2025 (3) TMI 1359 - AT - Customs

Invocation of extended period of limitation - issuance of multiple SCN on same facts - Classification of imported fabrics - to be classified under CTH 55151230 or not - eligibility for BCD exemption under N/N. 026/2000-Cus. dt. 01.03.2000 - HELD THAT - The Commissioner of Customs had ordered the extension of period of limitation by six months as proposed in the SCN and accordingly in strict compliance thereto Department did issue another SCN under Section 28 and 124 of the Customs Act. There is no dispute that the said notice is issued just before the expiry of six months. The time limit extended by the Commissioner having been honoured the only course available was to adjudicate at least this second SCN but however the issuance of another show cause notice after the extended six months period by violating the Commissioner s OIO has been questioned since this SCN is apparently issued by invoking the extended period of limitation. The arguments of the appellant is that the extension provided by the Order-in-Original supra was for issuing SCN and nothing else and once the SCN having been issued the Revenue could not have assumed jurisdiction once again that too after the expiry of permitted six months by treating directions in the said OIO as an endless permission which is not permissible under the Statute. This even cannot be accepted since the said notice which came to be adjudicated per impugned Order-in-Original was issued clearly after the artificially permitted extension of time and hence the very foundation itself is not proper. Conclusion - i) The invocation of the extended period of limitation for issuing SCNs not justified as the facts were already known to the authorities and subsequent notices based on the same facts did not constitute suppression. ii) The procedural lapse regarding cross-examination did not materially affect the decision as the primary issue was the improper invocation of the extended period. Appeal allowed on limitation.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the classification of imported fabrics under the incorrect tariff heading and the subsequent demand for differential duty was justified.
• Whether the invocation of the extended period of limitation for issuing show cause notices (SCNs) was valid under the Customs Act, 1962.
• Whether the evidence and procedural requirements, such as testing and cross-examination, were adequately met in the adjudication process.
• Whether the issuance of multiple SCNs based on the same facts constituted suppression of facts or justified the invocation of the extended period of limitation.

ISSUE-WISE DETAILED ANALYSIS

Classification of Imported Fabrics

The relevant legal framework involves the classification of goods under the Customs Tariff Act, 1975, and the applicability of exemptions under specific notifications. The Court examined whether the fabrics imported by M/s. Gaunir Impex Pvt. Ltd. were correctly classified under CTH 55151230, which provided a 100% concession from basic customs duty (BCD), or whether they should be reclassified under RITC 54079200, attracting a 25% duty.

The Court relied on test reports from the Customs Laboratory and the Central Revenue Control Lab (CRCL), which indicated that the fabrics were predominantly composed of synthetic/manmade woven fabrics. This necessitated reclassification under CTH 55. The Court found that the initial classification by the importer was incorrect, justifying the demand for differential duty.

Invocation of Extended Period of Limitation

The Court examined the invocation of the extended period of limitation under Section 28 of the Customs Act, 1962. The Revenue argued that the extended period was justified due to the misdeclaration of the country of origin and fraudulent certificates. However, the Court found that the facts were already known to the authorities when the first SCN was issued, and subsequent SCNs based on the same facts did not constitute suppression of facts.

The Court referenced several precedents, including Nizam Sugar Factory vs. CCE, A.P., which held that once facts are known to the authorities, they cannot be used to invoke the extended period of limitation in subsequent notices. The Court concluded that the Revenue's claim of unearthing new facts was unfounded, and the invocation of the extended period was unjustified.

Procedural Requirements and Evidence

The Court addressed procedural issues, particularly the validity of test reports and the opportunity for cross-examination. The test reports were deemed valid for six months as per Circular No. 23/2004, and their application to multiple Bills of Entry was not disputed. However, the Court noted that the lack of opportunity for cross-examination was a procedural lapse, although it did not significantly impact the outcome due to the primary focus on the limitation issue.

SIGNIFICANT HOLDINGS

The Court's significant holdings include:

• The reclassification of the imported fabrics under RITC 54079200 was justified based on the test reports, which indicated a predominance of synthetic/manmade woven fabrics.
• The invocation of the extended period of limitation for issuing SCNs was not justified, as the facts were already known to the authorities, and subsequent notices based on the same facts did not constitute suppression.
• The procedural lapse regarding cross-examination did not materially affect the decision, as the primary issue was the improper invocation of the extended period.

In conclusion, the Court set aside the impugned order and allowed the appeals on the ground of limitation, emphasizing that the Revenue failed to meet the legal standards for invoking the extended period of limitation as established by the Supreme Court.