D.R. ENTERPRISES LTD. Vs. ASSTT. COLLECTOR OF CUSTOMS AND ORS
Section 226 - Power of High Courts to issue certain writs
Section 28 - Notice for payment of duties not levied, short- levied or erroneously refunded.
Section 49 - Storage of imported goods in warehouse pending clearance.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4417 of 2003, Judgment Date: Aug 12, 2015
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.