1981 (5) TMI 118 - HC - Customs

Summary

Issues Involved:
1. Validity of the demand notice under Section 28 of the Customs Act, 1962.
2. Timeliness of the demand notice.
3. Retrospective application of the Tariff Advice/Ruling.
4. Provisional vs. final assessment of customs duty.
5. Legality of subsequent orders by the Assistant Collector, Appellate Collector, and Central Government.
6. Refund of the amount paid under protest.

Detailed Analysis:

1. Validity of the Demand Notice under Section 28 of the Customs Act, 1962:

The demand notice dated December 5, 1972, was issued under Section 28 of the Customs Act, 1962, for the payment of Rs. 3,74,144.18 towards customs duty. The court noted that Section 28 requires a show cause notice to be served before any demand for payment is made. The petitioners contended that no such show cause notice was served, making the demand invalid. The respondents argued that a communication dated April 28, 1972, served as the show cause notice. However, the court found that this communication did not meet the statutory requirements of a show cause notice under Section 28, as it was not issued under this section and had prospective operation. Therefore, the demand notice was quashed on this ground alone.

2. Timeliness of the Demand Notice:

The court examined whether the demand notice was issued within the statutory time limit. Section 28 stipulates a six-month period for issuing a show cause notice from the "relevant date." The court determined that the clearances made between February and April 1972 were not provisionally assessed, as there was no evidence of any conditions under Section 18 being fulfilled. Since the demand notice was issued more than six months after the clearances, it was deemed time-barred and thus invalid.

3. Retrospective Application of the Tariff Advice/Ruling:

The petitioners argued that the Tariff Advice/Ruling issued on February 22, 1972, could not be applied retrospectively to goods already cleared. The court agreed, stating that tariff classifications fixed at the time of warehousing and clearance could not be retrospectively altered. The demand notice, based on the revised classification, was therefore invalid.

4. Provisional vs. Final Assessment of Customs Duty:

The court analyzed whether the clearances were provisionally assessed. It found no evidence that the conditions for provisional assessment under Section 18 were met. The clearances were made after filing proper Bills of Entry and paying the assessed duty, indicating final assessment. The court rejected the respondents' claim of provisional assessment as an afterthought to fit within the statutory time limit.

5. Legality of Subsequent Orders by the Assistant Collector, Appellate Collector, and Central Government:

The court reviewed the subsequent orders upholding the demand notice. The Assistant Collector's order was based on the incorrect assumption of provisional assessment. The Appellate Collector's order incorrectly interpreted the applicable duty rate. The Central Government's order assumed provisional assessment without evidence. Since the demand notice itself was invalid, these subsequent orders were also quashed.

6. Refund of the Amount Paid Under Protest:

The court held that the payment of Rs. 3,74,144.18 was made under protest and was illegally recovered. It directed that this amount be adjusted against future customs duty claims. If any amount remained unadjusted, it was to be refunded to the petitioners. The court awarded costs to the petitioners, with counsel fees set at Rs. 350.

Conclusion:

The court made the Rule absolute, quashing the demand notice dated December 5, 1972, and the subsequent orders by the Assistant Collector, Appellate Collector, and Central Government. It directed the adjustment or refund of the amount paid under protest and awarded costs to the petitioners.