Customs demand and extended limitation fail where the show cause notice lacks factual foundation for alleged exemption breach.

A customs demand and penalty based on alleged wrongful availment of Notification No. 203/92-Customs were not maintainable because the show cause notice did not disclose the factual material needed to support the alleged breach of notification conditions. The notice also failed to provide a foundation for the allegation that export documents contained a wrongful declaration. On the same footing, the extended period of limitation under the proviso to Section 28(1) of the Customs Act, 1962 could not be invoked, as mere assertion of wrongful availment without supporting facts was insufficient. The impugned demand and penalty were set aside.

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Issues: (i) Whether the demand of duty and penalty based on alleged wrongful availment of the benefit under Notification No. 203/92-Customs could be sustained when the show cause notice disclosed no material basis for alleging contravention of the notification conditions; (ii) Whether the extended period of limitation under the proviso to Section 28(1) of the Customs Act, 1962 could be invoked in the absence of such foundational basis.

Issue (i): Whether the demand of duty and penalty based on alleged wrongful availment of the benefit under Notification No. 203/92-Customs could be sustained when the show cause notice disclosed no material basis for alleging contravention of the notification conditions.

Analysis: The notice alleged that Modvat credit had been taken and that the export documents contained a wrongful declaration, but it did not disclose the material on which those allegations were founded. The export documents did not contain the declaration attributed to them. In the absence of any basis for alleging breach of the notification condition, the demand founded on such notice could not be sustained.

Conclusion: The demand of duty and the penalty were not maintainable.

Issue (ii): Whether the extended period of limitation under the proviso to Section 28(1) of the Customs Act, 1962 could be invoked in the absence of such foundational basis.

Analysis: The record disclosed no material justifying invocation of the extended limitation period. A mere allegation of wrongful availment, without foundational facts or supporting material in the notice, was insufficient to attract the proviso to Section 28(1). The notice was therefore without authority of law.

Conclusion: The extended period of limitation could not be invoked.

Final Conclusion: The impugned demand and penalty were set aside and the appeal succeeded.

Ratio Decidendi: A customs demand based on alleged breach of exemption conditions cannot be sustained, and the extended limitation period under Section 28(1) cannot be invoked, unless the show cause notice itself discloses a factual foundation for the allegation.

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