Case ID: 6096

Judgment:
vil Appeal Nos. 1924 27 of 1980 etc. From the Judgment and Order dated 14.11.1979 of the Delhi High Court in Civil Writ No. 1517 of 1979. 359 Soli J. Sorabjee	 S.K. Mehta	 H.N. Salve	 A.N. Banatwa la	 Rajiv Datta	 R. Ravindran	 K.K. Patel	 Ujwal Rana	 M.K. Dua	 S.M. Sarin	 Aman Vachher	 E.M.S. Anam	 P.G. Gokhale	 P.B. Agarwala	 R.B. Hathikhanawala	 Ms. section Manchanda	 K.K. Mohan	 P.K. Chakravarty	 section Srinivasan	 K.C. Agarwal	 Madan Lokur	 A. Minocha	 R.B. Datar	 K.M.K. Nair	 S.K. Gambhir	 Sanjay Sarin	 Vivek Gambhir	 M. Veerappa	 Ms. Kamini Jais wal	 M.K.D. Namboodiry	 D.D. Gupta	 E.C. Agrawala	 V.K. Pandita	 Ms. Purnima Bhatt	 Atul sharma	 V.N. Ganpule	 C.K. Ratnaparkhi	 M.M.L. Srivastava	 M.C. Dhingra	 V. Maya Krish nan	 D.N. Misra	 K.K. Gupta and Anis Ahmed Khan	 for the Appellants. K. Parasaran	 Attorney General	 B. Datta	 Additional Solicitor General	 and Kuldip Singh	 Additional Solicitor General	 K.N. Bhatt	 C.V. Subba Rao	 Ms. A. Subhashini	 Mrs. Sushma Suri	 A. Subba Rao	 A.K. Srivastava	 P.P. Singh	 R.K. Joshi and H.K. Gangwani for the Respondents. The Judgment of the Court was delivered by PATHAK	 CJ. These appeals by special leave are directed against the judgment and order of the High Court of Delhi dismissing writ petitions complaining of discriminatory treatment between the appellants and the State Trading Corporation in regard to the rate of customs duty levied on the import of edible oils. A number of writ petitions have also been filed directly in this Court by other private importers based on the same complaint. They pray for relief in terms of the same rate of customs duty as has been ap plied to the import of edible oils effected by the State Trading Corporation. As common questions of law arise in these appeals and writ petitions and the facts are substantially similar	 we proposed to treat Writ Petition No. 3800 of 1980	 M/s Liber ty Oil Mills vs Union of India & Others	 as the leading case. On 17 January	 1977 the Government of India issued a Public Notice permitting private parties to import edible oils for direct human consumption. It was not permissible to use such imported oils for the manufacture of Vanaspati or for any industrial purpose. Under the Import Policy of 1978 79	 the Government canalised the import of edible oils so that the State Trading Corporation alone was permitted to import edible oils. Some of the private importers who had entered into firm commitments with foreign suppliers	 and were now being denied permission to import the edible oils filed writ petitions in vari 360 ous High Courts	 and these writ petitions were allowed and they were granted licences to import the edible oils. Prior to 1 March	 1979 the import of edible oils was exempt from customs duty	 but with effect from that date the exemption was partially withdrawn and certain specified oils were made liable to import duty at 12 1/2 per cent. Exemp tion was granted from additional duty chargeable under section 3 of the . Auxiliary duty chargeable under the Finance Act was	 however	 payable. On 17 March	 1979 the Government passed an order of exemption in favour of the State Trading Corporation under section 25(2) of the whereby the imports of the specified oils by the State Trading Corporation were made liable to customs duty at 5 per cent only	 and there was a total exemption from auxiliary and additional duty. The imports of the same specified oils by private importers were made liable to customs duty at 12.5 per cent ad valorem. The concessional rate of customs duty in favour of the State Trading Corpora tion was restricted to imports aggregating 3 lakh tonnes initially. That quantity was enlarged to 6 lakh tonnes on 26 June	 1979. On 31 October	 1979	 a further order of exemp tion was made in favour of the State Trading Corporation granting it exemption for imports of five lakh tonnes of the specified oils	 and this was followed on 31 March	 1981 by another order of exemption in respect of an aggregate quan tity of 5 lakh tonnes of oil. It may be mentioned that on 12 May	 1981 the import of edible oil was exempted from the levy of auxiliary duty. On 18 July	 1981	 the Government reduced the exemption granted to the import of the specified oils by private operators by raising the customs duty to 42 1/2 per cent. The exemption in favour of the State Trading Corporation continued without change. Thereafter on 26 July	 1981	 by Ordinance No. 9 of 1981 the Government raised the tariff rate of customs duty to 200 per cent ad valorem by amending the . At the same time exemption was granted insofar that the effective rate of duty on the import of the specified edible oils	 except Rape Seed oil and Soybean oil	 was fixed at 125 per cent. The exemption from auxiliary duty was withdrawn. In the result a private importer had to pay a basic duty of 125 per cent and auxil iary duty of 25 per cent on the import of edible oils. The oil seeds imported by the State Trading Corporation contin ued to attract customs duty at 5 per cent. Writ Petitions were filed in the High Court of Delhi by private importers complaining of the differential treatment accorded between 361 the private importers and the State Trading Corporation	 but these writ petitions were dismissed by the High Court	 and the appeals by special leave have now been placed before us. As has been mentioned earlier	 writ petitions have also been filed directly. At the outset learned counsel for the private importers states that no objection is being taken to canalisation in favour of the State Trading Corporation. Nor is there any objection to the permission granted to the State Trading Corporation to import 17 lakh tonnes of edible oils. The complaint is directed against the differential treatment meted out to the private importers in the rate of customs duty. The contention of the petitioners is that the discrimi natory treatment has no real or substantial nexus with the proposed object of the exemption orders	 having regard to the terms of section 25(2) under which the exemption orders in favour of the State Trading Corporation have been made and	 therefore	 there is a violation of article 14 of the Constitu tion. S 25(2) provides: "(2) If the Central Government is satisfied that it is necessary in the public interest so to do	 it may	 by special order in each case	 exempt from the payment of duty	 under circum stances of an exceptional nature to be stated in such order	 any goods on which duty is leviable. " It is apparent that the power conferred on the Central Government under section 25(2) of the Act is to be exercised by it in its subjective satisfaction. It must be satisfied that it is necessary in the public interest to pass a special exemption order. The exercise of the power is controlled by the requirement in the sub section that the exemption order must contain a statement stating the circumstances of an exceptional nature under which the special exemption order has been considered necessary. The requirement is intended by the statute to ensure that the satisfaction of the Cen tral Government concerning the necessity of the order is not reached arbitrarily but flows from material relevant to the object for which the power has been conferred. The circum stances recited in the exemption orders are: " . . In view of high international prices of vegetable oils and in order to keep the domestic prices of vanaspati at reasonable levels	 it has been felt that certain speci fied vegetable non essential oils imported by the S.T.C. would need to be exempted from part of the customs duty." 362 The reasons set forth in this statement have been analy sed by learned counsel for the private importers and an attempt has been made to establish that there is no justifi cation for relying on the international prices of vegetable oils nor the stated desirability of keeping the domestic prices of vanaspati at reasonable levels as grounds for making the impugned exemption orders in favour of the State Trading Corporation. In detailed argument	 learned counsel for the private importers urges that the public interest which could be contemplated under section 25(2) must be the reduction of the landed cost in order to reduce the domestic prices of the oils. That object	 it is said	 is not served by conferring an advantage upon a particular importer even if it be the State Trading Corporation	 who is engaged in the same activity in respect of the same goods. It is point ed out that the concession must relate to the goods and not to the personality of the importer. Further	 it is argued	 the allegation that the international prices of edible oils were high is inconsistent with the reality of the situation; on the contrary	 it is pointed out	 there had been a fall in the international prices of various oils. In support of the latter submission	 reference has been made before us to the pleadings of the parties and a P.A.C. report. Elaborating his submission in regard to the stated need for maintaining the domestic prices of vanaspati at reasonable levels	 learned counsel for the private importers urges that the oils which were being imported by private importers were intended for direct human consumption and could not have been supplied to the vanaspati industry. Reference is made to the affidavits of the parties to show that the oils imported by the petitioners could not be utilised in the manufacture of vanaspati as permission to do so had not been granted. Accordingly	 the private importers say	 there is no basis for the differential duty set out in the exemption orders and no real or substantial nexus between the differ entiation made and the object of section 25(2). Then	 it is also urged	 there is no real or substantial distinction between the private importers and the State Trading Corporation having regard to the object of the statute	 the nature of customs duty	 the rationale of section 25 and the professed object of the exemption orders under section 25(2). The State Trading Corporation	 it is contended	 cannot be equated with the Central Government	 and we are referred to S.T.C.v. Commercial Tax Officer	 Vishakapatnam	 t19641 4 SCR 99. It is a private limited company registered under the and liable to be wound up under that Act	 and that although it functions under the supervision of the Govern ment of India and its Directors	 it is not concerned with the performance of any governmental functions	 its functions being entirely commercial and in the nature of a trading activity. Reliance is also placed on Heavy Engineering Mazdoor Union 363 vs State of Bihar	 ; Andhra Pradesh State Road Transport Corporation vs Income Tax Officer	 ; and Vidarbha Housing Board vs Income Tax Officer	 City and Refund Circle	 Nagpur & Others	 Assum ing	 the private importers contend that the State Trading Corporation can be equated with the Central Government or that it is acting on behalf of the Central Government	 once the Government ventures into the commercial field it dons the robes of a trader	 and it cannot thereafter claim any special attribute or preference for differentiation from other traders. Learned counsel has placed before us the observations of this Court in L.I.C. vs Escorts Ltd.	 ; 	344. There is no rational basis	 it is urged	 for making a distinction in the imposition of customs duty in respect of the goods imported by the private importers and the State Trading Corporation as both purchased the same commodity in the open market for direct consumption	 that the sales effected by them are on a commercial basis	 and there is nothing to show that the State Trading Corporation sold these oils at a price lower than the market price or at subsidised prices. It is asserted that the Central Govern ment	 like any other importer	 is liable to customs duty	 and we are referred to section 12 of the . It is also complained that the differential proceeds on excessive classification	 and that results in violating the doctrine of equality enshrined in article 14 of the Constitution. Reli ance is placed on State of J & K vs T.N. Khosa		 ; 	 792; Mohammad Shujat Ali vs Union of India	 ; 	 470 and In Re The Special Courts Bill	 1978	 	 561 2. And	 finally	 the private importers claim that inasmuch as approximately 17 lakh tonnes of oil were imported by the State Trading Corporation as against a mere 1 lakh tonnes of oil imported by all the private im porters together	 and the exemption from duty has been granted in the public interest	 namely	 to control or reduce the price of edible oils	 the relief which should be granted is to include the imports made by the private importers within the particular customs duty rate of five per cent already extended to the oils imported by the State Trading Corporation. In some cases	 it is alleged that if the im ports effected by the private importers has to bear the duty levied upon them	 the impact of the total duty would be so impossible that it would cripple the business of those private importers. In reply	 the learned Attorney General has laid great stress on the submission that the State Trading Corporation	 in undertaking the imports	 acts solely as an agent or nominee of the Government of India and all the profits and losses are on account of the Government of India	 the State Trading Corporation being entitled to service charges 364 only at one per cent irrespective of loss or profit. It is submitted that the Central Government is not liable to customs duty and we are referred to various considerations in support of that claim. It seems to us unnecessary to enter into that question because we have before us a situa tion where customs duty has in fact been imposed	 even though at the rate of five per cent only. In accepting the imposition of customs duty	 albeit at five per cent	 neither the State Trading Corporation nor the Central Government rest their case on any claim to immunity of the Central Government from the levy of customs duty. It is not neces sary	 therefore	 to construe the amendment made in section 12 of the Customs Duty Act	 1962	 to which both learned counsel have made reference. The limited question before us is whether there is justification for the differential treatment accorded be tween the State Trading Corporation and the private import ers. Now it is significant to note that the import of the specified oils had been entrusted exclusively to the State ' Trading Corporation with effect from 2 December	 1978	 and because the private importers had already	 prior to that date	 entered into contracts for purchase of the edible oils with foreign sellers	 they were permitted to make the im ports in question in order to honour their commitment. In other words	 contracts by private importers concluded before 2 December	 1978 were allowed to be worked out after that date without affecting the principle that as from 2 Decem ber	 1978	 the business of importing such oils belonged exclusively to the State Trading Corporation. This is the background in which the questions raised before us need to be considered. First	 as to the contention that both the reasons set forth: in the exemption notifications under section 25(2) of the Act are without foundation. It seems to us that the two reasons set forth in the exemption notifications can consti tute a reasonable basis for those notifications. It does appear from the material before us that international prices were fluctuating	 the although they may have shown a percep tible fall there was the apprehension that because of the history of fluctuation there was a possibility of their rising in the future. The need to protect the domestic market is always present	 and therefore encouragement had to be given to the imports effected by the State Trading Corpo ration by reducing the rate of customs duty levied on them. This involved a long term perspective	 since the exclusive monopoly to import these edible oils was now entrusted to the State Trading Corporation. What appears to have dominat ed the policy of the Government in issuing the exemption notifications was the consideration that the domestic prices 365 of vanaspati should be maintained at reasonable levels. It cannot be doubted that the entire edible oil market is an integrated one	 and that it is not reasonable to treat anyone of the edible oils or vanaspati in isolation. It is well accepted fact that vanaspati manufacturers constitute a powerful organised sector in the edible oil market	 and a high vanaspati price would encourage an unauthorised diver sion of the edible oils to vanaspati manufacturing units	 resulting in a scarcity in the edible oil market	 giving rise to erratic prices and depriving consumers of access to edible oils. The need for preventing vanaspati prices ruling high was also to prevent people normally using vanaspati from switching over to other edible oils	 thus leading to an imbalance in the oil market. An overall view made it neces sary to ensure that domestic prices of vanaspati remained at reasonable levels. To all these considerations the learned Attorney General has drawn our attention	 and we cannot say that they are not reasonably related to the policy underly ing the exemption orders. So that the Government would have sufficient supplies of edible oil at hand in order to feed the market	 the learned Attorney General says	 it was con sidered desirable and in the public interest to reduce the rate of customs duty to five per cent on the imports made by the State Trading Corporation. Now it is the Central Govern ment which has to be satisfied	 as the authority appointed by Parliament under section 25(2)	 that it is necessary in the public interest to make the special orders of exemption. It has set out the reasons which prompted it to pass the or ders. In our opinion	 the circumstances mentioned in those notifications cannot be said to be irrelevant or unreasona ble. It is not for this Court to sit in judgment on the sufficiency of those reasons. The limitations on the juris diction of the Court in cases where the satisfaction has been entrusted to executive authority to judge the necessity for passing orders is well defined and has been long accept ed. It is true that the State dons the robes of a trader when it enters the field of commercial activity	 and ordi narily it can claim no favoured treatment. But there may be clear and good reason for making a departure. Viewed in the background of the reasons for granting a monopoly to the State Trading Corporation	 acting as an agent or nominee of the Central Government in importing the specified oils	 it will be evident that policy considerations rendered it necessary to make consummation of that policy effective by imposing a concessional levy on the imports. No such conces sion is called for in the case of the private importers who	 in any event	 are merely working out contracts entered into by them with foreign sellers before 2 December	 1978. 366 We are also not satisfied that any of the private im porters have made out that their business will be crippled or ruined in view of the rate of customs duty visited on their imports. The material before us is not sufficient to warrant any conclusion in their favour. As	 in our opinion	 the private importers are not enti tled to relief	 no question arises of considering whether the exemption orders should be struck down or their benefit extended in favour of the private importers also. The appeals and Petitions for Special leave to appeal as well as the writ petitions before us are dismissed	 but there is no order as to costs. R.S.S. Appeals and Petitions are dismissed.

Summary:
The appellants/writ petitioners are private importers of edible oils. Under the Import Policy of 1978 79	 the Govern ment canalised the import of edible oils through the State Trading Corporation. Some of the private importers who had entered into firm commitments with foreign suppliers	 and were now being denied permission to import the edible oils	 filed writ petitions in various High Courts. These writ petitions were allowed and they were granted licences to import the edible oils	 in order to honour their commit ments. From March 17	 1979 the import of edible oils was sub jected to differential rates of customs duty at the hands of private importers and the State Trading Corporation	 inas much as c oncessional rate of customs duty was levied on the imports by the State Trading Corporation under the order of exemp tion issued under section 25(2) of the . The order stated that in view of high international prices of vegetable oils and in order to keep the domestic prices at reasonable levels it was considered necessary to exempt the State Trading Corporation from part of the Customs duty. The appellants filed writ petitions in the High Court of Delhi complaining of the differential treatment accorded between the private importers and the State Trading Corpora tion. Similar writ petitions were filed in this Court di rectly. The High Court dismissed the writ petitions. Before this Court it was contended on behalf of the private importers that (i) there was no basis for the dif ferential duty set out in the exemption orders and no real or substantial nexus between the 357 differentiation made and the object of section 25(2); (ii) there was no real or substantial distinction between the private importers and the State Trading Corporation having regard to the object of the statute	 the nature of customs duty	 the rationale of section 25 and the professed object of the exemption orders under section 25(2); (iii) the State Trading Corporation could not be equated with the Central Government; (iv) assuming that the State Trading Corporation could be equated with the Central Government or that it was acting on behalf of the Central Government	 once the Government ventured into the commercial field it donned the robes of a trader	 and it could not therefore claim any special attribute or prefer ence for differentiation; (v) the differentiation proceeded on excessive classification	 and that resulted in violation of the doctrine of equality enshrined in article 14 of the Constitution; (vi) the concession must relate to the goods and not to the personality of the importer; and (vii) the allegation that the international prices of edible oils were high was inconsistent with the reality of the situation. Dismissing the appeals. special leave petitions and the writ petitions	 this Court. HELD: (1) The power conferred on the Central Government under section 25(2) of the Act is to be exercised by it in its subjective satisfaction. The exercise of the power is con trolled by the requirement in the sub section that the exemption order must contain a statement stating the circum stances of an exceptional nature under which the special exemption order has been considered necessary. The require ment is intended by the statute to ensure that the satisfac tion of the Central Government concerning the necessity of the order is not reached arbitrarily but flows from material relevant to the object for which the power has been con ferred. [361E G] (2) The limitations on the jurisdiction of the Court in cases where the satisfaction has been entrusted to executive authority to judge the necessity for passing orders is well defined and has been long accepted. [365E F] (3) Contracts by private importers concluded before 2 December	 1978 were allowed to be worked out after that date without affecting the principle that as from December	 1978	 the business of importing such oils belonged exclusively to the State Trading Corporation. This is the background in which the questions raised before the Court need to be considered. [364E] 358 (4) It is the Central Government which has to be satis fied	 as the authority appointed by Parliament under section 25(2)	 that it is necessary in the public interest to make the special order of exemption. It has set out the reasons which prompted it to pass the orders. It is not for this Court to sit in judgment on the sufficiency of those rea sons. [365D E] (5) The reasons set forth in the exemption notifications can constitute a reasonable basis for those notifications. International prices were fluctuating	 and although they may have shown a perceptible fall there was the apprehension that because of the history of fluctuations there was a possibility of their rising in future. The need to protect the domestic market is always present	 and therefore encour agement had to be given to the imports effected by the State Trading Corporation by reducing the rate of customs duty levied on them. [364F G] (6) It is true that the State dons the robes of a trader when it enters the field of commercial activity	 and ordi narily it can claim no favoured treatment. But there may be clear and good reason for making a departure. Viewed in the background of the reasons for granting a monopoly to the State Trading Corporation	 acting as an agent or nominee of the Central Government in importing the specified oils	 it will be evident that policy considerations rendered it necessary to make consummation of that policy effective by imposing a concessional levy on the imports. No such conces sion is called for in the case of private importers who	 in any event	 are merely working out contracts entered into by them with foreign sellers before 2 December	 1978. [365F H] S.T.C.v. Commercial Tax Officer	 Vishakapatnam	 [1964] 4 SCR 99; Heavy Engineering Mazdoor Union vs State of Bihar	 ; Andhra Pradesh State Road Transport Corpo ration vs Income Tax Officer; 	 ; Vidarbha Housing Board vs Income Tax Officer City & Refund Circle	 Nagpur	 ; L. 1. Escorts Ltd.; 	 	 344; State of J & K vs T.N. Khosa; 	 	792; Mohammad Shujat Ali vs Union of India	 ; 	 470 and In Re The Special Courts Bill	 1978	 	 561 2	 referred to.