To recapitulate the events, the appellant was accorded certain
benefits under Notification dated July 08, 1999. This Notification
stands nullified by Section 154 of the Act of 2003, which has been
given retrospective effect. The legal consequence of the
aforesaid statutory provision is that the amount with which the
appellant was benefitted under the aforesaid Notification becomes
refundable. Even after the notice is issued, the appellant cannot
take any plea to retain the said amount on any ground
whatsoever as it is bound by the dicta in R.C. Tobacco (supra).
Likewise, even the officer who passed the order has no choice but
to follow the dicta in R.C. Tobacco (supra). It is important to note
that as far as quantification of the amount is concerned, it is not
disputed at all. In such a situation, issuance of notice would be
an empty formality and we are of the firm opinion that the case
stands covered by 'useless formality theory'.
In Escorts Farms Ltd. (Previously known as M/s. Escorts
Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon Division,
Nainital, U.P. & Ors.24, this Court, while reiterating the position
that rules of natural justice are to be followed for doing substantial
justice, held that, at the same time, it would be of no use if it
amounts to completing a mere ritual of hearing without possibility
of any change in the decision of the case on merits. It was so
explained in the following terms:
“64. Right of hearing to a necessary party is a
valuable right. Denial of such right is serious
breach of statutory procedure prescribed and
violation of rules of natural justice. In these
appeals preferred by the holder of lands and some
other transferees, we have found that the terms of
government grant did not permit transfers of land
without permission of the State as grantor.
Remand of cases of a group of transferees who
were not heard, would, therefore, be of no legal
consequence, more so, when on this legal question
all affected parties have got full opportunity of
hearing before the High Court and in this appeal
before this Court. Rules of natural justice are to be
followed for doing substantial justice and not for
completing a mere ritual of hearing without
possibility of any change in the decision of the case
on merits. In view of the legal position explained
by us above, we, therefore, refrain from remanding
these cases in exercise of our discretionary powers
under Article 136 of the Constitution of India.”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4458-4459 OF 2015
(ARISING OUT OF SLP (C) NOS. 37108-37109 OF 2012)
M/S. DHARAMPAL SATYAPAL LTD. .....APPELLANT(S)
VERSUS
DEPUTY COMMISSIONER OF CENTRAL
EXCISE, GAUHATI & ORS.
.....RESPONDENT(S)
Citation;(2015) 8 SCC519
2) Union of India, vide Memorandum dated December 24, 1997,
unveiled a new industrial policy for the North-Eastern region. In
the said policy, in order to give stimulation to the development of
industrial infrastructure in the North-Eastern region, the said
region was made tax free zone for a period of ten years giving
incentives to those who wanted to establish industries in that
region. Pursuant thereto, the Notification dated July 08, 1999 was
issued granting new industrial units that had commercial
production on or after December 24, 1997 and certain types of
industrial units that increased their installed capacity after that
Civil Appeal Nos. 4458-4459 of 2015 Page 1 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 2
date, exemption on goods cleared from units located in growth
centres and integrated infrastructure centres.
3) The aforesaid Notification was issued under the provision of
Central Excise Act, 1944 as well as Additional Duties of Excise
(Goods of Special Importance) Act, 1957 and Additional Duties of
Excise (Textiles and Textile Articles) Act, 1978. However, on
December 31, 1999, another Notification was issued whereby
exemption of central excise was withdrawn in respect of goods
falling under Chapter 21.06 (pan masala) and Chapter 24
(tobacco and tobacco substitutes, including cigarettes, chewing
tobacco etc.).
4) This withdrawal Notification was challenged by the appellant by
filing the writ petition in the High Court of Gauhati. The learned
Single Judge dismissed the writ petition. However, appeal
preferred by the appellant was allowed by the Division Bench vide
judgment dated December 03, 2012. In nutshell, the High Court
held that the principal of Promissory Estoppel shall apply and
once a promise was given by the Union of India assuring that no
such duty would be charged for a period of ten years, it was not
open for the Union of India to withdraw the same. Challenging
that judgment, Union of India filed petitions for special leave.
Civil Appeal Nos. 4458-4459 of 2015 Page 2 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 3
Leave was granted and the petitions were registered as Civil
Appeal Nos. 8841-8844 of 2003.
5) After the filing of the aforesaid appeals, certain subsequent
events took place. It so happened that vide Section 154 of the
Finance Act, 2003 (hereinafter referred to as the 'Act of 2003'),
withdrawal of the benefit was effected from retrospective effect.
Effect thereof was to withdraw the benefit given under the
Notification issued earlier. Validity of Section 154 was questioned
and the issue was considered by this Court in R.C. Tobacco
Private Ltd. & Anr. v. Union of India & Anr.1
This Court upheld
the constitutional validity of the aforesaid provision and repelled
the challenge so laid. The effect was to disentitle the appellant
and other similarly situated from getting any such benefit by virtue
of Section 154 of the Act of 2003 and knocking down the basis of
the judgment of the High Court, which lost its validity on the
aforesaid ground.
6) So far so good. The grievance of the appellant and other similarly
situated industries for not extending the benefit of Notification
dated July 08, 1999 is buried down. However, after notifying
Section 154 of the Act of 2003, which had nullified the effect of
1
(2005) 7 SCC 725
Civil Appeal Nos. 4458-4459 of 2015 Page 3 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 4
Notification No. 32 of 1999 retrospectively thereby annulling the
effect thereof altogether, respondent No.1 herein passed recovery
order dated June 03, 2003 for recovery of a sum of ₹2,93,43,244
(rupees two crores ninety three lakhs forty three thousand two
hundred and forty four only) from the appellant, which was the
benefit that had been drawn by the appellant for the period
November 1999 till February 2001 in terms of the Notification No.
32 of 1999. By another order dated June 06, 2003 issued by
respondent No.1, the appellant was directed to pay the excise
duty for the said period for which the benefit had been availed.
He also rejected the pending claim of refund for the period from
March 2001 till May 31, 2003. These recovery orders were
challenged by the appellant by filing appeal before the
Commissioner (Appeals). Along with the appeal, the appellant
also filed an application for interim order seeking stay against the
pre-deposit. On this application, orders dated March 31, 2004
were passed by the Commissioner (Appeals) directing the
appellant to deposit entire duty amount within a period of thirty
days. This order of pre-deposit was challenged by the appellant
by filing four writ petitions in the High Court of Gauhati. The
learned Single Judge of the High Court, however, dismissed these
writ petitions vide orders dated May 18, 2004. The appellant
Civil Appeal Nos. 4458-4459 of 2015 Page 4 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 5
carried this issue of pre-deposit to a higher forum in the form of
writ appeals before the Division Bench of the said Court. Interim
orders dated June 11, 2004 were passed in the writ appeals
directing the Commissioner (Appeals) not to dismiss the appeals
preferred by the appellant before him for non-deposit of the duty
amount. In other words, interim stay against the pre-deposit was
given. The Commissioner (Appeals) heard the appeals and
passed the orders dated June 15, 2005 deciding the appeals in
favour of the appellant. He held that issuance of show-cause
notice was mandatory before a valid recovery of demand could be
made from the appellant and, thus, remitted the matter to the
adjudicating authority. After this final order was passed by the
Commissioner (Appeals), writ appeals of the appellant before the
Division Bench were disposed of as infructuous in view of the fact
that the Commissioner (Appeals) had passed an order on merits
and, therefore, no cause survived which required further
adjudication in those appeals.
7) Insofar as the order of the Commissioner (Appeals) is concerned,
both the appellant as well as the Revenue felt aggrieved thereby.
The appellant was not satisfied with the order of remand and the
nature of relief granted even after accepting that issuance of
show-cause notice was mandatory before passing a valid
Civil Appeal Nos. 4458-4459 of 2015 Page 5 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 6
recovery of demand. The respondents were aggrieved of the
order passed on merit holding that show-cause notice was
mandatory. Therefore, both the appellant as well as the Revenue
filed appeals aggrieved against the order dated June 15, 2005
passed by the Commissioner (Appeals). The Customs Excise &
Service Tax Appellate Tribunal (for short 'CESTAT') decided these
appeals vide common order dated My 28, 2007. It reversed the
orders of the Commissioner (Appeals), which resulted in allowing
the appeal filed by the Revenue and dismissing the appeal
preferred by the appellant. A perusal of the judgment of the
CESTAT would reveal that it has primarily referred to the
judgment of this Court in R.C. Tobacco and held that the matter
stood concluded by the said judgment. The appellant challenged
the order of CESTAT by filing Central Excise Tax Reference No. 1
of 2008 before the High Court of Gauhati. This Reference was
dismissed by the High Court on December 01, 2011 on the
ground of res judicata holding that orders dated May 18, 2004
passed by the Single Judge dismissing the writ petitions of the
appellant had attained finality. The appellant preferred Review
Petition seeking review of the said order, which has also been
dismissed by the High Court on June 05, 2012. In the present
appeals, the appellant has challenged both the orders dated
Civil Appeal Nos. 4458-4459 of 2015 Page 6 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 7
December 01, 2011 passed in the Tax Reference as well as the
order dated June 05, 2012 passed in the Review Petition.
8) From the brief narration of the background facts mentioned
above, it is apparent that the frontal attack of the appellant against
the recovery orders passed by the respondents is premised on
the plea that no such recovery proceedings could be initiated
without a show-cause notice under Section 11-A of the Excise Act.
The appellant has also taken a plea in these appeals that order of
the Single Judge at pre-deposit stage could not operate as res
judicata on merits and, therefore, dismissal of the Tax Reference
by the High Court, and consequently the Review Petition, is
clearly erroneous and the High Court should have gone into the
merits of the issue decided by CESTAT.
9) As noted above, CESTAT has decided the case against the
appellant on the ground that issue now raised is covered by the
judgment of this Court in R.C. Tobacco (supra). As pointed out,
in R.C. Tobacco (supra), this Court has already upheld the
validity of Section 154 of the Act of 2003 thereby taking away the
benefit of Notification No. 32 of 1999 retrospectively insofar as
excisable goods falling under Chapter 24 are concerned.
Conscious of the position that judgment in R.C. Tobacco (supra)
Civil Appeal Nos. 4458-4459 of 2015 Page 7 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 8
stares at the face of the appellant, Mr. Soli Sorabjee, learned
senior counsel who appeared for the appellant, has also made an
endeavour to show that the said judgment in R.C. Tobacco
(supra) is in clear conflict with earlier three Judge Bench judgment
of this Court in M/s. J.K. Cotton Spinning and Weaving Mills
Ltd. v. Union of India2
. Thus, following three issues have arisen
for consideration in these appeals:
(a) Whether order of the Single Judge at pre-deposit stage
can operate as res judicata on merits?
(b) Whether recovery proceedings can be initiated without
show-cause notice under Section 11A of the Excise Act,
which is mandatory?
(c) Whether there is a conflict between the three Judge
Bench judgment in J.K. Cotton (supra) and R.C.
Tobacco (supra)?
First issue is the basis for the judgment of the High Court.
10) For answering this issue, it would be necessary to take into
account the complete implication thereof with reference to the
nature of recovery orders passed by respondent No.1, challenge
thereto before the Commissioner (Appeals) and interim order of
pre-deposit passed by the Commissioner (Appeals) on March 31,
2004 as also the nature of challenge which was laid by the
2 (1987) Supp SCC 350
Civil Appeal Nos. 4458-4459 of 2015 Page 8 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 9
appellant against the said order of pre-deposit in the writ petitions
filed in the High Court, which were dismissed by the learned
Single Judge on May 18, 2004.
11) By virtue of Notification dated July 08, 1999, the appellant was
granted refund of the duty deposited in cash up to February 2001.
After the enactment of Section 154 of the Act of 2003, recovery
order dated June 03, 2003 was passed for recovery of the
aforesaid amount which had been refunded to the appellant.
Simultaneously, another order dated June 06, 2003 was issued
asking the appellant to pay duty on the ground that such goods
were no more exempted from payment of duty. In the appeals
which were filed by the appellants before the Commissioner
(Appeals) challenging the aforesaid orders, the Commissioner
passed interim orders dated March 31, 2004 directing the
appellants to pay the amount demanded by the aforesaid orders.
This order dated March 31, 2004 of the Commissioner (Appeals)
reflects that the Commissioner went into various issues raised by
the appellant on the basis of which it was pleaded by the
appellant that it had a good case on merits and, therefore,
condition of pre-deposit be waived. Apart from the contention that
no show-cause notice was given before passing those orders, it
Civil Appeal Nos. 4458-4459 of 2015 Page 9 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 10
was even argued that by making the retrospective amendment in
the form of Section 154 of the Act of 2003, the only effect was to
validate the earlier actions but no demand of refund of any
amount could be made and no refund of the amount already paid
could be claimed. It was also argued that the matter of recovery
of amounts was pending consideration of Central Board of Excise
and Customs (CBEC) as well as in the Gauhati High Court. All
these issues were considered by the Commissioner (Appeals),
who gave his prima facie view thereupon observing that the
appellants did not have strong prima facie case on merits
resulting into the direction to deposit the entire amount within
thirty days.
12) The appellant had filed writ petitions against the aforesaid order of
the Commissioner (Appeals) with the prayer that the direction of
the Commissioner (Appeals) to deposit the entire amount within
thirty days be set aside and the prayer of pre-deposit of the
appellant be accepted. No doubt, while arguing for this relief, the
appellant had raised various contentions on the merits of the case
in its endeavour to demonstrate that it had a good case on merits.
It is also borne from the record that the learned Single Judge,
while dismissing the writ petition, dealt with these issues, which
Civil Appeal Nos. 4458-4459 of 2015 Page 10 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 11
touched upon the merits of the main issue. That is the reason
that the order dated May 18, 2004 of the learned Single Judge
dismissing the writ petition of the appellant runs into 37 pages.
Nevertheless, we find that the observations which were made by
the learned Single Judge on the issues raised were only prima
facie in nature and the prime focus of the judgment rested on the
core issue, namely, whether the direction of the Commissioner
(Appeals) directing the appellant to make deposit of the amount
as a pre-condition for hearing of the appeal was sustainable or
not. The writ petition was dismissed affirming the said order.
Therefore, any observations made by the learned Single Judge,
which were tentative in nature, could not be taken into
consideration by the Division Bench in the impugned judgment,
thereby dismissing the Reference, invoking the principle of res
judicata. The order of the learned Single Judge dismissing the
writ petition was challenged before the Division Bench and the
Division Bench passed interim orders in the writ appeals not to
dismiss the appeals preferred by the appellant for non-deposit of
the duty. In this backdrop, appeals were heard and appellant
even partly succeeded. After the order of the Commissioner
(Appeals) dated June 15, 2005 deciding the appeals partly in
favour of the appellant, the writ appeals which were pending
Civil Appeal Nos. 4458-4459 of 2015 Page 11 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 12
before the Division Bench had become infructuous and disposed
of as such without going into the merit of the order passed by the
learned Single Judge. This is yet another reason to hold that the
order of the learned Single Judge could not be treated as res
judicata.
13) Having regard to the aforesaid position, we heard the instant
appeal on merits, namely, on the issue as to whether it was
mandatory to issue show-cause notice making an order of
recovery. The Commissioner (Appeals) has held it to be
mandatory and this order of the Commissioner (Appeals) has
been set aside by the CESTAT. The Reference petition against
the order of CESTAT, though wrongly is dismissed on the ground
of res judicata, the impugned order shows that it has mentioned
that such show-cause notice was not mandatory as held by the
learned Single Judge by order dated May 18, 2004.
14) Learned senior counsel appearing for the appellant as well as
learned Attorney General agreed that in this situation this Court
may decide the aforesaid issue finally. It is for this reason that we
have heard counsel for the parties at length on this aspect of the
matter.
Civil Appeal Nos. 4458-4459 of 2015 Page 12 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 13
15) The neat submission made by Mr. Soli Sorabjee on behalf of the
appellant was that the impugned demand of the Assistant
Commissioner was in the nature of adjudication whereby the
amount demanded in the order dated June 06, 2003 was
crystallized and, therefore, there could not have been demand for
recovery of the stipulated amount without issuing notice to the
appellant and giving the appellant herein right of hearing. He also
submitted that merely because vires of Section 154 of the Act of
2003 were upheld by this Court in R.C. Tobacco (supra) could
not be a ground to dispense with the aforesaid mandatory
requirements of principles of natural justice. His further
submission was that 'no prejudice' principle adopted by the
CESTAT amounted to erroneous approach. He sought to draw a
fine distinction in this behalf by contending that the Authority
passing the order could not presume that prejudice would not be
caused to a person against whom the action is contemplated and
on that presumption dispense with the mandatory requirement of
issuance of the notice. According to him, such a doctrine could
be applied only by the courts while dealing with such issues
where it is found that the action of the Authority was violative of
principles of natural justice, the Court could still choose not to
remit the case back to the concerned Authority if it finds that it will
Civil Appeal Nos. 4458-4459 of 2015 Page 13 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 14
be a futile exercise.
16) As a pure principle of law, we find substance and force in the
aforesaid submission of Mr. Sorabjee. No doubt, the Department
was seeking to recover the amount paid by virtue of Section 154
of the Act of 2003 which was enacted retrospectively and the
constitutional validity of the said Section had already been upheld
by this Court in R.C. Tobacco (supra) at the time of issuance of
notice for recovery. Further, no doubt, the effect of the said
amendment retrospectively was to take away the benefit which
was granted earlier. However, the question is whether before
passing such an order of recovery, whether it was necessary to
comply with the requirement of show-cause notice? The
appellant wanted to contend that Section 11A of the Excise Act
was applicable, which requires this procedure to be followed.
Even if that provision is not applicable, it is fundamental that
before taking any adverse action against a person, requirement of
principles of natural justice is to be fulfilled. This Court in
Collector of Central Excise, Patna & Ors. v. I.T.C. Limited &
Anr.3
has held that show-cause and personal hearing is
necessary before saddling an assessee with additional demand.
It is also trite that when a statute is silent, with no positive words
3 (1995) 2 SCC 38
Civil Appeal Nos. 4458-4459 of 2015 Page 14 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 15
in the Act or Rules spelling out need to hear the party whose
rights or interests are likely to be affected, requirement to follow
fair procedure before taking a decision must be read into statute,
unless the statute provides otherwise.
17) What is the genesis behind this requirement? Why it is necessary
that before an adverse action is taken against a person he is to be
given notice about the proposed action and be heard in the
matter? Why is it treated as inseparable and inextricable part of
the doctrine of principles of natural justice?
18) Natural justice is an expression of English Common Law. Natural
justice is not a single theory – it is a family of views. In one sense
administering justice itself is treated as natural virtue and,
therefore, a part of natural justice. It is also called 'naturalist'
approach to the phrase 'natural justice' and is related to 'moral
naturalism'. Moral naturalism captures the essence of
commonsense morality – that good and evil, right and wrong, are
the real features of the natural world that human reason can
comprehend. In this sense, it may comprehend virtue ethics and
virtue jurisprudence in relation to justice as all these are attributes
of natural justice. We are not addressing ourselves with this
connotation of natural justice here.
Civil Appeal Nos. 4458-4459 of 2015 Page 15 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 16
19) In Common Law, the concept and doctrine of natural justice,
particularly which is made applicable in the decision making by
judicial and quasi-judicial bodies, has assumed different
connotation. It is developed with this fundamental in mind that
those whose duty is to decide, must act judicially. They must deal
with the question referred both without bias and they must given
to each of the parties to adequately present the case made. It is
perceived that the practice of aforesaid attributes in mind only
would lead to doing justice. Since these attributes are treated as
natural or fundamental, it is known as 'natural justice'. The
principles of natural justice developed over a period of time and
which is still in vogue and valid even today were: (i) rule against
bias, i.e. nemo iudex in causa sua; and (ii) opportunity of being
heard to the concerned party, i.e. audi alteram partem. These are
known as principles of natural justice. To these principles a third
principle is added, which is of recent origin. It is duty to give
reasons in support of decision, namely, passing of a 'reasoned
order'.
20) Though the aforesaid principles of natural justice are known to
have their origin in Common Law, even in India the principle is
prevalent from ancient times, which was even invoked in
Civil Appeal Nos. 4458-4459 of 2015 Page 16 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 17
Kautilya's 'Arthashastra'. This Court in the case of Mohinder
Singh Gill & Anr. v. The Chief Election Commissioner, New
Delhi & Ors.4
explained the Indian origin of these principles in the
following words:
“Indeed, natural justice is a pervasive facet of
secular law where a spiritual touch enlivens
legislation, administration and adjudication, to
make fairness a creed of life. It has many colours
and shades, many forms and shapes and, save
where valid law excludes, it applies when people
are affected by acts of authority. It is the bone of
healthy government, recognised from earliest times
and not a mystic testament of judge-made law.
Indeed from the legendary days of Adam – and of
Kautilya's Arthashastra – the rule of law has had
this stamp of natural justice, which makes it social
justice. We need not go into these deeps for the
present except to indicate that the roots of natural
justice and its foliage are noble and not
new-fangled. Today its application must be
sustained by current legislation, case law or other
extant principle, not the hoary chords of legend and
history. Our jurisprudence has sanctioned its
prevalence even like the Anglo-American system”.
21) Aristotle, before the era of Christ, spoke of such principles calling
it as universal law. Justinian in the fifth and sixth Centuries A.D.
called it 'jura naturalia', i.e. natural law.
22) The principles have sound jurisprudential basis. Since the
function of the judicial and quasi-judicial authorities is to secure
justice with fairness, these principles provide great humanising
factor intended to invest law with fairness to secure justice and to
4 (1978) 1 SCC 405 : AIR 1978 SC 851
Civil Appeal Nos. 4458-4459 of 2015 Page 17 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 18
prevent miscarriage of justice. The principles are extended even
to those who have to take administrative decision and who are not
necessarily discharging judicial or quasi-judicial functions. They
are a kind of code of fair administrative procedure. In this context,
procedure is not a matter of secondary importance as it is only by
procedural fairness shown in the decision making that decision
becomes acceptable. In its proper sense, thus, natural justice
would mean the natural sense of what is right and wrong.
23) This aspect of procedural fairness, namely, right to a fair hearing,
would mandate what is literally known as 'hearing the other side'.
Prof. D.J. Galligan5
attempts to provide what he calls 'a general
theory of fair treatment' by exploring what it is that legal rules
requiring procedural fairness might seek to achieve. He
underlines the importance of arriving at correct decisions, which is
not possible without adopting the aforesaid procedural fairness,
by emphasizing that taking of correct decisions would
demonstrate that the system is working well. On the other hand,
if mistakes are committed leading to incorrect decisions, it would
mean that the system is not working well and the social good is to
that extent diminished. The rule of procedure is to see that the
law is applied accurately and, as a consequence, that the social
5 On 'Procedural Fairness' in Birks (ed), the Frontiers of Liability (Volume One) (Oxford 1994)
Civil Appeal Nos. 4458-4459 of 2015 Page 18 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 19
good is realised. For taking this view, Galligan took support from
Bentham6
, who wrote at length about the need to follow such
principles of natural justice in civil and criminal trials and insisted
that the said theory developed by Bentham can be transposed to
other forms of decision making as well. This jurisprudence of
advancing social good by adhering to the principles of natural
justice and arriving at correct decisions is explained by Galligan in
the following words:
“On this approach, the value of legal procedures is
judged according to their contribution to general
social goals. The object is to advance certain
social goals, whether through administrative
processes, or through the civil or criminal trial. The
law and its processes are simply instruments for
achieving some social good as determined from
time to time by the law makers of the society. Each
case is an instance in achieving the general goal,
and a mistaken decision, whether to the benefit or
the detriment of a particular person, is simply a
failure to achieve the general good in that case. At
this level of understanding, judgments of fairness
have no place, for all that matters is whether the
social good, as expressed through laws, is
effectively achieved.”
Galligan also takes the idea of fair treatment to a second
level of understanding, namely, pursuit of common good involves
the distribution of benefits and burdens, advantages and
disadvantages to individuals (or groups). According to him,
principles of justice are the subject matter of fair treatment.
6 A Treatise of Judicial Evidence (London 1825)
Civil Appeal Nos. 4458-4459 of 2015 Page 19 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 20
However, that aspect need not be dilated.
24) Allan7
, on the other hand, justifies the procedural fairness by
following the aforesaid principles of natural justice as rooted in
rule of law leading to good governance. He supports Galligan in
this respect and goes to the extent by saying that it is same as
ensuring dignity of individuals, in respect of whom or against
whom the decision is taken, in the following words:
“The instrumental value of procedures should not
be underestimated; the accurate application of
authoritative standards is, as Galligan clearly
explains, an important aspect of treating someone
with respect. But procedures also have intrinsic
value in acknowledging a person's right to
understand his treatment, and thereby to determine
his response as a conscientious citizen, willing to
make reasonable sacrifices for the public good. If
obedience to law ideally entails a recognition of its
morally obligatory character, there must be suitable
opportunities to test its moral credentials.
Procedures may also be though to have intrinsic
value in so far as they constitute a fair balance
between the demands of accuracy and other social
needs: where the moral harm entailed by
erroneous decisions is reasonably assessed and
fairly distributed, procedures express society's
commitment to equal concern and respect for all.”
It, thus, cannot be denied that principles of natural justice
are grounded in procedural fairness which ensures taking of
correct decision and procedural fairness is fundamentally an
instrumental good, in the sense that procedure should be
7 'Procedural Fairness and the Duty of Respect', (198) 18 OJLS 497
Civil Appeal Nos. 4458-4459 of 2015 Page 20 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 21
designed to ensure accurate or appropriate outcomes. In fact,
procedural fairness is valuable in both instrumental and
non-instrumental terms.
25) It is on the aforesaid jurisprudential premise that the fundamental
principles of natural justice, including audi alteram partem, have
developed. It is for this reason that the courts have consistently
insisted that such procedural fairness has to be adhered to before
a decision is made and infraction thereof has led to the quashing
of decisions taken. In many statutes, provisions are made
ensuring that a notice is given to a person against whom an order
is likely to be passed before a decision is made, but there may be
instances where though an authority is vested with the powers to
pass such orders, which affect the liberty or property of an
individual but the statute may not contain a provision for prior
hearing. But what is important to be noted is that the applicability
of principles of natural jsutice is not dependent upon any statutory
provision. The principle has to be mandatorily applied
irrespective of the fact as to whether there is any such statutory
provision or not.
De Smith8
captures the essence thus - “Where a statute
authorises interference with properties or other rights and is silent
8 Judial Review of Administrative Action (1980), at page 161
Civil Appeal Nos. 4458-4459 of 2015 Page 21 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 22
on the question of hearing, the courts would apply rule of
universal application and founded on plainest principles of natural
justice”.
Wade9
also emphasizes that principles of natural justice
operate as implied mandatory requirements, non-observance of
which invalidates the exercise of power. In Cooper v.
Sandworth Board of Works10 the Court laid down that:
'...although there is no positive word in the statute requiring that
the party shall be heard, yet justice of common law would supply
the omission of Legislature”. Exhaustive commentary explaining
the varied contours of this principle can be traced to the judgment
of this Court in Managing Director, ECIL, Hyderabad & Ors. v.
B. Karunakar & Ors.11, wherein the Court discussed plenty of
previous case law in restating the aforesaid principle, a glimpse
whereof can be found in the following passages:
“20. The origins of the law can also be traced to
the principles of natural justice, as developed in the
following cases: In A. K. Kraipak v. Union of India,
(1969) 2 SCC 262 : (1970) 1 SCR 457, it was held
that the rules of natural justice operate in areas not
covered by any law. They do not supplant the law
of the land but supplement it. They are not
embodied rules and their aim is to secure justice or
to prevent miscarriage of justice. If that is their
purpose, there is no reason why they should not be
made applicable to administrative proceedings also
especially when it is not easy to draw the line that
9 Administrative Law (1977), at page 395
10 (1863) 14 GB (NS)
11 (1993) 4 SCC 727
Civil Appeal Nos. 4458-4459 of 2015 Page 22 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 23
demarcates administrative enquiries from quasijudicial
ones. An unjust decision in an
administrative inquiry may have a more far
reaching effect than a decision in a quasi-judicial
inquiry. It was further observed that the concept of
natural justice has undergone a great deal of
change in recent years. What particular rule of
natural justice should apply to a given case must
depend to a great extent on the facts and
circumstances of that case, the framework of the
law under which the inquiry is held and the
constitution of the tribunal or the body of persons
appointed for that purpose. Whenever a complaint
is made before a Court that some principle of
natural justice has been contravened, the Court
has to decide whether the observance of that rule
was necessary for a just decision on the facts of
that case. The rule that inquiry must be held in
good faith and without bias and not arbitrarily or
unreasonably is now included among the principles
of natural justice.
21. In Chairman, Board of Mining Examination v.
Ramjee, (1977) 2 SCC 256, the Court has
observed that natural justice is not an unruly horse,
no lurking landmine, nor a judicial cure-all. If
fairness is shown by the decision-maker to the man
proceeded against, the form, features and the
fundamentals of such essential processual
propriety being conditioned by the facts and
circumstances of each situation, no breach of
natural justice can be complained of. Unnatural
expansion of natural justice, without reference to
the administrative realities and other factors of a
given case, can be exasperating. The Courts
cannot look at law in the abstract or natural justice
as mere artifact. Nor can they fit into a rigid mould
the concept of reasonable opportunity. If the totality
of circumstances satisfies the Court that the party
visited with adverse order has not suffered from
denial of reasonable opportunity, the Court will
decline to be punctilious or fanatical as if the rules
of natural justice were sacred scriptures.
22. In Institute of Chartered Accountants of India v.
L. K. Ratna, (1986) 4 SCC 537, Charan Lal Sahu v.
Union of India, (1990) 1 SCC 613 (Bhopal Gas
Civil Appeal Nos. 4458-4459 of 2015 Page 23 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 24
Leak Disaster Case) and C. B. Gautam v. Union of
India, (1993) 1 SCC 78, the doctrine that the
principles of natural justice must be applied in the
unoccupied interstices of the statute unless there is
a clear mandate to the contrary, is reiterated.”
In his separate opinion, concurring on this fundamental
issue, Justice K. Ramaswamy echoed the aforesaid sentiments in
the following words:
“61. It is now settled law that the proceedings must
be just, fair and reasonable and negation thereof
offends Articles 14 and 21. It is well settled law that
principles of natural justice are integral part of
Article 14. No decision prejudicial to a party should
be taken without affording an opportunity or
supplying the material which is the basis for the
decision. The enquiry report constitutes fresh
material which has great persuasive force or effect
on the mind of the disciplinary authority. The supply
of the report along with the final order is like a post
mortem certificate with putrefying odour. The failure
to supply copy thereof to the delinquent would be
unfair procedure offending not only Arts. 14, 21 and
311(2) of the Constitution, but also, the principles of
natural justice.”
26) Likewise, in C.B. Gautam v. Union of India & Ors.12, this Court
once again held that principle of natural justice was applicable
even though it was not statutorily required. The Court took the
view that even in the absence of statutory provision to this effect,
the authority was liable to give notice to the affected parties while
purchasing their properties under Section 269-UD of the Income
Tax Act, 1961. It was further observed that the very fact that an
12 (1993) 1 SCC 78
Civil Appeal Nos. 4458-4459 of 2015 Page 24 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 25
imputation of tax evasion arises where an order for compulsory
purchase is made and such an imputation casts a slur on the
parties to the agreement to sell leads to the conclusion that before
such an imputation can be made against the parties concerned
they must be given an opportunity to show-cause that the under
valuation in the agreement for sale was not with a view to evade
tax. It is, therefore, all the more necessary that an opportunity of
hearing is provided.
27) From the aforesaid discussion, it becomes clear that the
opportunity to provide hearing before making any decision was
considered to be a basic requirement in the Court proceeding.
Later on, this principle was applied to other quasi-judicial
authorities and other tribunals and ultimately it is now clearly laid
down that even in the administrative actions, where the decision
of the authority may result in civil consequences, a hearing before
taking a decision is necessary. It was, thus, observed in A.K.
Kraipak's case (supra) that if the purpose of rules of natural
justice is to prevent miscarriage of justice, one fails to see how
these rules should not be made available to administrative
inquiries. In the case of Maneka Gandhi v. Union of India &
Anr.13 also the application of principle of natural justice was
13 (1978) 1 SCC 248
Civil Appeal Nos. 4458-4459 of 2015 Page 25 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 26
extended to the administrative action of the State and its
authorities. It is, thus, clear that before taking an action, service
of notice and giving of hearing to the noticee is required. In
Maharashtra State Financial Corporation v. M/s. Suvarna
Board Mills & Anr.14, this aspect was explained in the following
manner:
“3. It has been contended before us by the learned
counsel for the appellant that principles of natural
justice were satisfied before taking action under
Section 29, assuming that it was necessary to do
so. Let it be seen whether it was so. It is well
settled that natural justice cannot be placed in a
straight-jacket; its rules are not embodied and they
do vary from case to case and from one
fact-situation to another. All that has to be seen is
that no adverse civil consequences are allowed to
ensue before one is put on notice that the
consequence would follow if he would not take care
of the lapse, because of which the action as made
known is contemplated. No particular form of
notice is the demand of law: All will depend on facts
and circumstances of the case.”
28) In the case of East India Commercial Company Ltd., Calcutta
& Anr. v. The Collector of Customs, Calcutta15, this Court held
that whether the statute provides for notice or not, it is incumbent
upon the quasi-judicial authority to issue a notice to the
concerned persons disclosing the circumstances under which
proceedings are sought to be initiated against them, failing which
the conclusion would be that principle of natural justice are
14 (1994) 5 SCC 566
15 AIR 1962 SC 1893
Civil Appeal Nos. 4458-4459 of 2015 Page 26 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 27
violated. To the same effect are the following judgments:
a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.16
b) Morarji Goculdas B&W Co. Ltd. & Anr. v. U.O.I. & Ors.17
c) Metal Forgings & Anr. v. U.O.I. & Ors.18
d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr.19
29) Therefore, we are inclined to hold that there was a requirement of
issuance of show-cause notice by the Deputy Commissioner
before passing the order of recovery, irrespective of the fact
whether Section 11A of the Act is attracted in the instant case or
not.
30) But that is not the end of the matter. While the law on the
principle of audi alteram partem has progressed in the manner
mentioned above, at the same time, the Courts have also
repeatedly remarked that the principles of natural justice are very
flexible principles. They cannot be applied in any straight-jacket
formula. It all depends upon the kind of functions performed and
to the extent to which a person is likely to be affected. For this
reason, certain exceptions to the aforesaid principles have been
invoked under certain circumstances. For example, the Courts
16 (1988) 3 SCC 348
17 (1995) Supp 3 SCC 588
18 (2003) 2 SCC 36
19 1988 (38) ELT 739 (SC) :: 1988 (19) ECR 569 (SC)
Civil Appeal Nos. 4458-4459 of 2015 Page 27 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 28
have held that it would be sufficient to allow a person to make a
representation and oral hearing may not be necessary in all
cases, though in some matters, depending upon the nature of the
case, not only full-fledged oral hearing but even
cross-examination of witnesses is treated as necessary
concomitant of the principles of natural justice. Likewise, in
service matters relating to major punishment by way of
disciplinary action, the requirement is very strict and full-fledged
opportunity is envisaged under the statutory rules as well. On the
other hand, in those cases where there is an admission of charge,
even when no such formal inquiry is held, the punishment based
on such admission is upheld. It is for this reason, in certain
circumstances, even post-decisional hearing is held to be
permissible. Further, the Courts have held that under certain
circumstances principles of natural justice may even be excluded
by reason of diverse factors like time, place, the apprehended
danger and so on.
31) We are not concerned with these aspects in the present case as
the issue relates to giving of notice before taking action. While
emphasizing that the principles of natural justice cannot be
applied in straight-jacket formula, the aforesaid instances are
Civil Appeal Nos. 4458-4459 of 2015 Page 28 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 29
given. We have highlighted the jurisprudential basis of adhering
to the principles of natural justice which are grounded on the
doctrine of procedural fairness, accuracy of outcome leading to
general social goals, etc. Nevertheless, there may be situations
wherein for some reason – perhaps because the evidence against
the individual is thought to be utterly compelling – it is felt that a
fair hearing 'would make no difference' – meaning that a hearing
would not change the ultimate conclusion reached by the
decision-maker – then no legal duty to supply a hearing arises.
Such an approach was endorsed by Lord Wilberforce in Malloch
v. Aberdeen Corporation20, who said that a 'breach of
procedure...cannot give (rise to) a remedy in the courts, unless
behind it there is something of substance which has been lost by
the failure. The court dos not act in vain'. Relying on these
comments, Brandon LJ opined in Cinnamond v. British Airports
Authority21 that 'no one can complain of not being given an
opportunity to make representations if such an opportunity would
have availed him nothing'. In such situations, fair procedures
appear to serve no purpose since 'right' result can be secured
without according such treatment to the individual. In this behalf,
we need to notice one other exception which has been carved out
20 (1971) 1 WLR 1578 at 1595
21 (1980) 1 WLR 582 at 593
Civil Appeal Nos. 4458-4459 of 2015 Page 29 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 30
to the aforesaid principle by the Courts. Even if it is found by the
Court that there is a violation of principles of natural justice, the
Courts have held that it may not be necessary to strike down the
action and refer the matter back to the authorities to take fresh
decision after complying with the procedural requirement in those
cases where non-grant of hearing has not caused any prejudice
to the person against whom the action is taken. Therefore, every
violation of a facet of natural justice may not lead to the
conclusion that order passed is always null and void. The validity
of the order has to be decided on the touchstone of 'prejudice'.
The ultimate test is always the same, viz., the test of prejudice or
the test of fair hearing.
32) In Managing Director, ECIL (supra), the majority opinion, penned
down by Sawant, J., while summing up the discussion and
answering the various questions posed, had to say as under qua
the prejudice principle:
“30. Hence the incidental questions raised above
may be answered as follows:
xx xx xx
(v) The next question to be answered is what is the
effect on the order of punishment when the report
of the enquiry officer is not furnished to the
employee and what relief should be granted to him
in such cases. The answer to this question has to
be relative to the punishment awarded. When the
Civil Appeal Nos. 4458-4459 of 2015 Page 30 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 31
employee is dismissed or removed from service
and the inquiry is set aside because the report is
not furnished to him, in some cases the
non-furnishing of the report may have prejudiced
him gravely while in other cases it may have made
no difference to the ultimate punishment awarded
to him. Hence to direct reinstatement of the
employee with back-wages in all cases is to reduce
the rules of justice to a mechanical ritual. The
theory of reasonable opportunity and the principles
of natural justice have been evolved to uphold the
rule of law and to assist the individual to vindicate
his just rights. They are not incantations to be
invoked nor rites to be performed on all and sundry
occasions. Whether in fact, prejudice has been
caused to the employee or not on account of the
denial to him of the report, has to be considered on
the facts and circumstances of each case. Where,
therefore, even after the furnishing of the report, no
different consequence would have followed, it
would be a perversion of justice to permit the
employee to resume duty and to get all the
consequential benefits. It amounts to rewarding
the dishonest and the guilty and thus to stretching
the concept of justice to illogical and exasperating
limits. It amounts to an “unnatural expansion of
natural justice” which in itself is antithetical to
justice.”
33) So far so good. However, an important question posed by Mr.
Sorabjee is as to whether it is open to the authority, which has to
take a decision, to dispense with the requirement of the principles
of natural justice on the ground that affording such an opportunity
will not make any difference? To put it otherwise, can the
administrative authority dispense with the requirement of issuing
notice by itself deciding that no prejudice will be caused to the
person against whom the action is contemplated? Answer has to
Civil Appeal Nos. 4458-4459 of 2015 Page 31 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 32
be in the negative. It is not permissible for the authority to jump
over the compliance of the principles of natural justice on the
ground that even if hearing had been provided it would have
served no useful purpose. The opportunity of hearing will serve
the purpose or not has to be considered at a later stage and such
things cannot be presumed by the authority. This was so held by
the English Court way back in the year 1943 in the case of
General Medical Council v. Spackman22. This Court also spoke
in the same language in the case of The Board of High School
and Intermediate Education, U.P. & Ors. v. Kumari Chittra
Srivastava & Ors.23
, as is apparent from the following words:
“8. The learned counsel for the appellant, Mr. C.B.
Aggarwal, contends that the facts are not in dispute
and it is further clear that no useful purpose would
have been served if the Board had served a show
cause notice on the petitioner. He says that in view
of these circumstances it was not necessary for the
Board to have issued a show cause notice. We are
unable to accept this contention. Whether a duty
arises in a particular case to issue a show cause
notice before inflicting a penalty does not depend
on the authority's satisfaction that the person to be
penalised has no defence but on the nature of the
order proposed to be passed.”
34) In view of the aforesaid enunciation of law, Mr. Sorabjee may also
be right in his submission that it was not open for the authority to
dispense with the requirement of principles of natural justice on
22 1943 AC 627
23 (1970) 1SCC 121 : AIR 1970 SC 1039
Civil Appeal Nos. 4458-4459 of 2015 Page 32 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 33
the presumption that no prejudice is going to be caused to the
appellant since judgment in R.C. Tobacco (supra) had closed all
the windows for the appellant.
35) At the same time, it cannot be denied that as far as Courts are
concerned, they are empowered to consider as to whether any
purpose would be served in remanding the case keeping in mind
whether any prejudice is caused to the person against whom the
action is taken. This was so clarified in the case of Managing
Director, ECIL (supra) itself in the following words:
“31. Hence, in all cases where the enquiry officer's
report is not furnished to the delinquent employee
in the disciplinary proceedings, the Courts and
Tribunals should cause the copy of the report to be
furnished to the aggrieved employee if he has not
already secured it before coming to the Court/
Tribunal and given the employee an opportunity to
show how his or her case was prejudiced because
of the non-supply of the report. If after hearing the
parties, the Court/Tribunal comes to the conclusion
that the non-supply of the report would have made
no difference to the ultimate findings and the
punishment given, the Court/Tribunal should not
interfere with the order of punishment. The Court/
Tribunal should not mechanically set aside the
order of punishment on the ground that the report
was not furnished as it regrettably being done at
present. The courts should avoid resorting to short
cuts. Since it is the Courts/Tribunals which will
apply their judicial mind to the question and give
their reasons for setting aside or not setting aside
the order of punishment, (and not any internal
appellate or revisional authority), there would be
neither a breach of the principles of natural justice
nor a denial of the reasonable opportunity. It is
only if the Court/Tribunal finds that the furnishing of
the report would have made a difference to the
result in the case that it should set aside the order
of punishment.”
36) Keeping in view the aforesaid principles in mind, even when we
find that there is an infraction of principles of natural justice, we
have to address a further question as to whether any purpose
would be served in remitting the case to the authority to make
fresh demand of amount recoverable, only after issuing notice to
show cause to the appellant. In the facts of the present case, we
find that such an exercise would be totally futile having regard to
the law laid down by this Court in R.C. Tobacco (supra).
37) To recapitulate the events, the appellant was accorded certain
benefits under Notification dated July 08, 1999. This Notification
stands nullified by Section 154 of the Act of 2003, which has been
given retrospective effect. The legal consequence of the
aforesaid statutory provision is that the amount with which the
appellant was benefitted under the aforesaid Notification becomes
refundable. Even after the notice is issued, the appellant cannot
take any plea to retain the said amount on any ground
whatsoever as it is bound by the dicta in R.C. Tobacco (supra).
Likewise, even the officer who passed the order has no choice but
to follow the dicta in R.C. Tobacco (supra). It is important to note
that as far as quantification of the amount is concerned, it is not
disputed at all. In such a situation, issuance of notice would be
an empty formality and we are of the firm opinion that the case
stands covered by 'useless formality theory'.
38) In Escorts Farms Ltd. (Previously known as M/s. Escorts
Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon Division,
Nainital, U.P. & Ors.24, this Court, while reiterating the position
that rules of natural justice are to be followed for doing substantial
justice, held that, at the same time, it would be of no use if it
amounts to completing a mere ritual of hearing without possibility
of any change in the decision of the case on merits. It was so
explained in the following terms:
“64. Right of hearing to a necessary party is a
valuable right. Denial of such right is serious
breach of statutory procedure prescribed and
violation of rules of natural justice. In these
appeals preferred by the holder of lands and some
other transferees, we have found that the terms of
government grant did not permit transfers of land
without permission of the State as grantor.
Remand of cases of a group of transferees who
were not heard, would, therefore, be of no legal
consequence, more so, when on this legal question
all affected parties have got full opportunity of
hearing before the High Court and in this appeal
before this Court. Rules of natural justice are to be
followed for doing substantial justice and not for
completing a mere ritual of hearing without
possibility of any change in the decision of the case
on merits. In view of the legal position explained
by us above, we, therefore, refrain from remanding
these cases in exercise of our discretionary powers
under Article 136 of the Constitution of India.”
24 (2004) 4 SCC 281
39) Therefore, on the facts of this case, we are of the opinion that
non-issuance of notice before sending communication dated June
23, 2003 has not resulted in any prejudice to the appellant and it
may not be feasible to direct the respondents to take fresh action
after issuing notice as that would be a mere formality.
40) With this we advert to the last submission of Mr. Sorabjee that the
judgment in R.C. Tobacco (supra) (which is a two Judge Bench
decision) is in conflict with the three Judge Bench judgment in
J.K. Cotton (supra). This argument is not even open to the
appellant for the simple reason that the judgment in J.K. Cotton
(supra) was specifically taken note of and discussed in R.C.
Tobacco (supra). Paragraph 13 of the judgment in R.C.
Tobacco (supra) would reflect that the appellant therein had
specifically relied upon the judgment in J.K. Cotton (supra) in
support of the submission that retrospectivity was harsh and
excessive since there is, in fact, a retrospective imposition of
excise duty. It was also argued that justification of such
retrospective imposition of tax must be overwhelming and no such
overriding consideration had been disclosed. The submission
went to the extent of pleading that if the appellant is called upon
to pay the excise duty now it will cripple its unit. More pertinent
Civil Appeal Nos. 4458-4459 of 2015 Page 36 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 37
was another submission, which is relevant for our purpose, that
the demand which was raised could not be sustained as it was
made without issuing any show-cause notice and was in
contravention of Section 11A of the Act. In support of this view,
few judgments, including J.K. Cotton (supra), were relied upon.
The Court, however, did not find any merit in the aforesaid
submissions and dealt with the issue as under, duly taking note of
the judgment in J.K. Cotton (supra):
“40. In J.K. Cotton Spg. & Wvg. Mills Ltd. v. Union
of India, (1987) Supp. SCC 350, relied upon by the
petitioners, by virtue of the retrospective
amendment of Rules 9 and 49 of the Central
Excise Rules in 1982, commodities obtained at an
intermediate stage of manufacture in a continuous
process were deemed to have been 'removed'
within the meaning of Rule 9(1) thereby making
such intermediate products dutiable under the Act
with effect from the commencement of the Act i.e.
1944. In this context the Court held that the
amended Rules 9 and 49 would take effect subject
to Section 11-A. The decision is distinguishable.
The circumstances in which the Court held that the
demands for duty could only be limited to six
months prior to the amendment was
unquestionably different from those present in the
case before us. What we have to consider here is
whether the benefit granted in 1999 could be
withdrawn in 2003. Besides, the Court in J.K.
Cotton Spg. & Wvg. Mills Ltd. case rejected the
contention of the Union of India that Section 51 of
the 1982 Finance Act by which the amendments
were made to Rules 9 and 49 overrode the
provisions of Section 11-A saying: (SCC p. 363,
para 32) “if the intention of the legislature was to
nullify the effect of Section 11-A,.. the legislature
would have specifically provided for the same.”
Similarly our decision in National Agricultural Coop.
Marketing Federation of India Ltd. v. Union of India,
Civil Appeal Nos. 4458-4459 of 2015 Page 37 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 38
(2003) 5 SCC 23 which dealt with an amendment
to Section 80-P(2)(a)(iii) of the Income Tax Act,
1961 noted that: (SCC p.35, para 29)
“The amendment does not seek to touch on
the periods of limitation provided in the Act,
and in the absence of such express provision
or clear implication, the legislature clearly
could not be taken to intend that the amending
provisions authorizes the Income Tax Officer to
commence proceedings which before the new
Act came into force, had, by the expiry of the
period provided become barred".
In the present case Section 154(4) specifically and
expressly allows amounts to be recovered within a
period of thirty days from the day Finance Bill,
2003 received the assent of the President. It
cannot but be held therefore that the period of six
months provided under Section 11-A would not
apply.”
40A) In the aforesaid scenario, when the Court was conscious of the
principle laid down in J.K. Cotton (supra) and explained the
same in a particular manner while deciding the appeal in R.C.
Tobacco (supra), it cannot be argued that the judgment in R.C.
Tobacco (supra) runs contrary to J.K. Cotton (supra).
41) For all these reasons, the appeals are dismissed.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
MAY 14, 2015.
Civil Appeal Nos. 4458-4459 of 2015 Page 38 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)
Print Page
benefits under Notification dated July 08, 1999. This Notification
stands nullified by Section 154 of the Act of 2003, which has been
given retrospective effect. The legal consequence of the
aforesaid statutory provision is that the amount with which the
appellant was benefitted under the aforesaid Notification becomes
refundable. Even after the notice is issued, the appellant cannot
take any plea to retain the said amount on any ground
whatsoever as it is bound by the dicta in R.C. Tobacco (supra).
Likewise, even the officer who passed the order has no choice but
to follow the dicta in R.C. Tobacco (supra). It is important to note
that as far as quantification of the amount is concerned, it is not
disputed at all. In such a situation, issuance of notice would be
an empty formality and we are of the firm opinion that the case
stands covered by 'useless formality theory'.
In Escorts Farms Ltd. (Previously known as M/s. Escorts
Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon Division,
Nainital, U.P. & Ors.24, this Court, while reiterating the position
that rules of natural justice are to be followed for doing substantial
justice, held that, at the same time, it would be of no use if it
amounts to completing a mere ritual of hearing without possibility
of any change in the decision of the case on merits. It was so
explained in the following terms:
“64. Right of hearing to a necessary party is a
valuable right. Denial of such right is serious
breach of statutory procedure prescribed and
violation of rules of natural justice. In these
appeals preferred by the holder of lands and some
other transferees, we have found that the terms of
government grant did not permit transfers of land
without permission of the State as grantor.
Remand of cases of a group of transferees who
were not heard, would, therefore, be of no legal
consequence, more so, when on this legal question
all affected parties have got full opportunity of
hearing before the High Court and in this appeal
before this Court. Rules of natural justice are to be
followed for doing substantial justice and not for
completing a mere ritual of hearing without
possibility of any change in the decision of the case
on merits. In view of the legal position explained
by us above, we, therefore, refrain from remanding
these cases in exercise of our discretionary powers
under Article 136 of the Constitution of India.”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4458-4459 OF 2015
(ARISING OUT OF SLP (C) NOS. 37108-37109 OF 2012)
M/S. DHARAMPAL SATYAPAL LTD. .....APPELLANT(S)
VERSUS
DEPUTY COMMISSIONER OF CENTRAL
EXCISE, GAUHATI & ORS.
.....RESPONDENT(S)
Citation;(2015) 8 SCC519
2) Union of India, vide Memorandum dated December 24, 1997,
unveiled a new industrial policy for the North-Eastern region. In
the said policy, in order to give stimulation to the development of
industrial infrastructure in the North-Eastern region, the said
region was made tax free zone for a period of ten years giving
incentives to those who wanted to establish industries in that
region. Pursuant thereto, the Notification dated July 08, 1999 was
issued granting new industrial units that had commercial
production on or after December 24, 1997 and certain types of
industrial units that increased their installed capacity after that
Civil Appeal Nos. 4458-4459 of 2015 Page 1 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 2
date, exemption on goods cleared from units located in growth
centres and integrated infrastructure centres.
3) The aforesaid Notification was issued under the provision of
Central Excise Act, 1944 as well as Additional Duties of Excise
(Goods of Special Importance) Act, 1957 and Additional Duties of
Excise (Textiles and Textile Articles) Act, 1978. However, on
December 31, 1999, another Notification was issued whereby
exemption of central excise was withdrawn in respect of goods
falling under Chapter 21.06 (pan masala) and Chapter 24
(tobacco and tobacco substitutes, including cigarettes, chewing
tobacco etc.).
4) This withdrawal Notification was challenged by the appellant by
filing the writ petition in the High Court of Gauhati. The learned
Single Judge dismissed the writ petition. However, appeal
preferred by the appellant was allowed by the Division Bench vide
judgment dated December 03, 2012. In nutshell, the High Court
held that the principal of Promissory Estoppel shall apply and
once a promise was given by the Union of India assuring that no
such duty would be charged for a period of ten years, it was not
open for the Union of India to withdraw the same. Challenging
that judgment, Union of India filed petitions for special leave.
Civil Appeal Nos. 4458-4459 of 2015 Page 2 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 3
Leave was granted and the petitions were registered as Civil
Appeal Nos. 8841-8844 of 2003.
5) After the filing of the aforesaid appeals, certain subsequent
events took place. It so happened that vide Section 154 of the
Finance Act, 2003 (hereinafter referred to as the 'Act of 2003'),
withdrawal of the benefit was effected from retrospective effect.
Effect thereof was to withdraw the benefit given under the
Notification issued earlier. Validity of Section 154 was questioned
and the issue was considered by this Court in R.C. Tobacco
Private Ltd. & Anr. v. Union of India & Anr.1
This Court upheld
the constitutional validity of the aforesaid provision and repelled
the challenge so laid. The effect was to disentitle the appellant
and other similarly situated from getting any such benefit by virtue
of Section 154 of the Act of 2003 and knocking down the basis of
the judgment of the High Court, which lost its validity on the
aforesaid ground.
6) So far so good. The grievance of the appellant and other similarly
situated industries for not extending the benefit of Notification
dated July 08, 1999 is buried down. However, after notifying
Section 154 of the Act of 2003, which had nullified the effect of
1
(2005) 7 SCC 725
Civil Appeal Nos. 4458-4459 of 2015 Page 3 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 4
Notification No. 32 of 1999 retrospectively thereby annulling the
effect thereof altogether, respondent No.1 herein passed recovery
order dated June 03, 2003 for recovery of a sum of ₹2,93,43,244
(rupees two crores ninety three lakhs forty three thousand two
hundred and forty four only) from the appellant, which was the
benefit that had been drawn by the appellant for the period
November 1999 till February 2001 in terms of the Notification No.
32 of 1999. By another order dated June 06, 2003 issued by
respondent No.1, the appellant was directed to pay the excise
duty for the said period for which the benefit had been availed.
He also rejected the pending claim of refund for the period from
March 2001 till May 31, 2003. These recovery orders were
challenged by the appellant by filing appeal before the
Commissioner (Appeals). Along with the appeal, the appellant
also filed an application for interim order seeking stay against the
pre-deposit. On this application, orders dated March 31, 2004
were passed by the Commissioner (Appeals) directing the
appellant to deposit entire duty amount within a period of thirty
days. This order of pre-deposit was challenged by the appellant
by filing four writ petitions in the High Court of Gauhati. The
learned Single Judge of the High Court, however, dismissed these
writ petitions vide orders dated May 18, 2004. The appellant
Civil Appeal Nos. 4458-4459 of 2015 Page 4 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 5
carried this issue of pre-deposit to a higher forum in the form of
writ appeals before the Division Bench of the said Court. Interim
orders dated June 11, 2004 were passed in the writ appeals
directing the Commissioner (Appeals) not to dismiss the appeals
preferred by the appellant before him for non-deposit of the duty
amount. In other words, interim stay against the pre-deposit was
given. The Commissioner (Appeals) heard the appeals and
passed the orders dated June 15, 2005 deciding the appeals in
favour of the appellant. He held that issuance of show-cause
notice was mandatory before a valid recovery of demand could be
made from the appellant and, thus, remitted the matter to the
adjudicating authority. After this final order was passed by the
Commissioner (Appeals), writ appeals of the appellant before the
Division Bench were disposed of as infructuous in view of the fact
that the Commissioner (Appeals) had passed an order on merits
and, therefore, no cause survived which required further
adjudication in those appeals.
7) Insofar as the order of the Commissioner (Appeals) is concerned,
both the appellant as well as the Revenue felt aggrieved thereby.
The appellant was not satisfied with the order of remand and the
nature of relief granted even after accepting that issuance of
show-cause notice was mandatory before passing a valid
Civil Appeal Nos. 4458-4459 of 2015 Page 5 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 6
recovery of demand. The respondents were aggrieved of the
order passed on merit holding that show-cause notice was
mandatory. Therefore, both the appellant as well as the Revenue
filed appeals aggrieved against the order dated June 15, 2005
passed by the Commissioner (Appeals). The Customs Excise &
Service Tax Appellate Tribunal (for short 'CESTAT') decided these
appeals vide common order dated My 28, 2007. It reversed the
orders of the Commissioner (Appeals), which resulted in allowing
the appeal filed by the Revenue and dismissing the appeal
preferred by the appellant. A perusal of the judgment of the
CESTAT would reveal that it has primarily referred to the
judgment of this Court in R.C. Tobacco and held that the matter
stood concluded by the said judgment. The appellant challenged
the order of CESTAT by filing Central Excise Tax Reference No. 1
of 2008 before the High Court of Gauhati. This Reference was
dismissed by the High Court on December 01, 2011 on the
ground of res judicata holding that orders dated May 18, 2004
passed by the Single Judge dismissing the writ petitions of the
appellant had attained finality. The appellant preferred Review
Petition seeking review of the said order, which has also been
dismissed by the High Court on June 05, 2012. In the present
appeals, the appellant has challenged both the orders dated
Civil Appeal Nos. 4458-4459 of 2015 Page 6 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 7
December 01, 2011 passed in the Tax Reference as well as the
order dated June 05, 2012 passed in the Review Petition.
8) From the brief narration of the background facts mentioned
above, it is apparent that the frontal attack of the appellant against
the recovery orders passed by the respondents is premised on
the plea that no such recovery proceedings could be initiated
without a show-cause notice under Section 11-A of the Excise Act.
The appellant has also taken a plea in these appeals that order of
the Single Judge at pre-deposit stage could not operate as res
judicata on merits and, therefore, dismissal of the Tax Reference
by the High Court, and consequently the Review Petition, is
clearly erroneous and the High Court should have gone into the
merits of the issue decided by CESTAT.
9) As noted above, CESTAT has decided the case against the
appellant on the ground that issue now raised is covered by the
judgment of this Court in R.C. Tobacco (supra). As pointed out,
in R.C. Tobacco (supra), this Court has already upheld the
validity of Section 154 of the Act of 2003 thereby taking away the
benefit of Notification No. 32 of 1999 retrospectively insofar as
excisable goods falling under Chapter 24 are concerned.
Conscious of the position that judgment in R.C. Tobacco (supra)
Civil Appeal Nos. 4458-4459 of 2015 Page 7 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 8
stares at the face of the appellant, Mr. Soli Sorabjee, learned
senior counsel who appeared for the appellant, has also made an
endeavour to show that the said judgment in R.C. Tobacco
(supra) is in clear conflict with earlier three Judge Bench judgment
of this Court in M/s. J.K. Cotton Spinning and Weaving Mills
Ltd. v. Union of India2
. Thus, following three issues have arisen
for consideration in these appeals:
(a) Whether order of the Single Judge at pre-deposit stage
can operate as res judicata on merits?
(b) Whether recovery proceedings can be initiated without
show-cause notice under Section 11A of the Excise Act,
which is mandatory?
(c) Whether there is a conflict between the three Judge
Bench judgment in J.K. Cotton (supra) and R.C.
Tobacco (supra)?
First issue is the basis for the judgment of the High Court.
10) For answering this issue, it would be necessary to take into
account the complete implication thereof with reference to the
nature of recovery orders passed by respondent No.1, challenge
thereto before the Commissioner (Appeals) and interim order of
pre-deposit passed by the Commissioner (Appeals) on March 31,
2004 as also the nature of challenge which was laid by the
2 (1987) Supp SCC 350
Civil Appeal Nos. 4458-4459 of 2015 Page 8 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 9
appellant against the said order of pre-deposit in the writ petitions
filed in the High Court, which were dismissed by the learned
Single Judge on May 18, 2004.
11) By virtue of Notification dated July 08, 1999, the appellant was
granted refund of the duty deposited in cash up to February 2001.
After the enactment of Section 154 of the Act of 2003, recovery
order dated June 03, 2003 was passed for recovery of the
aforesaid amount which had been refunded to the appellant.
Simultaneously, another order dated June 06, 2003 was issued
asking the appellant to pay duty on the ground that such goods
were no more exempted from payment of duty. In the appeals
which were filed by the appellants before the Commissioner
(Appeals) challenging the aforesaid orders, the Commissioner
passed interim orders dated March 31, 2004 directing the
appellants to pay the amount demanded by the aforesaid orders.
This order dated March 31, 2004 of the Commissioner (Appeals)
reflects that the Commissioner went into various issues raised by
the appellant on the basis of which it was pleaded by the
appellant that it had a good case on merits and, therefore,
condition of pre-deposit be waived. Apart from the contention that
no show-cause notice was given before passing those orders, it
Civil Appeal Nos. 4458-4459 of 2015 Page 9 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 10
was even argued that by making the retrospective amendment in
the form of Section 154 of the Act of 2003, the only effect was to
validate the earlier actions but no demand of refund of any
amount could be made and no refund of the amount already paid
could be claimed. It was also argued that the matter of recovery
of amounts was pending consideration of Central Board of Excise
and Customs (CBEC) as well as in the Gauhati High Court. All
these issues were considered by the Commissioner (Appeals),
who gave his prima facie view thereupon observing that the
appellants did not have strong prima facie case on merits
resulting into the direction to deposit the entire amount within
thirty days.
12) The appellant had filed writ petitions against the aforesaid order of
the Commissioner (Appeals) with the prayer that the direction of
the Commissioner (Appeals) to deposit the entire amount within
thirty days be set aside and the prayer of pre-deposit of the
appellant be accepted. No doubt, while arguing for this relief, the
appellant had raised various contentions on the merits of the case
in its endeavour to demonstrate that it had a good case on merits.
It is also borne from the record that the learned Single Judge,
while dismissing the writ petition, dealt with these issues, which
Civil Appeal Nos. 4458-4459 of 2015 Page 10 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 11
touched upon the merits of the main issue. That is the reason
that the order dated May 18, 2004 of the learned Single Judge
dismissing the writ petition of the appellant runs into 37 pages.
Nevertheless, we find that the observations which were made by
the learned Single Judge on the issues raised were only prima
facie in nature and the prime focus of the judgment rested on the
core issue, namely, whether the direction of the Commissioner
(Appeals) directing the appellant to make deposit of the amount
as a pre-condition for hearing of the appeal was sustainable or
not. The writ petition was dismissed affirming the said order.
Therefore, any observations made by the learned Single Judge,
which were tentative in nature, could not be taken into
consideration by the Division Bench in the impugned judgment,
thereby dismissing the Reference, invoking the principle of res
judicata. The order of the learned Single Judge dismissing the
writ petition was challenged before the Division Bench and the
Division Bench passed interim orders in the writ appeals not to
dismiss the appeals preferred by the appellant for non-deposit of
the duty. In this backdrop, appeals were heard and appellant
even partly succeeded. After the order of the Commissioner
(Appeals) dated June 15, 2005 deciding the appeals partly in
favour of the appellant, the writ appeals which were pending
Civil Appeal Nos. 4458-4459 of 2015 Page 11 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 12
before the Division Bench had become infructuous and disposed
of as such without going into the merit of the order passed by the
learned Single Judge. This is yet another reason to hold that the
order of the learned Single Judge could not be treated as res
judicata.
13) Having regard to the aforesaid position, we heard the instant
appeal on merits, namely, on the issue as to whether it was
mandatory to issue show-cause notice making an order of
recovery. The Commissioner (Appeals) has held it to be
mandatory and this order of the Commissioner (Appeals) has
been set aside by the CESTAT. The Reference petition against
the order of CESTAT, though wrongly is dismissed on the ground
of res judicata, the impugned order shows that it has mentioned
that such show-cause notice was not mandatory as held by the
learned Single Judge by order dated May 18, 2004.
14) Learned senior counsel appearing for the appellant as well as
learned Attorney General agreed that in this situation this Court
may decide the aforesaid issue finally. It is for this reason that we
have heard counsel for the parties at length on this aspect of the
matter.
Civil Appeal Nos. 4458-4459 of 2015 Page 12 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 13
15) The neat submission made by Mr. Soli Sorabjee on behalf of the
appellant was that the impugned demand of the Assistant
Commissioner was in the nature of adjudication whereby the
amount demanded in the order dated June 06, 2003 was
crystallized and, therefore, there could not have been demand for
recovery of the stipulated amount without issuing notice to the
appellant and giving the appellant herein right of hearing. He also
submitted that merely because vires of Section 154 of the Act of
2003 were upheld by this Court in R.C. Tobacco (supra) could
not be a ground to dispense with the aforesaid mandatory
requirements of principles of natural justice. His further
submission was that 'no prejudice' principle adopted by the
CESTAT amounted to erroneous approach. He sought to draw a
fine distinction in this behalf by contending that the Authority
passing the order could not presume that prejudice would not be
caused to a person against whom the action is contemplated and
on that presumption dispense with the mandatory requirement of
issuance of the notice. According to him, such a doctrine could
be applied only by the courts while dealing with such issues
where it is found that the action of the Authority was violative of
principles of natural justice, the Court could still choose not to
remit the case back to the concerned Authority if it finds that it will
Civil Appeal Nos. 4458-4459 of 2015 Page 13 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 14
be a futile exercise.
16) As a pure principle of law, we find substance and force in the
aforesaid submission of Mr. Sorabjee. No doubt, the Department
was seeking to recover the amount paid by virtue of Section 154
of the Act of 2003 which was enacted retrospectively and the
constitutional validity of the said Section had already been upheld
by this Court in R.C. Tobacco (supra) at the time of issuance of
notice for recovery. Further, no doubt, the effect of the said
amendment retrospectively was to take away the benefit which
was granted earlier. However, the question is whether before
passing such an order of recovery, whether it was necessary to
comply with the requirement of show-cause notice? The
appellant wanted to contend that Section 11A of the Excise Act
was applicable, which requires this procedure to be followed.
Even if that provision is not applicable, it is fundamental that
before taking any adverse action against a person, requirement of
principles of natural justice is to be fulfilled. This Court in
Collector of Central Excise, Patna & Ors. v. I.T.C. Limited &
Anr.3
has held that show-cause and personal hearing is
necessary before saddling an assessee with additional demand.
It is also trite that when a statute is silent, with no positive words
3 (1995) 2 SCC 38
Civil Appeal Nos. 4458-4459 of 2015 Page 14 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 15
in the Act or Rules spelling out need to hear the party whose
rights or interests are likely to be affected, requirement to follow
fair procedure before taking a decision must be read into statute,
unless the statute provides otherwise.
17) What is the genesis behind this requirement? Why it is necessary
that before an adverse action is taken against a person he is to be
given notice about the proposed action and be heard in the
matter? Why is it treated as inseparable and inextricable part of
the doctrine of principles of natural justice?
18) Natural justice is an expression of English Common Law. Natural
justice is not a single theory – it is a family of views. In one sense
administering justice itself is treated as natural virtue and,
therefore, a part of natural justice. It is also called 'naturalist'
approach to the phrase 'natural justice' and is related to 'moral
naturalism'. Moral naturalism captures the essence of
commonsense morality – that good and evil, right and wrong, are
the real features of the natural world that human reason can
comprehend. In this sense, it may comprehend virtue ethics and
virtue jurisprudence in relation to justice as all these are attributes
of natural justice. We are not addressing ourselves with this
connotation of natural justice here.
Civil Appeal Nos. 4458-4459 of 2015 Page 15 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 16
19) In Common Law, the concept and doctrine of natural justice,
particularly which is made applicable in the decision making by
judicial and quasi-judicial bodies, has assumed different
connotation. It is developed with this fundamental in mind that
those whose duty is to decide, must act judicially. They must deal
with the question referred both without bias and they must given
to each of the parties to adequately present the case made. It is
perceived that the practice of aforesaid attributes in mind only
would lead to doing justice. Since these attributes are treated as
natural or fundamental, it is known as 'natural justice'. The
principles of natural justice developed over a period of time and
which is still in vogue and valid even today were: (i) rule against
bias, i.e. nemo iudex in causa sua; and (ii) opportunity of being
heard to the concerned party, i.e. audi alteram partem. These are
known as principles of natural justice. To these principles a third
principle is added, which is of recent origin. It is duty to give
reasons in support of decision, namely, passing of a 'reasoned
order'.
20) Though the aforesaid principles of natural justice are known to
have their origin in Common Law, even in India the principle is
prevalent from ancient times, which was even invoked in
Civil Appeal Nos. 4458-4459 of 2015 Page 16 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 17
Kautilya's 'Arthashastra'. This Court in the case of Mohinder
Singh Gill & Anr. v. The Chief Election Commissioner, New
Delhi & Ors.4
explained the Indian origin of these principles in the
following words:
“Indeed, natural justice is a pervasive facet of
secular law where a spiritual touch enlivens
legislation, administration and adjudication, to
make fairness a creed of life. It has many colours
and shades, many forms and shapes and, save
where valid law excludes, it applies when people
are affected by acts of authority. It is the bone of
healthy government, recognised from earliest times
and not a mystic testament of judge-made law.
Indeed from the legendary days of Adam – and of
Kautilya's Arthashastra – the rule of law has had
this stamp of natural justice, which makes it social
justice. We need not go into these deeps for the
present except to indicate that the roots of natural
justice and its foliage are noble and not
new-fangled. Today its application must be
sustained by current legislation, case law or other
extant principle, not the hoary chords of legend and
history. Our jurisprudence has sanctioned its
prevalence even like the Anglo-American system”.
21) Aristotle, before the era of Christ, spoke of such principles calling
it as universal law. Justinian in the fifth and sixth Centuries A.D.
called it 'jura naturalia', i.e. natural law.
22) The principles have sound jurisprudential basis. Since the
function of the judicial and quasi-judicial authorities is to secure
justice with fairness, these principles provide great humanising
factor intended to invest law with fairness to secure justice and to
4 (1978) 1 SCC 405 : AIR 1978 SC 851
Civil Appeal Nos. 4458-4459 of 2015 Page 17 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 18
prevent miscarriage of justice. The principles are extended even
to those who have to take administrative decision and who are not
necessarily discharging judicial or quasi-judicial functions. They
are a kind of code of fair administrative procedure. In this context,
procedure is not a matter of secondary importance as it is only by
procedural fairness shown in the decision making that decision
becomes acceptable. In its proper sense, thus, natural justice
would mean the natural sense of what is right and wrong.
23) This aspect of procedural fairness, namely, right to a fair hearing,
would mandate what is literally known as 'hearing the other side'.
Prof. D.J. Galligan5
attempts to provide what he calls 'a general
theory of fair treatment' by exploring what it is that legal rules
requiring procedural fairness might seek to achieve. He
underlines the importance of arriving at correct decisions, which is
not possible without adopting the aforesaid procedural fairness,
by emphasizing that taking of correct decisions would
demonstrate that the system is working well. On the other hand,
if mistakes are committed leading to incorrect decisions, it would
mean that the system is not working well and the social good is to
that extent diminished. The rule of procedure is to see that the
law is applied accurately and, as a consequence, that the social
5 On 'Procedural Fairness' in Birks (ed), the Frontiers of Liability (Volume One) (Oxford 1994)
Civil Appeal Nos. 4458-4459 of 2015 Page 18 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 19
good is realised. For taking this view, Galligan took support from
Bentham6
, who wrote at length about the need to follow such
principles of natural justice in civil and criminal trials and insisted
that the said theory developed by Bentham can be transposed to
other forms of decision making as well. This jurisprudence of
advancing social good by adhering to the principles of natural
justice and arriving at correct decisions is explained by Galligan in
the following words:
“On this approach, the value of legal procedures is
judged according to their contribution to general
social goals. The object is to advance certain
social goals, whether through administrative
processes, or through the civil or criminal trial. The
law and its processes are simply instruments for
achieving some social good as determined from
time to time by the law makers of the society. Each
case is an instance in achieving the general goal,
and a mistaken decision, whether to the benefit or
the detriment of a particular person, is simply a
failure to achieve the general good in that case. At
this level of understanding, judgments of fairness
have no place, for all that matters is whether the
social good, as expressed through laws, is
effectively achieved.”
Galligan also takes the idea of fair treatment to a second
level of understanding, namely, pursuit of common good involves
the distribution of benefits and burdens, advantages and
disadvantages to individuals (or groups). According to him,
principles of justice are the subject matter of fair treatment.
6 A Treatise of Judicial Evidence (London 1825)
Civil Appeal Nos. 4458-4459 of 2015 Page 19 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 20
However, that aspect need not be dilated.
24) Allan7
, on the other hand, justifies the procedural fairness by
following the aforesaid principles of natural justice as rooted in
rule of law leading to good governance. He supports Galligan in
this respect and goes to the extent by saying that it is same as
ensuring dignity of individuals, in respect of whom or against
whom the decision is taken, in the following words:
“The instrumental value of procedures should not
be underestimated; the accurate application of
authoritative standards is, as Galligan clearly
explains, an important aspect of treating someone
with respect. But procedures also have intrinsic
value in acknowledging a person's right to
understand his treatment, and thereby to determine
his response as a conscientious citizen, willing to
make reasonable sacrifices for the public good. If
obedience to law ideally entails a recognition of its
morally obligatory character, there must be suitable
opportunities to test its moral credentials.
Procedures may also be though to have intrinsic
value in so far as they constitute a fair balance
between the demands of accuracy and other social
needs: where the moral harm entailed by
erroneous decisions is reasonably assessed and
fairly distributed, procedures express society's
commitment to equal concern and respect for all.”
It, thus, cannot be denied that principles of natural justice
are grounded in procedural fairness which ensures taking of
correct decision and procedural fairness is fundamentally an
instrumental good, in the sense that procedure should be
7 'Procedural Fairness and the Duty of Respect', (198) 18 OJLS 497
Civil Appeal Nos. 4458-4459 of 2015 Page 20 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 21
designed to ensure accurate or appropriate outcomes. In fact,
procedural fairness is valuable in both instrumental and
non-instrumental terms.
25) It is on the aforesaid jurisprudential premise that the fundamental
principles of natural justice, including audi alteram partem, have
developed. It is for this reason that the courts have consistently
insisted that such procedural fairness has to be adhered to before
a decision is made and infraction thereof has led to the quashing
of decisions taken. In many statutes, provisions are made
ensuring that a notice is given to a person against whom an order
is likely to be passed before a decision is made, but there may be
instances where though an authority is vested with the powers to
pass such orders, which affect the liberty or property of an
individual but the statute may not contain a provision for prior
hearing. But what is important to be noted is that the applicability
of principles of natural jsutice is not dependent upon any statutory
provision. The principle has to be mandatorily applied
irrespective of the fact as to whether there is any such statutory
provision or not.
De Smith8
captures the essence thus - “Where a statute
authorises interference with properties or other rights and is silent
8 Judial Review of Administrative Action (1980), at page 161
Civil Appeal Nos. 4458-4459 of 2015 Page 21 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 22
on the question of hearing, the courts would apply rule of
universal application and founded on plainest principles of natural
justice”.
Wade9
also emphasizes that principles of natural justice
operate as implied mandatory requirements, non-observance of
which invalidates the exercise of power. In Cooper v.
Sandworth Board of Works10 the Court laid down that:
'...although there is no positive word in the statute requiring that
the party shall be heard, yet justice of common law would supply
the omission of Legislature”. Exhaustive commentary explaining
the varied contours of this principle can be traced to the judgment
of this Court in Managing Director, ECIL, Hyderabad & Ors. v.
B. Karunakar & Ors.11, wherein the Court discussed plenty of
previous case law in restating the aforesaid principle, a glimpse
whereof can be found in the following passages:
“20. The origins of the law can also be traced to
the principles of natural justice, as developed in the
following cases: In A. K. Kraipak v. Union of India,
(1969) 2 SCC 262 : (1970) 1 SCR 457, it was held
that the rules of natural justice operate in areas not
covered by any law. They do not supplant the law
of the land but supplement it. They are not
embodied rules and their aim is to secure justice or
to prevent miscarriage of justice. If that is their
purpose, there is no reason why they should not be
made applicable to administrative proceedings also
especially when it is not easy to draw the line that
9 Administrative Law (1977), at page 395
10 (1863) 14 GB (NS)
11 (1993) 4 SCC 727
Civil Appeal Nos. 4458-4459 of 2015 Page 22 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 23
demarcates administrative enquiries from quasijudicial
ones. An unjust decision in an
administrative inquiry may have a more far
reaching effect than a decision in a quasi-judicial
inquiry. It was further observed that the concept of
natural justice has undergone a great deal of
change in recent years. What particular rule of
natural justice should apply to a given case must
depend to a great extent on the facts and
circumstances of that case, the framework of the
law under which the inquiry is held and the
constitution of the tribunal or the body of persons
appointed for that purpose. Whenever a complaint
is made before a Court that some principle of
natural justice has been contravened, the Court
has to decide whether the observance of that rule
was necessary for a just decision on the facts of
that case. The rule that inquiry must be held in
good faith and without bias and not arbitrarily or
unreasonably is now included among the principles
of natural justice.
21. In Chairman, Board of Mining Examination v.
Ramjee, (1977) 2 SCC 256, the Court has
observed that natural justice is not an unruly horse,
no lurking landmine, nor a judicial cure-all. If
fairness is shown by the decision-maker to the man
proceeded against, the form, features and the
fundamentals of such essential processual
propriety being conditioned by the facts and
circumstances of each situation, no breach of
natural justice can be complained of. Unnatural
expansion of natural justice, without reference to
the administrative realities and other factors of a
given case, can be exasperating. The Courts
cannot look at law in the abstract or natural justice
as mere artifact. Nor can they fit into a rigid mould
the concept of reasonable opportunity. If the totality
of circumstances satisfies the Court that the party
visited with adverse order has not suffered from
denial of reasonable opportunity, the Court will
decline to be punctilious or fanatical as if the rules
of natural justice were sacred scriptures.
22. In Institute of Chartered Accountants of India v.
L. K. Ratna, (1986) 4 SCC 537, Charan Lal Sahu v.
Union of India, (1990) 1 SCC 613 (Bhopal Gas
Civil Appeal Nos. 4458-4459 of 2015 Page 23 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 24
Leak Disaster Case) and C. B. Gautam v. Union of
India, (1993) 1 SCC 78, the doctrine that the
principles of natural justice must be applied in the
unoccupied interstices of the statute unless there is
a clear mandate to the contrary, is reiterated.”
In his separate opinion, concurring on this fundamental
issue, Justice K. Ramaswamy echoed the aforesaid sentiments in
the following words:
“61. It is now settled law that the proceedings must
be just, fair and reasonable and negation thereof
offends Articles 14 and 21. It is well settled law that
principles of natural justice are integral part of
Article 14. No decision prejudicial to a party should
be taken without affording an opportunity or
supplying the material which is the basis for the
decision. The enquiry report constitutes fresh
material which has great persuasive force or effect
on the mind of the disciplinary authority. The supply
of the report along with the final order is like a post
mortem certificate with putrefying odour. The failure
to supply copy thereof to the delinquent would be
unfair procedure offending not only Arts. 14, 21 and
311(2) of the Constitution, but also, the principles of
natural justice.”
26) Likewise, in C.B. Gautam v. Union of India & Ors.12, this Court
once again held that principle of natural justice was applicable
even though it was not statutorily required. The Court took the
view that even in the absence of statutory provision to this effect,
the authority was liable to give notice to the affected parties while
purchasing their properties under Section 269-UD of the Income
Tax Act, 1961. It was further observed that the very fact that an
12 (1993) 1 SCC 78
Civil Appeal Nos. 4458-4459 of 2015 Page 24 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 25
imputation of tax evasion arises where an order for compulsory
purchase is made and such an imputation casts a slur on the
parties to the agreement to sell leads to the conclusion that before
such an imputation can be made against the parties concerned
they must be given an opportunity to show-cause that the under
valuation in the agreement for sale was not with a view to evade
tax. It is, therefore, all the more necessary that an opportunity of
hearing is provided.
27) From the aforesaid discussion, it becomes clear that the
opportunity to provide hearing before making any decision was
considered to be a basic requirement in the Court proceeding.
Later on, this principle was applied to other quasi-judicial
authorities and other tribunals and ultimately it is now clearly laid
down that even in the administrative actions, where the decision
of the authority may result in civil consequences, a hearing before
taking a decision is necessary. It was, thus, observed in A.K.
Kraipak's case (supra) that if the purpose of rules of natural
justice is to prevent miscarriage of justice, one fails to see how
these rules should not be made available to administrative
inquiries. In the case of Maneka Gandhi v. Union of India &
Anr.13 also the application of principle of natural justice was
13 (1978) 1 SCC 248
Civil Appeal Nos. 4458-4459 of 2015 Page 25 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 26
extended to the administrative action of the State and its
authorities. It is, thus, clear that before taking an action, service
of notice and giving of hearing to the noticee is required. In
Maharashtra State Financial Corporation v. M/s. Suvarna
Board Mills & Anr.14, this aspect was explained in the following
manner:
“3. It has been contended before us by the learned
counsel for the appellant that principles of natural
justice were satisfied before taking action under
Section 29, assuming that it was necessary to do
so. Let it be seen whether it was so. It is well
settled that natural justice cannot be placed in a
straight-jacket; its rules are not embodied and they
do vary from case to case and from one
fact-situation to another. All that has to be seen is
that no adverse civil consequences are allowed to
ensue before one is put on notice that the
consequence would follow if he would not take care
of the lapse, because of which the action as made
known is contemplated. No particular form of
notice is the demand of law: All will depend on facts
and circumstances of the case.”
28) In the case of East India Commercial Company Ltd., Calcutta
& Anr. v. The Collector of Customs, Calcutta15, this Court held
that whether the statute provides for notice or not, it is incumbent
upon the quasi-judicial authority to issue a notice to the
concerned persons disclosing the circumstances under which
proceedings are sought to be initiated against them, failing which
the conclusion would be that principle of natural justice are
14 (1994) 5 SCC 566
15 AIR 1962 SC 1893
Civil Appeal Nos. 4458-4459 of 2015 Page 26 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 27
violated. To the same effect are the following judgments:
a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.16
b) Morarji Goculdas B&W Co. Ltd. & Anr. v. U.O.I. & Ors.17
c) Metal Forgings & Anr. v. U.O.I. & Ors.18
d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr.19
29) Therefore, we are inclined to hold that there was a requirement of
issuance of show-cause notice by the Deputy Commissioner
before passing the order of recovery, irrespective of the fact
whether Section 11A of the Act is attracted in the instant case or
not.
30) But that is not the end of the matter. While the law on the
principle of audi alteram partem has progressed in the manner
mentioned above, at the same time, the Courts have also
repeatedly remarked that the principles of natural justice are very
flexible principles. They cannot be applied in any straight-jacket
formula. It all depends upon the kind of functions performed and
to the extent to which a person is likely to be affected. For this
reason, certain exceptions to the aforesaid principles have been
invoked under certain circumstances. For example, the Courts
16 (1988) 3 SCC 348
17 (1995) Supp 3 SCC 588
18 (2003) 2 SCC 36
19 1988 (38) ELT 739 (SC) :: 1988 (19) ECR 569 (SC)
Civil Appeal Nos. 4458-4459 of 2015 Page 27 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 28
have held that it would be sufficient to allow a person to make a
representation and oral hearing may not be necessary in all
cases, though in some matters, depending upon the nature of the
case, not only full-fledged oral hearing but even
cross-examination of witnesses is treated as necessary
concomitant of the principles of natural justice. Likewise, in
service matters relating to major punishment by way of
disciplinary action, the requirement is very strict and full-fledged
opportunity is envisaged under the statutory rules as well. On the
other hand, in those cases where there is an admission of charge,
even when no such formal inquiry is held, the punishment based
on such admission is upheld. It is for this reason, in certain
circumstances, even post-decisional hearing is held to be
permissible. Further, the Courts have held that under certain
circumstances principles of natural justice may even be excluded
by reason of diverse factors like time, place, the apprehended
danger and so on.
31) We are not concerned with these aspects in the present case as
the issue relates to giving of notice before taking action. While
emphasizing that the principles of natural justice cannot be
applied in straight-jacket formula, the aforesaid instances are
Civil Appeal Nos. 4458-4459 of 2015 Page 28 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 29
given. We have highlighted the jurisprudential basis of adhering
to the principles of natural justice which are grounded on the
doctrine of procedural fairness, accuracy of outcome leading to
general social goals, etc. Nevertheless, there may be situations
wherein for some reason – perhaps because the evidence against
the individual is thought to be utterly compelling – it is felt that a
fair hearing 'would make no difference' – meaning that a hearing
would not change the ultimate conclusion reached by the
decision-maker – then no legal duty to supply a hearing arises.
Such an approach was endorsed by Lord Wilberforce in Malloch
v. Aberdeen Corporation20, who said that a 'breach of
procedure...cannot give (rise to) a remedy in the courts, unless
behind it there is something of substance which has been lost by
the failure. The court dos not act in vain'. Relying on these
comments, Brandon LJ opined in Cinnamond v. British Airports
Authority21 that 'no one can complain of not being given an
opportunity to make representations if such an opportunity would
have availed him nothing'. In such situations, fair procedures
appear to serve no purpose since 'right' result can be secured
without according such treatment to the individual. In this behalf,
we need to notice one other exception which has been carved out
20 (1971) 1 WLR 1578 at 1595
21 (1980) 1 WLR 582 at 593
Civil Appeal Nos. 4458-4459 of 2015 Page 29 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 30
to the aforesaid principle by the Courts. Even if it is found by the
Court that there is a violation of principles of natural justice, the
Courts have held that it may not be necessary to strike down the
action and refer the matter back to the authorities to take fresh
decision after complying with the procedural requirement in those
cases where non-grant of hearing has not caused any prejudice
to the person against whom the action is taken. Therefore, every
violation of a facet of natural justice may not lead to the
conclusion that order passed is always null and void. The validity
of the order has to be decided on the touchstone of 'prejudice'.
The ultimate test is always the same, viz., the test of prejudice or
the test of fair hearing.
32) In Managing Director, ECIL (supra), the majority opinion, penned
down by Sawant, J., while summing up the discussion and
answering the various questions posed, had to say as under qua
the prejudice principle:
“30. Hence the incidental questions raised above
may be answered as follows:
xx xx xx
(v) The next question to be answered is what is the
effect on the order of punishment when the report
of the enquiry officer is not furnished to the
employee and what relief should be granted to him
in such cases. The answer to this question has to
be relative to the punishment awarded. When the
Civil Appeal Nos. 4458-4459 of 2015 Page 30 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 31
employee is dismissed or removed from service
and the inquiry is set aside because the report is
not furnished to him, in some cases the
non-furnishing of the report may have prejudiced
him gravely while in other cases it may have made
no difference to the ultimate punishment awarded
to him. Hence to direct reinstatement of the
employee with back-wages in all cases is to reduce
the rules of justice to a mechanical ritual. The
theory of reasonable opportunity and the principles
of natural justice have been evolved to uphold the
rule of law and to assist the individual to vindicate
his just rights. They are not incantations to be
invoked nor rites to be performed on all and sundry
occasions. Whether in fact, prejudice has been
caused to the employee or not on account of the
denial to him of the report, has to be considered on
the facts and circumstances of each case. Where,
therefore, even after the furnishing of the report, no
different consequence would have followed, it
would be a perversion of justice to permit the
employee to resume duty and to get all the
consequential benefits. It amounts to rewarding
the dishonest and the guilty and thus to stretching
the concept of justice to illogical and exasperating
limits. It amounts to an “unnatural expansion of
natural justice” which in itself is antithetical to
justice.”
33) So far so good. However, an important question posed by Mr.
Sorabjee is as to whether it is open to the authority, which has to
take a decision, to dispense with the requirement of the principles
of natural justice on the ground that affording such an opportunity
will not make any difference? To put it otherwise, can the
administrative authority dispense with the requirement of issuing
notice by itself deciding that no prejudice will be caused to the
person against whom the action is contemplated? Answer has to
Civil Appeal Nos. 4458-4459 of 2015 Page 31 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 32
be in the negative. It is not permissible for the authority to jump
over the compliance of the principles of natural justice on the
ground that even if hearing had been provided it would have
served no useful purpose. The opportunity of hearing will serve
the purpose or not has to be considered at a later stage and such
things cannot be presumed by the authority. This was so held by
the English Court way back in the year 1943 in the case of
General Medical Council v. Spackman22. This Court also spoke
in the same language in the case of The Board of High School
and Intermediate Education, U.P. & Ors. v. Kumari Chittra
Srivastava & Ors.23
, as is apparent from the following words:
“8. The learned counsel for the appellant, Mr. C.B.
Aggarwal, contends that the facts are not in dispute
and it is further clear that no useful purpose would
have been served if the Board had served a show
cause notice on the petitioner. He says that in view
of these circumstances it was not necessary for the
Board to have issued a show cause notice. We are
unable to accept this contention. Whether a duty
arises in a particular case to issue a show cause
notice before inflicting a penalty does not depend
on the authority's satisfaction that the person to be
penalised has no defence but on the nature of the
order proposed to be passed.”
34) In view of the aforesaid enunciation of law, Mr. Sorabjee may also
be right in his submission that it was not open for the authority to
dispense with the requirement of principles of natural justice on
22 1943 AC 627
23 (1970) 1SCC 121 : AIR 1970 SC 1039
Civil Appeal Nos. 4458-4459 of 2015 Page 32 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 33
the presumption that no prejudice is going to be caused to the
appellant since judgment in R.C. Tobacco (supra) had closed all
the windows for the appellant.
35) At the same time, it cannot be denied that as far as Courts are
concerned, they are empowered to consider as to whether any
purpose would be served in remanding the case keeping in mind
whether any prejudice is caused to the person against whom the
action is taken. This was so clarified in the case of Managing
Director, ECIL (supra) itself in the following words:
“31. Hence, in all cases where the enquiry officer's
report is not furnished to the delinquent employee
in the disciplinary proceedings, the Courts and
Tribunals should cause the copy of the report to be
furnished to the aggrieved employee if he has not
already secured it before coming to the Court/
Tribunal and given the employee an opportunity to
show how his or her case was prejudiced because
of the non-supply of the report. If after hearing the
parties, the Court/Tribunal comes to the conclusion
that the non-supply of the report would have made
no difference to the ultimate findings and the
punishment given, the Court/Tribunal should not
interfere with the order of punishment. The Court/
Tribunal should not mechanically set aside the
order of punishment on the ground that the report
was not furnished as it regrettably being done at
present. The courts should avoid resorting to short
cuts. Since it is the Courts/Tribunals which will
apply their judicial mind to the question and give
their reasons for setting aside or not setting aside
the order of punishment, (and not any internal
appellate or revisional authority), there would be
neither a breach of the principles of natural justice
nor a denial of the reasonable opportunity. It is
only if the Court/Tribunal finds that the furnishing of
the report would have made a difference to the
result in the case that it should set aside the order
of punishment.”
36) Keeping in view the aforesaid principles in mind, even when we
find that there is an infraction of principles of natural justice, we
have to address a further question as to whether any purpose
would be served in remitting the case to the authority to make
fresh demand of amount recoverable, only after issuing notice to
show cause to the appellant. In the facts of the present case, we
find that such an exercise would be totally futile having regard to
the law laid down by this Court in R.C. Tobacco (supra).
37) To recapitulate the events, the appellant was accorded certain
benefits under Notification dated July 08, 1999. This Notification
stands nullified by Section 154 of the Act of 2003, which has been
given retrospective effect. The legal consequence of the
aforesaid statutory provision is that the amount with which the
appellant was benefitted under the aforesaid Notification becomes
refundable. Even after the notice is issued, the appellant cannot
take any plea to retain the said amount on any ground
whatsoever as it is bound by the dicta in R.C. Tobacco (supra).
Likewise, even the officer who passed the order has no choice but
to follow the dicta in R.C. Tobacco (supra). It is important to note
that as far as quantification of the amount is concerned, it is not
disputed at all. In such a situation, issuance of notice would be
an empty formality and we are of the firm opinion that the case
stands covered by 'useless formality theory'.
38) In Escorts Farms Ltd. (Previously known as M/s. Escorts
Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon Division,
Nainital, U.P. & Ors.24, this Court, while reiterating the position
that rules of natural justice are to be followed for doing substantial
justice, held that, at the same time, it would be of no use if it
amounts to completing a mere ritual of hearing without possibility
of any change in the decision of the case on merits. It was so
explained in the following terms:
“64. Right of hearing to a necessary party is a
valuable right. Denial of such right is serious
breach of statutory procedure prescribed and
violation of rules of natural justice. In these
appeals preferred by the holder of lands and some
other transferees, we have found that the terms of
government grant did not permit transfers of land
without permission of the State as grantor.
Remand of cases of a group of transferees who
were not heard, would, therefore, be of no legal
consequence, more so, when on this legal question
all affected parties have got full opportunity of
hearing before the High Court and in this appeal
before this Court. Rules of natural justice are to be
followed for doing substantial justice and not for
completing a mere ritual of hearing without
possibility of any change in the decision of the case
on merits. In view of the legal position explained
by us above, we, therefore, refrain from remanding
these cases in exercise of our discretionary powers
under Article 136 of the Constitution of India.”
24 (2004) 4 SCC 281
39) Therefore, on the facts of this case, we are of the opinion that
non-issuance of notice before sending communication dated June
23, 2003 has not resulted in any prejudice to the appellant and it
may not be feasible to direct the respondents to take fresh action
after issuing notice as that would be a mere formality.
40) With this we advert to the last submission of Mr. Sorabjee that the
judgment in R.C. Tobacco (supra) (which is a two Judge Bench
decision) is in conflict with the three Judge Bench judgment in
J.K. Cotton (supra). This argument is not even open to the
appellant for the simple reason that the judgment in J.K. Cotton
(supra) was specifically taken note of and discussed in R.C.
Tobacco (supra). Paragraph 13 of the judgment in R.C.
Tobacco (supra) would reflect that the appellant therein had
specifically relied upon the judgment in J.K. Cotton (supra) in
support of the submission that retrospectivity was harsh and
excessive since there is, in fact, a retrospective imposition of
excise duty. It was also argued that justification of such
retrospective imposition of tax must be overwhelming and no such
overriding consideration had been disclosed. The submission
went to the extent of pleading that if the appellant is called upon
to pay the excise duty now it will cripple its unit. More pertinent
Civil Appeal Nos. 4458-4459 of 2015 Page 36 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 37
was another submission, which is relevant for our purpose, that
the demand which was raised could not be sustained as it was
made without issuing any show-cause notice and was in
contravention of Section 11A of the Act. In support of this view,
few judgments, including J.K. Cotton (supra), were relied upon.
The Court, however, did not find any merit in the aforesaid
submissions and dealt with the issue as under, duly taking note of
the judgment in J.K. Cotton (supra):
“40. In J.K. Cotton Spg. & Wvg. Mills Ltd. v. Union
of India, (1987) Supp. SCC 350, relied upon by the
petitioners, by virtue of the retrospective
amendment of Rules 9 and 49 of the Central
Excise Rules in 1982, commodities obtained at an
intermediate stage of manufacture in a continuous
process were deemed to have been 'removed'
within the meaning of Rule 9(1) thereby making
such intermediate products dutiable under the Act
with effect from the commencement of the Act i.e.
1944. In this context the Court held that the
amended Rules 9 and 49 would take effect subject
to Section 11-A. The decision is distinguishable.
The circumstances in which the Court held that the
demands for duty could only be limited to six
months prior to the amendment was
unquestionably different from those present in the
case before us. What we have to consider here is
whether the benefit granted in 1999 could be
withdrawn in 2003. Besides, the Court in J.K.
Cotton Spg. & Wvg. Mills Ltd. case rejected the
contention of the Union of India that Section 51 of
the 1982 Finance Act by which the amendments
were made to Rules 9 and 49 overrode the
provisions of Section 11-A saying: (SCC p. 363,
para 32) “if the intention of the legislature was to
nullify the effect of Section 11-A,.. the legislature
would have specifically provided for the same.”
Similarly our decision in National Agricultural Coop.
Marketing Federation of India Ltd. v. Union of India,
Civil Appeal Nos. 4458-4459 of 2015 Page 37 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)Page 38
(2003) 5 SCC 23 which dealt with an amendment
to Section 80-P(2)(a)(iii) of the Income Tax Act,
1961 noted that: (SCC p.35, para 29)
“The amendment does not seek to touch on
the periods of limitation provided in the Act,
and in the absence of such express provision
or clear implication, the legislature clearly
could not be taken to intend that the amending
provisions authorizes the Income Tax Officer to
commence proceedings which before the new
Act came into force, had, by the expiry of the
period provided become barred".
In the present case Section 154(4) specifically and
expressly allows amounts to be recovered within a
period of thirty days from the day Finance Bill,
2003 received the assent of the President. It
cannot but be held therefore that the period of six
months provided under Section 11-A would not
apply.”
40A) In the aforesaid scenario, when the Court was conscious of the
principle laid down in J.K. Cotton (supra) and explained the
same in a particular manner while deciding the appeal in R.C.
Tobacco (supra), it cannot be argued that the judgment in R.C.
Tobacco (supra) runs contrary to J.K. Cotton (supra).
41) For all these reasons, the appeals are dismissed.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
MAY 14, 2015.
Civil Appeal Nos. 4458-4459 of 2015 Page 38 of 38
(arising out of SLP (C) Nos. 37108-37109 of 2012)
No comments:
Post a Comment