Extended limitation in customs demands requires material justification; without it, the notice, demand and penalty cannot stand.

The customs demand notice was found unsustainable because the department did not show the material basis for raising the demand or justify invocation of the extended limitation period under section 28(1) of the Customs Act, 1962. The notice proceeded on alleged contravention of Notification No. 203/92-Cus on the footing that Modvat credit had been taken in respect of export products, but no distinguishing facts were produced to support the extended period. As a result, the demand and penalty could not be maintained on limitation grounds.

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Issues: Whether the extended period of limitation could be invoked for issuing the customs demand notice and consequentially sustaining the duty demand and penalty.

Analysis: The appeals turned on the absence of material showing the basis on which the demand was raised and the absence of justification for invoking the extended limitation period under section 28(1) of the Customs Act, 1962. The order under challenge proceeded on the alleged contravention of Notification No. 203/92-Cus on the ground that Modvat credit had been taken in respect of export products, but no distinguishing material was shown to support application of the extended period. In these circumstances, the notice could not be sustained on limitation.

Conclusion: The extended period of limitation was not available to the department for issuing the notice, and the demand and penalty were set aside.

Ratio Decidendi: In the absence of material showing the basis for the demand and justifying invocation of the extended limitation period, the customs notice cannot be sustained.

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