1991 (2) TMI 145 - HC - Customs

Invalid show-cause notice on import duty time-barred under Customs Act.

The High Court of Orissa at Cuttack held that the show-cause notice issued to a petitioner regarding the import duty on Carbon Electrode Paste was invalid ... Demand - Limitation - Bonded warehouse Issues:Validity of show-cause notice under Article 226 - Barred by limitation - Electrode Paste usage as raw material.Analysis:The High Court of Orissa at Cuttack, consisting of B.L. Hansaria, C.J., and B.N. Dash, J., addressed a case involving a petitioner owning an export-oriented unit engaged in manufacturing Charge Chrome and other Ferro Alloys. The petitioner imported Carbon Electrode Paste, which was cleared without duty payment. A demand notice was issued for Rs. 14,84,452.70, later modified to Rs. 24,74,761.03, alleging non-usage of the paste as raw material, thus attracting import duty exemption dispute. The petitioner challenged the show-cause notice under Article 226 of the Constitution, raising concerns of limitation and Electrode Paste usage.Regarding the limitation issue, the petitioner argued that the notice, issued on 29-7-1985, exceeded the six-month limit from the relevant date of the goods' clearance from the bonded warehouse on 15-3-1984, as per Section 28 of the Customs Act, 1962. The Court noted that the case did not fall under the proviso to Section 28(1), which extends the limitation period to five years in specific circumstances. The Department contended that Section 28 did not apply, citing an exemption notification clause, claiming duty became leviable post-bond period. However, the Court disagreed, stating that duty became leviable upon clearance from the bonded warehouse, as per Section 15(1)(b) of the Act. Consequently, the notice issued on 29-7-1985 was beyond the six-month limit, rendering it invalid.The Court concluded that the show-cause notice, Annexure 1, was issued beyond the statutory limitation under Section 28 of the Act, thus setting it aside on this ground. As a result, the Court did not delve into the second contention regarding the usage of Electrode Paste as raw material. The writ petition was allowed, with no costs incurred in the matter.