Legal principle

Where DGFT has issued EODCs for the authorisations and the Customs Bond Cell has itself redeemed the bonds, the duty demand fails and the extended period under Section 28(4) is not invokable because the facts were within Revenue's knowledge, with confiscation, redemption fine and Section 135 proceedings unable to survive the collapse of that foundation.

Court decision

The Tribunal allowed the appeals of the assessee and the co-noticees (Shri Narrindra K. Suranna and Shri Tara Chand Jain) and dismissed Revenue's appeal: the demand was held barred by limitation (extended period under Section 28(4) not invokable), the Section 135 proceedings were held not warranted, the goods were held not liable to confiscation, and consequently no redemption fine was imposable.

Facts

M/s Kalpena Plastiks Ltd. (formerly Sarla Gems Ltd.), a merchant-exporter, imported polymer/plastic raw materials duty-free during 2009-2012 under 29 Advance Authorisation and DFIA licences (CIF value Rs. 67,51,85,463/-; duty foregone Rs. 14,97,51,922/-) with M/s Kalpena Industries Ltd. as supporting manufacturer, discharging export obligation by deemed exports to THPL, a 100% EOU. DGFT, Kolkata verified the supplies and issued Export Obligation Discharge Certificates for all 29 authorisations, and the Customs Bond Cell itself redeemed/vacated the bonds. DRI issued SCN dated 29.08.2014 under Sections 124 read with 28 alleging diversion of the duty-free imports to the open market and that the deemed exports were fictitious, proposing confiscation under Section 111(o), duty demand of Rs. 14,97,51,922/- under Section 28(4), interest under Section 28AA and penalty under Section 114A. The Commissioner of Customs (Port), Kolkata confirmed the full demand with interest and penalty and recorded (Para 46) that the ingredients of Section 135 stood attracted; Revenue also appealed for non-imposition of redemption fine.

Key provisions

• Section 135, Customs Act, 1962 — Evasion of duty or prohibitions
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 143(3), Customs Act, 1962 — Power to allow import or export on execution of bonds in certain cases
• Section 121, Customs Act, 1962 — Confiscation of sale-proceeds of smuggled goods
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc