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Tuesday, August 18, 2015

import of Web Printing Machine on concessional rate of custom duty = High court refused to give relief = one of the conditions needs to be satisfied to avail the concessional rate of duty @ 35% ad valorem under the aforesaid Notification is that the machine is having output of 30,000 or more copies per hour. Whereas the appellant contends that the machine in question churned out 36,000 copies per hour, the High Court has found it otherwise. As per the High Court the output of the machine was 25,000 copies per hour, which was reflected in the leaflet of the manufacturer of the machine, which leaflet was filed along with Bill of Entry.

                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  4417 OF 2003


|D.R. ENTERPRISES LTD.                      |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|ASSISTANT COLLECTOR OF CUSTOMS AND ORS.    |.....RESPONDENT(S)           |


                               J U D G M E N T


A.K. SIKRI, J.
                 The appellant herein is aggrieved by the impugned  judgment
of the High Court whereby the High Court has refused to allow the  appellant
import of Web Printing Machine on concessional  rate  of  custom  duty.  The
appellant had endeavored to avail the concessional rate of  custom  duty  on
the import of the  aforesaid  machine  under  Open  General  Allowance  (for
short,  'OGL')  with  the  aid  of  Notification   No.   114/80-CUS,   dated
19.06.1980.  The High Court has held  that  the  said  Notification  is  not
applicable in the instant case  as  the  appellant  has  not  been  able  to
satisfy one particular eligibility condition contained therein.  To  put  it
pithily, one  of  the  conditions  needs  to  be  satisfied  to  avail   the
concessional rate of duty @ 35% ad valorem under the aforesaid  Notification
is that the machine is having output of 30,000  or  more  copies  per  hour.
Whereas the appellant contends that the  machine  in  question  churned  out
36,000 copies per hour, the High Court has found it otherwise.  As  per  the
High Court the output of the machine was 25,000 copies per hour,  which  was
reflected in the leaflet of the manufacturer of the machine,  which  leaflet
was filed along with Bill of Entry.

In order to find out the details of the factual background under  which  the
aforesaid issue has cropped up, let us traverse through the  facts  in  some
more details.

The appellant herein had imported  one  printing  machine  of  make  'Harris
Graphic V-15H Model'  which arrived at Mumbai airport on 24.10.1987.  Custom
house agent of the appellant filed Bill of Entry for Home Consumption  under
OGL on 13.11.1987 and claimed concessional rate of duty  under  Notification
No. 114/80-CUS.

On 26.11.1987, the Appraiser of Customs House, Bombay issued  a  query  memo
with regard to the printing capacity of the imported machine which had  been
shown in the import invoice as 36,000 copies per  hour,  but  was  shown  as
25,000 in the leaflet furnished along with the Bill  of  Entry.  Some  other
queries were also raised. The appellant answered the issue on 21.01.1988.

Having not been satisfied with the reply furnished  by  the  appellant,  the
customs authorities directed it to warehouse the goods under Section  49  of
the Customs  Act,  1962  (hereinafter  referred  to  as  the  'Act'),  after
depositing the admitted customs duty. Accordingly, the imported machine  was
warehoused.

Thereafter, some queries regarding the output of  the  machine  were  raised
and the appellant tried to meet them. It also filed communications  received
from the manufacturer  explaining  that  the  machine  was  custom-made  for
Indian purposes, i.e, for the appellant enhancing  its  capacity  to  36,000
copies per hour as against normal capacity of 25,000 copies,  which  is  the
normal product manufactured by the said manufacturer.  On  that  basis,  the
appellant  wrote  to  the  customs  authorities   for   arranging   physical
examination of the consignment to satisfy themselves  that  the  machine  in
question was capable of giving output of 36,000 copies  per  hour.  However,
no action was taken by the customs authorities thereafter.

Taking note of the inaction of the customs authorities to get  the  imported
consignment physically inspected and proceeding with the  clearance  of  the
same, on 24.04.1988, the appellant filed a writ petition before  the  Bombay
High Court (being Civil Writ No. 2229/1988) praying for a  declaration  that
the  imported  machine  was  covered  by  OGL  and  was  entitled   to   the
concessional rate of customs duty under Notification No. 114/80-CUS and  for
directing the respondents to permit clearance of the same.   Interim  relief
of release of the machinery was also prayed for.

The  Assistant  Commissioner  of  Customs  (S.I.I.B.),  Bombay,   filed   an
affidavit opposing the admission  of  the  petition  and  grant  of  interim
relief.

On 10.08.1988, the High Court passed an order directing the  respondents  to
submit a list of relevant material required by them to the appellant  on  or
before  17.08.1988  and  directed  the  appellant  to  comply   with   those
requirements on or  before  26.08.1988  and  further  directed  the  customs
authorities to pass appropriate orders  within  one  week  thereafter.   The
matter was adjourned to 31.08.1988.  On  02.09.1988,  when  the  matter  was
again heard by the High Court, taking note of  the  fact  that  no  list  of
materials was served by the customs authorities  on  the  appellant  and  no
adjudication order was passed, the learned Single Judge of the  Bombay  High
Court passed an  order  directing  the  parties  to  inspect  and  test  the
consignment under the supervision of the Court Appointed  Officer  within  5
days from 02.09.1988 and directing the Adjudicating  Authority  to  pass  an
order within 7 days from the inspection and testing. It  was  not  done  and
further time was sought. However, when the needful was not done  even  after
getting time extension, on 03.10.1988,  the  Bombay  High  Court  passed  an
order allowing clearance of the imported machine in  question  in  terms  of
prayer clause (c)(i) of the writ petition.

Pursuant to the aforesaid interim order of the  High  Court,  the  appellant
was allowed to clear the consignment in question.  However,  the  main  writ
petition was kept pending thereafter which came up for final hearing in  the
year 2002, i.e. 14 years after the filing of  the  writ  petition.  By  that
time the imported printing machine had been in use by the appellant for  all
these years. The learned counsel  appearing  for  the  appellant,  in  these
circumstances, impressed upon the High Court  to  decide  itself  the  issue
involved, namely, whether imported machine could  print  36,000  copies  per
hour or its speed was less than 30,000  copies  per  hour  and  whether  the
appellant was not entitled to the benefit  of  the  concerned  Notification.
The High Court went into the issue and  by  its  detailed  judgment  it  has
decided this issue against the appellant. The basis  for  arriving  at  such
conclusion shall be stated by us in some details at the later stage.

Mr.  L.  Nageshwar  Rao,   learned  senior  counsel  who  appeared  for  the
appellant, challenged the very approach of the High Court  in  deciding  the
issue on merits as well as the finding arrived at by the High  Court in  the
following manner:
(i)   In the first place,  it  was  argued  that  the  High  Court  was  not
competent to  go  into  this  issue  when  the  Act  provides  for  complete
adjudication machinery to adjudicate  this  issue.  Learned  senior  counsel
referred to the provisions of Section 28  of  the  Act,  as  per  which  the
authorities are supposed to issue show cause  notice  to  the  importer  and
after giving opportunity to the importer  to meet the allegations  contained
in show cause notice, the Adjudicating  Officer  is  to  pass  an  Order-in-
Original deciding the case stated in the show cause notice. He  pointed  out
that against the order of the Adjudicating Authority there  is  a  provision
for appeal before the Customs, Excise and  Service  Tax  Appellate  Tribunal
(for short, 'CESTAT'). Against the order of the CESTAT, appeal  is  provided
to the Supreme Court. He further submitted that the Authority  and  Tribunal
are  the  fact   finding   authorities,   which   are   supposed   to   take
evidence/material on record and arrive at a finding on that basis. Mr.  Rao,
in this backdrop, submitted that  not  only  this  procedure  was  sidelined
thereby causing great prejudice to the appellant, even otherwise,  the  High
Court, while exercising its extraordinary writ  jurisdiction  under  Article
226 of the Constitution, was not competent to decide the disputed  questions
of facts.
(ii)  Mr. Rao also impressed upon the fact that  it  was  not  open  to  the
Department now to contend that the machine  in  question  was  incapable  of
producing 36,000 copies per hour and have the  matter  adjudicated  when  by
this time the matter had become time barred. In this behalf, it was  pointed
out that in the writ petition filed by the appellant,  there  was  no  order
restraining the respondents from issuing show cause notice under Section  28
of the Act and to proceed with the process of  adjudication.  Therefore,  it
was open to the customs authorities to invoke the said machinery  under  the
Act. However, it was not done, which resulted in accruing valuable right  in
favour of the appellant.  The learned counsel, thus, insisted that when  the
customs authorities were  precluded  from  taking  any  action  against  the
appellant because of embargo of limitation coming in  their  way,  the  High
Court was equally incompetent to decide the said issue on merit and  passing
the liability upon the appellant in respect of time barred claim.
(iii) Another submission of Mr. Rao was that the writ petition was filed  in
the year  1988  in  which  interim  order  was  granted  in  favour  of  the
appellant. The High Court  was  forced  to  pass  such  an  order  directing
release of the machine to the appellant when the authorities failed  to  get
the machine inspected to find out the potential output of the said  machine.
Therefore, the Department allowed the chance to be slipped  away  to  verify
this fact on which the entire decision depended, and benefit thereof  should
have been given to the appellant as it was not possible  to  ascertain  this
fact after 14 years. In any case, it was argued that  even  the  High  Court
before deciding the issue did not go into this aspect.
(iv)  The last submission of Mr. Rao was on merits of the  case  emphasising
that the High Court was merely influenced by  the  leaflets  containing  the
literature about the machine and did not appreciate other material  produced
by  the  appellant,  including   the   clarifications   furnished   by   the
manufacturer itself stating  that  advance  version  of  the  machine,  with
modification, was manufactured and supplied to the appellant and insofar  as
machine in question is concerned it had  the  printing  capacity  of  36,000
copies per hour. He, thus, submitted that even on merits,  the  findings  of
the High Court were coerced.

Mr. A.K. Panda, learned  senior  counsel  appearing  for  the  Revenue,  per
contra,  refuted  the  aforesaid   submissions   forcefully.   He   put   it
emphatically that it did not behove well on the part  of  the  appellant  to
now question the jurisdiction and competence of the High Court  to  go  into
the issue when the High Court was requested and persuaded by  the  appellant
itself to decide the  issue,  as  is  reflected  in  the  impugned  judgment
itself. He, thus, argued that the appellant was estopped from  raising  such
an  issue  when  the  appellant  itself  invited  the  judgment  on  merits.
According to Mr. Panda, this fact would also negate the  contention  of  the
appellant predicated on limitation. His submission in this behalf  was  that
the appellant had itself  raised  this  issue  in  the  High  Court  in  its
petition which was  pending  adjudication.   That  was  a  reason  that  the
Revenue authorities did not initiate any  action  as  per  the  adjudicatory
mechanism provided in the Act. Therefore, the appellant was not entitled  to
rake up the issue of limitation as  well.  On  merits,  the  learned  senior
counsel submitted that once the High Court was invited to decide  the  issue
on the basis of material that was placed on record by both  the  sides,  the
High Court had looked into the said material in its entirety and  has  found
that the machine in question imported by the appellant  does  not  meet  the
requirement of Notification  No. 114/80-CUS as its  output  is  only  25,000
copies per hour which is less than 30,000 copies that  is  needed  to  avail
the benefit of the Notification. He, therefore, pleaded  for  the  dismissal
of the appeal.

We have considered the respective submissions of  the  learned  counsel  for
the parties on either side with reference to the record. In  a  matter  like
this, it is necessary in the first instance to take note  of  the  scope  of
the writ petition that was filed by the appellant in the  High  Court  which
is dismissed by the judgment impugned.  A  copy  of  the  said  judgment  is
placed on record and  a  perusal  thereof  would  show  that  the  appellant
contested and disputed  the  position  taken  by  the  Department  that  the
imported machine did not fulfill  the  aforesaid  requirement  of  exemption
Notification No.   114/80-SC.  The  appellant  enclosed  copies  of  various
documents procured from the  manufacturer  and  others  in  support  of  its
submission on the basis of which it was claimed that the appellant was  able
to establish that the speed of the  imported  printing  machine  was  36,000
copies per hour.  On that basis, contention raised in the writ petition  was
that action of the Department in not allowing the  appellant  to  clear  the
machine was illegal. The appellant also alleged failure and refusal  on  the
part of the customs authorities in not permitting the  appellant  to  effect
clearance for an inordinately long period of  time  after  the  machine  was
landed. On the basis of these pleadings, following main relief  was  claimed
in the prayer clause:
“The petitioner, therefore, prays:

(a)   For a declaration that the petitioner is in  law  entitled  to  import
and clear the said printing machine covered by the said Bill  of  Entry  for
Home Consumption (Exhibit 'A' hereto) as  an  Actual  User  under  the  Open
General Licence;”

Another prayer was made to permit the appellant to clear the  said  imported
Harris Web Printing Machine and to issue  a  detention  certificate  to  the
appellant in respect of the said machine, covering the  entire  period  from
importation thereof upto the time the same is cleared by the appellant.   In
addition, interim prayer for immediate  clearance  of  the  machine  by  the
appellant and issuance of detention certificate were also made  pending  the
hearing and final disposal of the writ petition.

As mentioned above, this interim prayer  was  allowed  by  the  High  Court.
However, the writ petition was still kept pending  for  the  obvious  reason
that the appellant had sought the main relief of declaration  that  it  was,
in law, entitled to import and clear  the  said  machine  as  the  same  was
covered by the Bill of Entry for Home Consumption, as filed,  as  an  actual
user under OGL. Thus, the appellant had raised the dispute in the said  writ
petition on merits as well.

No doubt, when the High Court passed the interim  order  in  favour  of  the
appellant, the High Court could  dispose  of  the  writ  petition  with  the
observation that the aforesaid issue involved on merit can be gone  into  by
the appropriate authority  by  putting  the  machinery  of  adjudication  in
motion via Section 28 route.  For some reason, that was not done and it  was
more so as the appellant had itself prayed for declaration  to  this  effect
in the writ petition, which means it called upon the High  Court  to  decide
this issue.

In the aforesaid scenario, when the writ petition was pending, wherein  this
issue was raised, probably for this reason the Department  also  stayed  its
hands off. No doubt, there was no stay of adjudication proceedings  and  the
competent authority  could  go  ahead  with  the  adjudication  proceedings.
However, if there was a show cause notice  in  the  year  2002,  whether  it
would have been time barred or not is not even required  to  be  gone  into.
Such a guess game is not needed because of  one  simple  reason.   When  the
writ petition came up for  final  hearing  in  the  year  2002,  it  is  the
appellant who is responsible for inviting the decision on  merits.  Even  at
that stage, the appellant could have simply withdrawn the writ  petition  as
with the passing of interim order it had got the  printing  machine  cleared
from the customs authorities and was using the same.  However,  it  did  not
choose to do so. Had it done so, and thereafter received show  cause  notice
under Section 28 of the Act, it could have defended that notice raising  the
plea of limitation as well.  Only then question  would  have  arisen  as  to
whether the period during which the writ petition remained  pending  had  to
be excluded  or  not,  for  the  purpose  of  computing  limitation  period.
However, for the reasons best known to the appellant, the  appellant  argued
exactly the opposite of the submissions made before us by Mr. Rao. We  point
out, at the cost  of  repetition,  that  it  was  at  the  instance  of  the
appellant that this issue was taken up for hearing. We reproduce  below  the
following discussion in the impugned judgment touching upon this aspect:
“The long pendency of this petition for 14  years  and  the  peculiar  stand
taken by the petitioners prevented us from  remitting  this  matter  to  the
adjudicating authorities under the Act to determine the  disputed  questions
of fact. Left with no other alternative, we are constrained to  decide  this
matter on merits on appreciation of evidence for the following reasons:

Then, as many as seven reasons were given by the High Court which  compelled
the High Court to decide the issue on merits. After  noting  those  reasons,
the High Court recorded as follows:
“In the aforesaid circumstances, though we initially thought of getting  the
issue adjudicated  through  the  adjudicating  authority  by  directing  the
respondents to issue show cause notice under Section  11-A  [(sic);  Section
28] of the Act, so as to afford reasonable opportunity to  both  parties  to
place their case before the adjudicating authority  leaving  on  merits  all
the  rival  contentions  open,  the  petitioners  vehemently  opposed   this
approach and placed reliance on the judgment of the Apex Court in  the  case
of Gotak Patel  Volkart  Ltd.  Vs.  Collector  of  Central  Excise,  Belgaon
reported in 1987 (28) ELT 53 (SC) so as to contend that  show  cause  notice
cannot be issued beyond six months under Section 11-A  [(sic);  Section  28]
of the Act, and that after 14 years petitions cannot be asked  to  face  the
adjudication process. This is how the petitioners pressed for  the  decision
on merits.”


It shows that High Court was not oblivious of Section  28  of  the  Act  and
that determination of such an issue is  to  be  more  appropriately  in  the
hands of Adjudicating Authority. It also appears that High Court might  have
disposed of the writ petition with liberty to the Adjudicating Authority  to
initiate proceedings under Section 28 of the Act. Curiously, such an  action
was not taken at the instance of the appellant  which  contended  otherwise,
as is clear from the following narration:
“The learned counsel for the petitioners contended  that  this  Court  would
not be justified in dismissing the  petition  as  not  maintainable  on  the
grounds of availability of alternate remedy  especially  when  the  petition
was entertained, kept pending for 14 years   and when it is being  heard  on
merits. He also raised a  contention  that  the  availability  of  alternate
remedy does not affect the jurisdiction of the Court to issue writ. He  also
brought to our notice judgment of this Court in the case  of  Nehawas  Steel
Traders Vs. Union of India,  1993  (68)  ELT  721  (Bom.).  The  petitioners
therein were permitted to  clear  the  assignment  on  certain  terms  under
interim order which specifically provided that the respondents would  be  at
liberty to serve show cause notice and pass appropriate adjudication  order.
The respondents having failed to take any follow up action for more than  10
years, this Court in that case had observed that no fruitful  purpose  would
be  served  by  permitting  the   respondents   to   commence   adjudication
proceedings hereinafter. In this view of the matter, submission was made  to
decide this petition on its own merits on the available material.”


After inviting the High Court to decide the matter  on  merits  and  finding
that the decision has gone  against  the  appellant,  contrary  argument  is
nothing but a desperate attempt to chicken out of  the  situation  which  is
appellant's  own  creation.  This  kind  of  somersault,  taking  completely
reverse stand before us, cannot be countenanced. We, therefore,  reject  the
contention of the appellant that High Court was not competent to decide  the
issue in exercise of its writ jurisdiction.

The position would have been different if it was a case of inherent lack  of
jurisdiction.  That is not so.  The powers of the High Court  under  Article
226 of the Constitution, while issuing appropriate  writs,  are  very  wide.
Even if there is an alternate remedy that may not preclude  the  High  Court
from exercising the jurisdiction in a  particular  case.   In  the  face  of
alternate statutory remedies, when the High Court declines to  exercise  the
jurisdiction under Article 226 of the Constitution, it  is  a  self  imposed
restriction only. In the instant case, what is pertinent is that it  is  the
appellant which not only made a prayer in the  writ  petition  for  deciding
the issue in question, even at the time of hearing (as noted above),  it  is
the appellant which pressed  for  the  decision  with  the  submission  that
existence of alternate remedy should not  deter  the  Court  to  render  the
decision on merits.  In such a situation, the  objection,  if  any,  to  the
maintainability  of  the  writ  petition  could  have  been  taken  by   the
respondent and it does not behove the appellant to raise this  objection  in
the present appeal after pleading in the  High  Court  that  the  matter  be
decided on merits.

For the same reason, the argument that the issue involved disputed  question
of fact is also not available.  Order of  the  High  Court  clearly  records
that the appellant had requested the High Court to decide the issue  on  the
basis of material on record.

We are not impressed with the argument of the appellant that the matter  had
become time barred.  In fact,  reasons  for  rejecting  this  argument  have
already surfaced while discussing the  preceding  submission.   However,  we
would like to recapitulate them with focus on the issue  at  hand  which  is
being addressed now.

The issue as to whether the import of Web Printing Machine  was  covered  by
Notification No. 114/80-CUS dated 19.06.1980 was pending in the  High  Court
in respect of which petition was filed by the appellant itself way  back  in
the year 1988 raising this issue.  The appellant even got the interim  order
in its favour.  When the writ  petition  came  up  for  final  hearing,  the
appellant impressed  the  Court  to  decide  the  said  issue.   In  such  a
situation, question of limitation does not arise inasmuch as  it  is  not  a
case where proceedings under Section 28 of the Act  were  taken  out  giving
any show cause notice under the said section.  The  question  of  limitation
would have arisen only in case the respondent had issued show  cause  notice
under Section 28 of the Act.  Further, it is not that  the  High  Court  was
oblivious of the provisions of Section 28.  That is  categorically  recorded
in the impugned judgment.  Curiously, it  is  the  appellant  who,  pointing
this very reason, invited the decision on merits.  Now, therefore, issue  of
limitation is not even open for the appellant to urge before us.

Other arguments of Mr. Rao were on the merits of the  case.   Now  we  shall
advert to those submissions.

As pointed out above, the case of the appellant is that the High  Court  has
given undue weightage to the two leaflets as  against  the  other  material,
including the certificate of  the  manufacturer  clearly  stating  that  the
machine in question which was supplied to  the  appellant  was  an  upgraded
version capable of producing 36,000 prints  per  hour.   However,  from  the
reading of the impugned judgment, it  becomes  clear  that  each  and  every
document which  was  filed  and  relied  upon  by  the  appellant  has  been
discussed.  The High Court observed that insofar as  the  documents  of  the
appellant are concerned, they can conveniently be divided into  parts.   One
part of the document consists of two leaflets furnishing technical data  and
description of the printing machine in question along  with  Bill  of  Entry
and certificate showing date 08.02.1987 issued by the  manufacturer  of  the
machine M/s. Harris Graphics Corporation,   USA.   The  other  part  of  the
document is  nothing  but  a  correspondence  made  by  the  appellant,  its
Clearing and Holding Agent and one M/s. S.L. Kulkarni & Co., which deals  in
printing machinery, projecting themselves to be the  Indian  agent  of  M/s.
Harris Graphics Corporation, USA.  The said second  part  of  the  documents
can well  be  described  as  self  serving  evidence.   Likewise,  documents
produced by the respondent  were  also  divided  in  two  parts.   One  part
represents the  document  in  the  nature  of  Inspection  Report  based  on
examination of the entire consignment which  was  completed  on  28.09.1988,
while complying with the part of the directions issued by the High Court  by
order dated 02.09.1988, and the other part of  documents  is  basically  the
reproduction of documents supplied by the appellant itself.

Thereafter, the High  Court  formulated  the  question  as  to  whether  the
appellant had discharged its burden  to  prove  that  the  subject  printing
machine imported by it under OGL was having an output of  more  than  35,000
copies per hour so as to entitle it to claim  exemption  under  Notification
No. 114/80-CUS, as amended from time to time.  On that touchstone, the  High
Court has examined, appreciated and analyzed all the documents  produced  by
both the parties.  This detailed analysis runs into several  pages.   It  is
not necessary for us to go through this evidence and discuss the same as  we
find that the ultimate conclusion drawn by the High Court in this behalf  is
correct and plausible.  We would, however, like to reproduce  the  following
observations of the High Court  wherein  the  certificates  of  manufacturer
produced by the appellant vis-a-vis the leaflets  giving  technical  details
of the machine which were found along with the machine, are discussed:
“38.  The bare reading of the above certificate gives a picture that  Model-
15-H is with JF-25, JF-4, JF-10.  If this certificate is read in  the  light
of leaflets referred to hereinabove, the  relevant  portions  of  which  are
extracted in the above par, it would be clear that  the  manufacturer  wants
to suggest that  the  folder  JF-25-B  has  been  upgraded  to  JF-25,  with
additional  folders  JF-4  and  JF-10.   Firstly,  as  already  stated,  the
leaflets do not support this picture sought  to  be  projected  through  the
above certificate dated 3rd June, 1986.   Secondly,  had  it  been  so,  the
subsequent leaflet alleged to be a catalogue of  modified  model  would  not
have been omitted to mention this special feature  of  the  upgraded  model.
It does not support the assertion sought to be made in  the  certificate  in
question.  No reference is to be found to the additional folders  styled  as
JF-4 and JF-10 in the said literate.  Thirdly, the inspection report of  the
machine furnished by the Customs based on the  inspection  completed  before
28th September, 1988 shows that the folder base of the machine  in  question
was found as JF-25-B model.  Had the folder been  upgraded  from  JF-125-Bto
JF-25 then the machine in question ought to have been with  modified  folder
JF-25 and could not have been with folder  base  JF-25-B.   Fourthly,  other
modified folders JF-4 and JF-10 are not to be found in the inspection  note,
obviously, for want of such machine or model  with  such  modified  folders.
This inspection note has not been objected to by the petitioners.  Thus,  it
can be safely treated as undisputed document.  One more shade  of  the  same
evidence needs further appreciation.  The letter of M/s S.L. Kulkarni &  Co.
dated 21st January 1988 (Exh. J) makes out a case that the original model V-
15-H exported to India has been  modified  to  run  at  36,000  speed.   The
modification pertains to design changes in folder of the machine to  run  at
that speed and to take additional load due to higher speed, the horse  power
of the machine has also been suitably modified is  the  case  sought  to  be
made out.  We have  already  observed  and  recorded  our  finding  that  no
evidence is available on record to establish  modifications  of  the  folder
base of the machine or model in question.  If this be our finding, then  the
logical conclusion is that no modifications have been  made  in  the  folder
base of the machine or model in question.  If that be so,  then  in  absence
of modification of the folder base, machine cannot be said to be capable  of
taking additional load.  Therefore, it cannot given higher speed  so  as  to
given higher production to the extent of more than 35,000 copies  per  hour.
The certificate and the letter  of  M/s  S.L.  Kulkarni  &  Co.,  therefore,
cannot be relied upon.  The same cannot be given  any  credence.   The  said
evidence, for the aforesaid reasons, is not acceptable to us.

39.  One more aspect of the above certificate needs  to  be  noticed.   This
certificate of the manufacturer is dated 3rd June  1986.   The  contract  to
purchase machine in question has been shown to be dated  24th  March,  1987.
The copy of  the  contract  dated  24th  March,  1987  as  already  observed
hereinabove has not been produced on record.  One more  document  styled  as
agreement dated 24th April 1986 (Exh. G) is produced on record.  Both  these
documents are prior to the date of formation of contract  i.e.  24th  March,
1987.  No evidence is on record to connect these documents with the  subject
contract dated 24th March, 1987 or with the machine in question.  It is  not
known whether the same agreement culminated  in  the  final  contract  dated
24th March, 1987 or the same was  modified  or  a  new  contract  has  taken
place.  It is settled principle of law of contract that the  document  prior
to formation of contract cannot be taken into account  to  interpret  or  to
understand the contract in question unless it is shown to be a part  of  the
same contract or negotiation.  Therefore, for want of  material  on  record,
the said documents cannot be treated as part of  the  same  contract.   Even
otherwise the time gap between the alleged agreement dated 24th  April  1986
(Exh. G) and contract (dated 24th March, 1987) is such that it was  all  the
mere necessary to  prove  that  the  said  document  was  the  part  of  the
subsequently concluded contract.”

We are in agreement with the view taken by the High Court on merits,  having
regard to the fact that burden of proof was on the  appellant  to  establish
that the machine  imported  by  it  generates  more  than  35,000  composite
impressions or copies per hour.  The appellant has failed to do so.

As a result, the appeal fails and is hereby dismissed with no  order  as  to
costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                               (N.V. RAMANA)

NEW DELHI;
AUGUST 12, 2015.

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