JUDGMENT
Ramanujulu Naidu, J.
1. This writ appeal is preferred against the order dated 18-4-1988 passed by Anjaneyulu, J. allowing W.P. No. 577 of 1988 filed by the respondents for issue of a writ of certiorari quashing the order of the Government of Andhra Pradesh, the first appellant herein, made in G.O. Rt. No. 1571 Revenue (E) Department dated 30-11-1987 in so far as it levied a compounding fee of Rs. 54,00,000/- on the first respondent.
2. Reference to the parties in the Writ Appeal is made as they are arrayed in the writ petition.
3. The first petitioner-first respondent is a Company incorporated under the Companies Act on 11-3-1977 and the second petitioner-second respondent is its Managing Director. The first petitioner set up a distillery at Kodurupadu near Hanuman Junction for the manufacture of rectified spirit from molasses. Production of rectified spirit was commenced in the year 1981. The distillery is capable of distilling 186 Metric Tonnes of molasses. The affairs of the first petitioner-Company, hereinafter referred to as the ‘distillery’ were conducted smoothly till 1986 when there was a change in the management resulting in removal of some of its Directors including the Joint Managing Director of the Company. The Board of eleven Directors of the Company was divided into two groups. The smaller group consisting of three Directors assumed control of management of the affairs of the Company in May, 1986. Complaints were lodged with the Commissioner of Excise and other officials by the rival group of Directors alleging several violations committed by the distillery during the course of its working between 1981 and 1986. The complaints were investigated into by the concerned authorities and on the basis of the findings recorded by the said authorities, the Commissioner of Excise by his letter dated 17-3-1987 called upon the distillery to show cause as to why D2 licence granted in favour of the distillery should not be cancelled under Section 31 (a) of the Andhra Pradesh Excise Act, 1968, hereinafter referred to as the ‘Act’. The distillery submitted its explanation on 1-4-1987 to the Commissioner of Excise and personal hearing was also given to the distillery on 20-4-1987. It is unnecessary to extract the gist of the explanation offered by the distillery as the same was extracted in extenso by the learned single Judge in the order under appeal. The explanation offered by the distillery, it is enough to state, did not find acceptance with the Commissioner of Excise who held that the distillery had contravened the provisions of Rules 35, 45 and 48 of the Andhra Pradesh Distillery Rules. For that reason, the Commissioner refused to renew the licence in favour of the distillery for the year 1987-88, as by then, the licence granted to it for the earlier year had expired.
4. Against the order of the Commissioner of Excise, the distillery preferred a revision petition under Section 64 of the Excise Act on 13-5-1987 contending inter alia that the Commissioner of Excise was in error in rejecting the explanation offered by the distillery and in refusing to renew the licence for the year 1987-88. The Revision petition was heard by the Government on 13-8-1987 and orders were reserved on the revision petition. While the disposal of the revision petition was receiving consideration by the Government, the distillery addressed a letter to the Honourable Minister for Excise on 4-11-1987 wherein it was pleaded inter alia as under:
“We are anxious that final orders are passed in the revision petition at the earliest. In this connection, we submit that we are willing to have the charges against us compounded if the Government is pleased to direct the renewal of the distillery licence in favour of the Company”.
On receipt of the letter dated 4-11-1987, the Government felt that in the light of the offer made by the distillery, to have the offences committed by it, compounded, there was no need to go into the various explanations offered by the distillery. Ultimately on 30-11-1987, the Government passed the order impugned in the writ petition. For the purpose of appreciating the arguments advanced by the learned counsel appearing for both the parties, we may usefully extract paragraph-5 of the impugned order of the Government:
“After careful examination of the case and upon considering the contentions of the Revision Petitioners, Government observe that the petitioner’s firm Sri Hanumath Kali Vara Prasad Babu Chemicals (P) Limited has clearly contravened the provisions of D2 licence and the action taken by the Commissioner of Excise in rejecting the application for renewal is justified. However, the Revision Petitioners have come forward by affidavit dated 4-11-1987 with their willingness to get the offence compounded. On consideration of the faces and the circumstances of the case and the quantum of loss caused to the Government revenue, the Government consider that the offence committed by the revision petitioners herein be compounded for a sum of Rs. 54,00,000/- (Rupees fifty four lakhs only) and upon payment of the sum aforesaid mentioned, the case if any, against the revision petitioners pending in any criminal court in relation to the above matter shall be withdrawn and the further investigation of any such case be stopped.”
In paragraph-6 of the order, the Government directed forfeiture of cash security furnished by the distillery in a sum of Rs. 50,000/-. Instead of deducting the said amount the Commissioner of Excise was directed to take steps for recovery of the balance of Rs. 53,50,000/-.
5. As stated already, assailing the said order of the Government, the distillery preferred the writ petition and the same was heard by Anjaneyulu, J. Before the learned Judge, it was strenuously contended that no contravention or violation of any of the Excise Act or the Rules framed thereunder, was committed by the distillery, that the action taken by the Commissioner of Excise in refusing to renew the licence in favour of the distillery for the year 1987-88 was wholly uncalled for and that the Government was also in error in confirming the findings recorded by the Commissioner of Excise while passing the impugned order without adverting to the explanation offered by the distillery. The learned single Judge declined to advert to any of the submissions made on behalf of the distillery in view of the modified stand taken by the distillery to have the offences compounded under the Excise Act. In fact, the learned single Judge observed that the finding that the distillery violated the provisions of the Excise Act and the Rules framed thereunder, recorded by the Government in paragraph-5 of its order could be supported basically on the modified stand taken by the distillery in its representation dated 4-11-1987. The only question which therefore, fell for consideration before the learned single Judge was whether the order passed by the Government determining the compounding fee at Rs. 54,00,000/- was in accordance with law? The learned single Judge after referring to the relevant provisions of the Excise Act found that the order of the Government levying compounding fee in excess of Rs. 5,000/- was without sanction of law. That portion of the order of the Government was struck down by the learned single Judge and a writ of mandamus was accordingly issued to the Government to renew D-2 licence of the distillery for the year 1987-88 subject to payment of compounding fee in a sum of Rs. 5,000/-. The learned single Judge also quashed the direction of the Government to withdraw prosecution of the distillery under Section 24 of the Industries (Development and Regulation) Act.
6. Aggrieved by the order of the ‘learned single Judge, the above writ appeal was preferred by the State, as stated already.
7. Sri R. Venugopal Reddy, learned Advocate General appearing for the State firstly contends that the distillery, having induced the Government to compound the offences committed by it under the Excise Act and the Rules made thereunder, it is not open to the distillery to question the quantum of compounding fee, as the discretion vested under Section 47 of the Excise Act would not have been exercised by the Government, if the amount of compounding fee levied was not intended to be paid. We find it extremely difficult to accede to the submissions of the learned Advocate General. The levy of compounding fee of Rs. 54,00,000/- could be made either with the sanction of law or with the consent of the distillery. In fact, in the counter affidavit filed on behalf of the first respondent, the levy of compounding fee was sought to be justified on the ground that an undertaking for payment of compounding fee was furnished by the distillery. It is not denied that no such undertaking to pay the compounding fee in a sum of Rs. 54,00,000/- was furnished in the representation made by the distillery. All that was stated was, the distillery was willing to have the offences committed by it under the Excise Act, compounded. It therefore, follows that any levy of compounding fee should be authorised or sanctioned by the provisions of the Excise Act. As already stated, the Commissioner of Excise held that the distillery had violated and contravened the provisions of Section 31 of the Excise Act attracting cancellation of the licence or refusal to grant renewal of the licence. Section 47 of the Act, at the material point of time, permitted the authorities envisaged therein, to compound any offence committed under Section 31 of the Act on payment of compounding fee not exceeding Rs. 5,000/-. It may be recalled that the distillery only sought to have the offences committed by it under Section 31 of the Act, compounded and the Government accepting the offer of the distillery, compounded the offences committed by the distillery on payment of a sum of Rs. 54,00,000/-. As already stated, the maximum compounding fee that could be levied under Section 47 of the Act was Rs. 5,000/- at the material point of time and the order of the Government levying compounding fee on the distillery, in excess of Rs. 5,000/- was therefore, bad and rightly held to be bad.
8. It is next contended by the learned Advocate General that it is not open to the learned single Judge to dissect and quash one part of the impugned order of the Government and issue direction to the Government to renew D-2 licence in favour of the distillery on payment of compounding fee of Rs. 5,000/-. There is no force in this submission of the learned Advocate General either. It may be recalled that what was questioned in the writ petition by the distillery was that part of the impugned order of the Government levying compounding fee of Rs. 54,00,000/-. The learned single Judge was therefore, justified in addressing himself to the legality of levy of compounding fee of Rs. 54,00,000/-. It cannot be said that the impugned order of the Government is one and indivisible. Even if it is indivisible, that portion of the order which has no sanction of law and which is severa-ble, cou’d be quashed.
9. The learned Advocate General next contends that no application was made by the distillery to the original authority envisaged under Section 47 of the Excise Act and that the levy of compounding fee in a sum of Rs. 54,00,000/- by the Government was with out reference to the provisions of Section 47 of the Act. We don’t think we can countenance this submission of the learned Advocate General. Asalieady stated, levy of compounding fee should have either sanction of law or should be supported by consent of the concerned party. There could be no levy of compounding fee at the whim of the Government. It is also noticed by us, that before the learned single Judge, the taken Advocate General argued that the fee of Rs. 54,00,000/- levied by the Government was a price for renewal of the licence in favour of the distillery. The said argument, is not adopted by the learned Advocate General appearing before us now, rightly in our opinion. It was never contended before the learned single Judge that no power vested in the Government under Section 47 of the Excise Act to compound the offences committed under the Excise Act. Even in the grounds of appeal, no such plea in raised. Only before us for the first time the learned Advocate General puts forward this plea which should not be allowed to be put forward. In any event, the Government being the appellate or revisional authority under the Excise Act, can certainly exercise powers vested in the inferior authority under Section 47 of the Excise Act. The impugned order does not also read that it was made de hors the powers under the Excise Act.
10. It is now well settled that when a statutory functionary makes an, order based on certain grounds , its validity must be judged by the reasons to mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order made in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out-vide Mohinder Singh v. Chief Election Commissioner, (, Rel. on).
11. We must also observe that except Season 47 of the Excise Act. there is no other provision in The Excise Act or in any other Act empower ing the Government to compound an offence committed under the Excise Act and if the Government chooses to exercise such power, it must exercise the impower in the manner envisaged under Section 47 of the Act.
12. In Gujarat Electricity Board v. Girdharlal Motilal and Anr, it was held :
” …..The legislature has prescribed a mode for the exercising of that power and hence that power can be exercised only in that manner and in no other manner.”
13. In State of Gujarat v. Shantilal Mangaldas and others, it was held :
“……..It is settled rule of interpretation of statutes that when power is given under a statute to do a certain thing in a certain way the thing must be done in that way or not at all.”
14. In Shri Sitaram Sugar Co., Ltd. and another v. Union of India and ors, . 4, their Lordships observed that :
“……..The true position, therefore, is that any act of the repository of power, whether legislative or administrative or quasi-judicial, is open to challenge if it is in conflict with the Constitution or the governing Act or the general principles of the law of the land or it is so arbitrary or unreasonable that no fair minded authority could ever have made it.”
15. In Sree Rama Trading Company, Proddatur v. Commercial Tax Officer (Int) No. 1, Hyderabad, 8 APSTJ Page 57 a Division Bench of this Court held that the offence committed by the assessee therein squarely fell within clause (b) of Sub-Section (1) of Section 32 of the A.P. General Sales Tax Act and that the compounding fee levied thereunder could never exceed Rs. 1,000/- and that the excess amount of compounding fee collected from the assessee therein was directed to be refunded by the Division Bench. This decision was followed by another Division Bench of this Court in Ratnam Glass and Crockery House, Guntur v. Commercial Tax Officer (Int), Guntur, 10 APSTJ (1990) Page 73.
16. It may be thus noted that where compounding fee in excess of what was sanctioned by law had been collected or paid under a mistaken impression, the same was directed to be refunded.
17. In the result, the writ appeal fails and is accordingly dismissed. No costs. Government Pleader’s fee Rs. 500-00.
18. Consequent upon dismissal of the writ appeal the undertakings furnished on behalf of the distillery during the pendency of the writ appeal and recorded by this court in W.A.M.P. 1464/88 on 8-6-1988 and 27-6-1988 cease to have any force.