Conditional customs exemption fails when project-linked conditions are not met, with suppression and fraud supporting extended limitation and penalties.

A conditional customs exemption was treated as dependent on continuing project-linked use, and the benefit failed where the machinery was not intended for permanent deployment and the project authority certificate was cancelled. The Tribunal also treated unretracted statements, cancellation of the certificate, and admitted non-fulfilment of conditions as evidence of suppression and fraud, making the extended limitation period available. A further exemption claim under a different notification was rejected because fraud could not be cured by switching exemptions and the alternative relief remained conditional. Interest and penalties followed once duty liability survived.

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Issues: (i) Whether the benefit of Notification No. 84/97-Cus remained available when the imported machinery was not intended to be permanently deployed in the project and the project authority certificate was cancelled; (ii) whether the appellants' statements and surrounding circumstances established suppression and fraud so as to justify denial of exemption and invocation of the extended period; (iii) whether the appellants could alternatively claim exemption under Notification No. 21/2002-Cus; (iv) whether interest, penalty, and other consequential demands were sustainable.

Issue (i): Whether the benefit of Notification No. 84/97-Cus remained available when the imported machinery was not intended to be permanently deployed in the project and the project authority certificate was cancelled.

Analysis: The exemption was a conditional one linked to use of the goods for execution of the project. Explanation 2 to the notification was read in context to mean that the goods must remain for project execution while the project is operational. However, the decisive fact was that the appellants themselves admitted that the machinery was not intended to be brought into the project on a permanent basis and the project authority certificate was cancelled. The continuing obligation attached to the exemption was therefore not satisfied.

Conclusion: The exemption under Notification No. 84/97-Cus was not available to the appellants.

Issue (ii): Whether the appellants' statements and surrounding circumstances established suppression and fraud so as to justify denial of exemption and invocation of the extended period.

Analysis: The unretracted statements of the company officials, the cancellation of the project certificate, and the admitted non-fulfilment of the exemption conditions were treated as evidencing deliberate deception and misrepresentation. The Tribunal held that admissions are relevant and that suppression may include misstatement. On that basis, the matter was treated as one involving fraud, not a mere interpretative dispute, and the extended limitation period was held to be invocable.

Conclusion: Suppression and fraud were established, and invocation of the extended period was upheld.

Issue (iii): Whether the appellants could alternatively claim exemption under Notification No. 21/2002-Cus.

Analysis: The alternative exemption was rejected because a party who has obtained or attempted to retain an exemption by fraud cannot later shift to another exemption to cure the defect. The Tribunal also noted that the alternative exemption was itself conditional and required compliance to be determined in the prescribed manner, which could not assist the appellants on the facts found.

Conclusion: The alternative claim under Notification No. 21/2002-Cus was rejected.

Issue (iv): Whether interest, penalty, and other consequential demands were sustainable.

Analysis: Once duty liability survived, interest followed as a statutory consequence of delayed payment. The appellants' conduct was found blameworthy and lacking in good faith, and the penalty provisions were held to apply on account of the fraud and suppression found on record.

Conclusion: The demand of interest and the penalties were sustained.

Final Conclusion: The impugned order was affirmed in full and the appeals failed on all substantive grounds.

Ratio Decidendi: A conditional customs exemption remains unavailable where the importer does not satisfy the continuing project-linked conditions, and admissions plus cancellation of the supporting certificate can justify treating the case as one of suppression and fraud with consequential duty, interest, and penalty liability.

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