2025 (1) TMI 1457 - AT - Customs

Invocation of extended period of limitation under section 28(4) of the Customs Act 1962 - classiication of imported goods - benefit of reduced Basic Customs Duty under N/N. 24/20058 dated 01.03.2005 and N/N. 12/2012 dated 17.03.2012. Whether the Commissioner (Appeals) is justified in holding that the extended period of limitation could not have been invoked in the facts and circumstance of the case? - HELD THAT - On record is the examination report dated 03.01.2019 which shows that the medical equipment was as per the invoice and the Bills of Entry. Once the respondent had declared the goods in the Bills of Entry under a particular Tariff Item nothing prevented the officers from verifying the same and in the present case as noted above the verification was also done after which the goods were cleared. It is subsequently that the department believed that the goods deserved classification under a different Tariff Item declared by the respondent. The invocation of the extended period of limitation was therefore for goods reasons set-aside by the Commissioner (Appeals) as the respondent had not suppressed facts and in any case it cannot be said that the facts were suppressed with an intent to avoid payment of duty. Whether the Commissioner (Appeals) was justified in remanding the matter to the adjudicating authority for a fresh determination of classification of the imported goods for the normal period? - HELD THAT - In view of the findings recorded by the Commissioner (Appeals) that the notices could not be served because of change of address the respondent was prevented from filing a reply to the show cause notice or appearing before the Commissioner (Appeals). The Commissioner (Appeals) has granted an opportunity to the respondent to file a reply to the show cause notice and also appear before final hearing - It is also not possible to accept the contention advanced by the learned counsel for the respondent that the Commissioner (Appeals) should have himself determined the correct classification of the imported goods instead of remanding the matter. The matter can only be examined after the respondent files a reply to the show cause notice and this is precisely what has been done by the Commissioner (Appeals). There is therefore no infirmity in this part of the order of the Commissioner (Appeals). The appeal filed by the department deserves to be dismissed and is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the extended period of limitation under Section 28(4) of the Customs Act, 1962, was correctly invoked by the adjudicating authority.

2. Whether the Commissioner (Appeals) was justified in remanding the matter to the adjudicating authority for a fresh determination of the classification of imported goods for the normal period of limitation.

ISSUE-WISE DETAILED ANALYSIS

1. Invocation of the Extended Period of Limitation

Relevant Legal Framework and Precedents: The extended period of limitation under Section 28(4) of the Customs Act, 1962, allows the department to demand duty not levied or short-levied due to collusion, willful misstatement, or suppression of facts by the importer. The Commissioner (Appeals) relied on precedents such as Sachin Kshirsagar vs. Commissioner of Customs and others, which emphasize that classification disputes do not automatically imply suppression or misstatement.

Court's Interpretation and Reasoning: The Commissioner (Appeals) found that the extended period could not be invoked as the requisite details were declared in the Bills of Entry, and the department had the opportunity for scrutiny. The classification of goods is a technical function, and a wrong classification does not equate to suppression or willful misstatement.

Key Evidence and Findings: The Commissioner (Appeals) noted that the goods were cleared after scrutiny and audit. There was no evidence of fraud or collusion to justify the invocation of the extended period.

Application of Law to Facts: The Court found that the respondent had not suppressed facts with intent to evade duty. The goods were declared under a particular Tariff Item, and verification was done by the department, which later believed a different classification was appropriate.

Treatment of Competing Arguments: The department argued that the respondent deliberately misclassified the goods. However, the Court upheld the Commissioner (Appeals)'s finding that the classification dispute did not warrant the extended period's invocation.

Conclusions: The extended period of limitation was not applicable as the respondent did not suppress facts with the intent to evade duty.

2. Remand for Determination of Classification for the Normal Period

Relevant Legal Framework and Precedents: The remand was justified based on procedural fairness, allowing the respondent an opportunity to respond to the show cause notice and participate in the hearing.

Court's Interpretation and Reasoning: The Commissioner (Appeals) remanded the matter because the respondent could not respond to the show cause notice due to a change of address. The Court found this decision to be procedurally fair.

Key Evidence and Findings: Notices were not served due to the respondent's change of address, preventing them from filing a reply or appearing for a hearing.

Application of Law to Facts: The remand allows the respondent to file a reply and participate in the hearing, ensuring due process. The Court agreed that the Commissioner (Appeals) could not determine the classification without the respondent's input.

Treatment of Competing Arguments: The department contended that the respondent had sufficient opportunity to respond, while the respondent argued for a determination of classification without remand. The Court sided with the procedural fairness approach.

Conclusions: The remand was appropriate to ensure the respondent's right to a fair hearing and proper determination of classification for the normal period.

SIGNIFICANT HOLDINGS

Core Principles Established:

- The invocation of the extended period of limitation requires evidence of suppression, willful misstatement, or collusion with intent to evade duty. Classification disputes alone do not satisfy this requirement.

- Procedural fairness necessitates allowing parties an opportunity to respond to notices and participate in hearings, especially when service of notices is impeded by factors such as a change of address.

Final Determinations on Each Issue:

- The appeal by the department was dismissed, upholding the Commissioner (Appeals)'s decision that the extended period of limitation was not applicable.

- The remand for determining the classification of goods for the normal period was justified, ensuring the respondent's right to due process.