Customs exemption cannot be denied on a notice alleging breach of the wrong notification, leaving the duty demand unsustainable.

Customs duty demand under Section 28 was unsustainable where the show cause notice alleged breach of Notification No. 123/81-C.E., but the imported spectrometer had been assessed and cleared under Notification No. 13/81-Cus. granting exemption for capital goods used in 100% export oriented undertakings. Because the notice did not allege violation of the customs exemption actually applied at clearance, the demand could not be supported on that basis and the exemption remained effective.

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Issues: Whether the demand of customs duty under Section 28 of the Customs Act could be sustained when the show cause notice alleged non-compliance with Notification No. 123/81-C.E. but the imported goods had been cleared under Notification No. 13/81-Cus.

Analysis: The imported spectrometer had been assessed and cleared by the Customs authority by granting the benefit of Notification No. 13/81-Cus., which exempted imported capital goods used in 100% export oriented undertakings. The show cause notice, however, proceeded on the footing that the appellant had not complied with Notification No. 123/81-C.E., which concerned excise duty on capital goods and did not form the basis of the customs exemption granted at the time of import. As there was no allegation of violation of Notification No. 13/81-Cus., the demand raised as customs duty could not be supported on the basis of the notice.

Conclusion: The demand under Section 28 of the Customs Act was unsustainable and the appeal succeeded.

Final Conclusion: The imported goods remained entitled to the customs exemption granted at clearance, and the customs duty demand based on the wrong notification was set aside.

Ratio Decidendi: A duty demand cannot be sustained where the show cause notice alleges breach of an inapplicable exemption notification and does not allege violation of the notification under which the goods were actually assessed and cleared.

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