Punjab-Haryana High Court
Brij Bassi Hitech Udyog Ltd. vs State Of Punjab And Ors. on 11 March, 1997
Equivalent citations: (1997)117PLR538
Author: Iqbal Singh
Bench: Iqbal Singh
JUDGMENT G.S. Singhvi, J.
1. Whether the Sales Tax Tribunal constituted under the Punjab General Sales Tax Act, 1948, is required to record reasons and communicate the same to the affected party while exercising appellate/revisional powers under the Act of 1948 is one of the main issues which arises for adjudication in this petition filed by the petitioner for quashing of the orders passed by the Excise and Taxation Commissioner, Special Cell, (I), the Joint Director (Enforcement) and the Sales Tax Tribunal, Punjab.
2. Before examining the aforementioned issue, it will be useful to notice some of the facts. The petitioner entered into a contract with M/S Bharat Yantra Nigam Ltd. for instalment of Fire Fighting System at the oil terminal, of Indian Oil Corporation works at Bathinda. For the execution of that contract the petitioner imported machinery from outside the State of Punjab. The transport carrier through which the machinery was being brought to Bathinda was checked at the Sales Tax Check Barrier, Doomanwali. The officer incharge of the barrier detained the goods on the ground that the driver of the vehicle could not produce complete documents. He initiated action Under Section 14-B and imposed penalty amounting to Rs, 1,50,000/- Under Section 14-B(7) of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as 'the Act'). The Deputy Excise and Taxation Commissioner, before whom the petitioner filed appeal Under Section 20(1) of the Act, affirmed the order passed by the Excise and Taxation Officer. The Sales Tax Tribunal upheld the orders passed by the Excise and Taxation Officer as well as the Deputy Excise and Taxation Commissioner when it dismissed the second appeal filed by the petitioner.
3. The petitioner has challenged the imposition of penalty Under Section 14-B(7) on the ground that the Excise and Taxation, Officer did not have the jurisdiction to pass the order imposing penalty. It has also challenged the order of the Excise and Taxation Officer on the ground of violations of the principles of natural justice, non-application of mind and violation of the provisions of the Act. The orders passed by the Deputy Excise and Taxation Commissioner as well as the Tribunal have beep challenged on the ground that these authorities have not assigned reasons for dismissing appeals filed by the petitioners and, therefore, their orders are liable to be quashed being violative of the principles of natural justice.
4. After hearing Shri K.L. Goyal and Smt. Charu Tuli, we. have come to the conclusion that the order passed by the Tribunal dismissing the appeal filed by the petitioner deserves to be set aside in the short ground that it is a non-speaking order and, therefore, it is contrary to the principles of natural justice. We are also of the opinion that in view of the aforementioned conclusion, it is not necessary to deal with other grounds raised in the petition for challenging the orders passed by the Excise and Taxation Officer and the Deputy Excise and Taxation commissioner.
5. The principles of natural justice are multi-dimensional in their application. The Courts have applied different facets of the principles of natural justice while exercising the powers of judicial review. During recent past a new dimension has been added to the principles of natural justice, namely, that every quasi-judicial authority and every tribunal must not only record reasons in support of the order they make but such reasons should be communicated to the affected party. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure, The necessity of; giving reasons flows from the concept of rule of law which constitutes one of the corner stones of our constitutional set up. The administrative authorities charged with the duty to act judicially cannot decide the matters on considerations of policy or expediency. The requirement of recording of reasons by such authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimise arbitrariness in the decision making process. Another reasons which makes it imperative for the quasi-judicial authorities to give reasons is that their orders are subject to judicial review not only by way of departmental appeals and revisions but also by way of writ petition under Article 226 of the Constitution. Such decisions are also liable to be challenged by way of appeal under Article 136 of the Constitution. The High Courts and the Supreme Court have the powers to issue writ of certiorari to quash the decision of the quasi-judicial authorities. This power can be effectively exercised only if the impugned order contains reasons. If the order is bereft of reasons, the Courts cannot examine the correctness of the order tinder challenge and We cannot countenance a situation in which the administrative authorities may stultify the power to judicial review vesting in the High Courts and the Supreme Court simply by not recording reasons in support of their decisions.
6. Having indicated the theoretical aspect of the requirement of passing of speaking order by quasi-judicial authorities we may take notice of some important decisions on the subject.
7. In Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala, AIR 1961 SC 1669, a Constitution Bench of the Supreme Court quashed the order passed by the Central Government in exercise of its appellate powers Under Section 111(3) of the Companies Act, 1956 only on the ground that reasons had not been given in support of the order passed by the Deputy Secretary who heard the appeals. The Supreme Court observed:
"If the Central Government acts as a tribunal exercising judicial powers and the exercise of that power is subject to the jurisdiction of this Court under Article 136 of the Constitution we fail to see how the power of this Court can be effectively exercised if reasons are not given by the Central Government in support of its order."
8. In Madhya Pradesh Industries Ltd. v. Union of India, AIR 1966 SC 671, the order passed by the Central Government dismissing the revision petition filed under Rule 55 of the Mineral Concession Rules, 1960, was upheld by a majority judgment. The argument that the order should be quashed being contrary to the principles of natural justice, inasmuch as, it did not contain reasons was rejected. Bachawat, J. who delivered the majority judgment rejected the said contention on the ground that the Central Government had agreed with1 the reasons given by the State Government in its order. He also distinguished the decision of the Constitution Bench in Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala (supra) on the ground that in the said case the Central Government had reversed the decision appealed against without giving reasons. In his minority judgment Subba Rao, J. observed:-
"In the context of a welfare State, administrative tribunals have come to stay. Indeed, they are the necessary concomitants of a welfare State. But arbitrariness in their functioning destroys the concept of a welfare State itself. Self-discipline and supervision exclude or at any rate minimize arbitrariness. The least a tribunal can do is to disclose its mind. The compulsion of disclosure guarantees consideration. The condition to give reasons introduces clarity and excludes or at any rate minimizes arbitrariness; it gives satisfaction to the party against whom the order is made; and it also enables an appellate or supervisory court to keep the tribunals within bounds. A reasoned order is a desirable condition of judicial disposal.
If tribunals can make orders without giving reasons, the said power in the hands of unscrupulous or dishonest officers may turn out to be a potent weapon for abuse of power. But, if reasons for an order are to be given, it will be an effective restraint on such abuse, as they order, if it discloses extraneous or irrelevant considerations, will be subject to judicial scrutiny and correction. A speaking order will at its best be a reasonable and at its worst be at least a plausible one. The public should not be deprived of this only safeguard. There is an essential distinction between a court and an administrative tribunal. A Judge is trained to look at things objectively,: uninfluenced by considerations of policy or expediency; but an executive officer generally looks at things from the-standpoint of policy and expediency. The habit of mind of an executive officer so formed cannot be expected to change from function to function or from act to act. So it is. essential that some restrictions shall be imposed on tribunals in the matter of passing orders affecting the rights of parties; and the least, they should do is to give reasons for their orders. Even in the case of appellate courts invariably reasons are given, except when they dismiss an appeal, or revision in limine and that is because the appellate or revisional court agrees with the reasoned judgment of the subordinate court or there are no legally permissible grounds to interfere with it. But the same reasoning cannot apply to an appellate tribunal, for as often as not the order of the first tribunal is laconic and does not give any reasons."
"With reference to an order of affirmance the learned Judge observed that where the original tribunal gives reasons, the appellate tribunal may dismiss the appeal or the revision, as the case may be, agreeing with those reasons and that what is essential is that reasons shall be given by an appellate or revisional tribunal expressly or by reference to those given by the original tribunal.
9. In Bhagat Raja v. Union of India, AIR 1967 SC 1606, a Constitution Bench examined the correctness of the order passed by the Central Government in exercise of its revisional powers Under Section 30 of the Mines and Minerals (Regulation and Development) Act, 1957 read with Rules 54 and 55 of the Mineral Concession Rules, 1960.The Constitution Bench reiterated the requirement of recording of reasons and communication; thereof by quasi-judicial authorities and the tribunals and observed:-
"The decision of tribunals in India are subject to the supervisory powers of the High Courts under Article 227 of the Constitution and of appellate powers of this Court under Article 136. It goes without saying that both the High Court and this Court are placed under a great disadvantage if no reasons are given and. the revision is dismissed curtly by the use of the single word "rejected", or "dismissed." In such a case, this Court can, probably only exercise Us appellate jurisdiction satisfactorily by examining the entire records of the case and after giving, a hearing come to its conclusion on the merits of the appeal. This will certainly be a very unsatisfactory method of dealing with the appeal."
10. In Travancore Rayon Ltd. v. Union of India, AIR 1971 SC 862, the Supreme Court once again outlined the necessity of recording of reasons and communication thereof by making the following observations:-
"The Court insists upon disclosure of reasons in support of the order on two grounds; one, that the party aggrieved in proceedings 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."
11. In State of Gujarat v. Patgel Raghav Natha and Ors., AIR 1969 SC 1297, a three Judges Bench of the Supreme Court dealt with the issue in the context of an order passed by the Commissioner in exercise of powers Under Section 211 of the Bombay Land Revenue Code, 1879, The Supreme Court extracted the order passed by the Commissioner which was under:-
"From this inspection the contentions of the Municipality as to the existence of the various roads as well as the nature of the Kharaba land have been proved beyond doubt.
In light of the above arguments as well as the site inspection and the papers of the case, I set aside the order of the Collector granting N.A Permission. I consider, on weighing all evidence-cited above, that the land does hot belong to Shri Raghav Natha."
12. Their Lordships held that the order passed by the Commissioner was liable to be quashed on the ground that he did not contain reasons and observed:-
"We are also of the opinion that the order of the Commissioner should be quashed on the ground that he did not give any reasons for his conclusions. We have already extracted the passage above which shows that after reciting the various contentions he baldly stated his conclusions without disclosing his reasons. In a matter of this kind the, Commissioner should indicate his reasons, however briefly, so that an aggrieved party may carry the matter further if so advised."
13. In State of Punjab etc. v. Bakhtawar Singh and Ors., AIR 1972 SC 2083, the Apex Court upheld two judgments of this Court quashing the orders by which the respondents had been removed from the office of Members Punjab State Electricity Board Under Section 10(1)(e)(iv). After quoting the abstract the order passed in the case, the Supreme Court observed:-
"Now coming to Shri Rajinder Pal Abrol, all the charges levelled against him related to alleged acts and omissions prior to his appointment as a member of the board. That apart, the order of the Minister removing him does not disclose that he had applied his mind to the material on record. That order does not show what charges against Shri Abrol have been established. The order reads;
"I have gone through the charges and the explanation furnished by Shri R.P. Abrol. From the material on the file, I am definitely of the opinion that he is not a fit person to be retained as part-time member of the Electricity Board. I, therefore, order that Shri Abrol may be removed from membership under Sub-clause (iv) of Clause (e) of Sub-section.(1) of Section 10 of the Electricity Supply Act, 1948.
CM. may kindly see. After CM. has seen, immediate orders be issued.' Sd/- Sohan Singh Basi, I.P.M. 17.7.1969".
This order cannot be said to be a speaking order. It is arbitrary to the core. Such an order cannot be upheld. Hence it is not necessary to go into the other contentions advanced on behalf of Shri Abrol."
14. The requirement of recording of reasons by the Industrial Tribunal constituted under the Industrial Disputes Act, 1947 has also been insisted upon by the Supreme Court as would appear from the following observations made in Wool-combers of India Ltd. v. Woolcombers Workers' Union and Anr., AIR 1973 SC 2758:-
"The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious, unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of personal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations. Second, it is a well-known principle that justice should not only be done but should also appear to be done. Unreasoned conclusions may be just but they may not appear to be just, to those who read them. Reasoned conclusions, on the other hand, will have also the appearance of justice, third, it should be remembered that an appeal generally lies from the decision of judicial and quasi-judicial authorities to this Court by special leave granted under Article 136. A judgment which does not disclose the reasons will be of little assistance to the Court."
15. In Ajantha Industries and Ors. v. Central Board of Direct Taxes, New Delhi and Ors., AIR 1976 SC 437, the requirement of recording of reasons Under Section 127(1) of the Income Tax Act, 1961 has been held to be mandatory. In that case the Supreme Court observed:-
"When law requires reasons to be recorded in a particular order, affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated."
16. In Siemens Engineers and Manufacturing Co. of India Limited v. Union of India, AIR 1976 SC 1785, Bhagwati, J., as he then was, made some very important observations on the requirement of recording of reasons and communication thereof by the revisional authorities constituted under various enactments. His lordship observed:-
"If courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of cases, with the proliferation of administrative Law they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals, exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law."
17. The requirement of recording of reasons has also been read as implicit in the exercise of powers Under Sections 37 and 38 of the Monopolies and Restrictive Trade Practices Act, 1969. In Mahindra and Mahindra Ltd. v. The Union of India and Anr., AIR 1979 SC 798, the Supreme Court quashed the order passed by the Commission by observing as under:-
"There are two conditions precedent which must be satisfied before a cease and desist order can be made by the Commission in regard to any trade practice complained of before it. One is that the Commission must find that the trade practice complained of is a restrictive trade practice and the other is that where such finding is reached, the Commission must further be satisfied that none Of the gateways pleaded in answer to the complaint exists.
The Order is clearly vitiated by an error of law apparent on the face of the record if it contains only the final and operative order made by the Commission and does not record any reasons whatsoever in support of it."
In S.N. Mukherjee v. Union of India, AIR 1990 SC 1984, a Constitution Bench examined the Indian, American, English and Australian law on the subject and after reviewing several decisions of the Apex Court and foreign Courts it concluded:-
"The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American Courts. An important consideration which has weighed with the Court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the, decisions; and (Hi) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary Courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the stand point of policy and expediency.
Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decisions-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a Court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge."
18. In Shanti Prasad Agarwalla and Ors. v. Union of India and Ors., AIR 991 SC 814, the decision of the Central Government rejecting an application filed by the petitioners for seeking consent of the Central Government for the purpose of eviction of Consulate General of USSR from the premises belonging to the petitioners was challenged by way of writ petition filed under Article 32 of the Constitution. Their Lordships held that the rejection of the application only by use of the expression 'political grounds' did not satisfy the requirement of speaking order. There Lordships quashed the order and remanded the case to the Central Government for fresh decision. While doing so, the Apex Court observed;-
"It is not clear what-political considerations necessitated the rejection of the application. The Central Government while considering the application Under Section 86 of the code must decide the application in accordance with the provisions of the section itself and state clearly and intelligibly its reasons for rejecting the application."
19. In his dissenting opinion in Krishna Swami v. Union of India, (1992) 4SCC 605, K. Ramaswamy, J. brought out the importance of the recording of reasons in he following words:-
"Undoubtedly, in a parliament democracy government by rule of law, any action, decision or order of any statutory/public authority/functionary must be founded upon reasons stated in the order or starting from the record. Reasons are the links between the material, the foundation for their erection and the actual conclusions. They would also demonstrate how the mind of the maker was activated and actuated and their rational nexus and synthesis with the facts considered and the conclusions reached. Lest it would be arbitrary, unfair and unjust, violating Article 14 or unfair procedure offending Article 21."
20. In M.L. Jaggi v. Mahanagar Telephones Nigam Ltd. and Ors., (1996) 3 SCC 119, a two Judge Bench of the Supreme Court held that an award passed Under Section 7-B of the Telegraph Act, 1885 is liable to be nullified if it does not contain reasons. In that decision the Court observed:-
"It is, thus settled law that reasons are required to be recorded when it affects the public interest. It is seen that Under Section 7-B, the award is conclusive when the citizen complains that he was not correctly put to bill for the calls be had made and disputed the demand for payment. The statutory remedy opened to him is one provided Under Section 7-B of the Act, By necessary, implication, when the arbitrator decides the dispute Under Section 7-B, he is enjoined to give reasons in support of his decision since it is final and cannot be questioned in a court of law. The only obvious remedy available to the aggrieved persons against the award is judicial review under Article 226 of the Constitution. If the reasons are not given, it would be difficult for the High Court to adjudge as to under what circumstances the arbitrator came to his conclusion that the amount demanded by the Department is correct or the amount disputed by the citizen is unjustified. The reasons would indicate as to how the mind of the arbitrator was applied to the dispute and how he arrived at the decision. The High Court, though does not act in exercising judicial review as a court of appeal but within narrow limits of judicial review it would consider the correctness and legality of the award."
21. What has happened in the present case is that the Tribunal has in the first instance made reference to the orders passed by the Excise and Taxation Officer and the Deputy Excise and Taxation Commissioner. Thereafter it noticed the rival contentions and in the last paragraph it recorded the conclusion in the following words:-
"After going through the file and considering the arguments advanced by the parties, I am of the considered view that imposition of a penalty of Rs. 1,50,000/- Under Section 14-B(7) of the Act ibid was valid and accordingly the appeal is dismissed."
22. A bare reading of the above extracted portion of the impugned order shows that the Tribunal has not recorded any reason in support of its conclusion that the imposition of penalty is justified. This order depicts complete non-application of mind by the Tribunal to the grounds raised in the memo of appeal and the contentions urged on behalf of the petitioner. Even this much has not been recorded by the Tribunal that it agrees with the findings recorded by the Excise and Taxation Officer and the Deputy Excise and Taxation Commissioner and that the appeal is meritless. In our opinion, the manner in which the Tribunal has decided the appeal Cannot in any manner be treated as satisfactory. The learned Tribunal should have kept in view the fact that the order of penalty passed by the Excise and Taxation Officer had grave consequences upon the business of the petitioner and, therefore, it was its duty to deal with the points raised on behalf of the petitioner. That was the least which the Tribunal should have done while exercising quasi-judicial powers. Failure of the Tribunal to do so leads to an irresistible inference that the order passed by it is a non-speaking order and, therefore, it is contrary to the principles of natural justice.
23. Accordingly, the writ petition is allowed. The order Annexure-P.1 is quashed. The Sales Tax Tribunal, Punjab is directed to decide the appeal afresh after giving opportunity of hearing to the petitioner. The tribunal shall pass a speaking order while deciding the appeal of the petitioner.