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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether customs duty could be demanded from a subsequent purchaser of a duty entitlement licence that had been re-registered and utilised for clearance; and (ii) whether invocation of the extended period of limitation under section 28(4) of the Customs Act, 1962 was justified.
Issue (i): Whether customs duty could be demanded from a subsequent purchaser of a duty entitlement licence that had been re-registered and utilised for clearance.
Analysis: The licence had been re-registered by the department and was utilised for payment of duty before the appellant purchased it. The governing principle applied was that a licence obtained by fraud is not void ab initio but is voidable, and a transferee for valuable consideration without notice is protected where the licence was valid and acted upon at the relevant time. On the facts, the appellant was a subsequent purchaser and the licence had already been used for clearance; the position would be different only if the licence had not been re-registered or had never been issued.
Conclusion: Customs duty could not be confirmed against the appellant; the demand was unsustainable and the finding was in favour of the assessee.
Issue (ii): Whether invocation of the extended period of limitation under section 28(4) of the Customs Act, 1962 was justified.
Analysis: The notice relied only on the allegation that the appellant ought to have verified the licence before purchase. Since the licence stood re-registered by the department and the appellant had no basis to be treated as lacking due care on those facts, the ingredients required for the extended limitation were not established.
Conclusion: Invocation of the extended period of limitation under section 28(4) was not justified; this issue was also decided in favour of the assessee.
Final Conclusion: The duty demand, penalties, and the appellate order sustaining them were set aside, and the appeal succeeded.
Ratio Decidendi: A transferee who purchases a duly re-registered licence for value without notice cannot be saddled with customs duty merely because the licence was later found to have been fraudulently re-registered, and the extended limitation under section 28(4) cannot be invoked without the requisite statutory grounds.
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