2011 (3) TMI 313 - HC - Customs

Demand - Time barred - Applicability of Section 142(1) ( c ) (ii) - Subsequent purchaser - the agreement of sale between M/s. Falcon Beverages India (P) Ltd., and M/s. Aradhana Bottling company is dated 12.1.1994 - On this date, the proviso to Section 142(1)(c)(ii) of the Customs Act was not in force, It came into effect only on 10.9.2004 i.e. 10 years after signing the agreement and the sale - The proviso states that recovery from the person succeeding to the goods, materials etc. by way of attachment will be based on a written approval of the Commissioner of Customs for the recovery of amount payable by such predecessor at the time of such transfer or disposal or change - the purchaser in this case i.e. the petitioner was under no obligation to bear the duty liability as the goods, which was sold, did not suffer any duty liability on the date of sale - Hence, the first issue is answered against the respondents Proviso to Section 142(1)(c)(ii) of the Act provides for obtaining written approval from the Commissioner of Customs for the purpose of recovering the amount so payable by the said purchaser at the time of transfer or otherwise disposal by change - In the absence of specific order by the Commissioner of Customs as prescribed under the Act, the Tax Recovery Officer has no authority to issue the impugned proceedings against the petitioner - Hence, the second issue is also answered against the respondents Except sending series of letters, which were not served on the importer, no effective steps appears to have been taken to serve on the importer and adjudicate the case - It is, therefore, clear that the concerned officer of the respondents has wasted his time sending notices time and again without proper service and slept over the issue for more than a decade - The delay and laches remain unexplained - The claim for duty against the petitioner is not justified as the inordinate delay and laches on the part of the department further disentitles them to take action against the petitioner - Hence, the third issue is also answered against the respondents

Summary

Issues Involved:
1. Whether the respondents are entitled to proceed against the petitioner under Section 142(1)(c)(ii) of the Customs Act.
2. Whether the certificate in terms of the order-in-original issued against the importer can be used to recover the amount from the present petitioner, who is the subsequent purchaser.
3. Whether the Department is barred from collecting the amount from the present petitioner due to delay and laches.

Issue-wise Detailed Analysis:

Issue 1: Entitlement to Proceed Against the Petitioner Under Section 142(1)(c)(ii) of the Customs Act
The petitioner challenged the recovery proceedings initiated by the Tax Recovery Officer under Section 142(1)(c)(ii) of the Customs Act. The petitioner argued that on the date of the sale agreement between M/s. Falcon Beverages India (P) Ltd. and M/s. Aradhana Bottling Company (12.1.1994), there was no customs duty liability as no show cause notice had been issued. The proviso to Section 142(1)(c)(ii) was not in force at that time and came into effect only on 10.9.2004. Therefore, the liability could not be retrospectively applied to the petitioner as the subsequent purchaser. The court agreed with the petitioner, stating that the proviso to Section 142(1)(c)(ii) could not be applied retrospectively, and hence, the first issue was answered against the respondents.

Issue 2: Use of Certificate Issued Against Importer to Recover Amount from Petitioner
The impugned proceedings were based on a certificate dated 26.10.2004 issued by the Deputy Commissioner of Customs against the original importer, M/s. Falcon Beverages India (P) Ltd., and not against the petitioner. The court noted that the proviso to Section 142(1)(c)(ii) requires a written approval from the Commissioner of Customs for recovery from the subsequent purchaser. Since no such certificate was issued against the petitioner, the proceedings were deemed unauthorized and without legal basis. Thus, the second issue was also answered against the respondents.

Issue 3: Bar on Collecting Amount Due to Delay and Laches
The court observed that the Customs Department had been informed by the original importer about the completion of the project and commencement of commercial production as early as 1988. Despite this, the department took no effective action for over a decade and only issued a show cause notice in 2004. The court criticized the department for its inaction and delay, which resulted in an ex parte order and subsequent recovery proceedings against the petitioner. The court held that the inordinate delay and laches on the part of the department disentitled them from taking action against the petitioner. Therefore, the third issue was also answered against the respondents.

Conclusion
The court set aside the impugned proceedings, allowing the writ petition and ruling in favor of the petitioner on all three issues. The court emphasized the importance of timely and effective action by the department and the non-retrospective application of statutory provisions. There was no order as to costs.