in a case that even this process would be treated as manufacturing
process with the aid of power even when such power is used to a limited
extent. That judgment is reported in Commissioner of Central Excise,
Nagpur v. Gurukripa Resins Private Limited' which was rendered
on 11. 07.2011, which fact would again be discussed while dealing with
the sequence of events leading to the instant appeal.
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8. What is emphasised at this stage is that it is a common case of C
the parties that excise duty on the goods manufactured by the appellant
is, otherwise, payable in law. Insofar as the history of payment of excise
on these goods is concerned, record shows that vide notification No.
179/77-CE dated 18.06.1977, the Central Government had exempted all
goods, falling under Item No.68 of erstwhile First Schedule to the Central
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Government Excise and Salt Act (I of 1944) in or relation to the
manufacturing of such goods where no process is ordinarily carried on
with the.aid of power, from the whole of the duty of excise leviable
thereon. The Department of Revenue had issued clarification dated
16.01.1978 to the effect that the aforesaid notification covers those units
which are manufacturing Rosin and Turpentine oil where no power is
used in the manufacture of Rosin but power is used for drawing water
into the tank through which the coils containing oil vapours pass. This
notification was issued in exercise of powers conferred by sub rule ( 1)
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of Rule 8 of the Central Excise Rules, 1944. However, this notification
was superseded by another notification dated 01.03 .1986 thereby
withdrawing the aforesaid exemption. It was followed by the Circular
dated 27.05.1994 clarifying that all earlier circulars/instructions/ tariff
advices issued prior to March 1986 in the context of old tariffhad been
withdrawn.-
9. A show cause notice dated 04.10:2004 was issued to the
appellant by the Excise Department demanding duty ofRs.10,91,99,456/
- on the aforesaid products manufactured by the appellant and cleared
during the period 01.04.1999 to 31.08.2003. It was followed by further
notices to the same effect covering the period September-October, 2003
• c2011) 13 sec 1so
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to March, 2004; April, 2004 to November, 2004; and December, 2004 to
September, 2005 for the amount of Rs.50, 760/-, Rs.66,44,602/-,
Rs.1,01,92,867/- and Rs.81,44,105/- respectively. One more unit Mis.
Gurukripa Resins Pvt. Ltd., Nagpur (for short 'Gurukripa') was al~o
issued similar show cause notices. Case of the appellant is that out of
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300 units using Bhatti method, only these two units were picked up for
raising demand of excise.
I 0. Gurukripa had challenged the order of assessment passed in
its case by filing the appeal before the Central Excise and Service Tax
Appellate Tribunal, Mumbai (for short 'CESTAT'). The said appeal of
Gurukripa was allowed videjudgmentdated 14.01.2004. The Depa1tment
challenged the order passed by the CESTAT in the case ofGurukripa, in
which the Revenue succeeded as that appeal was allowed by this Court
vi de its judgment dated 11 .07 .20 I I, as pointed out above.
11. This Court held that the process of lifting of water into the
cooling tank was integrally connected with the manufacture of these
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goods and hence, ifthe power was used for lifting of water, the exemption
would not be available. This Court also held that the TRU's circular of
1978 was not applicable since the same stood withdrawn in I 994.
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12. In view of the aforesaid judgment rendered in the case of
GurukripaResi11s Private Limited, appeals filed by the appellant before
the CESTAT came to be dismissed. However, the Tribunal restricted
the Depaitment to recover the dues falling within the period oflimitation
only, i.e. for a period of one year. This drastically reduced the demand
of excise inasmuch as the excise demanded for the period from
0 I .04.1999 to 31.08.2003 became time barred. Both the Department as
well as the appellant have challenged the said order of the CESTAT
before the High Court of Bombay and the matter is still pending there.
13. After the judgment of this Court in Gurukripa Resins Private
Limited, several trade associations made representations to the
Government with a request to grant benefit under Section 11 C of the
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Act. On receiving these representations, the Central Board of Excise
and Customs decided to float a survey to ascertain a general practice
during the period from 27.05.1994 to 27.02.2006. Consequently, the
survey letter was issued on 14.03.2012. On the basis of this survey, the
Department came to the conclusion that there was no such practice of
non-levying excise duty on these products. Objections were raised to
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MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
[A. K. SIKRI, J.]
the finding of the said survey on the ground that only ten units in the
survey were considered as against the total units of approximately 300.
This led to ordering a re-survey vide letter dated 23.01.2013. According
to the appellant, this re-survey revealed that though there were many
units across the country which had turnover exceeding SS! but they
were also never levied excise duty during the aforesaid period, and this
phenomenon establishes that there was a general practice of not
demanding excise duty from the units, which were using Bhatti method.
Whether this plea of the appellant is factually correct or not would be
discussed at an appropriate stage.
14. Fact of the matter is that after thorough consideration, the
Finance Ministry decided on 15.09.2014 not to issue any such notification
under Section l lC of the Act as it was going to benefit only two
companies, which includes the appellant. This decision was
communicated by the Department of Revenue to the All India
Manufacturer Organisations vide letter dated 30.09.2014. Challenging
the aforesaid decision, the appellant filed writ petition in the High Court
of Delhi with the following prayers:
"(a) Issue a writ of ce1iiorari or any other similar writ or direction
for quashing the decision, communicated vide letter dated 30.09.2014 of
the respondent that the notification under Section 11 C of the Central
Excise Act, 1944 cannot be issued for extending the benefits of not
requiring to pay the Central Excise Duty to the units manufacturing Rosin
and Turpentine without the aid of power, except for the purpose of usirig
electricity to pump, for lifting up water for condensation to overhead
tank, for the period from 27.05.1994 to 28.02.2006, even though the
practice of non-levy on these units for the said period has already been
established in. a survey done by the Department;
( b) Issue a writ of mandamus or any others im i lar writ or direction
to the respondent to issue the notification under Section 11 C of the Central
Excise Act, 1944 for extending the benefits of not recovering the Central
Excise D'.lty from the units manufacturing Rosin and Turpentine without
the aid of power, except for the purpose of using electricity to pump for
lifting up water to overhead tank, for the period from 27.05.1994 to
28.02.2006; and
(c) Pass any other order or direction as the Court may think fit
and proper."
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It is this writ petition which has been dismissed by the High Court
vide impugned judgment dated 16.02.2016.
15. Submission of Mr. S. Ganesh, senior advocate, and Mr.
Prashant Bhushan, advocate appearing for the appellant, was that it
stood established from the re-survey conducted by the Department itself
that there was a general practice of not demanding excise duty from
Bhatti manufacturers, though, in this survey, only around 125 units could
be examined as the Department could not get full details of the remaining
industries and moreover, most of them were small scale industries availing
benefit under SSI exemption. The learned counsel argued that still this
survey indicated that there were at least 39 units whose turnover
exceeded SSI limit but no excise duty was demanded from those units
as well. The appellant relied upon following noting dated 20.05.2014 of
the Commissioner(Central Excise):
"I I. ... it is clear that majority of the units were not paying duty
during this period and that show cause notices were issued in respect of
2 units i.e. Mis. Gurukripa Resins (P) Ltd. and Mis. Dujodwala
Industries. In respect of unregistered units no show cause notices have
been reportedly issued.
The reasons for not filing any declaration by unregistered units
are not clear. It could be a case of non-payment of dutv or alternatively
a belief by these units that they covered by the TRU clarification of
1978 and hence do not require registration. The precise reasons for not
filing declaration can only be explained by field formations who are
reportedly not having complete records. However, the fact remains that
a number of unregistered units did not pay the duty even when they had
crossed the ssr limit and the department also did not demand such duty
from them .... This can, therefore, also be considered as a case ofnonlevy as well as that of non-payment..."
The Under Secretary, Central Excise in his noting dated 22.08.2014
has stated that:
" ... _The re-survey has indicated that there were at least 39
unregistered units which had turnover more than SSI exemption limit
either once or more than once during 1994-1995 to 2005-06 ... .It could
be concluded that there was a practice of non levy of duty."
M/S. MANGA[,AM ORGANICS LTD. v. UNION OF INDIA
[A. K. SIKRI, J.]
Finally, the Member Central Excise also in his noting dated
11.09.2014 has observed;
'' ... the issue was again examined after conducting a fresh survey.
It was found that though there was a practice of non-levy of duty,
issuance of Section I I [C] notifications will only benefit two companies,
namely, M/s. Gurukripa Resins Pvt. Ltd., Nagpur and M/s. Dujodwala
Industries, Mumbai. Decision was taken with the approval of the then
revenue secretary [p/112 N .S.] That section 11 [CJ notification cannot
be issued to favour only a few select industries and it was decided to
reject the request."
16. It was, thus, argued that there was a specific finding of the
Department itself that there was a prevalent practice of non-levy of
duties on units which manufactured the same products and use power
only to pump water to the cooling tank. It was, thus, argued that conditions
mentioned under Section 11 C of the Act for issuing the notification were
clearly fulfilled.
17. Proceeding on the aforesaid basis, submission of the learned
counsel for the appellant was that once conditions of a particular statutory
provision were fulfilled, the Government was obligated to exercise the
power with the issuance of a required notification. It was argued that
this power rested in the Central Government under Section 11 C of the
Act coupled with the duty and, therefore, the Central Government was
duty bound to exercise the power once the conditions stipulated therein
were fulfilled. In support, reference was made to the judgment of the
Privy Council in Julius v. Lord Bishop of Oxford & Anr.1, which was
followed by this Court in Ambica Quarry Works v. State of Gujarat &
Ors ... , where it was explained that the very nature of the thing empowered
to be done may itself impose an obligation to exercise the power in
favour of a particular person. It was held that this is especially so where
the non-exercise of the power may affect that person's substantive rights.
Para 13 of this judgment was specifically relied upon which reads as
under:
"13. It was submitted by Shri Gobind Das that the said rule was in
pari materia with sub-rule (b) ofRule 18 of Gujarat Minor Mineral Rules,
1966. Often when a public authority is vested with power, the expression
2 1880(5)A.C.214
' (1987) 1sec213
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"may" has been construed as "shall" because power if the conditions
for the exercise are fulfilled is coupled with duty. As observed in Craies
on Statute Law, 7th Edn., p. 229, the expression "may" and "shall" have
often been subject of constant and conflicting interpretation. "May" is a
permissive or enabling expression but there are cases in which for various
reasons as soon as the person who is within the statute is entrusted with
the power, it becomes his duty to exercise it. As early as 1880 the Privy
Council in Julius v. Lord Bishop of Oxford [( 1880) 5 AC 214] explained
the position. Earl Cairns, Lord Chancellor speaking for the judicial
committee observed dealing with the expression "it shall be lawful" that
these words confer a faculty or power and they do not of themselves do
more than confer a faculty or power. But the Lord Chancellor explained
there may be something in the nature of the thing empowered to be
done, something in the object for which it is to be done, something in the
conditions under which it is to be done, something in the title of the
person or persons for whose benefit the power is to be exercised, which
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may couple the power with a duty, and make it the duty of the person in
whom the power is reposed, to exercise that power when cal led upon to
do so. Whether the power is one coupled with a duty must depend upon
the facts and circumstances of each case and must be so decided by the
courts in each case. Lord Blackburn observed in the said decision that
enabling words were always compulsory where the words were to
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effectuate a legal right."
18. Learned counsel also drew our attention to the judgment in
the case of Dhampur Sugar Mills Ltd. v. State of U.P. & Ors. 4 wherein
the Privy Council decision in Julius was again referred to about
enforcement of the obligation to which the power is coupled with duty,
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by issuing order for that purpose. It was submitted that in the said ~ase,
the Court had directed the Government to constitute an Advisory Council
while rejecting the contention of the Government that it was for the
Government to exercise its discretion. It was also submitted that the
same approach and legal position has been laid down in D.K. Basu v.
State of West Bengal & Ors. 5 where it was held that the power of the
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State Governments to set up the State Human Rights Commissions was
not a power simpliciter but a power coupled with the duty to exercise
such power, especially so because it touched the right of affected citizens
to access justice, which was a fundamental right covered by Article 21.
• (2007) s sec 338
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' (2015) s sec 744
MIS. MANGALAM ORGANICS LTD. v. UNION OF INDIA
419
[A. K. SIKRI, J.]
The said duty of the State Government was accordingly enforced by the A
Court by issuing a mandamus or direction to set up the Commissions/ti II
up the vacancies within a time bound period. Again in Aneesli D.
Lawande & Ors. v. State of Goa & Ors. 6, this Court gave a direction
to enforce the obligation which was held to be annexed to the power
conferred on the Government. Reference was also made to Sureslt
Chand Gautam v. State of Uttar Pratlesh & Ors. 7 on this very aspect.
19. Another submission of the counsel for the appellant was that
the solitary reason furnished by the respondent for not exercising its
powers under Section 11 C of the Act was that such a notification, if
issued, was going to benefit only two assessees. It was submitted that
this could never be a valid or tenable ground for the Government to
refuse such a notification, more so, in a situation where the demand
notices were issued to two assessees only and other similarly situated
persons were spared. Learned counsel also submitted that the Central
Government in the past had issued a notification under Section 11 C of
the Act in individual cases i.e. where the benefit of the Court is to only
one identified assessee. On this very premise, another submission
developed by the appellant was that issuance of notification under the
said provision became al I the more necessary and imperative in order to
remove discrimination, which situation was created by the Department
by roping in only two assessees and not demanding the excise duty from
other assessees though identically placed. According to the appellant,
non-issuance of the notification resulted in violation of appellant's
fundamental rights under Article 14 as well as Article 19(l)(g) of the
Constitution. It was, thus, argued that the Government could not take
shelter under the plea that the power under Section 1 IC of the Act was
a discretionary power and it was amenable to judicial review under Article
226 of the Constitution. Submission was that mandamus of this nature
had been issued earlier. Example of cases titled Clloksi Tube Company
Lttl. v. Union of India & Ors. 8 and Union of India & Ors. v. N.S.
Ratlmam & Sons9 were given.
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20. It was also argued that there was no delay whatsoever on the
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part of the appellant in filing the writ petition and objection of the
respondent to this effect was untenable. The rejection order of the
6 (2014) I SCC554
1 (2016) 11 sec 113
'(1997) 11 sec 179
•Civil Appeal No. 1795 of2005, decided on 29.07.2015
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Minister came only in September, 2014 and the writ petition was filed
shortly thereafter. The only reason why the appellant was compelled to
pay excise duty was that it could not obtain an interim stay in the writ
petition filed by it. It is, thus, submitted that in the event of the appellant
succeeding in the present case, there should be an order for refund of
the amount paid by the appellant, along with interest thereon at a rate
which this Court considers reasonable.
21. Countering the aforesaid submissions with equal vehemence
and also adopting the reasoning given by the High Court in the impugned
judgment in support of its conclusion, Mr. A.K. Sanghi, learned senior
counsel appearing for the respondent. submitted that Section 11 C of the
Act was an enabling provision which empowered the Central Government
to issue a notification in the Official Gazette for not recovering whole of
the excise duty payable on ce11ain goods or recovering the excise duty
lesser than the normal duty payable. He emphasized the opening words
of Section 11 C, i.e. 'power not to recover duty of excise ... '. His
argument, thus, was that it is a provision which empowers the
Government to issue such a notification and, therefore, th is power was
discretionary in nature. His further submission was that since waiver of
the duty can be by issuance of a notification in the Official Gazette, such
a power was in the nature of subordinate legislation and as per the settled
law, courts refrain from issuing any mandamus to exercise a statutory
function. He further submitted that the Central Government had, for
valid reasons, decided not to issue any such notification. According to
him, reason for not issuing the notification, namely, that it was to benefit
only two parties, was a valid reason and such a policy decision taken for
not exercising power under Section 11 C of the Act was not open to
judicial review. Without prejudice to this argument, his another plea was
that the exercise carried out by the Government, culminating into the
aforesaid decision of not exercising the power, was based on valid and
justified grounds, which was rested on valid considerations and the Court
would not substitute its own decision for that arrived at by the
Government.
22. Dilating on the aforesaid argument, Mr. Sanghi submitted that
the most important events which had to be kept in mind were that the
show cause notices were issued to the appellant as well as Gurukripa
and in the case ofGurukripa the legal position was finally determined by
this Court vi de judgment dated 11.07.2011 holding that the process of
M/S. MANGALAM ORGANICS LTD. v. UNION OF INDIA
[A. K. SIKRI, J.]
lifting of water into cooling tank was integrally connected with the
manufacture of the goods and, ·hence, if power is used for lifting of
water, the exemption would not be available. The argument of Mr.
Sanghi was that once this position was legally settled, it was not open to
the appellant to nullify the effect of the said judgment by seeking a
direction to issue notification under Section 11 C of the Act.
23. The aforesaid narration makes it clear that three issues arise
for consideration - the first question is as to whether these conditions
are satisfied in the instant case? Secondly, if it is found that the goods
which are excisable goods liable for levy of duty under the Act, but there
has been generally prevalent practice not to demand duty or levy the
duty, or demand lesser duty on such goods, whether it is mandatory on
the parfofthe Central Government to issue a notification under Section
11 C of the Act requiring that no such duty shall be payable or lesser duty
shall be payable on such goods? Thirdly, ifthe Government chooses not
to exercise this 'power', whether the Court can issue a mandamus to
the Central Government to pass such a notification exercising its power
under Section 11 C of the Act?
We have bestowed our serious consideration that this case
deserves to the issues involved.
QUESTION NO. 1
24. It may be remarked in the first instance that, undoubtedly, as
far as duty under the Excise Act on the goods manufactured and cleared
for sale by the appellant is concerned, the same is payable under the
provisions of the Excise Act. It is the appellant's own case that the legal
position in this behalf, before the judgment dated 11.07.2011 in the case
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of Gurukripa Resins Private Limited, was somewhat fluid and
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uncertain. Those units manufacturing Rosin and Turpentine by using
power in all processes are concerned, i.e. vacuum chemical treatment
process, were admittedly liable to pay the excise duty and were paying
also. However, insofar as the units adopting Bhatti process (to which
category the appellant belongs and wherein the whole of the process is
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manual, except for one process, viz. use of power to operate the pump
for lifting up the water to storage tank for the purpose of condensing)
are concerned, whether this process would amount to manufacturing
. process or not, was unclear. Moreover, most of these units which were
resorting to Bhatti method were small scale units and were enjoying the
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exemption from payment of excise duty on that ground. Therefore, they
were not within the net of revenue in any case. Five registered units
were paying the excise duty. The Depa11ment issued show cause notices
to the two units which were registered with it but not paying the duty, as
according to the Revenue, even the use of power for lifting of water to
overhead tanks for condensation of Turpentine vapours collected as liquid
Turpentine in tanks would be manufacturing process and, therefore, excise
duty payable. Others were not registered and were SS! Units. It so
happened that at some point of time, few of them had ceased to be SS!
units. However, the Department remained unaware of that. It was for
this reason that notices could not be issued to the others. When the
matter is looked from the aforesaid angle, it cannot be said that there
was a conscious practice which was generally prevalent not to recover
duty of excise.
25. No doubt, at the instance of and on the request made by the
Association, a survey was got conducted to find out as to whether there
was any general practice in this behalf or not. The result of the first
survey was unfavourable to the appellant inasmuch as in respect of
registered units, the survey revealed that the general practice of such
units not paying duty was not established. It was noticed that five
registered units were paying duty throughout the period. Two units had
not paid duty and show cause notices were issued to them (these are the
appellant and Gurukripa). The Association of which the appellant was a
men:iber, had sent a list of 250 units obtained by it under the Right to
Information Act. However. what was found was that these units were
unregistered and presumed to be under SS! and, therefore, for these
reasons, the excise duty was not demanded from them. From this, it is
difficult to draw an inference that there was a general practice not to
demand duty. The Association demanded fresh survey and request in
this behalf was received with the backing ofa Minister.
26. As per the appellant, in the second survey, this general practice
stood established. For this purpose, the appellant is relying upon certain
extracts from the Noting dated 20.05.2014 of the Commissioner (Central
Excise). The said Noting, when read in entirety, does not categorically
admit of any such practice. What it reveals is that in the second survey
it was found that 37 unregistered units had crossed SS! exemption limit
at least once, but they were not paying duty during the period in question.
From this the Director in his note had observed that there was practice
M/S. MANGALAM ORGANICS LTD. v. UNION OF INDIA
[A. K. SIKRI, J.]
of not paying the duty. However, what is significant is that the
Commissioner (Central Excise) in his Note dated 20.05.2014 specifically
. stated that he was not in agreement with the aforesaid conclusion arrived
at by the Director, which was highly debatable.