Customs limitation in short levy cases runs from duty payment; notice issued beyond five years was time barred.

Wilful misdeclaration was found where imported fabrics were declared as 100% cotton processed fabrics, but investigation showed mixed fabric composition and fabricated import documents using DFRC licences for the declared goods. On that basis, the extended period was treated as rightly invocable for suppression and false declaration. For limitation under Section 28 of the Customs Act, the case was treated as one of short levy, so the relevant date was the date of duty payment, not the out-of-charge date. As the show cause notice was issued more than five years after payment, it was held time barred and the demand and penalties could not survive.

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Issues: (i) Whether the appellant had mis-declared the nature and description of the imported goods, and whether invocation of the extended period was justified; (ii) whether the show cause notice was barred by limitation under Section 28 of the Customs Act, 1962.

Issue (i): Whether the appellant had mis-declared the nature and description of the imported goods, and whether invocation of the extended period was justified.

Analysis: The imported consignment was found, on investigation, to contain both 100% cotton processed fabrics and 65% polyester and 35% cotton fabrics, while the bill of entry declared the entire quantity as 100% cotton processed fabrics. The record showed fabrication of import documents, concealment of the actual description, and use of DFRC licences meant for the declared goods. The admitted use of false documents and suppression of the true composition established wilful misdeclaration. On that footing, invocation of the extended period was held to be justified.

Conclusion: The misdeclaration was established and the extended period was rightly invocable, against the assessee on this issue.

Issue (ii): Whether the show cause notice was barred by limitation under Section 28 of the Customs Act, 1962.

Analysis: The dispute turned on the relevant date for computing limitation. The goods were assessed and duty liability arose on the bill of entry, but the duty component relevant to the imported goods had been discharged on 11.02.2008, whereas the show cause notice was issued on 21.02.2013. The case was treated as one of short levy and not non-levy, so the relevant date was held to be the date of payment of duty rather than the out-of-charge date. Since the notice was issued beyond five years from that date, the maximum period under Section 28(4) was exceeded.

Conclusion: The show cause notice was time barred and unsustainable, in favour of the assessee on this issue.

Final Conclusion: The demand and consequential penalties could not survive because the proceedings were initiated beyond the permissible limitation period.

Ratio Decidendi: Where the case involves short levy on assessed imports, the relevant date for limitation under Section 28 is the date of payment of duty, and a notice issued beyond the statutory maximum period is barred notwithstanding findings of misdeclaration.

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