Limitation for customs demand after rescission of exemption notification barred delayed show cause notice and penal action

Show cause and penal proceedings based on post-import obligations under Notification No. 64/88-Cus. were held to be time-barred after those obligations were rescinded by Notification No. 99/1994 with effect from 01.03.1994. Although the obligation was described as continuous, any coercive action still had to comply with the statutory saving provision and the limitation under Section 28 of the Customs Act. As the demand and notice were initiated only on 27.12.1999, after the limitation period had expired on 28.02.1999, the notice was beyond time and the proceedings could not be sustained.

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Issues: Whether the show cause notice and consequential penal action were barred by limitation after rescission of the exemption notification, and whether the saving provision could sustain proceedings initiated beyond the statutory period.

Analysis: The appellant had imported a CT scanner under Notification No. 64/88-Cus., which carried post-import obligations. Those obligations were later rescinded by Notification No. 99/1994 with effect from 01.03.1994. The demand and penal proceedings were initiated only on 27.12.1999. Although the obligation was stated to be continuous, coercive action after rescission still had to satisfy the saving provision and remain within the limitation prescribed by the statute. The limitation for action under Section 28 of the Customs Act had expired on 28.02.1999, and the notice issued thereafter was beyond time.

Conclusion: The proceedings were barred by limitation, and the appeal was allowed in favour of the appellant.

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