2011 (5) TMI 790 - AT - Customs

Demand under Section 28 of the Customs Act, 1962 - demanded invoking Section 111(o) of the Customs Act, 1962 Held that - Section 111(o) of the Customs Act, 1962 cannot be invoked nor can the duty be demanded, Customs authorities have allowed the exemption after satisfying themselves that the pre-import conditions have been fulfilled and if they have allowed the exemption to certain non-eligible goods, the only course for recovery of the duty was to issue the demand notice under Section 28 of the Customs Act, 1962 within the time prescribed thereunder. Since that has not been done, prima facie, the demand appears to be not sustainable, requirement of pre-deposit waived

Summary

Issues:
1. Interpretation of Section 111(o) of the Customs Act, 1962 regarding the demand of duty.
2. Application of Notification No. 41/2005 granting exemption to goods.
3. Time-barred demand and invocation of Section 28 of the Customs Act, 1962.

Analysis:

1. The advocate for the appellant argued that the amount demanded under Section 28 of the Customs Act, 1962 has been paid, while the balance amount was demanded under Section 111(o). He contended that there was a mistake in claiming duty exemption for the goods, but since the notification had no post-import conditions, Section 111(o) should not apply. He emphasized that there was no misdeclaration or suppression, and the demand being time-barred as the show-cause notice was issued beyond the prescribed period. The appellant's position was that Section 28 was not invoked for the demand.

2. The Tribunal analyzed Notification No. 41/2005 which granted exemption to various goods. It noted that the notification had pre-importation conditions but lacked post-import conditions. The Tribunal opined that in the absence of post-import conditions, Section 111(o) of the Customs Act, 1962 could not be invoked for demanding duty. It was observed that the Customs authorities had granted exemption after verifying pre-import conditions, and if exemption was allowed for ineligible goods, the proper course for duty recovery was through a demand notice under Section 28 within the prescribed time limit. Since this procedure was not followed, the demand was deemed unsustainable. Consequently, considering the duty amount already paid by the appellants, the Tribunal waived the pre-deposit requirement during the appeal process.

3. The learned S.D.R. attempted to defend the impugned order, but the Tribunal's analysis focused on the absence of post-import conditions in the notification, leading to the conclusion that Section 111(o) could not be invoked for duty demand. The Tribunal's decision was based on the proper interpretation of the Customs Act provisions and the specific conditions outlined in the notification. By emphasizing the necessity of following prescribed procedures and timelines for duty demands, the Tribunal ensured a fair and legally sound resolution in the case, ultimately benefiting the appellants by waiving the pre-deposit requirement.