2007 (6) TMI 336 - AT - Customs

Demand/Remission of duty - Non-fulfilment of export obligation - Held that - the appellants have succeeded in establishing that they have not violated condition (iii) of the Notification and, therefore, they have no liability to pay the duty demanded by the lower authorities - The authorities ought to have borne in mind the legal maxim lex non cogit ad impossibilia, which means the law does not compel a person to do the impossible.

Issues:
1. Non-compliance with Customs Notification No. 32/97 regarding re-export obligation.
2. Failure to discharge export obligation due to reasons beyond control.
3. Demand of Customs duty and interest under Section 28 of the Customs Act.
4. Request for remission of duty.
5. Application of limitation period for duty recovery.

Analysis:

Issue 1: Non-compliance with Customs Notification No. 32/97
The appellants imported Whole Squid under Customs Notification No. 32/97 for processing and re-export. The Notification required re-export within a specified period and prohibited selling or disposing of the imported goods. The appellants failed to complete re-export within the timeline due to stringent conditions imposed by European Union countries on seafood exporters. The lower authorities demanded duty based on non-compliance with the notification. However, the Tribunal found that the appellants did not violate the conditions as they did not sell or dispose of the goods, and their inability to re-export was beyond their control. The principle of lex non cogit ad impossibilia was invoked, emphasizing that the law does not compel the impossible.

Issue 2: Failure to discharge export obligation
The Tribunal acknowledged that the appellants' failure to re-export the goods was due to reasons beyond their control, such as the perishable nature of the goods and strict conditions imposed by the European Union. Despite the appellants' request for an extension, which was not granted, the goods perished and became unsuitable for export. The authorities were criticized for not considering the impossibility of fulfilling the export obligation and enforcing conditions against the appellants.

Issue 3: Demand of Customs duty and interest
A show-cause notice was issued to recover Customs duty and interest under Section 28 of the Customs Act due to the appellants' failure to re-export within the specified period. The Tribunal ruled in favor of the appellants, stating that the demand made long after the duty allegedly became due was not justified. The absence of collusion or wilful misstatement by the appellants further supported their case against the demand.

Issue 4: Request for remission of duty
The appellants requested permission to surrender the goods to Customs for destruction, indicating their willingness to comply. The Tribunal found that the appellants were entitled to remission of duty based on the circumstances of the case and their efforts to fulfill the export obligation.

Issue 5: Application of limitation period
The demand for duty made after the expiration of the normal limitation period was deemed invalid. The absence of any challenge to the original authority's findings regarding collusion or wilful misstatement further supported the appellants' case against the demand. The Tribunal concluded that the appellants succeeded on both merits and limitation, setting aside the impugned order and allowing the appeal.

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