2025 (2) TMI 431 - AT - Customs

Revenue loses appeal as excise show cause notice issued beyond statutory time limit under Section 28(1)(a)

The CESTAT Hyderabad allowed the appellant's appeal against a time-barred show cause notice (SCN). The Revenue contended that goods were initially ... Time barred SCN or not - fulfilment of conditions for re-export obligation as per N/N.158/95-CUS. or not - Revenue argued that goods are initially exported under EPCG scheme and not under bond, without payment of Excise Duty - HELD THAT:- SCN was issued after prescribed period, as provided under Section 28(1)(a) of the Customs Act, 1962. There are no mis-statement or suppression of facts on the part of the appellant. Therefore, appeal is liable to be allowed - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED Whether the Show Cause Notice (SCN) issued under Section 28 of the Customs Act, 1962, demanding Customs duty on re-imported goods is barred by limitation. Whether the appellant fulfilled the conditions of re-export obligation under Notification No.158/95-CUS dated 14.11.1995, thereby justifying exemption from Customs duty on re-imported goods. Whether the benefit of Notification No.94/96-CUS dated 16.12.1996 is applicable to the appellant for re-imported goods. Whether payment of Excise duty on re-imported goods exempts the appellant from payment of Customs duty. Whether the appellant's failure to fulfill export obligation under the EPCG scheme affects entitlement to exemption under the Customs notifications. Whether there was any suppression of facts or willful misstatement by the appellant that would justify invocation of extended limitation period under Section 28 of the Customs Act, 1962. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Limitation for issuance of SCN under Section 28 of the Customs Act, 1962 Legal Framework and Precedents: Section 28(1)(a) of the Customs Act, 1962 mandates that the proper officer shall serve a notice within two years from the relevant date where duty has not been levied or paid, except in cases involving collusion or wilful mis-statement or suppression of facts. During the period under dispute, the prescribed limitation period was six months. The Supreme Court judgments relied upon establish that SCNs issued beyond the prescribed limitation period without evidence of malafide conduct or suppression are not sustainable. Court's Interpretation and Reasoning: The Court noted that no findings of collusion, wilful mis-statement, or suppression of facts were recorded against the appellant. The SCN was issued more than two years after the relevant communication from the appellant, exceeding the limitation period. The adjudicating authority's view that this was not a case of non-levy or short levy but a breach of exemption conditions was considered, but the Court found that such breach does not extend the limitation period absent malafide conduct. Key Evidence and Findings: The SCN dated 27.07.2011 was issued after a letter from the appellant dated 03.07.2009, indicating a delay exceeding the limitation period. No evidence of suppression or misstatement was found. Application of Law to Facts: Applying the limitation provisions strictly, the Court held the SCN to be time-barred. Treatment of Competing Arguments: The department's reliance on a Madras High Court decision was distinguished on the ground that limitation was not at issue in that case. The appellant's reliance on multiple Supreme Court decisions emphasizing limitation was accepted. Conclusion: The SCN issued under Section 28 was barred by limitation and thus unsustainable. Issue 2: Fulfillment of re-export obligation under Notification No.158/95-CUS dated 14.11.1995 Legal Framework and Precedents: Notification No.158/95-CUS allows re-import of exported goods without payment of duty for repair/reconditioning, subject to conditions including execution of bond and fulfillment of re-export obligation within prescribed time. Court's Interpretation and Reasoning: The Court observed that the appellant had executed the bond but failed to fulfill the re-export obligation as required. The payment of Excise duty on re-imported goods does not exempt Customs duty liability if conditions are not met. The initial export was under the EPCG scheme, which mandates fulfillment of export obligations. Key Evidence and Findings: The appellant re-imported moulds without paying duty under the notification but subsequently cleared the goods to a 100% EOU and paid Excise duty. The re-export condition was not satisfied within the stipulated period. Application of Law to Facts: Failure to fulfill re-export obligations under the notification disentitles the appellant from exemption from Customs duty. Treatment of Competing Arguments: The appellant's contention of entitlement under the notification was rejected based on documentary evidence and regulatory conditions. Conclusion: The appellant did not fulfill the conditions of Notification No.158/95-CUS; hence, duty demand was justified. Issue 3: Applicability of Notification No.94/96-CUS dated 16.12.1996 Legal Framework and Precedents: Notification No.94/96-CUS provides exemption for re-import of goods subject to payment of duty at specified rates without requirement of re-export. Court's Interpretation and Reasoning: The Court relied on a Tribunal decision holding that this notification is an exemption notification without attendant requirements of re-export, applicable when duty is discharged on re-importation. Key Evidence and Findings: The appellant's goods were initially exported under the EPCG scheme, not under bond without payment of Excise duty, making the notification inapplicable. Application of Law to Facts: Since the appellant did not export under conditions covered by Notification No.94/96-CUS, the benefit thereof was not available. Treatment of Competing Arguments: The department's argument that the notification was not applicable was accepted. Conclusion: Notification No.94/96-CUS benefit was not available to the appellant. Issue 4: Effect of payment of Excise duty on re-imported goods on Customs duty liability Legal Framework and Precedents: Payment of Excise duty on re-imported goods does not automatically exempt the importer from Customs duty liability under relevant Customs notifications. Court's Interpretation and Reasoning: The Court noted that payment of Excise duty is distinct from Customs duty obligations and does not fulfill the conditions of exemption under the Customs Act. Key Evidence and Findings: The appellant paid Excise duty on clearance to 100% EOU but did not fulfill Customs re-export obligations. Application of Law to Facts: Excise duty payment does not negate Customs duty liability where exemption conditions are not met. Treatment of Competing Arguments: The appellant's contention that Excise duty payment sufficed was rejected. Conclusion: Customs duty liability remains despite payment of Excise duty if exemption conditions are unmet. Issue 5: Impact of initial export under EPCG scheme on entitlement to Customs duty exemption Legal Framework and Precedents: EPCG scheme requires fulfillment of export obligations; failure to do so results in liability to pay applicable duties. Court's Interpretation and Reasoning: The Court held that since the appellant initially exported under EPCG, the export obligation was mandatory and non-fulfillment disentitles the appellant from exemption under Notification No.158/95-CUS. Key Evidence and Findings: The appellant did not meet export obligations under EPCG, as required. Application of Law to Facts: Non-fulfillment of EPCG export obligations affects Customs duty exemption claims. Treatment of Competing Arguments: The department's argument on mandatory export obligation was accepted. Conclusion: Failure to fulfill EPCG export obligations nullifies exemption claims under Customs notifications. Issue 6: Presence or absence of suppression of facts or wilful misstatement affecting limitation period Legal Framework and Precedents: Extended limitation under Section 28 applies only in cases involving collusion, wilful mis-statement, or suppression of facts. Court's Interpretation and Reasoning: The Court found no evidence or finding of suppression or misstatement by the appellant. Reliance on Supreme Court precedents confirmed that in absence of such conduct, extended limitation cannot be invoked. Key Evidence and Findings: Records and adjudicating authority's orders did not indicate any malafide or suppression. Application of Law to Facts: Limitation period could not be extended; SCN was time-barred. Treatment of Competing Arguments: Department's reliance on unrelated precedent was rejected. Conclusion: No suppression or wilful misstatement was found; limitation period for SCN was not extendable.