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Issues: (i) Whether the demand could be sustained despite non-issuance of the mandatory notice contemplated under Section 28(6) of the Customs Act, 1962 after the assessee's reply under Section 28(5) of the Customs Act, 1962; (ii) Whether invocation of the extended period was justified on the facts, including the allegation of suppression of facts and misdeclaration.
Issue (i): Whether the demand could be sustained despite non-issuance of the mandatory notice contemplated under Section 28(6) of the Customs Act, 1962 after the assessee's reply under Section 28(5) of the Customs Act, 1962.
Analysis: Section 28(6) was treated as a mandatory procedural requirement where the proper officer does not accept the assessee's position after a reply under Section 28(5). The order records that no such notice was issued, and the omission was not treated as a mere irregularity. The consequence was that the proceedings founded on that stage of the process could not be sustained.
Conclusion: The demand could not be sustained in the absence of compliance with Section 28(6) of the Customs Act, 1962.
Issue (ii): Whether invocation of the extended period was justified on the facts, including the allegation of suppression of facts and misdeclaration.
Analysis: The Tribunal found that the notice was issued beyond the normal period and that the record did not establish the ingredients required for the extended period. The adjudication also reflected interpretational and valuation disputes, which weakened the allegation of deliberate suppression. On that basis, the Revenue failed to establish the factual foundation necessary to sustain the larger period demand.
Conclusion: Invocation of the extended period was not justified and the demand was unsustainable on limitation.
Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief, while the connected department appeal and cross-objections stood disposed of in view of the common finding on limitation.
Ratio Decidendi: Where the statutory procedure under Section 28(6) of the Customs Act, 1962 is not complied with and the Revenue also fails to establish the ingredients for invoking the extended period, a demand founded on such proceedings cannot be sustained.
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