MARUTHI INDUSTRIAL Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants had imported "Micro Crystalline Cellulose" and filed bill of entry dated 31.12.1996 for its clearance claiming the benefit of Customs Notification No. 158/95, which exempted the goods from payment of duty of customs subject to condition that the product resulting from reprocessing of the imported material be exported. Duty -free clearance was obtained by the appellants upon execution of a bond in terms of the Notification. Apparently, under the bond, the assessing authority was required to furnish proof of export, which was not furnished. Eventually, by a letter dated 8.6.98, the Assistant Commissioner of Customs (Group I and II) requested the appellants to pay 'bond value' of Rs. 17,50,835/ - immediately, failing which, it was warned, action would be initiated in terms of Section 142 of the Customs Act. A reminder dated 7.9.98 was also sent by the Assistant Commissioner. Apparently, this demand was not honoured by the party. Ultimately, on 12.10.98, the 'proper officer of Customs' issued to the appellants a "NOTICE IN TERMS OF SECTION 28 (1) OF THE CUSTOMS ACT, 1962". This notice was in a printed format and the same required the noticee to show cause within fifteen days why the amount of duty of Rs. 17,50,835/ - should not be paid by them. It also indicated that, if no reply was given within the said period, the case would be disposed of in accordance with the provisions of Section 28(2) of the Customs Act without further reference to the noticee. The annexure to the notice stated thus: "The conditions as laid down in Customs Notification No. 158/95 dated 14.11.1995 have not been fulfilled. Also you have not submitted any documentary evidence of re -export. Hence you are requested to pay Rs. 17,50,835/ - immediately." The show -cause notice was not replied to by the appellants, nor did they attend personal hearing offered by the adjudicating authority. After examining the records, the said authority confirmed demand of the above amount of duty against the party under Section 28(2) of the Customs Act on the ground of breach of the bond executed under Notification No. 158/95 ibid. The appeal filed by the party against the order of adjudication was rejected by the Commissioner (Appeals). Hence the present appeal.

(2.) AFTER examining the records and hearing both sides, we find that a basic legal issue arises in this case. The ld. Commissioner (Appeals) has fastened 'contractual obligation' on the appellants to pay duty of customs on the imported material in the wake of breach of bond by them. She has also rejected the appellants' plea of time -bar on the premise that a demand of duty raised on the ground of breach of conditions of exemption Notification cannot be resisted on such a ground. According to the appellants, where any amount of duty is demanded under Section 28 of the Customs Act, the plea of time -bar is available to the noticee. In this case, the bill of entry was filed on 31.12.96 and the show -cause notice was issued on 12.10.98 without invoking the extended period of limitation. Therefore, according to the appellants, the demand of duty is time -barred. Ld. Counsel for the appellants and ld. SDR for the respondent have reiterated the respective contentions. Ld. SDR has particularly referred to the annexure to the notice in her endeavour to show that the cause of action for the demand of duty was clearly stated therein. She has also referred to Section 142 of the Customs Act and has submitted that the authority of the Department for proceeding against the assessee under this provision of law stands reserved to it. We must readily accept the last submission made by the ld. SDR. Admittedly, the Assistant Commissioner had been demanding the "bond value" from the appellants, with a warning that, in the event of nonpayment, (Sic) action would be taken under Section 142 of the Customs Act for recovery of the amount. Apparently the Department eventually chose to issue a show -cause notice to the appellants under Section 28 (1) of the Customs Act. We have already described the salient features of this notice. Significant among these features is the fact that this notice proposed adjudication under Section 28(2) of the Act. Where a demand of duty is raised under Section 28(1) of the Act, it is open to the noticee to resist it on all legal and factual grounds available to them. One ground which has been expressly offered to the noticee under Section 28 is the plea of time -bar. At the material time, any demand of duty of customs was ordinarily permissible for a period of six months from the relevant date. For invoking the larger period limitation (five years), it was incumbent on the Department to allege the necessary ingredients such as fraud, collusion, suppression of facts etc. against the noticee so as to invite the latter's rebuttal. This did not happen in the present case. As we have already indicated, the belated notice was issued without invoking the extended period of limitation. Nothing contained in the annexure to the notice was a ground for invoking the extended period of limitation. On these facts, we have to hold that the appellants have a strong case on the ground of limitation against the demand of duty raised in the impugned order.

(3.) AFTER a perusal of the original records shown to us by ld. SDR, we find that a detention notice was issued by the Department to the appellants under Section 142 of the Customs Act on 17.2.2000 i.e. after the Order -in -Original was passed in this case. In a subsequent notice dated 4.3.2000 issued by the Department, the appellants were informed that the detention notice was being kept in abeyance till the case was finalized by the Commissioner (Appeals). We have found the orders of both the lower authorities to be unsustainable and, therefore, it appears to us, there is no reason for any detention notice under Section 142 to be kept in abeyance any longer. The Department is at liberty to continue their proceedings under Section 142 to its logical conclusion in accordance with law.