2006 (8) TMI 179 - SC - Customs

Whether the Department could invoke the extended period of limitation under proviso to Section 28 of the Act? Held that - In the present case we find that in the show cause notice it is not alleged that duty of custom could not been levied or paid by reason of collusion or willful mis-statement or willful suppression of facts. The appellants were not put to notice which of the various omissions or commissions stated in the proviso were committed by them to extend the period of limitation from six months to five years. The appellants having not been put to notice did not have the opportunity to meet the case of the Department. The Department would not be entitled to invoke the proviso to Section 28 of the Customs Act and avail of extended period of limitation. The appeals are partly accepted. The appellants would be liable to pay the duty for a period of six months prior to the date of issuance of the show cause notice and not for the subsequent period. The demand for the subsequent period is held to be beyond the period of limitation. Accordingly, the demand of duty and levy of penalty for the subsequent period is quashed. Penalty, if any, for the period of six months immediately preceding the issuance of notice, for which the assessee has agreed to pay the duty, is also waived.

Summary

Issues Involved:
1. Unauthorized loading, unloading, storage, or removal of imported, indigenous items, and scrap.
2. Invocation of the extended period of limitation under the proviso to Section 28 of the Customs Act.
3. Confiscation of goods and levy of customs duty and penalty.

Detailed Analysis:

1. Unauthorized Loading, Unloading, Storage, or Removal of Imported, Indigenous Items, and Scrap:
The appellants, engaged in offshore oil exploration and exploitation under contracts with ONGC, were issued show cause notices by the Customs Department alleging unauthorized activities at Nhava Base. The notices contended unauthorized loading, unloading, storage, or removal of items and proposed to recover escaped customs duty and levy penalties. The appellants argued that the Customs Department was aware of these activities, as ONGC had informed the department about its operations, and hence, the demand for duty and penalties was unjustified.

2. Invocation of the Extended Period of Limitation under Proviso to Section 28 of the Customs Act:
The primary contention was whether the Department could invoke the extended period of limitation under the proviso to Section 28 of the Customs Act. The appellants argued that the show cause notices lacked specific allegations of collusion, willful mis-statement, or willful suppression of facts necessary to invoke the extended period. The court noted that the proviso to Section 28 requires an intention to evade duty, and the show cause notices did not contain necessary averments pointing out specific omissions or commissions by the appellants. Consequently, the extended period of limitation could not be invoked.

3. Confiscation of Goods and Levy of Customs Duty and Penalty:
The Tribunal accepted the appeals of Essar Oil Limited and Aban Loyd Chiles Offshore Limited, setting aside the confiscation of goods and the levy of duty and penalties. It was noted that ONGC had informed the Customs Department of its operations at Nhava Base, and the department was aware of the general nature of activities. The Tribunal concluded that the appellants, acting on behalf of ONGC, could not be accused of willful suppression of facts. The court held that the Department was not justified in invoking the extended period of limitation, and the demand for duty and penalties for the subsequent period was quashed.

Conclusion:
The appeals were partly accepted. The appellants were liable to pay duty for six months immediately preceding the issuance of the show cause notice but not for the subsequent period, as the demand for the subsequent period was beyond the period of limitation. Penalties for the six-month period were waived, and the point on merits was left open. Each party was to bear its own costs.