Limitation under Customs law barred confiscation proceedings, and the consequential penalty also failed once the action was time-barred.

Proceedings under the Customs Act were held time-barred because the show cause notice for breach of a rescinded import notification was issued after the five-year period under Section 28 had expired, counted from the notification's rescission. The court held that even if the obligation was continuing and Section 159A preserved enforcement proceedings, limitation still governed the action, so confiscation could not be sustained. The penalty, being consequential to the confiscation proceedings and based on liability under Sections 111(o) and 112(a), also failed once the underlying action was found barred. The Department's challenge was therefore rejected.

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Issues: (i) Whether the show cause notice and consequent confiscation proceedings were barred by limitation under Section 28 of the Customs Act, 1962. (ii) Whether the penalty could survive once the confiscation proceedings were held to be time-barred.

Issue (i): Whether the show cause notice and consequent confiscation proceedings were barred by limitation under Section 28 of the Customs Act, 1962.

Analysis: The imported equipment was cleared in 1992 under Notification No. 64/88, which was rescinded on 01.03.1994 by Notification No. 99 of 1994. Even assuming that the notification imposed a continuing obligation and that Section 159A of the Customs Act, 1962 preserved proceedings for enforcement, any action for breach had to be initiated within the limitation period prescribed under Section 28 of the Customs Act, 1962. The five-year period was reckoned from the date of rescission and expired on 28.02.1999, whereas the show cause notice was issued only on 27.12.1999.

Conclusion: The proceedings were barred by limitation and the finding was in favour of the respondent.

Issue (ii): Whether the penalty could survive once the confiscation proceedings were held to be time-barred.

Analysis: The penalty arose as a consequence of the confiscation proceedings and was founded on liability under Sections 111(o) and 112(a) of the Customs Act, 1962. Once the confiscation proceedings failed on limitation, the consequential penal action could not independently survive.

Conclusion: The penalty could not survive and this issue was also in favour of the respondent.

Final Conclusion: The Department's challenge failed because the entire action was initiated beyond limitation, and the penalty imposed or reduced on that basis could not be sustained.

Ratio Decidendi: Where a customs enforcement proceeding is initiated beyond the limitation period, any confiscation-based penalty dependent on that proceeding also fails.

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