Prospective application of customs restrictions bars retrospective liability for prior diversion of imported goods and related penalties.

An amendment enlarging the conditions in Customs Notification No. 93/2004-Cus. was held inapplicable to goods diverted before the amendment took effect. Because the diversion occurred in June 2008 and the notification was amended only on 16 July 2008, liability had to be assessed under the notification as it stood at the time of the act. A later amendment could not be applied retrospectively to fasten customs demand or connected penal consequences for a completed prior diversion. On that basis, the demand, confiscation, redemption fine and penalty were unsustainable, and the assessee obtained full relief.

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Issues: Whether the amended conditions of Customs Notification No. 93/2004-Cus. could be applied to diversion of imported goods made before the amendment, and whether the resulting demand, confiscation, redemption fine and penalty were sustainable.

Analysis: The imported material was diverted to the assessee's own unit in June 2008, whereas the notification was amended only on 16-07-2008. The operative effect of the notification had to be assessed on the basis of the notification as it stood at the time of diversion. An amendment enlarging the restriction could not be applied retrospectively so as to fasten liability for an act completed before the amendment. Any alleged breach of the Foreign Trade Policy, if at all, would not sustain the customs demand on the amended notification.

Conclusion: The amended notification did not apply to the prior diversion. The demand, confiscation, redemption fine and penalty were unsustainable and the appeal succeeded in favour of the assessee.

Final Conclusion: The assessee obtained full relief against the customs demand and the connected penal consequences, as the amendment operated only prospectively.

Ratio Decidendi: An amendment imposing or expanding a customs restriction applies prospectively unless the statute or notification clearly provides otherwise, and liability cannot be founded on retrospective application of the amended condition.

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