Holding

Non‑issuance of a show‑cause notice, though a breach of natural justice, does not invalidate a recovery order where no prejudice is caused and the statutory provision (s.154) retrospectively withdraws the exemption.

Summary

The appellant, Mis. Dhrampal Satyapal Ltd., claimed exemption from excise duty under a 1999 notification for North‑Eastern industrial units, which was later withdrawn retrospectively by Section 154 of the Finance Act, 2003. The Department issued recovery orders without a prior show‑cause notice, which the appellant argued violated Section 11A of the Central Excise Act and the principles of natural justice. The Court examined whether the pre‑deposit order of the High Court could operate as res judicata, whether a show‑cause notice was mandatory, and whether the earlier judgment in J.K. Cotton conflicted with R.C. Tobacco. Relying on R.C. Tobacco, the Court held that the statutory amendment rendered the benefit void and that the non‑issuance of notice did not cause any prejudice. Consequently, the recovery orders were upheld and the appeals were dismissed. The decision reaffirmed that a breach of natural‑justice procedures does not invalidate an order where no prejudice is shown.

Issues considered

Whether the order of the Single Judge at the pre‑deposit stage can operate as res judicata on the merits.
Whether recovery proceedings can be initiated without a show‑cause notice under Section 11A of the Central Excise Act.
Whether there is a conflict between the three‑judge judgment in J.K. Cotton and the two‑judge judgment in R.C. Tobacco.

Legislation cited

Subjects

natural justiceaudi alteram partemshow‑cause noticeprocedural fairnessprejudice testSection 11ASection 154retrospective taxexcise dutypromissory estoppelres judicataadministrative law

Judgment

[2015] 6 S.C.R. 437

MIS. DHARAMPAL SATYAPAL LTD. A
v.
DEPUTY COMMISSIONER OF CENTRAL EXCISE,
GAUHATI & ORS.
(Civil Appeal Nos.4458-4459 of 2015) B

MAY 14, 2015
[A.K. SIKRI AND ROHINTON FALi NARIMAN, JJ.]
Central Excise Act, 1944 - s. 11A - Finance Act, 2003 ~ s. c
154- Initiation of recovery proceedings without show cause
notice - Exemption of excise duty for certain tobacco
products to new industrial units in North-Eastern region -
Said exemption withdrawn - Withdrawal challenged by
assessee - Subsequently, vide s. 154, withdrawal of benefit D
effected from retrospective effect - In R. C. Tobacco's case
this Court upheld the constitutional validity of s. 154 -
Thereafter, recovery order passed by the Department against
assessee for the benefit drawn by the assessee - Said order
passed without issuing notice - Challenge to, on the ground E
of violation of principles of natural justice - Held: Every
violation of a facet of natural justice may not lead to the
conclusion that order passed is always null and void- Validity
of the order has to be decided on the touchstone of 'prejudice'
- Ultimate test is always the same, viz., the test of prejudice F
or the test of fair hearing- On facts, issuance of notice would
be an empty formality and the case stands covered by
'useless formality theory' - Thus, non-issuance of notice
before sending communication did not result in any prejudice G
to assessee and it may not be feasible to direct the
Department to take fresh action after issuing notice as that
would be a mere formality.

Natural justice - Concept and doctrine of - ExplaiRed and
discussed. H
437
438 SUPREME COURT REPORTS [2015] 6 S.C.R.

A Dismissing the appeals, the Court

HELD: 1.1 The principles of natural justice have
sound jurisprudential basis. Since the function of the
judicial and quasi-judicial authorities is to secure justice
B with fairness, these principles provide great humanising
factor intended to invest law with fairness to secure
justice and to prevent miscarriage of justice. The
principles are extended even to those who have to take
administrative decision and who are not necessarily
C discharging judicial or quasi-judicial functions. The
principles of natural justice are grounded in procedural
fairness which ensures taking of correct decision and
procedural fairness is fundamentally an instrumental
good, in the sense that procedure should be designed
D to ensure accurate or appropriate outcomes. In fact,
procedural fairness is valuable in both instrumental and
non-instrumental terms. It is on the said jurisprudential
premise that the fundamental principles of natural
justice, including audi alteram partem, have developed.
E It is for this reason that the courts have consistently
insisted that such procedural fairness has to be adhered
to before a decision is made and infraction thereof has
led to the quashing of decisions taken. In many statutes,
F provisions are made ensuring that a notice is given to a
person against whom an order is likely to be passed
before a decision is made, but there may be instances
where though an authority is vested with the powers to
pass such orders, which affect the liberty or property of
G an individual but the statute may not contain a provision
for prior hearing. But what is important to be noted is
that the applicability of principles of natural justice is
not dependent upon any statutory provision. The
principle has to be mandatorily applied irrespective of
H the fact as to whether there is any such statutory
MIS. DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 439
CENTRAL EXCISE, GAUHATI

provision or not. [Para 22, 24, 25] [455-D-F; 457-H; 458- A
A-F]

1.2 It becomes clear that the opportunity to
provide hearing before making any decision was
considered to be a basic requirement in the Court B
proceeding. Later on, this principle was applied to other
quasi-judicial authorities and other tribunals and
ultimately it is now clearly laid down that even in the
administrative actions, where the decision of the
authority may result in civil consequences, a hearing C
before taking a decision is necessary. Therefore, there
was a requirement of issuance of show-cause notice by
the Deputy Commissioner before passing the order of
recovery, irrespective of the fact whether s. 11A of the
Act is attracted in the instant case or not. [Paras 27, 29] D
[462-8-C; 463-F]

1.3 Even if it is found by the Court that there is a
violation of principles of natural justice, the Courts have
held that it may not be necessary to strike down the E
action and refer the matter back to the authorities to
take fresh decision after complying with the procedural
requirement in those cases where non-grant of hearing
has not caused any prejudice to the person against
whom the action is taken. Therefore, every violation of a F
facet of natural justice may not lead to the conclusion
that order passed is always null and void. The validity
of the order has to be decided on the touchstone of
'prejudice'. The ultimate test is always the same, viz.,
the test of prejudice or the test of fair hearing. [Para 31] G
[465-E-G]

1.4 As regards whether it is open to the authority,
which has to take a decision, to dispense with the
requirement of the principles of natural justice on the H
440 SUPREME COURT REPORTS [2015] 6 S.C.R.

A ground that affording such an opportunity will not make
any difference, to put it otherwise, can the administrative
authority dispense with the requirement of issuing notice
by itself deciding that no prejudice would be caused to
the person against whom the action is contemplated,
B answer has to be in the negative. It is not permissible
for the authority to jump over· the compliance of the
principles of natural justice on the ground that even if
hearing had been provided it would have served no
useful purpose. The opportunity of hearing will serve
C the purpose or not has to be considered at a later stage
and such things cannot be presumed by the authority.
[Para 33] [467-B-E]

1.5 It cannot be denied that as far as Courts are
D concerned, they are empowered to consider as to
whether any purpose would be served in remanding the
case keeping in mind whether any prejudice is caused
to the person against whom the action is taken. Keeping
in view the said principles in mind, even when it is found
E that there is an infraction of principles of natural justice,
a further question is addressed as to whether any
purpose would be served in remitting the case to the
authority to make fresh demand of amount recoverable,
F only after issuing notice to show cause to the appellant.
In the facts of the instant case, it is found that such an
exercise would be totally futile having regard to the law
laid down in R.C. Tobacco's case.[Para 34-36] [468-D-E;
469-D-E]
G 1.6 The legal consequence of s. 154 is that the
amount with which the appellant was benefitted under
the said Notification becomes refundable. Even after the
notice is issued, the appellant cannot take any plea to
H retain the said amount on any ground whatsoever as it
is bound by the dicta in R.C. Tobacco's case. Likewise,
MIS. DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 441
CENTRAL EXCISE, GAUHATI

even the officer who passed the order has no choice A
but to follow the dicta in R.C. Tobacco's case.
Quantification of the amount is not disputed at all. In
such a situation, issuance of notice would be an empty
formality and that the case stands covered by 'useless
formality theory'. Therefore, non-issuance of notice B
before sending communication did not result in any
prejudice to the appellant and it may not be feasible to
direct the respondents to take fresh action after issuing
notice as that would be a mere formality. [Paras 37,39]
[469-G-H; 470-A; 471-A-B] C

1.7 The judgment in J.K. Cotton's case was
-specifically taken note of and discussed in R. C.
Tobacco's case. The judgment in R.C. Tobacco's case
would reflect that the appellant therein had specifically D
relied upon the judgment in J.K. Cotton's case in
support of the submission that retrospectivity was
harsh and excessive since there is, in fact, a
retrospective imposition of excise duty. Another E
submission, that the demand which was raised could
not be sustained as it was made without issuing any
show-cause notice and was in contravention of s.11A
of the Act. The Court, however, did not find any merit
in the submissions. When the Court was conscious of F
the principle laid down in J.K. Cotton's case and
explained the same in a particular manner while
deciding the appeal in R.C. Tobacco's case, it cannot
be argued that the judgment in R.C. Tobacco runs
contrary to J.K. Cotton's case.[Para 40A] [471-C-G] G
R. C. Tobacco Private Ltd. & Anr v. Union of India &
Anr. 2005 (3) Suppl. SCR 342 : (2005) 7 sec 725; Ml
s. J.K. Cotton Spinning and Weaving Mills Ltd. v. Union
H
442 SUPREME COURT REPORTS [2015) 6 S.C.R.

A of India 1988 SCR 700 : (1987) Supp SCC 350;
Collector of Central Excise, Patna & Ors. v. I. T.C.
Limited &Anr. (1995) 2 SCC 38; Mohinder Singh Gill &
Anr. v. The Chief Election Commissioner, New Delhi &
Ors. 1978 (2) SCR 272: (1978) 1 SCC 405; Cooper v.
B Sandworth Board of Works (1863) 14 GB (NS);
Managing Director, ECIL, Hyderabad & Ors. v. B.
Karunakar& Ors. 1993 (2) Suppl. SCR 576: (1993) 4
SCC 727; C.B. Gautam v. Union of India & Ors. 1992
(3) Suppl. SCR 12: (1993) 1SCC78; Maneka Gandhi
c v. Union of India & Anr. 1978 (2) SCR 621: (1978) 1
SCC 248; Maharashtra State Financial Corporation v.
Mis. Suvarna Board Mills &Anr. 1994 (2) Suppl. SCR
754: (1994) 5 SCC 566; East India Commercial
Company Ltd., Calcutta & Anr. v. The Collector of
D
Customs, Calcutta AIR 1962 SC 1893: 1963 SCR 338;
U.0.1. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.
1988 (3) SCR 838: (1988) 3 SCC 348;' Morarji Goculdas
B&W Co. Ltd. & Anr. v. U.0.1. & Ors. (1995) Supp 3
E SCC 588; Metal Forgings &Anr. v. U. 0.1. & Ors. (2003)
2 SCC 36; U.0.1. & Ors. v. Tata Yodogawa Ltd. &Anr.
19.88 (38) ELT 739 (SC); Malloch v. Aberdeen
Corporation (1971) 1WLR1578at1595; Cinnamond
v. British Airports Authority (1980) 1 WLR 582 at 593;
F General Medical Council v. Spackman 1943 AC 627;
The Board of High School and Intermediate Education,
U.P. & Ors. v. Kumari Chittra Srivastava & Ors. AIR
1970 SC 1039: 1970 (3) SCR 266: 1970) 1SCC 121;
Escorts Farms Ltd. (Previously known as Mis. Escorts
G Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon
Division, Nainital, U.P. &Ors. 2004 (2) SCR 543: (2004)
4 sec 281 - referred to.
Case Law Reference
H 2005 (3) Suppl. SCR 342 Referred to. Para 5
M/S. DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 443
CENTRAL EXCISE, GAUHATI

1988 SCR 700 Referred to. Para 9 A
(1995) 2 sec 38 Referred to. Para 16
1978 (2) SCR 272 Referred to. Para 20
(1863) 14 GB (NS) Referred to. Para 25
1993 (2) Suppl. SCR 576 Referred to. Para 25 B
1992 (3) Suppl. SCR 12 Referred to. Para 26
1978 (2) SCR 621 Referred to. Para 27
1994 (2) Suppl. SCR 754 Referred to. Para 27
1963 SCR 338 Referred to. Para 28
1988 (3) SCR 838 Referred to. Para 28
c
(1995) Supp 3 sec 588 Referred to. Para 28
(2003) 2 sec 36 Referred to. Para 28
1988 (38) ELT 739 (SC) Referred to. Para 28
Referred to. Para 31 D
(1971) 1 WLR 1578
(1980) 1 WLR 582 Referred to. Para 31
1943 AC 627 Referred to. Para 33
1970 (3) SCR 266 Referred to. Para 33
2004 (2) SCR 543 Referred to. Para 38 E
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 4458 - 4459 of 2015.

From the Judgment and Order of the High Court of
Gauhati dated 05.06.2012 and 01.12.2011 in Review Petition F
No. 176560 of 2012 in Central Excise Tax Reference No. 1
of 2008 and Central Excise Tax Reference No. 1 of 2008
respectively.

Mukul Rohtagi, Rupesh Kumar, Ms. Madhvi Diwan, G
Charul Sarin, B. Krishna Prasad for the Appellant.

Soli J. Sorabjee, Preetesh Kapur, S. Kashyap, Abaya
Kashyap, Raghav Narayan (For Mitter & Mitter Co.), Gopal
Singh, Corporate Law Group for the Respondents. H
444 SUPREME COURT REPORTS [2015) 6 S.C.R.

A The Judgment of the Court was delivered by

A.K. SIKRI, J. Leave granted.

2. Union of India, vide Memorandum dated December
24, 1997, unveiled a new industrial policy for the North-
8
Eastern region. In the said policy, in order to give stimulation
to the development of industrial infrastructure in the North-
Eastern region, the said region was made tax free zone for
a period of ten years giving incentives to those who wanted
c to establish industries in that region. Pursuant thereto, the
Notification dated July 08, 1999 was issued granting new
industrial units that had commercial production on or after
December 24, 1997 and certain types of industrial units that
increased their installed capacity after that date, exemption
D on goods cleared from units located in growth centres and
integrated infrastructure centres.

3. The aforesaid Notification was issued under the
provision of Central Excise Act, 1944 as well as Additional
E Duties of Excise (Goods of Special Importance) Act, 1957
and Additional Duties of Excise (Textiles and Textile Articles)
Act, 1978. However, on December 31, 1999, another
Notification was issued whereby exemption of central excise
was withdrawn in respect of goods falling under Chapter
F 21.06 (pan masa/a) and Chapter 24 (tobacco and tobacco
substitutes, including cigarettes, chewing tobacco etc.).

4. This withdrawal Notification was challenged by the
appellant by filing the writ petition in the High Court of
G Gauhati. The learned Single Judge dismissed the writ
petition. However, appeal preferred. by the appellant was
allowed by the Division Bench vide judgment dated
December 03, 2012. In nutshell, the High Court held that
the principal of Promissory Estoppel shall apply and once a
H promise was given by the Union of India assuring that no
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 445
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.]

such duty would be charged for a period of ten years, it was A
not open for the Union of India to withdraw. the same.
Challenging that judgment, Union of India filed petitions for
special leave. Leave was granted and the petitions were .
registered as Civil Appeal Nos. 8841-8844 of 2003.
B
5. After the filing of the aforesaid appeals, certain
subsequent events took place. It so happened that vide
Section 154 of the Finance Act, 2003 (hereinafter referred
to as the 'Act of 2003'), withdrawal of the benefit was effected
from retrospective effect. Effect thereof was to withdraw the C
benefit given under the Notification issued earlier. Validity .
of Section 154 was questioned and the issue was considered
by this Court in R. C. Tobacco Private Ltd. & Anr. v. Union
of India & Anr.' This Court upheld the constitutional validity
of the aforesaid provision and repelled the challenge so laid. D
The effect was to disentitle the appellant and other similarly
. situated from getting any such benefit by virtue of Section
154 of the Act of 2003 and knocking down the basis of the
judgment of the High Court, which lost its validity on the
aforesaid ground. E

6. So far so good. The grievance of the appellant
and other similarly situated industries for not extending the
benefit of Notification dated July 08, 1999 is buried down.
However, after notifying Section 154 of the Act of 2003, which F
had nullified the effect of Notification No. 32 of 1999
retrospectively thereby annulling the effect thereof altogether,
respondent No.1 herein passed recovery order dated June
03, 2003 for recovery of a sum of 2,93,43,244 (rupees two
crores ninety three lakhs forty three thousand two hundred G
and forty four only) from the appellant, which was the benefit
that had been drawn by the appellant for the period
November 1999 till February 2001 in terms of the Notification
No. 32of1999. By another order dated June 06, 2003 issued H
1
c2005) 1 sec 125
446 SUPREME COURT REPORTS [2015] 6 S.C.R.

A by respondent No.1 , the appellant was directed to pay the
excise duty for the said period for which the benefit had been
availed. He also rejected the pending claim of refund for
the period from March 2001 till May 31, 2003. These recovery
orders were challenged by the appellant by filing appeal
B before the Commissioner (Appeals). Along with the appeal,
the appellant also filed an application for interim order
seeking stay against the pre-deposit. On this application,
orders dated March 31, 2004 were passed by the
Commissioner (Appeals) directing the appellant to deposit
C entire duty amount within a period of thirty days. This order
of pre-deposit was challenged by the appellant by filing four
writ petitions in the High Court of Gauhati. The learned Single
Judge of the High Court, h~w;:;·;;:;o, .:!ismissed these writ
D petitions vide orders dated May 18, 2004. The appellant
carried this issue of pre-deposit to a higher forum in the form
of writ appeals before the Division Bench of the said Court.
Interim orders dated June 11, 2004 were passed in the writ
appeals directing the Commissioner (Appeals) not to dismiss
E the appeals preferred by the appellant before him for non-
deposit of the duty amount. In other words, interim stay
against the pre-deposit was given. The Commissioner
(Appeals) heard the appeals and passed the orders dated
June 15, 2005 deciding the appeals in favour of the appellant.
F He held that issuance of show-cause notice was mandatory
before a valid recovery of demand could be made from the
appellant and, thus, remitted the matter to the adjudicating
authority. After this final order was passed by the
Commissioner (Appeals), writ appeals of the appellant before
G the Division Bench were disposed of as infructuous in view
of the fact that the Commissioner (Appeals) had passed an
order on merits and, therefore, no cause survived which
required further adjudication in those appeals.

H 7. Insofar as ~he order of the Commissioner (Ap!Jeals)
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 447 ·
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.)

is concerned, both the appellant as well as the Revenue felt A
aggrieved thereby. The appellant was not satisfied with the
order of remand and the nature of relief granted even after
accepting that issuance of show-cause notice was mandatory
before passing a valid recovery of demand. The respondents
were aggrieved of the order passed on merit holding that B
show-cause notice was mandatory. Therefore, both the
appellant as well as the Revenue filed appeals aggrieved
against the order dated June 15, 2005 passed by the
Commissioner,{Appeals). The Customs Excise & Service
Tax Appellate Tribunal (for short 'CESTAT') decided these C
appeals vide common order dated My 28, 2007. It reversed
the orders of the Commissioner (Appeals), which resulted
in allowing the appeal filed by the Revenue and dismissing
the appeal preferred by the appellant. A perusal ·of the D
judgment of the CESTAT would reveal that it has primarily
referred to the judgment of this Court in R.C. Tobacco and
held that the matter stood concluded by the said judgment.
The appellant challenged the order of CESTAT by filing
Central Excise Tax Reference No. 1 of 2008 before the High E
Court of Gauhati. This Reference was cdismissed by the
High Court on December 01, 2011 on the ground of res
judicata holding that orders dated May 18, 2004 passed by
the Single Judge dismissing the writ petitions of the appellant
had attained finality. The appellant preferred Review Petition F
seeking review of the said order, which has also been
dismissed by the High Court on June 05, 2012. In the present
appeals, the appellant has challenged both the orders dated
December 01, 2011 passed in the Tax Reference as well as
the order dated June 05, 2012 passed in the Review Petition. G

8. From the brief narration of the background facts
mentioned above, it is apparent that the frontal attack of the
appellant against the recovery orders passed by the
respondents is premised on the plea that no such recovery H
448 SUPREME COURT REPORTS [2015] 6 S.C.R.

A proceedings could be initiated without a show-cause notice
under Section 11-A of the Excise Act. The appellant has also
taken a plea in these appeals that order of the Single Judge
at pre-deposit stage could not operate as res judicata on
merits and, therefore, dismissal of the Tax Reference by the
B High Court, and consequently the Review Petition, is clearly
erroneous and the High Court should have gone into the
merits of the issue decided by CESTAT.

9. As noted above, CESTAT has decided the case
C against the appellant on the ground that issue now raised is
covered by the judgment of this Court in R.C. Tobacco
(supra). As pointed out, in R.C. Tobacco (supra), this Court
has already upheld the validity of Section 154 of the Act of
2003 thereby taking away the benefit of Notification No. 32
D of 1999 retrospectively insofar as excisable goods falling
under Chapter 24 are concerned. Conscious of the position
that judgment in R.C. Tobacco (supra) stares at the face of
the appellant, Mr. Soli Sorabjee, learned senior counsel who
appeared for the appellant, has also made an endeavour to
E show that the said judgment in R.C. Tobacco (supra) is in
clear conflict with earlier three Judge Bench judgment of
this Court in Mis. J.K. Cotton Spinning and Weaving Mills
Ltd. v. Union of lndia 2 . Thus, following three issues have
F arisen for consideration in these appeals:

(a) Whether order of the Single Judge at pre-deposit
stage can operate as res judicata on merits?

(b) Whether recovery proceedings can be initiated without
G show-cause notice under Section 11A of the Excise
Act, which is mandatory?

(c) Whether there is a conflict between the three Judge
Bench judgment in J.K. Cotton (supra) and R.C.
H Tobacco (supra)?
2
(1987) supp sec 350
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 449
CENTRAL EXCISE, GAUHATI [AK. SIKRI, J.]

First issue is the basis for the judgment of the High A
Court.

10. For answering this issue,.it would be necessary
to take into account the complete implication thereof with
reference to the nature of recovery orders passed by B
respondent No.1, challenge thereto before the Commissioner
(Appeals) and interim order of pre-deposit passed by the
Commissioner (Appeals) on March 31, 2004 as also the
nature of challenge which was laid by the appellant against
the said order of pre-deposit in the writ petitions filed in the C
High Court, which were dismissed by the learned !'>:;igle
Judge on May 18, 2004.

11. By virtue of Notification dated July 08, 1999, the
appellant was granted refund of the duty deposited in cash D
up to February 2001. After the enactment of Section 154 of
the Act of 2003, recovery order dated June 03, 2003 was
passed for recovery of the aforesaid amount which had been
refunded to the appellant. Simultaneously, another order
dated June 06, 2003 was issued asking the appellant to pay E
duty on the ground that such goods were no more exempted
from payment of duty. In the appeals which were filed by
the appellants before the Commissioner (Appeals)
challenging the aforesaid orders, the Commissioner passed
interim orders dated March 31, 2004 directing the appellants F
to pay the amount demanded by the aforesaid orders. This
order dated March 31, 2004 of the Commissioner (Appeals)
reflects that the Commissioner went into various issues
raised by the appellant on the basis of which it was pleaded
by the appellant that it had a good case on merits and, G
therefore, condition of pre-deposit be waived. Apart from
the contention that no show-cause notice was given before
passing those orders, it was even argued that by making the
retrospective amendment in the form of Section 154 of the H
Act of 2003, the only effect was to validate the earlier actions
450 SUPREME COURT REPORTS [2015] 6 S.C.R.

A but no demand of refund of any amount could be made and
no refund of the amount already paid could be claimed. It
was also argued that the matter of recovery of amounts was
pending consideration of Central Board of Excise and
Customs (CBEC) as well as in the Gauhati High Court. All
B these issues were considered by the Commissioner
(Appeals), who gave his prima facie view thereupon
observing that the appellants did not have strong prima facie
case on merits resulting into the direction to deposit the entire
amount within thirty days.
c
12. The appellant had filed writ petitions against the
aforesaid order of the Commissioner (Appeals) with the
prayer that the direction of the Commissioner (Appeals) to
deposit the entire amount within thirty days be set aside and
D the prayer of pre-deposit of the appellant be accepted. No
doubt, while arguing for this relief, the appellant had raised
various contentions on the merits of the case in its endeavour
to demonstrate that it had a good case on merits. It is also
borne from the record that the learned Single Judge, while
E dismissing the writ petition, dealt with these issues, which
touched upon the merits of the main issue. That is the reason
that the order dated May 18, 2004 of the learned Single
Judge dismissing the writ petition of the appellant runs into
F 37 pages. Nevertheless, we find that the observations which
were made by the learned Single Judge on the issues raised
were only prima facie in nature and the prime focus of the
judgment rested on the core issue, namely, whether the
direction of the Commissioner (Appeals) directing the
G appellant to make deposit of the amount as a pre-condition
for hearing of the appeal was sustainable or not. The writ
petition was dismissed affirming the said order. Therefore,
any observations made by the learned Single Judge, which
were tentative in nature, could not be taken into consideration
H by the Division Bench in the impugned judgment, thereby
DHARAMPAL SATYAPAL LTD. v. DY COMMNR. OF 451
CENTRAL EXCISE, GAUHATI [AK. SIKRI, J.]

dismissing the Reference, invoking the principle of res A
judicata. The order of the learned Single Judge dismissing
the writ petition was challenged before the Division Bench
and the Division Bench passed interim orders in the writ
appeals not to dismiss the appeals preferred by the appellant
for non-deposit of the duty. In this backdrop, appeals were B
heard and appellant even partly succeeded. After the order
of the Commissioner (Appeals) dated June 15, 2005 deciding
the appeals partly in favour of the appellant, the writ appeals
which were pending before the Division Bench had become
infructuous and disposed of as such without going into the C
merit of the order passed by the learned Single Judge '!"his
is yet another reason to hold that the order of the learned
Single Judge could not be treated as res judicata.

13. Having regard to the aforesaid position, we heard D
the instant appeal on merits, namely, on the issue as to
whether it was mandatory to issue show-cause notice making
an order of recovery. The Commissioner (Appeals} has held
it to be mandatory and this order of the Commissioner
(Appeals) has been set aside by the CESTAT The Reference E
petition against the order of CESTAT, though wrongly is
dismissed on the ground of resjudicata, the impugned order
shows that it has mentioned that such show-cause notice
was not mandatory as held by the learned Single Judge by F
order dated May 18, 2004.

14. Learned senior counsel appearing for the
appellant as well as learned Attorney General agreed that in
this situation this Court may decide the aforesaid issue finally.
It is for this reason that we have heard counsel for the parties G
at length on this aspect of the matter.

15. The neat submission made by Mr. Soli Sorabjee
on behalf of the appellant was that the impugned demand
of the Assistant Commissioner was in the nature of H
452 SUPREME COURT REPORTS (2015] 6 S.C.R.

A adjudication whereby the amount demanded in the order
dated June 06, 2003 was crystallized and, therefore, there
could not have been demand for recovery of the stipulated
amount without issuing notice to the appellant and giving
the appellant herein right of hearing. He also submitted that
B merely because vires of Section 154 of the Act of 2003 were
upheld by this Court in R.C. Tobacco (supra) could not be a
ground to dispense with the aforesaid mandatory
requirements of principles of natural justice. His further
submission was that 'no prejudice' principle adopted by the
C CESTAT amounted to erroneous approach. He sought to
draw a fine distinction in this behalf by contending that the
Authority passing the order could not presume that prejudice
would not be caused to a person against whom the action is
contemplated and on that presumption dispense with the
0
mandatory requirement of issuance of the notice. According
to him, such a doctrine could be applied only by the courts
while dealing with such issues where it is found that the action
of the Authority was violative of principles of natural justice,
E the Court could still choose not to remit the case back to the
concerned Authority if it finds that it will be a futile exercise.

16. As a pure principle of law, we find substance and
force in the aforesaid submission of l\llr. Sorabjee. No doubt,
F the Department was seeking to recover the amount paid by
virtue of Section 154 of the Act of 2003 which was enacted
retrospectively and the constitutional validity of the said
Section had already been upheld by this Court in R.C.
Tobacco (supra) at the time of issuance of notice for
G recovery. Further, no doubt, the effect of the said amendment
retrospectively was to take away the benefit which was
granted earlier. However, the question is whether before
passing such an order of recovery, whether it was necessary
to comply with the requirement of show-cause notice? The
H appellant wanted to contend that Section 11A of the Excise
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 453
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.]

Act was applicable, which requires this procedure to be A
followed. Even if that provision is not applicable, it is
fundamental that before taking any adverse action against
a person, requirement of principles of natural justice is to be
fulfilled. This Court in Collector of Central Excise, Patna
& Ors. v. /. T.C. Limited & Anr. 3 has held that show-cause B
and personal hearing is necessary before saddling an
assessee with additional demand. It is also trite that when a
statute is silent, with no positive words in the Act or Rules
spelling out need to hear the party whose rights or interests
are likely to be affected, requirement to follow fair procedure c
before taking a decision must be read into statute, unless
the statute provides otherwise.

17. What is the genesis behind this requirement?
Why it is necessary that before an adverse action is taken D
against a person he is to be given notice about the proposed
action and be heard in the matter? Why is it treated as
inseparable and inextricable part of the doctrine of principles
of natural justice?
E
18. Natural justice is an expression of English
Common Law. Natural justice is not a single theory - it is a
family of views. In one sense administering justice itself is
treated as natural virtue and, therefore, a part of natural
justice. It is also called 'naturalist' approach to the phrase F
'natural justice' and is related to 'moral naturalism'. Moral
naturalism captures the essence of commonsense morality
- that good and evil, right and wrong, are the real features
of the natural world that human reason can comprehend. In
this sense, it may comprehend virtue ethics and virtue G
jurisprudence in relation to justice as all these are attributes
of natural justice. We are not addressing ourselves with this
connotation of natural justice here.
' (1995) 2 sec 38
H
454 SUPREME COURT REPORTS [2015) 6 S.C.R.

A 19. In Common Law, the concept and doctrine of
natural justice, particularly which is made applicable in the
decision making by judicial and quasi-judicial bodies, has
assumed different connotation. It is developed with this
fundamental in mind that those whose duty is to decide, must
B act judicially. They must deal with the question referred both
without bias and they must given to each of the parties to
adequately present the case made. It is perceived that the
practice of aforesaid attributes in mind only would lead to
doing justice. Since these attributes are treated as natural
C or fundamental, it is known as 'natural justice'. The principles
of natural justice developed over a period of time and which
is still in vogue and valid even today were: (i) rule against
bias, i.e. nemo iudex in causa sua; and (ii) opportunity of
being heard to the concerned party, i.e. audi alteram parlem.
0
These are known as principles of natural justice. To these
principles a third principle is added, which is of recent origin.
It is duty to give reasons in support of decision, namely,
passing of a 'reasoned order'.
E 20. Though the aforesaid principles of natural justice
are known to have their origin in Common Law, even in India
the principle is prevalent from ancient times, which was even
invoked in Kautilya's 'Arlhashastra'. This Court in the case
F of Mohinder Singh Gill & Anr. v. The Chief Election
Commissioner, New Delhi & Ors. 4 explained the Indian
origin of these principles in the following words:

"Indeed, natural justice is a pervasive facet of Sf''::Ji?.~
law where a spiritual touch enlivens legislation,
G administration and adjudication, to make fairness a
creed of life. It has many colours and shades, many
forms and shapes and, save where valid law excludes,
it applies when people are affected by acts of authority.
It is the bone of healthy government, recognised from
H
4 (1978) 1 sec 405. AIR 1978 SC 851
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 455
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earliest times and not a mystic testament of judge-made A
law. Indeed from the legendary days of Adam - and of
Kautilya's Arthashastra - the rule of law has had this
stamp of natural justice, which makes it social justice.
We need not go into these deeps for the present except
to indicate that the roots of natural justice and its foliage B
are noble and not new-fangled. Today its application
must be sustained by current legislation, case law or
other extant principle, not the hoary chords of legend
and history. Our jurisprudence has sanctioned its
prevalence even like the Anglo-American system". c
21. Aristotle, before the era of Christ, spoke of such
principles calling it as universal law. Justinian in the fifth
and sixth Centuries A.O. called it Jura natura/ia', i.e. natural
law.

22. The principles have sound jurisprudential basis.
Since the function of the judicial and quasi-judicial authorities
is to secure justice with fairness, these principles provide
great humanising factor intended to invest law with fairness E
to secure justice and to prevent miscarriage of justice. The
principles are extended even to those who have to take .
administrative decision and who are not necessarily
discharging judicial or quasi-judicial functions. They are a
kind of code of fair administrative procedure. In this context, F
procedure is not a matter of secondary importance as it is
only by procedural fairness shown in the decision making
that decision becomes acceptable. In its proper sense, thus,
natural justice would mean the natural sense of what is right
and wrong. G

23. This aspect of procedural fairness, namely, right
to a fair hearing, wotild mandate what is literally known as
'hearing the other side'. Prof. D.J. Galligan 5 attempts to
5 On 'Procedural Fairness' in Birks (ed). the Frontiers of Liability (Volume One) (Oxford H
1994)
456 SUPREME COURT REPORTS [2015] 6 S.C.R.

A provide what he calls 'a general theory of fair treatment' by
exploring what it is that legal rules requiring procedural
fairness might seek to achieve. He underlines the importance
of arriving at correct decisions, which is not possible without
adopting the aforesaid procedural fairness, by emphasizing
B that taking of correct decisions would demonstrate that the
system is working well. On the other hand, if mistakes are
committed leading to incorrect decisions, it would mean that
the system is not working well and the social good is to that
extent diminished. The rule of procedure is to see that the
C law is applied accurately and, as a consequence, that the
social good is realised. For taking this view, Galligan took
support from Bentham 6 , who wrote at length about the need
to follow such principles of natural justice in civil and criminal
trials and insisted that the said theory developed by Bentham
0
can be transposed to other forms of decision making as well.
This jurisprudence of advancing social good by adhering to
the principles of natural justice and arriving at correct
decisions is explained by Galligan in the following words:
E "On this approach, the value of legal procedures is
judged according to their contribution to general social
goals. The object is to advance certain social goals,
whether through administrative processes, or through
the civil or criminal trial. The law and its processes are
F
simply instruments for achieving some social good as
determined from time to time by the l'.lw makers of the
society. Each case is an instance in achieving the
general goal, and a mistaken decision, whether to me
G benefit or the detriment of a particular person, is simply
a failure to achieve the general good in that case. At
this level of understanding, judgments of fairness have
no place, for all that matters is wh~erthe social good,
as expressed through laws, is effectively achieved."
H 6
A Treatise of Judicial Evidence (London 1825)
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 457
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Galligan also takes the idea of fair treatment to a A
second level of understanding, namely, pursuit of common
good involves the distribution of benefits and burdens,
advantages and disadvantages to individuals (or groups).
According to him, principles ofjustice are the subject matter
of fair treatment. However, that aspect need not be dilated. B

24. Allan 7 , on the other hand, justifies the procedural
fairness by following the aforesaid principles of natural justice
as rooted in rule of law leading to good governance. He
supports Galligan in this respect and goes to the extent by C
saying that it is same as ensuring dignity of individuals, in
respect of whom or against whom the decision is taken, in
the following words:

"The instrumental value of procedures should not be D
underestimated; the accurate application of
authoritative standards is, as Galligan clearly explains,
an important aspect of treating someone with respect.
But procedures also have intrinsic value in
acknowledging a person's right to understand his E
treatment, and thereby to determine his response as a
conscientious citizen, willing to make reasonable
sacrifices for the public good. If obedience to law ideally
entails a recognition of its morally obligatory character,
there must be suitable opportunities to test its moral F
credentials. Procedures may also be though to have
intrinsic value in so far as they constitute a fair balance
between the demands of accuracy and other social
needs: where the moral harm entailed by erroneous
decisions is reasonably assessed and fairly distributed, G
procedures express society's commitment to equal
concern and respect for all."

It, thus, cannot be denied that principles of natural
7 'Procedural Fairness and /he Duty of Respect', (198) 18 OJLS 497 H
458 SUPREME COURT REPORTS (2015] 6 S.C.R.

A justice are grounded in procedural fairness which ensures
taking of correct decision and procedural fairness is
fundamentally an instrumental good, in the sense that
procedure should be designed to ensure accurate or
appropriate outcomes. In fact, procedural fairness is valuable
B in both instrumental and non-instrumental terms.

25. It is on the aforesaid jurisprudential premise that
the fundamental principles of natural justice, including audi
alteram partem, have developed. It is for this reason that
C the courts have consistently insisted that such procedural
fairness has to be adhered to before a decision is made and
infraction thereof has led to the quashing of decisions taken.
In many statutes, provisions are made ensuring that a notice
is given to a person against whom an order is likely to be
D passed before a decision is made, but there may be instances
where though an authority is vested with the powers to pass
such orders, which affect the liberty or property of an
individual but the statute may not contain a provision for
prior hearing. But what is important to be noted is that the
E applicability of principles of natural jsutice is not dependent
upon any statutory provision. The principle has to be
mandatorily applied irrespective of the fact as to whether
there is any such statutory provision or not.

F De Smith 8 captures the essence thus - "Where a
statute authorises interference with properties or other rights
and is silent on the question of hearing, the courts would
apply rule of universal application and founded on plainest
principles of natural justice".
G
Wade9 also emphasizes that principles of natural
justice operate as implied mandatory requirements, non-
observance of which invalidates the exercise of power. In
H 8 Judia/ Review of Administrative Action (1980), at page 161
9 Administrative Law (1977), at page 395
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 459
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Cooperv. Sandworth Board ofWorks10 the Court laid down A
that: '... although there is no positive word in the statute
requiring that the party shall be heard, yet justice of common
Jaw would supply the omission of Legislature". Exhaustive
commentary explaining the varied contours of this principle
can be traced to the judgment of this Court in Managing B
Director, ECJL, Hyderabad & Ors. v. 8. Karunakar & Ors. 11 ,
wherein the Court discussed plenty of previous case law in
restating the aforesaid principle, a glimpse whereof can be
found in the following passages:
c
"20. The origins of the law can also be traced to the
principles of natural justice, as developed in the
following cases: In A. K. Kraipak v. Union of India, (1969)
2 SCC 262 : (1970) 1 SCR 457, it was held that the
rules of natural justice operate in areas not covered by D
any law. They do not supplant the law of the land but
supplement it. They are not embodied rules and their
aim is to secure justice or to prevent miscarriage of
justice. If that is their purpose, there is no reason why
they should not be made applicable to administrative E
proceedings also especially when it is not easy to draw
the line that demarcates administrative enquiries from
quasi- judicial one.s. An unjust decision in an
administrative inquiry may have a more far reaching
F
effect than a decision in a quasi-judicial inquiry. It was
further observed that the concept of natural justice has
undergone a great deal of change in recent years. What
particular rule of natural justice should apply to a given
case must depend to a great extent on the facts and G
circumstances of that case, the framework of the law
under which the inquiry is held and the constitution of
the tribunal or the body of persons appointed for that
purpose. Whenever a complaint is made before a Court
10
(1863) 14 GB (NS) H
11
(1993) 4 sec 727
460 SUPREME COURT REPORTS [2015) 6 S.C.R.

A that some principle of natural justice has been
contravened, the Court has to decide whether the
observance of that rule was necessary for a just
decision on the facts of that case. The rule that inquiry
must be held in good faith and without bias and not
B arbitrarily or unreasonably is now included among the
principles of natural justice.

21. In Chairman, Board of Mining Examination v.
Ramjee. (1977) 2 SCC 256, the Court has observed
c that natural justice is not an unruly horse, no lurking
landmine, nor a judicial cure-all. If fairness is shown by
the decision-maker to the man proceeded against, the
form, features and the fundamentals of such essential
processual propriety being conditioned by the facts and
D circumstances of each situation, no breach of natural
justice can be complained of. Unnatural expansion of
natural justice, without reference to the administrative
realities and other factors of a given case, can be
exasperating. The Courts cannot look at law in the
E abstract or natural justice as mere artifact. Nor can they
fit into a rigid mould the concept of reasonable
opportunity. If the totality of circumstances satisfies the
Court that the party visited with adverse order has not
suffered from denial of reasonable opportunity, the
F
Court will decline to be punctilious or fanatical as if the
rules of natural justice were sacred scriptures.

22. In Institute of Chartered Accountants of India v. L.
K. Ratna, (1986) 4 SCC 537, Charan Lal Sahu v. Union
G oflndia, (1990) 1 SCC 613 (Bhopal Gas Leak Disaster
Case) and C. B. Gautam v. Union of India. (1993) 1
sec 78, the doctrine that the principles of natural justice
must be applied in the unoccupied interstices of the
statute unless there is a clear mandate to the contrary,
H
is reiterated."
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 461
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In his separate opinion, concurring on this A
fundamental issue, Justice K. Ramaswamy echoed the
aforesaid sentiments in the following words:

"61. It is now settled law that the proceedings must be
just, fair and reasonable and negation thereof offends B
Articles 14 and 21. It is well settled law that principles
of natural justice are integral part of Article 14. No
decision prejudicial to a party should be taken without
affording an opportunity or supplying the material which
. is the basis for the decision. The enquiry report C
constitutes fresh material which has great persuasive
force or effect on the mind of the disciplinary authority.
The supply of the report along with the final order is
like a post mortem certificate with putrefying odour. The
failure to supply .copy thereof to the delinquent would D
be unfair procedure offending not only Arts. 14, 21 and
311 (2) of the Constitution, but also, the principles of
natural justice."

26. Likewise, in C.B. Gautam v. Union of India & E
12
Ors. , this Court once again held that principle of natural
justice was applicable even though it was not statutorily
required. The Court took the view that even in the absence
of statutory provision to this effect, the authority was liable
to give notice to the affected parties while purchasing their F
properties under Section 269-UD of the Income Tax Act,
1961. It was further observed that the very fact that an
imputation of tax evasion arises where an order for
compulsory purchase is made and such an imputation casts
a slur on the parties to the agreement to sell leads to the G
conclusion that before such an imputation can be made
against the parties concerned they must be given an
opportunity to show-cause that the under valuation in the
agreement for sale was not with a view to evade tax. It is, H
12 (1993) 1 sec 78
462 SUPREME COURT REPORTS [2015) 6 S.C.R.

A therefore, all the more necessary that an opportunity of
hearing is provided.

27. From the aforesaid discussion, it becomes clear
that the opportunity to provide hearing before making any
B decision was considered to be a basic requirement in the
Court proceeding. Later on, this principle was applied to other
quasi-judicial authorities and other tribunals and ultimately
it is now clearly laid down that even in the administrative
actions, where the decision of the authority may result in
C civil consequences, a hearing before taking a decision is
necessary. It was, thus, observed in A.K. Kraipak's case
(supra) that if the purpose of rules of natural justice is to
prevent miscarriage of justice, one fails to see how these
rules should not be made available to administrative inquiries.
D In the case of Maneka Gandhi v. Union of India & Anr. 13
also the application of principle of natural justice was
extended to the administrative action of the State and its
authorities. It is, thus, clear that before taking an action,
service of notice and giving of hearing to the noticee is
E required. In Maharashtra State Financial Corporation v.
Mis. Suvarna Board Mills & Anr. 14 , this aspect was
explained in the following manner:

"3. It has been contended before us by the learned
F counsel for the appellant that principles of natural justice
were satisfied before taking action under Section 29,
assuming that it was necessary to do so. Let it be
seen whether it was so. It is well settled that natural
justice cannot be placed in a straight-jacket; its rules
G are not embodied and they do vary from case to case
and from one fact-situation to another. All that has to
be seen is that no adverse civil consequences are
allowed to ensue before one is put on notice that the
H 13
(1978) 1 sec 248
"(1994) s sec 566
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 463
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consequence would follow if he would not take care of A
the lapse, because of which the action as made known
is contemplated. No particular form of notice is the
demand of law: All will depend on facts and
circumstances of the case."
B
28. In the case of East India Commercial Company
Ltd., Calcutta & Anr. v. The Collector of Customs,
Calcutta15 , this Court held that whether the statute provides
for notice or not, it is incumbent upon the quasi-judicial
authority to issue a notice to the concerned persons C
disclosing the circumstances under which proceedings are
sought to be initiated against them, failing which the
conclusion would be that principle of natural justice are
violated. To the same effect are the following judgments:
D
a) U.0.1. & Ors. v. Madhumilan Syntex Pvt. Ltd,. &Am: 16

b) Morarji Goculdas B&W Co. Ltd. & Anr. v. U.0.1. &
Ors. 11

c) Metal Forgings & Anr. v. U.0.1. & Ors. 18 E

d) U.0.1. & Ors. v. Tata Yodogawa Ltd. & Anr. 19

29. Therefore, we are inclined to hold that there was
a requirement of issuance of show-cause notice by the F
Deputy Commissioner before passing the order of recovery,
irrespective of the fact whether Section 11A of the Act is
attracted in the instant case or not.

30. But that is not the end of the matter. While the G
law on the principle of audi alteram partem has progressed
15
AIR 1962 SC 1893
16 (1988) 3 sec 348
11
(1995) supp 3 sec 588
16
(2003) 2 sec 36
19 1988 (38) ELT 739 (SC):: 1988 (19) ECR 569 (SC) H
464 SUPREME COURT REPORTS [2015] 6 S.C.R.

A in the manner mentioned above, at the same time, the Courts
have also repeatedly remarked that the principles of natural
justice are very flexibl1e principles. They cannot be applied
in any straight-jacket formula. It all depends upon the kind
of functions performed and to the extent to which a person
B is likely to be affected. For this reason, certain exceptions
to the aforesaid principles have been invoked under certain
circumstances. For example, the Courts have held that it
would be sufficient to allow a person to make a representation
and oral hearing may not be necessary in all cases, though
C in some matters, depending upon the nature of the case,
not only full-fledged oral hearing but even cross-examination
of witnesses is treated as necessary concomitant of the
principles of natural justice. Likewise, in service matters
relating to major punishment by way of disciplinary action,
0
the requirement is very strict and full-fledged opportunity is
envisaged under the statutory rules as well. On the other
hand, in those cases where there is an admission of charge,
even when no such formal inquiry is held, the punishment
E based on such admission is upheld. It is for this reason, in
certain circumstances, even post-decisional hearing is held
to be permissible. Further, the Courts have held that under
certain circumstances principles of natural justice may even
be excluded by reason of diverse factors like time, place,
F the apprehended danger and so on.

31. We are not concerned with these aspects in the
present case as the issue relates to giving of notice before
taking action. While emphasizing that the principles of natural
G justice cannot be applied in straight-jacket formula, the
aforesaid instances are given. We have highlighted the
jurisprudential basis of adhering to the principles of natural
justice which are grounded on the doctrine of procedural
fairness, accuracy of outcome leading to general social goals,
H etc. Nevertheless, there may be situations wherein for some
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 465
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reason - perhaps because thei evidence against the A
individual is thought to be utterly compelling - it is felt that a
fair hearing 'would make no difference' - meaning that a
hearing would not change the ultimate conclusion reached
by the decision-maker-then no legal duty to supply a hearing
arises. Such an approach was endorsed by Lord Wilberforce B
in Malloch v. Aberdeen Corporation20 , who said that a
'breach of procedure ... cannot give (rise to) a remedy in the
courts, unless behind it there is something of substance
w:1ich has been lost by the failure. The court dos not act in
vain'. Relying on these comments, Brandon LJ opined in · C
Cinnamondv. British Airports Authority21 that 'no one can
complain of not being given an opportunity to make
representations if such an opportunity would have availed
him nothing'. In such situations, fair procedures appear to
0
serve no purpose since 'right' result can be secured without
according such treatment to the individual. In this behalf,
we rieed to notice one other exception which has been carved
out to the aforesaid principle by the Courts. Even if it is
found by the Court that there is a violation of principles of E
natural justice, the Courts have held that it may not be
necessary to strike down the action and refer the matter
back to the authorities to take fresh decision after complying
with the procedural requirement in those cases where non-
grant of hearing has not caused any prejudice to the person F
against whom the action is taken. Therefore, every violation
of a facet of natural justice may not lead to the conclusion
that order passed is always null and void. The validity of
the order has to be decided on the touchstone of 'prejudice'.
The ultimate test is always the same, viz., the test of prejudice G
or the test of fair hearing.

32. In Managing Director, ECIL (supra), the majority
opinion, penned down by Sawant, J., while summing up the
20 (1971) 1WLR1578 at 1595
H
21
(1980) 1 WLR 582 at 593
466 SUPREME COURT REPORTS [2015) 6 S.C.R.

A discussion and answering the various questions posed, had
to say as under qua the prejudice principle:
"30. Hence the incidental questions raised above may
be answered as follows:
B
xx xx xx
(v) The next question to be answered is what is the
effect on the order of punishment when the report of
the enquiry officer is not furnished to the employee and
c what relief should be granted to him in such cases.
The answer to this question has to be relative to the
punishment awarded. When the employee is
dismissed or removed from service and the inquiry is
set aside because the report is not furnished to him, in
D
some cases the non-furnishing of the report may have
prejudiced him gravely while in other cases it may have
made no difference to the ultimate punishment awarded
to him. Hence to direct reinstatement of the employee
E with back-wages in all cases is to reduce the rules of
justice to a mechanical ritual. The theory of reasonable
opportunity and the principles of natural justice have
been evolved to uphold the rule of law and to assist
the individual to vindicate his just rights. They are not
F incantations to be invoked nor rites to be performed on
all and sundry occasions. Whether in fact, prejudice
has been caused to the employee or not on account of
the denial to him of the report, has to be considered on
the facts and circumstances of each case. Where,
G therefore, even after the furnishing of the report, no
different consequence would have followed, it would
be a perversion of justice to permit the employee to
resume duty and to get all the consequential benefits.
It amounts to rewarding the dishonest and the guilty
H and thus to stretching the concept of justice to illogical
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 467
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and exasperating limits. It amounts to an "unnatural A
expansion of natural justice" which in itself is antithetical
to justice."

33. So far so good. However, an important question
posed by Mr. Sorabjee is as to whether it is open to the B
authority, which has to take a decision, to dispense with the
requirement of the principles of natural justice on the grouna
that affording such an opportunity will not make ia1ny
difference? To put it otherwise, can the administrative
authority dispense with the requirement of issuing notice by C
itself deciding that no.prejudice will be caused to the person
against whom the action is contemplated? Answer has to
be in the negative. It is not permissible for the authority to
jump over the compliance of the principles of natural justice
on the ground that even if hearing had been provided it would D
have served no useful purpose. The opportunity of hearing
will serve the purpose or not has to be considered at a later
stage and such things cannot be presumed by the authority.
This was so .held by the English Court way back in the year E
1943 in the case of General Medical Council v.
Spackman22 • This Court !jlso spoke in the same language
in the case of The Board of High School and Intermediate
Education, U.P. & Ors. v. Kumari Chittra Srivastava &
Ors. 23 • as is apparent from the following words:
F
"8. The learned counsel for the appellant, Mr. C.B.
Aggarwal, contends that the facts are not in dispute
and it is further clear that no useful purpose would have
been served if the Board had served a show cause
notice on the petitioner. He says that in view of these G
circumstances it was not necessary for the Board to
have issued a show cause notice. We are unable to
accept this contention. Whether a duty arises in a
22 1943AC·627
23 (1970) 1SCC 121 : AIR 1970 SC 1039
H
468 SUPREME COURT REPORTS [2015] 6 S.C.R.

A particular case to issue a show cause notice before
inflicting a penalty does not depend on the authority's
satisfaction that the person to be penalised has no
defence but on the nature of the order proposed to be
passed."
B
34. In view of the aforesaid enunciation of law, Mr.
Sorabjee may also be right in his submission that it was not
open for the authority to dispense with the requirement of
principles of natural justice on the presumption that no
C prejudice is going to be caused to the appellant since
judgment in R.C. Tobacco (supra) had closed all the windows
for the appellant.

35. At the same time, it cannot be denied that as far
D as Courts are concerned, they are empowered to consider
as to whether any purpose would be served in remanding
the case keeping in mind whether any prejudice is caused
to the person against whom the action is taken. This was so
clarified in the case of Managing Director, ECIL (supra)
E itself in the following words:

"31. Hence, in all cases where the enquiry officer's
report is not furnished to the delinquent employee in
the disciplinary proceedings, the Courts and Tribunals
F should cause the copy of the report to be furnished to
the aggrieved employee if he has not already secured
it before coming to the CourU Tribunal and given the
employee an opportunity to show how his or her case
was prejudiced because of the non-supply of the report.
G If after hearing the parties, the CourUTribunal comes
to the conclusion that the non-supply of the report would
have made no difference to the ultimate findings and
the punishment given, the CourUTribunal should not
interfere with the order of punishment. The CourU
H Tribunal should not mechanically set aside the order
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 469
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.)

of punishment on the ground that the report was not A
furnished as it regrettably being done at present. The
courts should avoid resorting to short cuts. Since it is
the Courts/Tribunals which will apply their judicial mind
to the question and give their reasons for setting aside
or not setting aside the order of punishment, (and not B
any internal appellate or revisional authority), there
would be neither a breach of the principles of natural
justice nor a denial of the reasonable opportunity. It is
only if the Court/Tribunal finds that the furnishing of
the report would have made a difference to the result c
in the case that it should set aside the order of
punishment."

36. Keeping in view the aforesaid principles in mind,
even when we find that there is an infraction of principles of D
natural justice, we have to address a further question as to
whether any purpose would be served in remitting the case
to the authority to make fresh demand of amount recoverable,
only after issuing notice to show cause to the appellant. In
the facts of the present case, we find that such an exercise E
would be totally futile having regard to the law laid down by
this Court in R.C. Tobacco (supra).

37. To recapitulate the events, the appellant was
accorded certain benefits under Notification dated July 08, F
1999. This Notification stands nullified by Section 154 of
the Act of 2003, which has been given retrospective effect.
The legal consequence of the aforesaid statutory provision
is that the amount with which the appellant was benefitted
under the aforesaid Notification becomes refundable. Even G
after the notice is issued, the appellant cannot take any plea
to retain the said amount on any ground whatsoever as it is
bound by the dicta in R.C. Tobacco (supra). Likewise, even
the officer who passed the order has no choice but to follow H
the dicta in R.C. Tobacco (supra). It is important to note
470 SUPREME COURT REPORTS [2015) 6 S.C.R.

A that as far as quantification of the amount is concerned, it is
not disputed at all. In such a situation, issuance of notice
would be an empty formality and we are of the firm opinion
that the case stands covered by 'useless formality theory'.

B 38. In Escorts Farms Ltd. (Previously known as
Mis. Escorts Farms (Ramgarh) Ltd.) v. Commissioner,
Kumaon Division, Nainital, U.P. & Ors. 24 , this Court, while
reiterating the position that rules of natural justice are to be
followed for doing substantial justice, held that, at the same
C time, it would be of no use if it amounts to completing a
mere ritual of hearing without possibility of any change in
the decision of the case on merits.. It was so explained in
the following terms:

D "64. Right of hearing to a necessary party is a valuable
right. Denial of such right is serious breach of statutory
procedure prescribed and violation of rules of natural
justice. In these appeals preferred by the holder of
lands and some other transferees, we have found that
E the terms of government grant did not permit transfers
of land without permission of the State as grantor.
Remand of cases of a group of transferees who were
not heard, would, therefore, be of no legal
consequence, more so, when on this legal question all
F affected parties have got full opportunity of hearing
before the High Court and in this appeal before this
Court. Rules of natural justice are to be followed for
doing substantial justice and not for completing a mere
ritual of hearing without possibility of any change in
G the decision of the case on merits. In view of the legal
position explained by us above, we, therefore, refrain
from remanding these cases in exercise of our
discretionary powers under Article 136 of the
Constitution of India."
H 24 (2004) 4 sec 2a1
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 471
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.]

39. Therefore, on the facts of this case, we are of the A
opinion that non-issuance of notice before sending
communication dated June 23, 2003 has not resulted in any
prejudice to the appellant and it may not be feasible to direct
the respondents to take fresh action after issuing notice as
that would be a mere formality. B
40. With this we advert to the last submission of Mr.
Sorabjee that the judgment in R.C. Tobacco (supra) (which
is a two Judge Bench decision) is in conflict with the three
Judge Bench judgment in J.K. Cotton (supra). This C
argument is not even open to the appellant for the simple
reason that the judgment in J.K. Cotton (supra) was
specifically taken note of and discussed in R.C. Tobacco
(supra). Paragraph 13 of the judgment in R.C. Tobacco
(supra) would reflect that the appellant therein had specifically D
relied upon the judgment in J.K. Cotton (supra) in support
of the submission that retrospectivity was harsh and
excessive since there is, in fact, a retrospective imposition
of excise duty. It was also argued that justification of such
retrospective imposition of tax must be overwhelming and E
no such overriding consideration had been disclosed. The
submission went to the extent of pleading that if the appellant
is called upon to pay the excise duty now it will cripple its
unit. More pertinent was another submission, which is F
relevant for our purpose, that the demand which was raised
could not be sustained as it was made without issuing any
show-cause notice and was in contravention of Section 11A
of the Act. In support of this view, few judgments, including
J.K. Cotton (supra), were relied upon. The Court, however, G
did not find any merit in the aforesaid submissions and dealt
with the issue as under, duly taking note of the judgment in
J.K. Cotton (supra):

"40. In J.K. Cotton Spg. & Wvg. Mills Ltd. v. Union of
H
India, (1987) Supp. SCC 350, relied upon by the
472 SUPREME COURT REPORTS [2015] 6 S.C.R.

A petitioners, by virtue of the retrospective amendment
of Rules 9 and 49 of the Central Excise Rules in 1982,
commodities obtained at an intermediate stage of
manufacture in a continuous process were deemed to
have been 'removed' within the meaning of Rule 9(1)
B thereby making such intermediate products dutiable
under the Act with effect from the commencement of
the Act i.e. 1944. In this context the Court held that the
amended Rules 9 and 49 would take effect subject to
Section 11-A. The decision is distinguishable. The
c circumstances in which the Court held that the demands
for duty could only be limited to six months prior to the
amendment was unquestionably different from those
present in the case before us. What we have to consider
here is whether the benefit granted in 1999 could be
D
withdrawn in 2003. Besides, the Court in J.K. Cotton
Spg. & Wvg. Mills Ltd. case rejected the contention of
the Union of India that Section 51 of the 1982 Finance·
Act by which the amendments were made to Rules 9
E and 49 overrode the provisions of Section 11-A saying:
(SCC p. 363, pzira 32) "if the intention of the legislature
was to nullify the effect of Section 11-A, .. the legislature
would have specifically provided for the same." Similarly
our decision iin National Agricultural Coop. Marketing
F Federation of India Ltd. v. Union of India, (2003) 5 SCC
23 which dealt with an amendment to Section 80-
P(2)(a)(iii) of the Income Tax Act, 1961 noted that: (SCC
p.35, para 29)

G "The amendment does not seek to touch on the
periods of limitation provided in the Act, and in
the absence of such express provision or clear
implication, the legislature clearly could not be
taken to intend that the amending provisions
H authorizes the Income Tax Officer to commence
DHARAMPAL SATYAPAL LTD. v. DY. COMMNR. OF 473
CENTRAL EXCISE, GAUHATI [A.K. SIKRI, J.]

proceedings which before the new Act came into A
force, had, by the expiry of the period provided
become barred".

In the present case Section 154(4) specifically and
expressly allows amounts to be recovered within a B
period of thirty days from the day Finance Bill, 2003
received the assent of the President. It cannot but be
held therefore that the period of six months provided
under Section 11-Awould not apply."
c
40 A. In the aforesaid scenario, when the Court was
conscious of the principle laid down in J.K. Cotton (supra)
and explained the same in a particular manner while deciding
the appeal in R.C. Tobacco (supra), it cannot be argued
that the judgment in R.C. Tobacco (supra) runs contrary to D
J.K. Cotton (supra).

41. For all these reasons, the appeals are dismissed.

Nidhi Jain Appeals dismissed.
E