2000 (4) TMI 93 - AT - Customs

Summary

Issues Involved:
1. Validity of the import under REP licence.
2. Duty demand on imported goods and liability to pay by the appellant.
3. Confiscation of goods and imposition of penalties.
4. Timeliness and legality of the show cause notice.

Detailed Analysis:

1. Validity of the Import under REP Licence:
The appellant, Angel Overseas, imported 5976 kgs. of poly filament yarn using REP import licence No. 2243737, which was transferred from Sehgal Exports. The import licence was initially accepted by the Customs authorities and 80% of the goods were cleared duty-free. However, the licence was later suspended on 23-6-1987 and cancelled on 21-7-1987 by the Dy. Chief Controller of Import and Export, Amritsar, on the grounds of fraud and misrepresentation by Sehgal Exports. The appellant argued that the licence was valid at the time of import and that they were a bona fide purchaser for value, unaware of any fraud.

2. Duty Demand on Imported Goods and Liability to Pay by the Appellant:
The Customs authorities issued show cause notices demanding customs duty of Rs. 9,26,506/- on the cleared goods, asserting that the import licence was obtained fraudulently. The appellant contended that the show cause notice was issued under Section 124 of the Customs Act, which pertains to confiscation and penalties, not duty demands. There was no specific demand under Section 28(1) of the Customs Act, which addresses duty demands due to misstatement or suppression of facts. The Tribunal found that the demand for duty was not legally substantiated as per the provisions of Section 28(1) of the Customs Act.

3. Confiscation of Goods and Imposition of Penalties:
The Customs authorities ordered the absolute confiscation of the remaining 20% of the goods and imposed a personal penalty of Rs. 1,15,000/- on the appellant. The appellant argued that they were not involved in obtaining the licence fraudulently and that they acted in good faith. The Tribunal noted that there was no material evidence to show the appellant's involvement in the fraud. The confiscation and penalties were deemed unjustified as the appellant was a bona fide purchaser and the import was conducted under a valid licence at the time.

4. Timeliness and Legality of the Show Cause Notice:
The show cause notice was issued 8 months after the import, which the appellant argued was barred by time. The Tribunal observed that the show cause notice was issued under Section 124 of the Customs Act, which does not address duty demands. The notice should have been issued under Section 28(1) of the Customs Act, which allows for a 5-year period in cases of suppression or misstatement. The Tribunal found that the demand for duty was barred by the normal period stipulated in Section 28 of the Customs Act.

Conclusion:
The Tribunal concluded that the appellant had imported the goods under a valid licence at the time, and the subsequent suspension and cancellation of the licence did not retrospectively affect the legality of the import. The demand for duty was not legally substantiated, and the confiscation and penalties imposed were unjustified. The appeal was allowed, and the impugned order was set aside.

Order:
The appeal is allowed with consequential relief, and the impugned order against the appellant is set aside.