2012 (11) TMI 249 - AT - Customs

Goods cleared from SEZ to DTA - Whether testing, packing and checking would amount to manufacture Held that - Definition in the SEZ Act of manufacture has to be construed widely and not narrowly. Instead of dwelling into the merits of the case, the matter can be disposed on the point of limitation itself. Therefore no reason to conclude that the imports were not to be subjected to or are not subjected to manufacture and are thus imports of Complete Consumer Goods, not permissible to be imported. there was no mis-declaration as applicant had filed bills of entry with officers, who after assessing the said bills of entry allowed the appellant to clear the goods from SEZ. It is also his submission that the officers were fully aware as to the process undertaken by the appellant The process (A) & (B) & (C) would be covered under the concept of manufacture, as there is no finding that the goods were marketable dehors all or any one of these process; the bland allegations of deodorant cans to be finished goods would not be sufficient to hold so. Invoking Extended period of Limtation - It is the submission that the entire show-cause notice is hit by limitation as the show-cause notice is issued on 21/06/2010, while the demands are for the period from February, 2006 to December, 2009. It is his submission that the extended time beyond the period of 6 months cannot be invoked in this case as the appellant has made out a case on limitation; we hold that show-cause notice demanding of duty in this case being beyond the period of 6 months, and there being no act of suppression of facts or mis-declaration etc., with intent to evade duty, the adjudication order confirming such demand with interest, and imposing penalties on both the appellants is in-sustainable and is liable to be set-aside and we do so - Both the appeals are allowed and the impugned order is set-aside.

Summary

Issues:
1. Interpretation of manufacturing activity under SEZ Act, 2005.
2. Application of limitation period under Section-28 of the Customs Act, 1962.

Issue 1: Interpretation of manufacturing activity under SEZ Act, 2005
The case involved appeals against an Order in Original regarding the appellant company's activities within the Kandla Special Economic Zone (KASEZ). The dispute centered on whether the appellant's activities, such as spray testing, appearance checking, fragrance testing, and packing of goods, constituted manufacturing under the SEZ Act. The lower authorities contended that these activities did not qualify as manufacturing, leading to demands for differential duty, penalties, and interest. The appellant argued that their processes met the SEZ Act's definition of manufacturing, citing previous judicial decisions and official communications supporting their position. The Tribunal analyzed the activities in question and the legal interpretations, ultimately finding in favor of the appellant. The Tribunal highlighted that the appellant had consistently declared their activities and intent to avail exemptions, supported by official correspondence and customs assessments. The Tribunal concluded that the appellant's activities qualified as manufacturing under the SEZ Act, overturning the lower authorities' decision.

Issue 2: Application of limitation period under Section-28 of the Customs Act, 1962
The Tribunal also addressed the issue of the limitation period for issuing the show-cause notice under Section-28 of the Customs Act, 1962. The lower authorities had invoked an extended limitation period, alleging willful suppression of facts by the appellant to evade duty. However, the Tribunal found that the show-cause notice, issued beyond the normal 6-month period, lacked evidence of suppression or misdeclaration with intent to evade duty. The Tribunal emphasized that the appellant had acted in good faith, supported by official communications recognizing their activities as manufacturing. Therefore, the Tribunal held that the extended limitation period was incorrectly applied, rendering the demands, penalties, and interest imposed unsustainable. Consequently, the Tribunal allowed both appeals, setting aside the impugned order and ruling in favor of the appellant on the limitation issue.

In conclusion, the Tribunal's judgment clarified the interpretation of manufacturing activities under the SEZ Act, 2005, and emphasized the importance of adhering to the limitation period provisions under the Customs Act, 1962. The detailed analysis and findings provided a comprehensive legal perspective on the issues raised in the appeals, resulting in a favorable outcome for the appellant.