2008 (7) TMI 359 - HC - Customs

Tribunal affirms Commissioner's decision on customs duty fraud liability, clarifies limitation period requirements

The Tribunal upheld the decision of the Commissioner (Appeals) in a case involving customs duty liability in the context of fraud by exporters. It ... Demand of Duty – extended period of limitation - Revenue in their memo of appeal have not attributed any mis-statement or suppression of fact to the respondent herein. They have simply asserted that the case involved, fraud committed by the exporter resulting in clearance of imported goods without payment of duty by importer and as such, Revenue should be allowed to recover the customs duty - there is no collusion, willful misstatement or suppression of facts qua the importer namely the person against whom the demand is being made – Demand is not sustainable. Issues:1. Interpretation of customs duty liability in case of fraud by exporter.2. Application of Section 28 of the Customs Act, 1962 in determining duty liability.Issue 1: Interpretation of customs duty liability in case of fraud by exporterThe case involved an appeal by the Commissioner of Customs, Kandla, challenging the decision of the Tribunal regarding the demand of duty on imported goods cleared without payment due to fraud committed by the exporter. The appellant argued that once the DEPB license was cancelled due to fraud, any imports based on that license should be liable for duty. The Tribunal, however, found no misrepresentation or suppression of facts at the time of import clearance, as the license was valid then. The Tribunal emphasized that there was no collusion, willful misstatement, or suppression of facts by the importer, leading to the conclusion that the demand for duty beyond the limitation period was impermissible. The Tribunal upheld the decision of the Commissioner (Appeals) in this regard.Issue 2: Application of Section 28 of the Customs Act, 1962 in determining duty liabilitySection 28 of the Customs Act, 1962 allows issuing a notice for duty determination and payment within a prescribed period. The proviso to Section 28(1) extends the limitation period to five years in cases of collusion, willful misstatement, or suppression of facts. In this case, the importer cleared goods based on a DEPB license transferred by the exporter before its cancellation. The Tribunal noted that the Revenue did not attribute any misstatement or suppression of facts to the importer but claimed fraud by the exporter. As there was no evidence of collusion or willful misstatement by the importer, the demand for duty recovery beyond the limitation period was held impermissible. The Tribunal found no legal error justifying interference, dismissing the appeal as no substantial question of law arose from the impugned order.In conclusion, the judgment clarified the customs duty liability in cases of fraud by exporters and emphasized the importance of evidence of collusion or willful misstatement to invoke an extended limitation period under Section 28 of the Customs Act, 1962. The decision highlighted the need for clear attribution of wrongdoing to the party liable for duty payment and affirmed the Tribunal's findings based on the absence of such attributions in the case at hand.