1987 (3) TMI 205 - AT - Customs

Customs duty upheld, but demands invalidated for non-compliance with procedural rules. Appeal allowed, demands set aside.

The Tribunal held that the subject goods were liable for customs duty due to the expiration of the notification before clearance. However, the demands ... Customs - Exemption Notification withdrawn before clearance of goods Issues Involved:1. Liability for Customs Duty on the subject goods.2. Validity of the demands issued by the Customs Department.Detailed Analysis of the Judgment:1. Liability for Customs Duty on the Subject Goods:The appellants imported three consignments of Tin Imported Black Plate, which were initially assessed free of duty under Notification No. 243-Cus., dated 13-11-1981, as amended. The bills of entry were presented before the vessels' final entry into the port, and the goods were cleared when the notification was still in force. However, the vessels entered the port of Calcutta after the notification had expired.The Customs Department argued that, according to Sections 15 and 46 of the Customs Act, the relevant date for determining the rate of duty is the date of entry inwards of the vessel. Since the vessels entered inwards after the notification expired, the goods were not entitled to exemption.The appellants contended that the goods had entered Indian territorial waters before the notification expired and should be exempt from duty. They cited various judicial precedents to support their claim that the goods were exempt when they entered territorial waters.The Tribunal held that the goods are considered imported only when they are cleared for home consumption. The fact that the vessels touched other ports before reaching Calcutta did not change the status of the goods as 'imported goods.' The decision of the Calcutta High Court in 1987 (27) E.L.T. 626 (Indian Rayon Corporation and Others v. Collector of Customs) was cited, which stated that goods retain their character as imported goods until cleared for home consumption. Therefore, the goods were liable for customs duty as the notification had expired by the time they were cleared.2. Validity of the Demands Issued by the Customs Department:The Customs Department issued two demand notices on 27-12-1984 and 28-12-1984, requesting payment of short-levied amounts. The appellants argued that these demands were ultra vires of Section 28 of the Customs Act as they were not preceded by a show cause notice. They also contended that there was no suppression of facts or fraud on their part to justify invoking the extended limitation period of five years under the proviso to Section 28(1).The Tribunal found that no show cause notice was issued within the standard six-month period. The demand notices did not provide any grounds or reasons for the short levy and merely requested immediate payment. The appellants were not given an opportunity to present their case, which is a requirement under Section 28.The Tribunal also noted that suppression under Section 28(1) proviso is analogous to fraud, which involves a deliberate omission to state a particular fact. In this case, the appellants had no intention to deceive, and the Customs Department was aware of the notification's withdrawal. The responsibility for re-assessment lies with the assessing authority under Section 17(4) of the Customs Act, not with the appellants.Therefore, the Tribunal concluded that the longer period of limitation for issuing a demand notice was not applicable in this case. The appeal was allowed on the grounds that the demands were not validly issued.Conclusion:The Tribunal held that while the subject goods were liable for customs duty due to the expiration of the notification before clearance, the demands issued by the Customs Department were invalid as they did not comply with the procedural requirements of Section 28 of the Customs Act. The appeal was allowed, and the demands were set aside.