2008 (9) TMI 609 - HC - Customs

Short levy - Ext. P3 has been issued beyond six months from the relevant date applicable Held that - Ext. P3 and all further proceedings based on the same are unsustainable for want of compliance with the provisions of Section 28 of the Customs Act, petitioner is not liable to pay the amount demanded by Exts. P3 and P5 and consequently, no proceedings under Section 142 of the Customs Act could have been invoked against the petitioner for want of payment of amount covered by Exts. P3 and P5, writ petition is allowed

Summary

Issues:
1. Validity of demand notice for short levy of import duty.
2. Compliance with provisions of Section 28 of the Customs Act.
3. Legality of subsequent demand notices and detention order.

Analysis:
1. The petitioner, an importer, challenged a demand notice for short levy of import duty issued after the goods were cleared and duty paid. The demand was based on a clerical error in the classification of goods under two invoices. The petitioner contended that the assessment had attained finality with the Commissioner of Customs (Appeals) order and could not be reopened without following Section 28 of the Customs Act. The petitioner argued that the demand was beyond the six-month limit for issuing a show cause notice under Section 28, rendering it unsustainable. The petitioner sought to quash the subsequent demand notices and detention order issued for non-payment.

2. The respondent contended that Section 28 did not apply as both invoices pertained to the same goods, and the demand was to correct a clerical mistake in the earlier proceedings. The respondent argued that there was no error in calculation but a clear case of short levy that needed correction. The Asstt. Solicitor General representing the respondent supported the validity of the demand notices and detention order based on this argument.

3. Upon detailed consideration, the court found that the case was indeed a clear instance of short levy of import duty due to the omission of one invoice in the original show cause notice. Referring to Section 28 of the Customs Act, the court noted the obligation to issue a show cause notice within six months for short levy cases. Since the demand notice was issued beyond this statutory period, the court concluded that the demand and subsequent proceedings were unsustainable. Consequently, the court quashed the demand notices and the detention order, declaring the petitioner not liable to pay the demanded amount. The writ petition was allowed in favor of the petitioner.