By TIOL News Service

NEW DELHI, APRIL 25, 2017: THIS appeal arises out of the judgment of the High Court - 2016-TIOL-326-HC-DEL-CX, wherein the appellant wanted the High Court to issue mandamus to the Central Government directing the Central Government to issue a notification under Section 11C of the Central Excise Act, 1944 to the effect that duty payable by the appellant on goods manufactured by it shall not be paid.

If certain conditions are satisfied, the Central Government may issue a notification directing that whole of the duty of excise payable on such goods, or, as the case may be, the duty of excise in excess of that payable on such goods, but for the said practice, shall not be required to be paid. The condition stipulated in the said Section with which the Central Government is to satisfy itself is that there is/was a generally prevalent practice according to which the duty was not, or is not being levied, even when such a duty of excise was otherwise payable on such excisable goods.

The High Court vide impugned judgment has come to the conclusion that Section 11C of the Act grants a discretionary power to the Government to issue or not to issue such a notification. The said provision does not mandate the Government to necessarily issue such a notification and in the absence of any obligation on the part of the Government in this behalf, the Courts are precluded from giving any mandamus to the Central Government to exercise such a power and issue the notification.

The facts:

The appellant is in the business of manufacturing Rosin and Turpentine. Rosin is the resinous constituent of the oleoresin exuded by various species of Pine Tree i.e. Oleo Pine Resin, known in commerce as 'crude turpentine'. The separation of the oleoresin into the essential oil spirit of Turpentine and Rosin is effected by distillation in large kettle stills. There are two methods of manufacturing Rosin/Turpentine from Oleo Pine Resin. One method is the vacuum chemical treatment process which uses power in almost all the processes. The second method, commonly known as the Bhatti process, is entirely manual except for the use of power to operate the pump for lifting up the water to the storage tank for the purpose of condensing. Thus, in the second method, power is used, but is confined to operating the pump for lifting up the water to the storage tank for the purpose of condensing. The appellant is using this second method of manufacturing Rosin/Turpentine.

A show cause notice dated 04.10.2004 was issued to the appellant by the Excise Department demanding duty of Rs.10,91,99,456 /- on the aforesaid products manufactured by the appellant and cleared during the period 01.04.1999 to 31.08.2003. It was followed by further notices to the same effect covering the period September-October, 2003 to March, 2004; April, 2004 to November, 2004; and December, 2004 to September, 2005 for the amount of Rs.50,760 /-, Rs.66,44,602 /-, Rs.1,01,92,867 /- and Rs.81,44,105 /- respectively. One more unit M/s. Gurukripa Resins Pvt. Ltd., Nagpur (for short 'Gurukripa') was also issued similar show cause notices. Case of the appellant is that out of 300 units using Bhatti method, only these two units were picked up for raising demand of excise.

Gurukripa had challenged the order of assessment passed in its case by filing the appeal before the Central Excise and Service Tax Appellate Tribunal, Mumbai ('CESTAT'). The said appeal of Gurukripa was allowed vide judgment dated 14.01.2004. The Department challenged the order passed by the CESTAT in the case of Gurukripa, in which the Revenue succeeded as that appeal was allowed by the Supreme Court vide its judgment dated 11.07.2011 - 2011-TIOL-67-SC-CX .

The Court held that the process of lifting of water into the cooling tank was integrally connected with the manufacture of these goods and hence, if the power was used for lifting of water, the exemption would not be available.

After the judgment of the Supreme Court in Gurukripa Resins Private Limited, several trade associations made representations to the Government with a request to grant benefit under Section 11C of the Act.

After thorough consideration, the Finance Ministry decided on 15.09.2014 not to issue any such notification under Section 11C of the Act as it was going to benefit only two companies, which includes the appellant. Challenging the aforesaid decision, the appellant filed writ petition in the High Court of Delhi which has been dismissed by the High Court vide impugned judgment dated 16.02.2016.

The Supreme Court observed:

When the matter is examined taking into consideration all the facts in totality, we are of the view that there is no clinching evidence to suggest the existence of a general practice not to levy excise duty. Under the impression that it was to be demanded from registered units and five such registered units were, in fact, paying the duty, show cause notices were issued to the remaining two units, namely, the appellant and Gurukripa . That itself negates the argument of existence of general practice of not levying the duty of excise. It is stated at the cost of repetition that merely because some unregistered firms which were initially getting the SSI exemption, but omitted to be covered under the Act on their crossing the SSI limits, would not, in our opinion, establish any such practice.

In this behalf, it also needs to be highlighted that as far as the Department is concerned, it had taken a categorical stand that even those units which are using Bhatti method for manufacture of Turpentine and Rosin were covered by the Act and that was the reason for issuing of show cause notices to the two units. This view, which the Department had nurtured while issuing the notices, has been vindicated in view of the judgment of this Court in Gurukripa Resins Private Limited. Interestingly, after the said judgment, even the appellant paid the duty of excise. The entire effort now is to recover back the said duty by seeking issuance of a notification under Section 11C of the Act. Such a situation, to our mind, cannot be countenanced.

Insofar as the argument based on obligation of the Government to issue such a notification is concerned, a clear distinction is to be made between the duty to act in an administrative capacity and the power to exercise statutory function. If a public authority is foisted with any duty to do an act and fails to discharge that function, mandamus can be issued to the said authority to perform its duty. However, that is done while exercising the power of judicial review of an administrative action. It is entirely different from judicial review of a legislative action.

Issuance of a notification under Section 11C of the Act is in the nature of subordinate legislation. Directing the Government to issue such a notification would amount to take a policy decision in a particular manner, which is impermissible.

Similarly when an executive authority exercises a legislative power by way of subordinate legislation pursuant to the delegated authority of a legislature, such executive authority cannot be asked to enact the law which it has been empowered to do under the delegated legislative authority.

The matter can be looked into from another angle as well. When 'power' is given to the Central Government to issue a notification to the effect not to recover duty of excise or recover lesser duty than what is normally payable under the Act, for deciding whether to issue such a Notification or not, there may be various considerations in the mind of the Government. Merely because conditions laid in the said provisions are satisfied, would not be a reason to necessarily issue such a notification. It is purely a policy matter.

It is impermissible for this Court to tinker with such policy decision more particularly when it is found that the decision is not irrational and is founded on valid considerations. It has also to be borne in mind that in the instant case the appellant has already paid the duty. Section 11C contemplates those situations where duty is not paid. It does not cover the situation where duty is paid and that is to be refunded.

It is well established that the equality clause enshrined in Article 14 of the Constitution is a positive concept and cannot be applied in the negative.

As a result, this appeal is found to be bereft of any merit and is, accordingly, dismissed.

(See 2017-TIOL-187-SC-CX)