2001 (8) TMI 118 - SC - Customs

Whether the show cause notice which was issued by the appellant to the respondent beyond the period of one year of the import of the items in question is covered by the provisions of Section 28(1) proviso of the Customs Act, 1962 and, therefore, within time? Held that - In view of the decision of this Court in M.J. Exports' case ( 1992 (5) TMI 23 - SUPREME COURT OF INDIA ) there can be no doubt that any item which was imported under OGL which fell in the category of life saving drugs or medicines or equipment clearly implied that the import was for India and not for being exported to another country the respondent was not entitled to claim the benefit of exemption as provided by Notification No. 208 of 1981. The customs authorities were, therefore, quite clear in their mind that such life saving equipments when imported under the OGL could not be re-exported. This was the correct position in law as has been upheld by this Court. If at the time of import on 19th October, 1988, it had been known that the goods imported are not to be used in India but are to be exported, then the benefit of exemption notification would not have been granted. By not disclosing the correct fact that the goods were meant for re-export, the benefit of exemption was availed of. In our opinion, therefore, the provisions of the proviso to Section 28(1) was applicable and the show cause notice issued by the customs authorities on 6th April, 1993 was valid. Further this is not a case of mere failure or negligence on the part of the exporter, it was clearly a design on its part to import and then export. Appeal allowed.

Issues Involved:
1. Validity of the show cause notice issued beyond the period of one year under Section 28(1) of the Customs Act, 1962.
2. Legitimacy of exemption from customs duty under Notification No. 208 of 1981.
3. Jurisdiction of the Collector of Customs, Kandla, to demand duty for goods imported through Bombay.
4. Application of the extended period of limitation for recovery of duty.
5. Alleged wilful suppression of facts by the respondent.

Detailed Analysis:

1. Validity of the Show Cause Notice:
The primary issue was whether the show cause notice issued by the appellant beyond the period of one year from the import date was covered by the provisions of Section 28(1) proviso of the Customs Act, 1962, and thus within time. The Court concluded that the show cause notice issued on 6th April 1993 was valid under the proviso to Section 28(1), as it was issued within the extended period due to the respondent's suppression of facts.

2. Legitimacy of Exemption from Customs Duty:
The respondent imported Haemodialysers under OGL, claiming exemption from customs duty under Notification No. 208 of 1981. The Court held that the exemption was inherently conditional upon the goods being used in India. The import of life-saving equipment under OGL implied usage within India, and re-exporting the goods violated this condition. Therefore, the respondent was not entitled to the exemption.

3. Jurisdiction of the Collector of Customs, Kandla:
The respondent argued that the Collector of Customs, Kandla, had no jurisdiction to demand duty for goods imported through Bombay. The Collector agreed but noted that the goods were unconditionally exempt from duty under Notification No. 208/1981. The Court did not find jurisdictional issues significant enough to affect the case's outcome, focusing instead on the misuse of the exemption.

4. Application of the Extended Period of Limitation:
The Court examined whether the extended period of five years for issuing a show cause notice was applicable. The CEGAT had previously ruled against its application, citing no wilful suppression by the respondent. However, the Supreme Court found that the respondent's actions-importing goods with the intent to export them-constituted suppression of facts, justifying the extended period under Section 28(1) proviso.

5. Alleged Wilful Suppression of Facts:
The Court determined that the respondent had wilfully suppressed the fact that the imported goods were intended for re-export. The respondent's Director's examination revealed that the import was solely for export to Russia, contradicting the conditions of the exemption notification. The Court held that the respondent's failure to disclose this intention at the time of import amounted to suppression of facts, making the extended period of limitation applicable.

Conclusion:
The Supreme Court allowed the appeal, setting aside the CEGAT's decision and restoring the Collector of Customs' order. The Court upheld that the show cause notice was valid, the exemption under Notification No. 208/1981 was inapplicable due to the intended re-export, and the extended period of limitation was justified due to the respondent's suppression of facts.

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