Customs duty limitation and Section 114A penalty: time-barred demand cut down, stock adjustment required in recomputation.
Section 28 limitation under the Customs Act, 1962 was applied to split the duty demand by period: the demand for 1998-99 to 2002-03 was time-barred, while the later period survived within limitation. Penalty under Section 114A was treated as consequential to duty and interest determined on the basis of collusion, wilful misstatement or suppression, and was therefore leviable only to the extent of the surviving demand. The quantified shortage and duty liability also required recomputation after giving credit for the available physical stock of re-imported silk fabric, with adjustment directed for the period from 2003-04 to 2007-08.
Issues: (i) whether the demand for customs duty was barred, in part, by limitation under Section 28 of the Customs Act, 1962; (ii) whether penalty under Section 114A of the Customs Act, 1962 was leviable for the duty and interest determined under Section 28; and (iii) whether the shortage and duty liability required recomputation by adjusting the available physical stock of re-imported silk fabric.
Issue (i): Whether the demand for customs duty was barred, in part, by limitation under Section 28 of the Customs Act, 1962.
Analysis: The show cause notice covered the period from 1998-99 to 2007-08. The five-year period under Section 28 had to be reckoned with reference to the relevant date, as defined in Explanation 1 to Section 28. On that basis, the period from 2003-04 to 2007-08 fell within limitation, but the period from 1998-99 to 2002-03 did not.
Conclusion: The demand for the period from 1998-99 to 2002-03 was barred by limitation under Section 28(4) of the Customs Act, 1962.
Issue (ii): Whether penalty under Section 114A of the Customs Act, 1962 was leviable for the duty and interest determined under Section 28.
Analysis: The finding sustaining the demand under Section 28 rested on collusion, wilful misstatement, or suppression of facts. Once such a finding was recorded, penalty under Section 114A, being consequential to the duty and interest determined under Section 28(8), could not be deleted.
Conclusion: Penalty under Section 114A was leviable to the extent of the duty and interest determined under Section 28(8) of the Customs Act, 1962.
Issue (iii): Whether the shortage and duty liability required recomputation by adjusting the available physical stock of re-imported silk fabric.
Analysis: The record did not establish the precise period to which the available physical stock related, but the stock of 7,263.60 meters was available and had to be accounted for while determining the shortage for the surviving period. The duty liability therefore required fresh computation after giving due adjustment for that stock.
Conclusion: The shortage and duty liability were directed to be recomputed by giving credit for 7,263.60 meters of re-imported silk fabric for the period from 2003-04 to 2007-08.
Final Conclusion: The decision sustained the duty demand only for the non-barred period, upheld penalty under Section 114A to that extent, and required reassessment after adjusting the available stock.
Ratio Decidendi: Where a duty demand under Section 28 is partly time-barred, penalty under Section 114A survives only to the extent of the duty and interest lawfully determined for the surviving period, and the quantified liability must reflect any proven stock adjustment.
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