2008 (9) TMI 296 - AT - Customs

Non fulfillment of export obligations - there is no dispute that the imported components had been converted into 29500 Krammer sub-assemblies and exported. There is also no allegation that the appellants did not receive the sale proceeds from the buyer abroad - larger period under Section 28 of the Act could not be invoked where the material facts were known to the departmental authorities and no collusion, willful misstatement or willful suppression of facts by the importer was alleged in the Show Cause Notice

Issues Involved:
1. Fulfillment of export obligation under the DEEC scheme.
2. Validity of the demand for duty and penalty.
3. Jurisdiction of the DRI to issue the show cause notice.
4. Applicability of the larger period for demand under Section 28 of the Customs Act.

Issue-wise Detailed Analysis:

1. Fulfillment of Export Obligation under the DEEC Scheme:
Motorola India Private Ltd. (MIL) imported components of cellular phones under the DEEC scheme and was obligated to export 29,500 sub-assemblies of Dao cellular phones. MIL exported only 9,550 pieces of Dao subassemblies and 19,950 pieces of Krammer subassemblies. The authorities initiated proceedings to recover the exemption availed for the corresponding quantity of inputs imported along with applicable interest, as MIL failed to export the specified quantity of Dao brand sub-assemblies as per the licenses. MIL argued that they had imported components necessary to manufacture Krammer subassemblies and had exported corresponding pieces in fulfillment of their export obligation, which was not accepted by the Commissioner.

2. Validity of the Demand for Duty and Penalty:
The demand of Rs. 51,92,566/- towards inadmissible exemption availed under Notification No. 51/2000-Cus., dated 27-4-2000, and an equal amount of penalty under Section 114A of the Customs Act, 1962, along with applicable interest, was contested by MIL. MIL contended that there were arithmetical errors in quantifying the demand and that the export goods had been manufactured out of the imported inputs, thus fulfilling the export obligation. They also claimed that the show cause notice did not invoke suppression of facts, and hence, the demand made beyond the normal period was barred by limitation. The Tribunal found that the demand invoking a larger period on the ground of suppression of facts was not sustainable, as MIL had declared the correct description of the goods when imported. The Tribunal also noted that the Commissioner accepted MIL's claim of exporting 19,950 Krammer subassemblies.

3. Jurisdiction of the DRI to Issue the Show Cause Notice:
MIL argued that the DRI did not have jurisdiction to issue the show cause notice to demand duty and interest. However, the Tribunal found that the officers of DRI were conferred with powers of officers of customs with jurisdiction in the whole of India vide Notification No. 17/2002-Cus. (N.T.), dated 7-3-2002, issued under Section 4 of the Customs Act. Therefore, the show cause notice was issued lawfully.

4. Applicability of the Larger Period for Demand under Section 28 of the Customs Act:
The Tribunal referred to several case laws, including the judgment of the Calcutta High Court in Ratan Exports and Industries Ltd. v. Asst. Collector of Customs, which held that the principle of promissory estoppel would apply, and the revenue could not take advantage of their own mistake by punishing an innocent importer. The Tribunal found that the demand for non-levy on imports made in 2001 under a show cause notice issued in 2003 was barred by limitation. The Tribunal also noted that the show cause notice had to specifically state the commission or omission under the proviso to Section 28(1) of the Customs Act, which was not done in this case. Therefore, the impugned demand was not sustainable in law.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal filed by Motorola India Pvt. Limited, concluding that the demand for duty and penalty was not justified, the show cause notice was issued lawfully by the DRI, and the larger period for demand under Section 28 of the Customs Act was not applicable due to the absence of specific allegations of suppression of facts.

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