Case: Kirloskar Cummins Limited Vs. Union of India & Others

SHARAD MANOHAR, J.The main question that arises for consideration in this writ petition relates to the interpretation of section 36(2) read with section 36(1) of the Central Excises and Salt Act, 1944.2. The facts out of which the petition arise are as follows:---(A) In December 1973 the petitioner, Kirloskar Cummins Ltd., had negotiations regarding export of 29 Engines to Tanzania. In March & April 1974, 5 Engines were cleared from the Factory for the purpose of export to Tanzania. In view of the export promotion policy the duty leviable on the export goods intended to be exported was much lower than the excise duty payable for the goods to be sold In India. Hence, the goods were allowed to be cleared by the Government on the payment of such lesser duty only. However, it is turned out that for reasons beyond the control of the petitioner/company the goods could not be exported. The petitioner/company had no doubt sold the goods to Kirloskar Electric Company Ltd., for export. But since Kirloskar Electric Company Ltd., could not export the goods, application was made by the petitioner/company to the Assistant Collector under the Excise Act for permission to sell the goods within the territory of India. By an order dt. 10th July, 1974 the Assistant Collector of Central Excise gave permission to divert the goods for internal market as requested by the petitioner. The petitioner was further directed by the said order to approach the Superintendent of Central Excise for consequential endorsement in the books of the said authority so as to enable the petitioner/company to make necessary amendment in their own books.However, on 22nd July, 1975 a Show-Cause notice was issued by the Superintendent of Central Excise, Pune, to the petitioner to show cause as to why the differential duty amounting to Rs. 24,987.85 together with the penalty for non-payment thereof should not levied upon the petitioner-company in view of the fact that the duty payable for sale of goods in the territory of India was not duly paid. In a sense, the showcause notice was for short payment of duty and for levy of penalty.A reply was given by the Company to the said Notice. They also asked for an opportunity to be heard. Their contention was that the goods had been lawfully cleared from the Factory and that the duty which was payable for lawful clearance was already paid and that there was no jurisdiction vesting in the Excise Authority to call upon the petitioner to pay the differential duty. As a corollary to this contention, it was further contended that if no such differential duty was payable, no question of payment of penalty arose.This contention was negatived by the Assistant Collector, who by his order dated 8th October, 1975 ordered that the differential duty of Rs. 24,987.85 should be paid by the Company. He also levied a penalty of Rs. 250/- for the short payment.The petitioner/Company filed an appeal to the Collector of Central Excise. The quantum of penalty was challenged; as also was challenged the decision of the Assistant Collector to the effect that the differential duty was payable by the Company.The Collector in exercise of his appellate jurisdiction under section 35 of the Central Excises and Salt Act, 1944, as it then stood, dismissed the appeal so far as the liability for payment of the differential duty was concerned. But the amount of penalty for payment of the differential duty was concerned. But the amount of penalty was reduced by him from Rs. 250/- to Rs. 100/-.Against this order the petitioner/Company filed a Revision application on 13-09-1976 to the Central Government, evidently under section 36 of the Central Excises & Salt Act. During the pendency of this Revision Application, the Central Government issued a show cause notice to the company on 15-03-1977 calling upon them to show cause as to why the amount of penalty should not be enhanced. After giving the necessary hearing to the petitioner/Company, the Central Government Passed an Order, evidently under section 35(2) of the Act, on 25-09-1979, dismissing the Revision application, but enhancing the penalty from the amount of Rs. 100/- as fixed by the Collector in the appeal, to the amount of Rs. 50,000/-.The present petition is filed against the said Order of the Central Government.3. Mr. Setalvad has formulated three propositions before the Court for this Courts consideration, viz.:---(i) that the Central Government has no power in the facts & circumstances of the present case to enhance the penalty to anything beyond what was done by the Assistant Collector:(ii) that the purported exercise of the power of penalty is perverse in the circumstances of the case:(iii) that there can be no recovery of short levy of duty after the goods have been lawfully cleared from the Factory.However, I may state here that so far as the 3rd proposition is concerned, Mr. Setalvad has specifically given up the same. He no longer presses his claim of immunity from the liability to pay the differential duty. He made it clear that he wished to keep the point open.Only points Nos. (i) & (ii) were something upon which submissions were made by the learned Counsel.4. As regards the 1st point, our attention was invited to the scope of the Central Governments power under section 36 of the Act in so for as they relate to the power to enhance the penalty. It is, therefore, necessary to examine sub-section (1) and sub-section (2) of the said Act.Sub-section (1) of section 36 runs as follows:---"(1) The Central Government may on the application of any person aggrieved by any decision or order passed under this Act or the rules made thereunder by any Central Excise Officer or by the Central Board of Excise & Customs constituted under the Central Boards of Revenue Act, 1963 and from which no appeal lies reverse or modify such decision or order."Sub-section (2), which is the main section relevant for our purpose runs as follows:---"(2) The Central Government may, of its own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under section 35 or section 35-A of this Act for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as it thinks fit":Sub-section (2) is followed by a proviso ; but there is no dispute that the proviso has no relevance for the purpose of this petition.5. Sub-section (1) of said section 36 leaves no room for doubt that the power contemplated by the Act comes into existence provided only that an application is made by any aggrieved person against any decision or order passed under the Act or under the Rules under the Act by the officer or authority constituted under the Act and provided, further, that no Appeal lay to any authority against that decision or order. Thus, for instance, if any appeal lay from the order of the Assistant Collector to the Collector, the Central Government would be having no power to entertain a Revision Application directly against the order of the Assistant Collector.Coming to sub-section (2) of the Act, it can be readily seen that it gives a suo motu jurisdiction and power to the Central Government to revise certain orders passed by certain authorities. Question here is as to which of the orders are capable of being revised. The plain reading of said sub-section (2) leaves no room for doubt that only a decision or order which has been passed by the officer concerned under section 35 or section 35-A is something which is capable of being revised by the Central Government. It was not argued before us and it cannot be argued that apart from sub section (2) of said section 36, there exists or vests any revisional power in the Central Government against any of the orders passed by the authority. The suo motu power of revision of the Central Government is located only in said sub-section (2) and said sub-section (2) has been hedged and circumscribed by the unequivocal words viz. that the correctness, legality or propriety of any decision or order "passed under section 35 or section 35-A of this Act" can be subjected to the revisional power. In other words, said sub section (2) gives no power whatsoever to the Central Government to go into the question of legality, correctness or propriety of the order passed by the Assistant Collector ignoring the order passed by the Collector in appeal under section 35 of the Act.6. The next point to be noted is that the revisional power of the Central Government also extends to the order or decision passed by the Collector under section 35 of the Act. Assuming that the Collector was having some kind of review or revisional jurisdiction and he could have passed such an order and could have passed but did not exercise that jurisdiction to pass any order, that power cannot be exercised by the Central Government. In other words, that which the Collector did not do cannot be looked into. The legality, propriety or correctness only of the order passed under section 35 can be gone into.7. In the instant case, the Collector had reduced the penalty from Rs. 250/ to Rs. 100/- This was the order passed by the Collector. At the most, a view could have been taken by the Central Government that the Collector had no justification to reduce the penalty from Rs. 250/- to Rs. 100/- and the Central Government could have enhanced the penalty from Rs. 100/- to Rs. 250/- maximum. It is difficult to see from the plain reading of the section as to how the penalty could be enhanced to anything exceeding Rs. 250/-. If the Assistant Collector was wrong in imposing the penalty of Rs. 250/-, the Collector could himself have reduced it, he could not have enhanced it. The revisional authority could only step into the shoes of the Collector. The revisional authority could pass order which could be passed by the Collector legally within the bounds of his jurisdiction. The order which could not have been passed by the Collector could not have been passed by the revisional authority viz. the Central Government.If any authority is necessary for this proposition, it can be readily seen in the Judgment of the Supreme Court in the case of (A. St. Arunachalam Pillai v. M/s. Southern Roadways Ltd., and another)1, A.I.R. 1960, Supreme Court, page 1191. There the Supreme Court was considering a similar provision under the Motor Vehicles Act relating to the revisional powers vested in the State Government under section 64-A of the Motor Vehicles Act. Just as in the present case, it was contended in that case that the revisional powers which are of the similar character could be exercised by the Government not only vis-a-vis the appellate order but also the original order of the Court of first instance. In connection with that order, it was observed by the Supreme Court as follows:---"In our opinion, section 64-A is power vested in the State Government by way of revision or orders passed under Chapter IV of the Act by any authority or officer subordinate to it. This is not a power which the State Government could exercise by way of original jurisdiction which was vested elsewhere. In our opinion, although the words "may pass such order in reference thereto as it thinks fit" are wide in expression, they do not mean that the State Government could pass an order in exercise of revisional jurisdiction which the authority whose order the Government was revising had no jurisdiction to pass. The State Government could undoubtedly set aside an order of an authority or officer subordinate to it who had no jurisdiction to pass the order in question under Chapter IV but it could not substitute for that order its own order directing the variation in the conditions of the permit of the appellant."We may briefly paraphrase the legal position by saying that in its revisional jurisdiction the Central Government is exercising the power to revise the decision of the appellate authority. It is not exercising the original jurisdiction. This is the ratio of the Supreme Court Judgment. It may be that the authority of the first instance, (which exercises original power) would be having wider powers and if the revisional authority had the original power, the revisional authority would be also having the same power as the original authority. But in the instant case it cannot be disputed that the order of the original authority had merged in the order of the appellate authority and all that was required to be seen by the revisional authority was whether the appellate authority has transgressed its own jurisdiction.In this view of the matter, in our opinion, it must be held that in the instant case the Central Government acting as a revising authority had transgressed its power by assuming that it had the jurisdiction to pass the order which could have been passed by the Assistant Collector even if no appeal could have been filed by the Government or by anybody on behalf of the Government to any authority whatsoever.A few other authorities were cited across the bar. But in view of the plain meaning of section 35(2) of the Act, as seen by us, and in view of the clear pronouncement of law contained in the above Supreme Court Judgment, we find it is unnecessary to examine any of those authorities.8. Likewise, it is unnecessary for us to go into the question as to whether the purported exercise of the jurisdiction to impose higher penalty by the Central Government was a perverse decision. No doubt the judgment of the Supreme Court in A.I.R. 1970 Supreme Court, page 253 (M/s Hindustan Steel Ltd. v. The State of Orissa)2, has been relied upon by the learned Counsel Mr. Setalvad. However, we do not propose to examine the said point, because, in our opinion, the question is capable of being decided on the 1st point discussed above.9. Since the 3rd point regarding the Governments power regarding the Authoritys power to recover differential duty is not called in question in this writ petition at the time of the argument, no order is necessary in this behalf.We make it clear that the interpretation of said section 36(2) relates to the unamended section. We are cognisant of the fact that it has undergone amendments thereafter.

Decision reasoning: 1[ds]However, I may state here that so far as the 3rd proposition is concerned, Mr. Setalvad has specifically given up the same. He no longer presses his claim of immunity from the liability to pay the differential duty. He made it clear that he wished to keep the point open.Only points Nos. (i)(ii) were something upon which submissions were made by the learned Counsel.n (1) of said section 36 leaves no room for doubt that the power contemplated by the Act comes into existence provided only that an application is made by any aggrieved person against any decision or order passed under the Act or under the Rules under the Act by the officer or authority constituted under the Act and provided, further, that no Appeal lay to any authority against that decision or order. Thus, for instance, if any appeal lay from the order of the Assistant Collector to the Collector, the Central Government would be having no power to entertain a Revision Application directly against the order of the Assistant Collector.Coming to(2) of the Act, it can be readily seen that it gives a suo motu jurisdiction and power to the Central Government to revise certain orders passed by certainplain reading of said(2) leaves no room for doubt that only a decision or order which has been passed by the officer concerned under section 35 or sectionis something which is capable of being revised by the Central Government. It was not argued before us and it cannot be argued that apart from sub section (2) of said section 36, there exists or vests any revisional power in the Central Government against any of the orders passed by the authority. The suo motu power of revision of the Central Government is located only in said(2) and said(2) has been hedged and circumscribed by the unequivocal words viz. that the correctness, legality or propriety of any decision or order "passed under section 35 or sectionof this Act" can be subjected to the revisional power. In other words, said sub section (2) gives no power whatsoever to the Central Government to go into the question of legality, correctness or propriety of the order passed by the Assistant Collector ignoring the order passed by the Collector in appeal under section 35 of the Act.6. The next point to be noted is that the revisional power of the Central Government also extends to the order or decision passed by the Collector under section 35 of the Act. Assuming that the Collector was having some kind of review or revisional jurisdiction and he could have passed such an order and could have passed but did not exercise that jurisdiction to pass any order, that power cannot be exercised by the Central Government. In other words, that which the Collector did not do cannot be looked into. The legality, propriety or correctness only of the order passed under section 35 can be gone into.7. In the instant case, the Collector had reduced the penalty from Rs. 250/ to Rs. 100/This was the order passed by the Collector. At the most, a view could have been taken by the Central Government that the Collector had no justification to reduce the penalty from Rs. 250/to Rs. 100/and the Central Government could have enhanced the penalty from Rs. 100/to Rs. 250/maximum. It is difficult to see from the plain reading of the section as to how the penalty could be enhanced to anything exceeding Rs.If the Assistant Collector was wrong in imposing the penalty of Rs.the Collector could himself have reduced it, he could not have enhanced it. The revisional authority could only step into the shoes of the Collector. The revisional authority could pass order which could be passed by the Collector legally within the bounds of his jurisdiction. The order which could not have been passed by the Collector could not have been passed by the revisional authority viz. the Centralmay briefly paraphrase the legal position by saying that in its revisional jurisdiction the Central Government is exercising the power to revise the decision of the appellate authority. It is not exercising the original jurisdiction. This is the ratio of the Supreme Court Judgment. It may be that the authority of the first instance, (which exercises original power) would be having wider powers and if the revisional authority had the original power, the revisional authority would be also having the same power as the original authority. But in the instant case it cannot be disputed that the order of the original authority had merged in the order of the appellate authority and all that was required to be seen by the revisional authority was whether the appellate authority has transgressed its own jurisdiction.In this view of the matter, in our opinion, it must be held that in the instant case the Central Government acting as a revising authority had transgressed its power by assuming that it had the jurisdiction to pass the order which could have been passed by the Assistant Collector even if no appeal could have been filed by the Government or by anybody on behalf of the Government to any authority whatsoever.A few other authorities were cited across the bar. But in view of the plain meaning of section 35(2) of the Act, as seen by us, and in view of the clear pronouncement of law contained in the above Supreme Court Judgment, we find it is unnecessary to examine any of those authorities.8. Likewise, it is unnecessary for us to go into the question as to whether the purported exercise of the jurisdiction to impose higher penalty by the Central Government was a perverse decision. No doubt the judgment of the Supreme Court in A.I.R. 1970 Supreme Court, page 253 (M/s Hindustan Steel Ltd. v. The State of Orissa)2, has been relied upon by the learned Counsel Mr. Setalvad. However, we do not propose to examine the said point, because, in our opinion, the question is capable of being decided on the 1st point discussed above.9. Since the 3rd point regarding the Governments power regarding the Authoritys power to recover differential duty is not called in question in this writ petition at the time of the argument, no order is necessary in this behalf.We make it clear that the interpretation of said section 36(2) relates to the unamended section. We are cognisant of the fact that it has undergone amendments thereafter.