2018 (12) TMI 960 - SC - Customs

Time Limitation - short levy of duty on the imported goods due to willful mis-declaration and suppression of facts and on the strength of forged documents - whether the finding of the CESTAT that the demand was barred by limitation is sustainable or not? - Held that - The authorities have sufficiently described the wrong transactions and the allegedly illegal benefit obtained by the importers in respect of the rate of duty, from paragraph 43 onwards in the said show cause notice. Undoubtedly, if the importers will be entitled to demonstrate that the allegations against them cannot be established on the basis of the show cause notice, that however does not entitle them to the relief of setting aside of the order against them on the ground of limitation - appeal allowed - Matter restored before the CESTAT.

Summary

Issues:
- Whether the demand of duty is barred by limitation.
- Whether the show cause notice adequately specified the allegations of willful mis-statement or suppression of facts.
- Whether the authorities issued the show cause notice within the prescribed time limit under the Customs Act.

Analysis:
The case involved appeals arising from orders passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowing the appeals of the respondents-importers on the ground that the demand of duty was barred by limitation and setting aside penalties imposed. The respondents had used Special Import Licences (SILs) for gold and silver bars at a concessional rate of duty under a specific notification. However, it was discovered that the SILs were forged and fabricated, leading to a show cause notice being issued in 1999. The notice alleged willful mis-declaration, suppression of facts, and the use of forged documents, resulting in duty evasion and penalties under sections 114A and 112(a) of the Customs Act.

The main issue revolved around the limitation period for issuing the demand notice, as per Section 28 of the Customs Act. The proviso to this section extends the time limit to five years in cases of willful mis-statement or suppression of facts. The respondent argued that there was no allegation of willful mis-statement or suppression of facts against them. However, the show cause notice clearly contained such allegations, and the authorities described the fraudulent transactions and benefits obtained by the importers. The show cause notice was issued within the prescribed time limit, considering the detection of fraud in 1998 and the notice issued in 1999, well within the one and a half year period under the proviso.

Ultimately, the Supreme Court allowed the appeals, setting aside the CESTAT's orders and directing a fresh decision based on merits. The Court emphasized that the importers could still challenge the allegations against them but not on the grounds of limitation. The judgment reaffirmed the importance of adhering to statutory time limits for issuing demand notices and the need for specificity in allegations of fraud or misrepresentation in show cause notices. All contentions of the parties were left open for further proceedings.