Customs demand fails without proof of notice service, suppression, or MODVAT credit violation under exemption conditions.

Demand under Section 28 of the Customs Act could not be sustained where the record did not show service of the show cause notice and there was no specific allegation or evidence of suppression to justify the extended limitation period. The Tribunal also held that denial of exemption under Notification No. 203/92-Cus. required affirmative proof that the assessee had availed MODVAT/Cenvat credit on inputs used in exported goods; in the absence of such material, the alleged disqualification was not established. On both grounds, the demand, confiscation and penalty failed and the assessee obtained consequential relief.

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Issues: (i) Whether the demand under Section 28 of the Customs Act, 1962 was barred for want of service of the show cause notice and absence of suppression; (ii) Whether the Revenue had proved violation of the condition in Notification No. 203/92-Cus. by showing availment of MODVAT/Cenvat credit so as to deny the exemption.

Issue (i): Whether the demand under Section 28 of the Customs Act, 1962 was barred for want of service of the show cause notice and absence of suppression.

Analysis: The records did not show that the show cause notice had been served on the appellant. The imports were made in December 1992, whereas the notice was issued in August 1997. There was also no specific allegation or material showing deliberate suppression of facts so as to invoke the extended period. In the absence of proof of service and suppression, the demand could not be sustained under the limitation provisions.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the Revenue had proved violation of the condition in Notification No. 203/92-Cus. by showing availment of MODVAT/Cenvat credit so as to deny the exemption.

Analysis: The exemption was denied on the allegation that the appellant had availed credit on inputs used in exported goods. However, no material was brought on record to establish such availment. The burden to prove ineligibility for the exemption lay on the Revenue, and in the absence of evidence the demand could not stand. The Tribunal relied on the settled principle that denial of exemption on this ground requires affirmative proof from the department.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The demand, confiscation and penalty could not be sustained, and the appeal succeeded with consequential relief.

Ratio Decidendi: When exemption is denied for alleged violation of notification conditions, the Revenue must prove both valid service of the show cause notice and the factual basis for the alleged disqualification; absent such proof, the demand cannot be upheld.

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