In a significant ruling, the Supreme Court held that the power vested under the Central Government under section 11C of the Excise Act is purely a policy matter and no judicial review is required in such matters.
The appellants, in the instant case, initially approached the High Court seeking a direction to the Central Government to issue an exemption notification under section 11C of the Excise Act granting excise duty exemption to the goods manufactured by them. The High Court, vide its order, refused to accept the plea by holding that Section 11C of the Act grants a discretionary power to the Government to issue or not to issue such a notification.
The case of the appellants was that there was a specific finding of the Department itself that there was a general practice of not demanding excise duty from Bhatti manufacturers use power only to pump water to the cooling tank. It was therefore, submitted that the conditions mentioned under Section 11C of the Act for issuing the notification were clearly fulfilled and hence, the department is duty bound to issue an exemption notification in this regard.
However, the Department refused to exercise its power by finding that such a notification, if issued, was going to benefit only two assessees. It was contended on behalf of the Department that such a policy decision taken for not exercising power under Section 11C of the Act was not open to judicial review.
The substantial questions rose before the Court are that, firstly, whether the conditions u/s 11C are satisfied in the instant case?
Secondly, whether on satisfaction of the conditions u/s 11C, it is mandatory on the part of the Central Government to issue a notification requiring that no such duty shall be payable or lesser duty shall be payable on such goods? And lastly, if the 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 11C of the Act?
Answering the first question, the bench said that there is no clinching evidence to suggest the existence of a general practice not to levy excise duty. The bench noted that merely because some unregistered firms which were initially getting the SSI exemption, but omitted to be covered under the Act on their crossing the SSI limits, would not establish any such practice.
With regard to the second and third issues, the bench held that “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. In the opinion of the Court, the scope of judicial review is very limited in such matters.”
“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.”
The two judge bench comprising of Justice A.K Sikri and Justice Ashok Bhushan accepted the contention of the Department that the specific policy of the Government is that when a large section of trade is affected and any relief is proposed to be given, a notification under Section 11C of the Act is issued. “When the reasons furnished by the Government in not exercising its power to issue notification under Section 11C of the Act are seen in this perspective, namely, such a notification, if issued, is going to benefit only two units, we find them to be valid and justified.”
Relying on the ration laid down in Madria Chemicals Ltd. Etc. Etc. v. Union of India and others Etc, the bench noted that “It was held that such a policy decision of the legislature could not be faulted with nor was it a matter to be gone into by the courts to test the legitimacy of such a measure relating to financial policy. As already pointed out above, it is impermissible for this Court to tinker with such policy decision more particularly when it is found that the decision is not irrational and is founded on valid considerations. It has also to be borne in mind that in the instant case the appellant has already paid the duty. Section 11C contemplates those situations where duty is not paid. It does not cover the situation where duty is paid and that is to be refunded.”
The bench also observed that the non-issuance exemption notification would not, amount to a case of discrimination or it cannot be said that the appellants have any right under Article 14 or Article 19(1)(g) of the Constitution to get such exemption.
Read the full text of the Judgment below.
