THE SECURITY PRINTING AND MINTING CORPORATION OF INDIA LIMITED AND ANR. versus M/S. GANDHI INDUSTRIAL CORPORATION

Citation: [2007] 11 S.C.R. 86 · Decided: 12-10-2007 · Supreme Court of India · Bench: A.K. MATHUR · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
THE SECURITY PRINTING AND MINTING CORPORATION 
OF INDIA LIMITED AND ANR. 
v. 
MIS. GANDHI INDUSTRIAL CORPORATION 
B 
OCTOBER 12, 2007 
[A.K. MATHUR AND D.K. JAIN, JJ.] 
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Contract: Terms of contract vis-a-vis terms of tender/ 
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c advertisement-Binding effect of-Held: Once contract comes into 
existence between parties they are bound by it and not by terms of 
tender/advertisement-On facts, tender not containing clause 
regarding non-availability of modvat credit to claimant-
manufacturer-While placing order, appellant added term that modvat 
D credit availed by claimant would be passed on to it-Claimant 
protested but continued with contract-Hence, claimant bound by 
contract and has to restore modvat credit received by it to the 
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appellant-Terms of contract were very clear and understood by 
claimant-Principle of sub silentio not applicable. 
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E 
Central Excise Rules, 1944: Rule 57A-Modvat credit-
Entitlement for-Held: Appellant issued gate passes and documentary 
evidence for payment of excise duty on which claimant claimed benefit 
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of modvat credit-Hence appellant is entitled to benefit of modvat 
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credit as it had paid excise duty. 
On 2.6.1994, the appellant floated tenders for gumming and 
super calendaring work. The claimant received the order, The 
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appellant while placing orders on 31.5.1994 added a terr~ that the 
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modvat credit if any, availed by the claimant would be passed on to 
G the appellant. The claimant by its letter dated 5.6.~995 agreed to 
accept the order subject to withdrawal of the term refating to passing 
of modvat credit to the appellant. 
The appellant did not respond but fonvarded base paper to the 
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86 
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· SECURITYPRINTINGANDMINTINGCORPN.OFINDIA 87 
LTD. v. GANDHIINDUSTRIALCORPN. 
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Claimant to carry out the work of gumming and super-calendaring A 
of base paper. The finished goods were delivered by the claimant 
along with necessary documents including the gate passes for 
endorsement by the appellant. The claimant had been reminding 
them from time to time that the modvat credit is only available to 
the manufacturer i.e. the claimant. By letter dated 30.12.1995, the B 
appellant informed that the modvat credit availed by the claimant 
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would have to be transferred to the appellant. Though the claimant 
did not accept the same but the view of the appellant remained 
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unchanged. Finally on 25. 7.1996, the appellant informed the claimant 
that the modvat credit availed by the claimant after 1996 would be c 
adjusted by deduction of the amounts payable to the claimant. 
Accordingly, the modvat credit availed by the claimant was deducted. 
Matter was referred to arbitration. Arbitrator decided in favour of 
claimant and awarded Rs. 50 lakhs. Single Judge of High Court and 
Division Bench of High Court affirmed the view of the arbitrator. D 
Hence the present appeal. 
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Allowing the appeal, the Court 
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HELD: 1. The view taken by the Arbitrator and affirmed by 
the Single Judge and the Division Bench of the High Court cannot E 
be sustained. Firstly, when the terms and conditions had been 
reduced in the supply order dated 31.5.1995, the condition of modvat 
credit was incorporated. The contract had come into existence and 
the supply had been started on the basis of that supply order. Though 
the claimant had protested with regard to this clause but the appellant F 
did not accede to the request for deleting that clause and the 
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appellant had informed the claimant on 31.12.1995 that there was 
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no change in the conditions of the supply order, still claimant 
continued to supply the goods as per the order. Therefore, on the 
face of this condition there is no going back from that. In case the G 
claimant was not inclined to accept this clause, it could have very 
well withdrawn from the contract. But it did not do so and continued 
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with the contract. Therefore,.on the basis of the clear terms of the 
contract, the claimant is bound by it and it has to restore whatever 
the modvat credit received by it to the appellant. [Para 8] [97-B-E] 
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88 
SUPREME €0URT REPORTS 
[2007] 11 S.C.R. 
A 
2. The view taken by the Arbitrator that since it was not the 
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condition when the tender was floated is not correct as after the 
complete contract having come into existence, there is no purpose 
to refer to the terms of tender. What is binding is the completed 
contract and not the terms of offer of the advertisem

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