Customs limitation and origin verification rules barred differential duty demand and denial of preferential exemption.

A customs demand for differential duty based on alleged non-fulfilment of preferential origin conditions was held time-barred because the relevant facts were already within departmental knowledge when the bill of entry was filed, the show cause notice was issued beyond the normal period, and no suppression, misdeclaration, or mala fide conduct justified extended limitation. Preferential exemption also could not be denied on assumptions or intelligence inputs alone, because the certificate of origin issued by the competent foreign authority required case-specific retroactive verification where origin was in doubt. In the absence of such verification, the denial of benefit was unsustainable, and the demand, penalty, and denial of exemption were set aside.

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Issues: (i) Whether the demand of differential customs duty was barred by limitation under the Customs Act, 1962. (ii) Whether the benefit of the preferential notifications could be denied without a prescribed retroactive verification of the certificate of origin.

Issue (i): Whether the demand of differential customs duty was barred by limitation under the Customs Act, 1962.

Analysis: The demand was founded on an allegation that the imported goods did not satisfy the originating criteria, yet the facts relevant to assessment were already within the department's knowledge when the bill of entry was filed and the certificate of origin had been produced by the importer. The show cause notice was issued beyond the normal period and the record did not establish any deliberate suppression, misdeclaration, or mala fide conduct justifying invocation of the extended period.

Conclusion: The demand was time-barred and the finding on limitation was in favour of the assessee.

Issue (ii): Whether the benefit of the preferential notifications could be denied without a prescribed retroactive verification of the certificate of origin.

Analysis: The certificate of origin issued by the exporting country's competent authority was documentary evidence that could not be displaced merely on the basis of assumptions or intelligence inputs relating to other importers. Under the origin-verification framework, the customs authorities were required to seek a retroactive check from the issuing authority if they had reasonable doubt about origin or value addition. No such verification in respect of the appellant was shown on record, and the denial of exemption rested on a generalised inference rather than a case-specific verification.

Conclusion: The exemption could not be denied on the material before the department, and this issue was also in favour of the assessee.

Final Conclusion: The impugned demand, penalty, and denial of preferential customs benefit were set aside, and the appeal succeeded.

Ratio Decidendi: A customs demand based on alleged ineligibility for preferential origin benefit cannot be sustained when the notice is issued beyond the normal limitation period without establishing the statutory basis for extended limitation, and a certificate of origin cannot be displaced without the prescribed origin-verification process.

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