1990 (2) TMI 70 - HC - Customs

Summary

Issues Involved:
1. Validity of the demand for customs duty on imported Strawberry Pulp.
2. Applicability of Notification No. 117/78-Cus, dated 9-6-1978.
3. Fulfillment of export obligations under the DEEC Scheme.
4. Application of the principle of promissory estoppel.
5. Compliance with Section 28 of the Customs Act, 1962 regarding the issuance of a show cause notice.
6. Limitation period for raising the demand.

Detailed Analysis:

1. Validity of the Demand for Customs Duty on Imported Strawberry Pulp:
The petitioners challenged the demand made by the Assistant Collector of Customs for payment of customs duty on Strawberry Pulp amounting to Rs. 8,22,610.89/-. The demand was based on the assertion that Strawberry Pulp did not conform to the list of items specified in Annexure-1 to Appendix-19 and was not covered by Notification No. 117/78-Cus, dated 9-6-1978. The petitioners argued that they had imported the pulp under a valid DEEC Scheme and had fulfilled all export obligations.

2. Applicability of Notification No. 117/78-Cus, Dated 9-6-1978:
The petitioners contended that Strawberry Pulp is covered under the said notification as it falls under the description of "Fruits preserved by freezing, containing added sugar." The technical specifications provided by Batewell Limited indicated that Strawberry Pulp is essentially Strawberry Puree/Paste without sugar or alcohol, used for manufacturing jam. The petitioners argued that the exemption was rightly granted at the time of importation.

3. Fulfillment of Export Obligations under the DEEC Scheme:
The petitioners provided evidence that they had fulfilled all export obligations by manufacturing and exporting the required quantities of Strawberry Jam and other products. The Customs authorities had duly recorded and attested these exports in the DEEC Book. The petitioners argued that having met all conditions, they should not be liable for any customs duty on the imported pulp.

4. Application of the Principle of Promissory Estoppel:
The petitioners invoked the principle of promissory estoppel, arguing that they acted on the representation made by the respondents through the issuance of the Advance Licence under the DEEC Scheme. They contended that the respondents are now estopped from denying the benefits of the licence and imposing customs duty, as the petitioners had fulfilled all conditions and exported the manufactured goods.

5. Compliance with Section 28 of the Customs Act, 1962 Regarding the Issuance of a Show Cause Notice:
The petitioners argued that no show cause notice was issued before raising the demand, violating Section 28(1) of the Customs Act, which mandates a notice to show cause within six months from the relevant date. The respondents admitted that there was an error on their part in not realizing the customs duty at the time of importation but did not allege any collusion or suppression of facts by the petitioners.

6. Limitation Period for Raising the Demand:
The court held that the demand was barred by limitation as it was made beyond the six-month period stipulated in Section 28 of the Customs Act. The goods were imported in March 1985, and the demand was made in June 1987 without issuing a show cause notice. The court emphasized that the respondents could not take advantage of their own mistake and penalize the petitioners.

Conclusion:
The court concluded that the notice of demand issued by the Assistant Collector of Customs was without jurisdiction and liable to be set aside. The writ petition succeeded, and the demand notice dated 10-6-1985 was quashed. The court also noted that the petitioners were prevented from availing the benefit of duty drawback due to the respondents' representation, further supporting the application of promissory estoppel. The operation of the order was stayed for a fortnight as requested by the respondents.