Extended limitation under customs law failed where no wrongful declaration or Modvat credit misuse was proved against the licence transferee.

Extended limitation under the Customs Act could not be invoked where the allegation of wrongful declaration regarding Modvat credit was unsupported by evidence. A transferee of an advance licence, who did not file the export documents, could not be attributed with any declaration contained in those documents. In the absence of proof that the exporter had availed Modvat credit or that the appellant made any wrongful declaration or contravention, there was no lawful basis to sustain the duty demand or penalty. The demand, penalty, and extended-period invocation were therefore unsustainable.

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Issues: Whether the demand of duty and penalty under the Customs Act, 1962 could be sustained by invoking the extended period of limitation on the basis of an alleged wrongful declaration regarding availment of Modvat credit, where the appellant was only a transferee of the advance licence.

Analysis: The appellant, being only a transferee of the licence, had not filed the export documents and could not be attributed with any declaration made in those documents. The alleged foundation for denial of the exemption, namely that Modvat credit had been availed in the manufacture of the exported product, was not supported by evidence. In the absence of proof that the exporter had availed Modvat credit or that any wrongful declaration was made by the appellant, there was no lawful basis to sustain the duty demand or the penalty, and the extended limitation was not attracted.

Conclusion: The demand and penalty were unsustainable and the appeal succeeded.

Ratio Decidendi: The extended period and consequent demand cannot be sustained without evidence of the requisite wrongful declaration or contravention by the person sought to be fastened with liability.

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