Case: Travancore Rayon Ltd Vs. Union Of India

1. The appellant Company is engaged in the production of cellulose film. The Central Excise Inspector reported that the appellant Company was producing in its factory nitro-cellulose lacquer [falling under tariff Item No. 22 (iii) (i), No. 14 (iii) (i) of the First Schedule to the Central Excises and Salt Act, 1944 read with the Finance Act, 1955], without obtaining a central excise licence as required by the rules and was also removing nitro-cellulose lacquer for "internal use" without payment of duty. The appellant Company denied that the chemical compound utilised by it to render plain film moisture-proof was "nitro-cellulose lacquer" within the meaning of the Central Excises and Salt Act, 1944.2. The Deputy Superintendent of Central Excise, determined that the appellant Company was liable to pay, for the period between March 1, 1955 and September 19, 1962, Rs. 4, 88, 797 34 as excise duty on the consumption of nitro-cellulose lacquer produced by the Company. The Deputy Superintendent issued a demand notice, but the appellant Company failed to pay the duty.3. The Assistant Collector of Customs required the Appellant Company to show cause why penalty should not be imposed on it for failing to obtain a licence for production of nitro-cellulose lacquer. The appellant Company contended that what was produced by it was not nitro-cellulose lacquer. The Assistant Collector rejected the contention and confirmed the order of assessment and imposed a penalty of Rs. 25/-.4. In appeal to the Collector, the appellant Company raised a large number of contentions-including the followingthat nitro-cellulose lacquer which is clear as well as pigmented falls within the purview of Item 14 of the First Schedule to the Central Excises and Salt Act, 1944, and that clear and white, or murky and pigmented lacquer is not subject to duty;(2) that a certificate of test issued by the Silk Mills Research Association, Bombay, showed that the nitro-cellulose lacquer content of a sample of surface-coating compound produced by the appellant company was only 4.7 per cent, and it could not be considered nitro-cellulose lacquer within the meaning of the Act; and(3) that the failure to levy duty on the product from 1955 to 1962 was proof of the fact that the Excise Department was itself of the view that the product was not excisable.The Collector of Customs consulted the Chemical Examiner and was of the view that the opinion expressed by the Silk Mills Research Association, Bombay, was not correct. In considering the question about the reason for not levying duty for nearly seven years, the Collector thought it necessary to give a fresh hearing to the Appellant Company. Additional arguments were advanced at the second hearing. After considering the arguments advanced by the appellant Company the Collector wrote a detailed judgment setting out the "points" on which he held against the claim of the appellant Company, and expressed the view that the Appellant Company was not right in contending that only that chemical which is "clear and pigmented" falls within the purview of Item 14 of the First Schedule.6. Against the order dismissing the appeal, the appellant Company moved a petition invoking the revisional jurisdiction of the Central Government under Section 36 of the Central Excises and Salt Act, 1944 The petition was entertained, but no. personal hearing was given to the appellant Company. By order dated July 16, 1966, communicated by the Joint Secretary to the Government of India, Ministry of Finance, the petition was rejected. The order readGovernment of India have carefully considered the points made by the applicant(s), but see no. justification for interfering with the order in appeal. The revision application is accordinglythe order passed by the Central Government this appeal is preferred with special leave.

Reasoning:
It is true that the rules do not require that personal hearing shall be given, but, if in appropriate cases where complex and difficult questions requiring familiarity with technical problems are raised, personal hearing is given it would conduce to better administration and more satisfactory disposal of the grievances of citizens. The order does not disclose the name or designation of the authority of the Government of India who considered "the points made by the applicants", and it is impossible to say whether the officer was familiar with the subject-matter so that he could decide the dispute without elucidation and merely on a perusal of the papers. The form in which the order was communicated is apparently a printed form. There is a bare assertion by the Joint Secretary to the Government of India in his communication that the Government of India had "carefully considered the points made by the applicants", there is no. evidence as to who considered the "points" and what was considered. The Central Government is by Section 36 invested with the judicial power of the State. Orders involving important disputes are brought before the Government. The orders made by the Central Government are subject to appeal to this Court under Article 136 of the Constitution. It would be impossible for this Court, exercising jurisdiction under Article l36, to decide the dispute without a speaking order of the authority, setting out the nature of the dispute, the arguments in support thereof raised by the aggrieved party and reasonably disclosing that the matter received due consideration by the authority competent to decide the dispute. Exercise of the right to appeal to this Court would be futile, if the authority chooses not to disclose the reasons in support of the decision reached by it. A party who approaches the Government in exercise of a statutory right, for adjudication of a dispute is entitled to know at least the official designation of the person who has considered the matter, what was considered by him, and the reasons for recording a decision against him. To enable the High Court or this Court to exercise its constitutional powers, not only the decision, but an adequate disclosure of materials justifying an inference that there has been a judicial consideration of the dispute by an authority competent in that behalf in the light of the claim made by the aggrieved party, is necessary. If the Officer acting on behalf of the Government chooses to give no. reasons, the right of appeal will be devoid of anyour view, the majority judgment of this Court in Madhya Pradesh Industries Ltd.s case, (1966) 1 SCR 466   = (AIR 1966 SC 671  ) has been overruled by this Court in Bhagat Rajas case, (1967) 3 SCR 302   = (AIR 1967 SCIn this case the communication from the Central Government gave no. reasons in support of the order; the appellant Company is merely intimated thereby that the Government of India did not see any reasons to interfere "with the order in appeal". The communication does not disclose the "points" which were considered and the reasons for rejecting them. This is a totally unsatisfactory method of disposal of a case in exercise of the judicial power vested in the Central Government. Necessity to give sufficient reasons which disclose proper appreciation of the problem to be solved, and the mental process by which the conclusion is reached in cases where a non-judicial authority exercises judicial functions, is obvious. When judicial power is exercised by an authority normally performing executive or administrative functions, this Court would require to be satisfied that the decision has been reached after due consideration of the merits of the dispute, uninfluenced by extraneous considerations of policy or expediency. The Court insists upon disclosure of reasons in support of the order on two grounds : one, that the party aggrieved in a proceeding before the High Court or this Court has the opportunity to demonstrate that the reasons which persuaded the authority to reject his case were erroneous : the other, that the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power.