2021 (2) TMI 842 - HC - Customs

High Court Upholds Tribunal Decision on Duty and Penalties

M/s. Varalakshmi Exports Versus The Customs, Excise & Service Tax Appellate Tribunal, The Commissioner of Customs, (Port-Export), Chennai

M/s. Varalakshmi Exports Versus The Customs, Excise & Service Tax Appellate Tribunal, The Commissioner of Customs, (Port-Export), Chennai - 2021 (376) ... Issues Involved:1. Whether the demand for the period 17.03.1994 to 04.10.1995 is barred by limitation under Section 28 of the Customs Act.2. Whether the extended period of limitation can be invoked for demanding duty during the said period.3. Whether the imposition of penalty under Section 112 against the appellants is sustainable when the Tribunal has no power to impose such penalty for the first time.Detailed Analysis:Issue 1: Limitation under Section 28 of the Customs ActThe Appellant argued that the demand for the period 17.03.1994 to 04.10.1995 is barred by limitation under Section 28 of the Customs Act. The Tribunal accepted that the period of limitation in respect of Bill of Entry cleared during the period from 12.04.1993 to 28.02.1994 had expired and dropped the demand of duty for Rs. 48,03,968/-. However, the Tribunal held that the rest of the demand of duty of Rs. 34,96,777/- was upheld. The Tribunal relied on the decision in the Bombay Hospital Trust case, which held that the period of limitation does not apply to demands arising from the failure to fulfill post-importation conditions. The High Court agreed with this interpretation, stating that the demand for the violation of post-importation conditions is not confined to any period of limitation. Thus, the claim of the Appellants on the point of limitation does not deserve merit.Issue 2: Extended Period of LimitationThe Appellant contended that the extended period of limitation is not applicable as there was no suppression of facts. The Tribunal observed that the violation of post-import conditions is a continuing obligation, and thus, the period of limitation does not commence from the date of issue of the show cause notice. The High Court concurred, stating that the demand of duty for violating the post-importation condition is not confined to any period of limitation, and hence, there is no relevancy in the argument of the Appellants that they did not suppress any material facts. The High Court noted that the suppression of facts and materials is visible from the conduct and the pattern in which the Appellants caused the disappearance of the raw materials. Thus, the extended period of limitation is applicable, and the Questions of law 1 and 2 are answered against the Appellants.Issue 3: Imposition of Penalty under Section 112The Appellant argued that the imposition of penalty under Section 112 of the Customs Act is without jurisdiction because it was invoked for the first time by the Tribunal. The High Court noted that the power of the Department to initiate duty recovery proceedings for violating the conditions of the import Exemption Certificate has been settled in the decision of the Five Members Bench of the Tribunal in the Bombay Hospital Case. The High Court further observed that Section 114(A) of the Customs Act, which empowers the Department to impose a penalty equal to the duty, was not in force during the impugned period. Hence, the Tribunal modified the imposition of penalty by restricting it to Section 112 (prior to its amendment). The High Court concluded that the modification by the Tribunal was correct and not prejudicial to the Appellants' interest. Thus, the question of law No.3 is also answered against the Appellants.Conclusion:The appeal is dismissed, and the High Court upheld the Tribunal's order, confirming the demand of duty and the imposition of penalties while rejecting the appellants' claims on the grounds of limitation and jurisdiction.