1. A notification was issued on 19-6-1980 by which an exemption was granted under S.25(1) of the Customs Act, 1962 of customs duty in excess of 25% ad valorem payable in respect of the import of various items designed for use in the printing industry. Among the items specified in the table to the notification, Serial No. 1 refers to Web fed high speed letter press rotary and Web fed offset rotary printing machines having 30,000 or more copies per hour.

2. According to the appellant, it had imported three printing presses from Sweden during the period 1986-87 each of which had an output of more than 30,000 copies per hour. The Customs Authorities issued three show cause notices to the appellant in respect of each of the three machines. The show cause notices are substantially similar and it would be sufficient for our purpose to merely consider the first show cause notice which is undated but issued presumably sometime prior to August 1987. The show cause notice stated that the Customs Authorities had obtained information to the effect that the rated speed of the printing machines imported by the appellant was only 25,000 copies per hour and the suppliers catalogues submitted by the appellant were manipulated to show that the machine could produce 36,000 copies per hour. The show cause notice went on to state that the machines imported by the appellant had a running capacity of 25,000 copies per hour on the basis of (a) British Printer Data Guide, (b) p. 35 of the magazine Printing Work, and (c) the Swedish manufacturers original catalogue. The three documents, according to the show cause notice, showed that the model of the machine imported by the appellant was capable of producing only 25,000 copies per hour at top rated speed. The notice which was issued by the Deputy Collector of Customs, alleged that the speed of the appellants machine being only 25,000 revolutions per hour and not 36,000 revolutions as claimed by the appellant, the benefit of the notification was not available to it. It was proposed to confiscate the machines and to impose the tariff rate of duty on the appellant.

3. The appellant replied to the show cause notice by making available whatever documents were with it as supplied by the manufacturer. It was stated that before the import of the machines, they had been tested by the appellant in Sweden and that the import was effected only after it was certified that the machines were capable of an output of more than 35,000 copies per hour. It was also stated that the appellant was prepared to demonstrate before the Customs Authorities the actual performance of the machines. This offer was not taken up by the Customs Authorities. The appellant, in addition to the catalogue issued by the Swedish manufacturer in respect of its machines imported to India, also submitted the certificate of two independent technical experts to the effect that the machines were capable of an output of more than 36,000 copies per hour. The experts included a Professor of IIT Department of Electrical Engineering, Madras.

4. The Customs Authorities originally referred the matter to the Director General of Technical Development (DGTD) for verification and a trial run. The DGTD did not carry out the inspection on the ground that they required to have further details.

5. The Commissioner decided against the appellant by holding that the certificates issued by the two experts did not in fact show that the machines were capable of an output of 35,000 copies per hour. The Indian catalogue of the Swedish machines was also rejected on the ground that it was not convincing. It was also noted that the particulars asked for by DGTD had not been made available by the appellant as the suppliers had refused to disclose the technical specifications of the model supplied on the ground of commercial confidentiality. The Commissioner also came to the conclusion that the machines were not capable of producing 36,000 copies per hour merely by any modification carried out to the electrical drive. In conclusion, the Commissioner said:

"The question is whether they are designed and are capable of a commercial run of 36,000 copies per hour. Unless it is established that the machines are designed for a higher output, the importers cannot be considered as having satisfied the conditions. The Department has clearly brought out in the show cause by comparison of the catalogues that all other specifications remaining the same, only the output gas has been shown as different in respect of the machines marketed to India. The Department has also brought out that there are distinct models produced by the same manufacturer for higher output of 35,000 copies per hour. When such models designed for 35,000 copies per hour are produced by the same manufacturer, their statement to the effect that by altering the electrical drive of a model or lower output without changing any other specifications, the machines are capable of giving higher output does not carry conviction."

6. The plea of the appellant to have the actual performance of the machines tested was rejected on the ground that Customs Officers could not be deputed to every nook and corner of the country for satisfying themselves as to the performance of the machines.

7. An order was accordingly passed confiscating the machines under S.111(d) of the Customs Act, 1962 read with S.3(2) of the Import and Export (Control) Act, 1947. A redemption fine of Rs 1 lakh per machine was imposed. The appellant was also called upon to pay the differential duty forthwith. Penalty of Rs 1 lakh was imposed on the local agent of the Swedish manufacturer.

8. An appeal was preferred before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal partially allowed the appellants appeal by holding that the proceedings insofar as import of one of the machines was barred by time. However, with regard to the import of the other two machines, the Tribunal came to the conclusion that what was important was not the capacity of the machine but the actual output of the machine. It was found that the appellant had not discharged its burden for claiming the exemptions since the actual output had not been proved except the modifications to the imported machines. The order of the Commissioner was, therefore, upheld in respect of the two machines.

9. Pursuant to an order passed by this Court at an interim stage on 16-8-2001, the Collector of Customs was directed to personally inspect the machines and give his opinion with regard to the capacity of the printing press imported by the appellant. The Collector has submitted its report on 10-12-2001 in which he has stated that of the two machines one was not in use for some time. However, it was reconnected and for a short period, it had produced 27,000 copies per hour. After 15 minutes, the machine seized. The second machine which was at Madurai when operated was found to produce 30,000 copies but the paper reel needed changing after 25 minutes and it was found that some of the prints were not clear. This factual report must be assessed in the light of the fact that the machines were being inspected more than 15 years after they were imported.

10. This appeal must, however, be allowed on the short ground that the respondent authorities have taken an inconsistent stand. From the narration of the facts it is clear that the Commissioner had proceeded on the basis of the capacity of the imported machines and not their actual production. The show cause notice had also been issued on this basis. The Tribunal, on the other hand, has categorically rejected the "capacity test" and has come to the conclusion that the capacity was irrelevant. It held that the interpretation of the notification in fact shows that the only test was whether the output of a machine in one hour was 30,000 copies per hour in actuality and not whether the machine was designed for capacity of X or Y at speeds P and Q.

11. Learned counsel for the respondent has supported the Tribunals interpretation of the notification. In our opinion, this would mean that the show cause notice had been issued on an incorrect interpretation of the notification. That should have been sufficient for the Tribunal to set aside the proceedings against the appellant.

12. In the circumstances of the case, the appeal is allowed and the decision of the High Court is set aside.