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Judgment
Sanjeev Kumar, J
1) This intra court appeal by the then State of Jammu & Kashmir (now Union Territory of J&K) is directed against the judgment of learned Single Judge [“Writ Court”] dated 31.12.2001 passed in OWP No.218/1989, whereby the writ petition filed by the respondent Nos. 1 to 5 (hereinafter to be referred as “writ petitioners”) has been allowed and clause No.13(v) of the purchase order impugned before the Writ Court has been quashed. In the impugned judgment the Writ Court has further directed that in case the writ petitioners file their claim for refund, they would first show that they have not passed on the burden to the consumer.
2) The background facts leading to the filing of this appeal, to put in a nutshell, are that the writ petitioners are registered small scale industrial units established in Jammu and are engaged in the manufacturing of AAC/SCSR conductors. These articles are manufactured by the writ petitioners-SSI Units from the raw material imported from outside the State. Under the Central Excise Act, as it was then in force, excise duty was leviable on raw material so imported as also on the finished goods after their manufacturing. It is pleaded that at the relevant point of time, Government of India as also State Government had introduced various schemes envisaging various incentives and benefits for the SSI Unit set up in the State of J&K. These benefits included the exemption from payment of sales tax, toll, price preference and refund of CST on raw material etc etc. Apart from the aforementioned benefits, the industrial policy of the Government of India also provided the central subsidy and credit of excise duty on raw material under the „MODVAT‟ scheme. The MODVAT scheme was introduced by the Government of India in the year 1986 while rolling out annual budget of the Parliament. The scheme envisaged the benefit of excise duty leviable on raw material procured by the Small Scale Industrial Units in the following manner:-
i) When the SSI unit would import raw material it would pay excise duty at the time of purchase to the purchaser on such raw material;
ii) The SSI units would utilize this raw material in their manufacturing units for production of finished goods and products. The sale and supply of the finished products by the SSI Units would also attract levy of excise duty but at this stage under the scheme, the SSI Units would be entitled to the credit of excise duty paid by them on the raw material at the time of purchase.
3) To put it briefly, benefit under the MODVAT scheme was introduced by the Central Government for encouraging setting up of Small Scale Industrial Units and to enable them to withstand the competition from the organized sector, widen the entrepreneurial base and employment etc etc. The appellant No.2 placed an order for supply of AAC/ACSR conductors to the J&K Small Scale Industrial Development Corporation (SICOP) vide its purchase order dated 12.01.1987. Besides other terms and conditions of purchase settled mutually between the appellant No.2 and SICOP, Clause 13(v) under the caption „Special Conditions‟ provided as under:-
“M/s SICOP will watch benefit of MODVAT in respect of excise duty to units and pass on this relief to this Department;
4) The SICOP which is a public sector undertaking of the Government of Jammu & Kashmir placed supply orders for procurement of AAC/ACSR conductors requisitioned by the appellant No.2 to the writ petitioners. With a view to give effect to Clause 13(v) of the supply order placed by appellant No.2 with the SICOP, the supply orders, the terms and conditions whereof were mutually settled between the SICOP and the writ petitioners, also envisaged and incorporated the conditions under the heading „special conditions‟ wherein it was provided that in case there was any benefit of taxes/duties under MODVAT, the relief thereof shall be passed on to the purchasing department. This was so provided in Clause (ii) of the „Special Conditions‟ incorporated in the supply order placed with the writ petitioners. As is claimed by the writ petitioners that on receipt of these purchase orders, they immediately reacted and made number of representations to the SICOP as also to other respondents for deletion of this clause. On the request of the writ petitioners, meetings of the Purchase Committee were held from time to time in which the representatives of the writ petitioners also participated. It was the case set up by the writ petitioners that though, Purchase Committee assured them to restore the benefit of MODVAT to the writ petitioners yet issue was not formally settled and on the contrary the SICOP continued to deduct benefit under MODVAT from the bills of the writ petitioners. It was, thus, pleaded by the writ petitioners that the benefit of exemption/refund of excise duty under MODVAT scheme was granted by the Central Government under the Central Excise Act and the Rules framed thereunder and, therefore, SICOP could not have put a condition in the supply order which had the effect of depriving the writ petitioners of the benefits available to them under a statute. Further case was set up by the writ petitioners that the appellant herein as also the SICOP had placed similar orders for procurement of goods from various SSI units established in the State as well as outside the State but in the purchase orders issued to them, there was no such clause providing for transfer of benefit of MODVAT from the SSI Unit to the purchasing department. On these twin grounds urged by the writ petitioners, OWP No.218/1988 came to be filed in which the writ petitioners inter alia sought quashing of Clause 13(v) of the supply order issued by the appellants to the SICOP and Clause (ii) of the special conditions of the purchase orders placed by the SICOP with the writ petitioners. The writ petitioners also prayed for refund of the amount of excise duty benefit, which was available to them under MODVAT scheme but had been taken away by the offending clause in the purchase orders(s).
5) The writ petition was contested by the appellants herein as well as the SICOP. In the reply affidavit filed on behalf of appellant No.2, claim of the writ petitioners for refund of the benefit of MODVAT, which had been deducted by the SICOP, was denied on the ground that the same had been done by the SICOP pursuant to the terms and conditions of the supply order(s). It was submitted that the supply order, on acceptance by the writ petitioners, became a concluded contract between the parties and, therefore, the writ petitioners were not permitted to accept the terms and conditions favourable to them and reject the terms and conditions not so favourable to them. With regard to the case set up by the writ petitioners on the ground of discrimination viz-a-viz similarly situated SSI units, it was submitted by the appellant No.2 that each contract was a separate contract and, therefore, no parity could be claimed. It was claimed that the supply order was in the nature of offer to the writ petitioners to supply certain type of goods on certain terms and conditions and its unconditional acceptance by the writ petitioners gave rise to a concluded contract between the parties. It was, thus, not available to either party to come out of these terms and conditions, particularly, from the terms and condition, which a party to the contract may later on find unfavourable.
6) Be that as it may, in the backdrop of aforesaid facts and arguments and counter arguments, the Writ Court (Division Bench) decided the writ petition vide judgment dated 05.08.1988. The Writ petition was dismissed on two counts; that the cost of raw materials including all expenses and 13% excise duty on raw material had been charged by the writ petitioners from the PDD and, therefore, there was no question of allowing the writ petitioners the benefit of MODVAT scheme. The Division Bench was also of the opinion that for impeaching a contractual obligation, the writ petition was not an appropriate remedy, more particularly when the writ petitioners had acted upon the purchase orders through out.
7) Feeling aggrieved, the writ petitioners approached the Hon‟ble Supreme Court of India by way of SLP (Civil) No.14417/88, which was disposed of by the Apex Court vide order dated 08.02.1989.
Hon‟ble the Supreme Court did not specifically set aside the judgment of the Writ Court (Division Bench of this Court) but remanded the matter back to the High Court to determine the issue whether the benefit of MODVAT scheme had been allowed to pass on to other industries similarly situated but not to the writ petitioners. The writ petitioners were allowed to urge this contention before the High Court. The parties were also given opportunity to supplement their pleadings by filing affidavits or otherwise. This is how the matter on remand came before this Court, yet again, for consideration.
8) Exercising the liberty granted by the Hon‟ble Supreme Court, the writ petitioners filed supplementary affidavit to fortify their plea of discrimination, which was rebutted by the appellants by filing affidavit of the then Chief Engineer, PDD. In the supplementary affidavit, it was pleaded by the writ petitioners that in the year 1986, after the MODVAT scheme was rolled out, the State Government placed orders for supply of AAC/ACSR conductors with the local manufacturers as well as two outside manufacturers. The order placed to the outside manufacturers could not be honoured by them and in view of the failure of the outside manufactures to complete the supply order within the stipulated period, the State Government was constrained to approach the local SSI units for supply of the material. This is how the appellants placed the supply orders with the SICOP on 12.01.1987. It was pleaded that the supply orders, which were issued to the outside manufacturers, did not contain any clause for passing on the benefit of MODVAT scheme to the purchasing department. It was pleaded that since the SSI Units, which had been earlier placed the supply orders and the writ petitioners formed a single class and, therefore, there could not have been different terms and conditions of supply incorporated in the supply orders placed with the writ petitioners. This plea set up by the writ petitioners in the supplementary affidavit was opposed by the appellants by filing their affidavit in rebuttal.
9) The appellants herein submitted that the two purchase orders reference to which had been made by the writ petitioners given to the two outside firms were based on firm negotiated rates. Further, any individual contract, it was submitted, has its own terms and conditions depending upon different commercial and technical considerations. The terms of one contract cannot be read into another contract. In short, the response of the appellant was that the writ petitioners and the outside manufacturers, to which the reference was made, formed a different class, as such, there was no hostile discrimination meted out to the writ petitioners The Writ Court considered the matter in light of the record placed before it and having regard to the rival contentions came to the conclusion that the appellants had practiced discrimination while dealing with the writ petitioners, in that, the supply orders issued to the similarly situated SSI Units within and outside the State did not have the clause of passing on the benefit of MODVAT from the supplier to the purchasers. The plea of discrimination set up by the writ petitioners was held established by the Writ Court and on that account the impugned clause in the purchase order issued by appellant No.2 to the SICOP was directed not to be given effect to. The clause (ii) of the purchaser orders issued by the SICOP in favour of the writ petitioners, however, escaped attention of the Writ Court for, the Writ Court did not specifically quash the said clause. The Writ Court also directed that in case the writ petitioners put up their claim for refund they will have to show that they have not passed on the burden of excise duty to the consumers. The writ petitioners are happy with the judgment and have accepted the same. The State, as noted above, has come up in appeal and this is how the matter came up for consideration before us.
10) Having heard learned counsel for the parties and perused the material on record, we noticed few anomalous situations obtaining in the case:-
i) The Writ Court has, though directed that Clause 13(v) of the Purchase Order issued by appellant No.2 to SICOP shall not be given effect to but has, for reasons not discernible from the impugned order, not specifically dealt with or set aside clause (ii) of the „special conditions‟ of the purchase orders placed by the SICOP with the writ petitioners.
ii) The writ petitioners were stranger to the contract between the appellant No.2 and the SICOP and, therefore, had no locus to call in question clause 13(v) of the purchase order issued by appellant No.2 to the SICOP.
iii) That the offending clause i.e. clause (ii) of the special conditions of the purchase orders placed by the SICOP with the writ petitioners, though challenged specifically in the writ petition, has not been touched or set aside.
iv) The appeal has been preferred by the State and the Chief Engineer, PDD whereas the contract was entered into by the SICOP with the writ petitioners. The SICOP has not filed any appeal and possibly for the reasons that Clause (ii) of the special conditions of the purchase orders issued by the SICOP in favour of the writ petitioners has not been dealt with or set aside by the Writ Court.
11) Aside the anomalies pointed out by us hereinabove, the issue which calls for determination in this appeal is whether the decision of the Writ Court that Clause 13(v) of the supply order dated 12th January, 1987, is discriminatory in nature and violates the right of equality guaranteed by Article 14 of the Constitution of India, is sustainable in the given facts and circumstances of the case and the legal position well settled by the Hon‟ble Supreme Court.
12) The plea of discrimination raised by the writ petitioners is predicated on the ground that in the supply orders issued by SICOP for purchase of AAC/ACSR conductors with the local manufacturers as well as two outside manufacturers, there was no condition akin to Clause 13(v). Specific mention is made of the supply order placed with M/S Jaldara Conductors Pvt. Ltd, Jaipur, and supply order placed with M/S Ashok Transmission Wire Pvt. Ltd, Jaipur, both dated 23rd August, 1986. The writ petitioners also invited our attention to certain supply orders made by SICOP to the local manufacturers in the year 1986 and 1987 to hammer the point that clause similar to Clause 13(v) providing for transfer of benefit under MODVAT scheme to the purchaser(s) was not incorporated in the supply orders issued to such local SSI units. The plea is refuted by the respondents which, we have, already adverted to hereinabove. From the reading of pleadings of both the sides, it clearly transpires that there is no dispute with regard to the fact that the supply orders issued by appellant No.2 directly to M/S Jaldara Conductors Pvt. Ltd, Jaipur, and M/S Ashok Transmission Wire Pvt. Ltd, Jaipur, dated 23rd August, 1986, did not contain any condition, as is contained in Clause 13(v) of the supply order dated 12th January, 1987 and Class (ii) of purchase orders issued by SICOP in favour of the writ petitioners. These supply orders were directly between appellant No.2 and the units outside the State. From the reading of these two supply orders, it becomes abundantly clear that these were issued after initiating the process of tenders and receiving offers from the intending suppliers. The rates to be charged for different items of goods like AAC/ACSR and the terms and conditions of the supply were those which were mutually settled between the parties.
13) We are aware that there are some supply orders issued by appellant No.2 in favour of local SSI units for certain items other than AAC/ACSR conductors and those supply orders are also san the condition of the nature which is contained in the supply orders placed by SICOP with the writ petitioners but this alone cannot per se constitute discrimination. The supply orders in question issued in favour of the writ petitioners and the supply orders issued in favour of local SSI units and some outside units are not issued simultaneously but pertain to different point of time. In the instant case, the supplies from the writ petitioners were procured by the appellants through SICOP. In the supply order issued by the appellants in favour of SICOP, it was clearly mentioned that the SSI units, who would enter into arrangement with SICOP for supply of AAC/ACSR conductors, would transfer the benefit, if any, received by them under MODVAT scheme. We are in full agreement with Mr. Kohli, learned senior counsel, that a benefit provided to SSI units by the Government of India under its industrial policy by giving exemption from payment of excise duty under the MODVAT scheme cannot be taken away by the State Government even by entering into contract with such SSI units but nothing prevents the appellants or for that matter SICOP to enter into contract with the SSI units with the condition that in lieu of bulk supply orders issued in their favour, they would be parting with the benefit that would accrue to them in the shape of refund of excise duty under MODVAT scheme. This exactly has been done by the SICOP in the instant case. Clause (ii) of the conditions embodied in the supply orders was not intended to supersede or override any statutory provision or to deprive the writ petitioner of any benefit available to them under the scheme promulgated by the Central Government but was only by way of a contractual arrangement under which the writ petitioners were to surrender their benefit of refund of excise duty under MODVAT scheme in favour of the purchasing department in lieu of bulk supply orders which they would receive. The writ petitioners were aware and entered into contract with their eyes wide open. The SICOP framed the supply order after discussion with the writ petitioners and after having regard to all commercial aspects of the transaction. The Purchase Committee, which was instrumental in shaping the supply order and laying down the terms and conditions of the contract, in its commercial wisdom, decided to issue supply orders to local SSI units on the pre-negotiated rates without even inviting tenders or quotations with the condition that these SSI units will reciprocate by providing relief to the Purchasing Department in the shape of transferring the benefit of refund of excise duty under MODVAT scheme. The writ petitioners accepted the supply orders and made the supplies strictly as per the terms and conditions laid down in the supply orders. However, later on, it seems finding that the appellants had directly placed certain orders with outside units without imposing such conduction, the writ petitioners made representation to the respondents. The representation made by the writ petitioners came under active consideration of the respondents, who, after weighing all pros and cons of the matter, concluded that it was not possible to revoke the condition which was included in the supply orders in consultation with the writ petitioners and more particularly when 80% of the supplies had already been made by the writ petitioners.
14) Viewed thus, it is very difficult for us to say that the writ petitioners herein and the local as well outside manufacturers, who were also given supply orders by the appellants for procurement of certain items, form a single class. Each contractual transaction is independent transaction between two parties. The relationship of two contracting parties is governed by the terms and conditions of the contract. Even in the case of Government, it is very unwise to expect that the State would enter into contracts for supply of various items with various persons by having same and identical terms and conditions.
15) The dynamics of the market and the commercial considerations change with every passing day. The relevant time to consider all these aspects is the time when the two parties enter into contract. If we were to hold that Clause (ii) of the special conditions of the supply orders issued by the SICOP in favour of the writ petitioners is aimed at depriving the writ petitioners of the benefit of refund of excise duty under MODVAT regime whereas other similarly situated are enjoying such benefit, we will have no difficulty to struck down Clause (ii) being discriminatory in nature and violative of Article 14 and 19 of the Constitution of India. However, such is not the case set up before us. We have read Clause 13(v) of the supply order issued by the appellants in favour of SICOP and Clause (ii) of the special conditions of the supply orders issued by SICOP in favour of the writ petitioners and we find that these clauses incorporated in the supply orders were only as a bargain to seek some discount or concession from the suppliers in lieu of placing bulk supply orders with them without even inviting tenders and making the writ petitioners to compete with outside manufacturing units. The transfer of benefit of refund of excise duty by the writ petitioners to the Purchasing Department i.e., the appellants herein, was part of a bargain struck between the two parties under which one party i.e. SICOP, was to issue the supply orders for procurement of AAC/ACSR conductors in favour of the writ petitioners and the other party i.e. the writ petitioners herein, were to make supplies on the mutually agreed/settled rates of the items with a further benefit to the Purchasing Department in the shape of transfer of benefit of refund of excise duty available to the writ petitioners under MODVAT scheme.
16) There was a Single Standard Supply order that was placed with all the petitioners by SICOP pursuant to request made by appellants for procurement of supplies. It is not anybody‟s case that in this transaction, any other SSI unit was favoured with a supply order sans the impugned condition. Equals have been treated equally and, therefore, no discrimination with anyone.
17) We find nothing wrong or unholy in the arrangement. The legal position in this regard is well settled. Unless the Court finds a condition in the contract entered into between the two parties unconscionable, it would be loath to interfere in the matter. The impugned condition, as we have elaborately discussed above, is found neither unconscionable nor in violation of any statutory provision. Rather this Court has found this condition a result of negotiations between two contracting parties which ultimately resulted into a concluded contract coming into existence between them. Comparing this contract with other contracts executed at different points of time and even between different parties would not be justified. The plea of discrimination raised by the writ petitioners is thus not supported by any legal or fact situation obtaining in the instant case. The Writ Court has not considered all these aspects and has, without any justification, held Clause 13(v) discriminatory in nature. As we have pointed out above, Clause 13(v) is contained in the supply order issued by the appellants in favour of SICOP and, therefore, there was no privity of contract between appellants and the writ petitioners giving them any cause of action or locus to challenge the said Clause. The Clause (ii) of the special conditions of the supply order which the SICOP issued in favour of the writ petitioners has not been considered, discussed or dealt with by the Writ Court.
18) Be that as it may, Clause (ii) of the special conditions is similar and akin to Clause 13(v) and in view of discussion made above, we have not been able to find any fault with Clause 13(v), so is the position with Clause (ii).
19) Viewed from any angle, we are of the considered view that the writ petitioners have not been able to make out any case of discrimination between them and the outside manufacturers/local SSI units and, therefore, the decision of the Writ Court cannot be upheld.
20) For these reasons, this appeal is allowed and the impugned order of the learned Writ Court is set aside.