One Year Validity of Notice issued u/s 28 of Customs Act not applies to Kerala Minerals & Metals being a Registered Company under Companies Act: CESTAT [Read Order]

The Bangalore bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT )rejected the question on the validity of notice issued under section 28 of the Customs Act, 1962, as the Kerala Minerals & Metals is a Registered Company under the Companies Act, 1956.

The Kerala Minerals & Metals Ltd, the appellant, is a limited company fully owned by the Government of Kerala, engaged in the business of mining and manufacturing Titanium Dioxide. They imported ‘Huy glass 1105 M-Membrane Bags’ ( Filter Bags ) which were classified under Customs Tariff Heading 5911 9090. On scrutiny of the documents, it was noticed that the item filter bags are not made of textile fabrics but they were made of fibreglass non-woven which are rightly classifiable under Customs Tariff Heading 8421.

The classification was finalised under Customs Tariff Heading 8421 and differential duty was demanded, which was upheld by the Commissioner ( Appeals ) in the impugned order.

The counsel on behalf of the appellant submitted that the filter bags imported by the appellant are used as straining cloth in a strainer for separation of solid material of micron size from gaseous stream, which is similar to the cloth used in paper making machine; hence, it is rightly classifiable under Customs Tariff Heading 59. It is also submitted that the Bill of Entry was assessed and duty was paid by the appellant; later, notice was issued on 10.1.2007 which was beyond six months and therefore, it is barred by limitation. However, the adjudicating authorities held that the notice was within the prescribed time limit of one year as applies to State Government Undertaking as per Section 28(1)(a).

The issue about limitation applicable under Section 28(1)(a), the Commissioner (A) has held that Section 28(1)(a) empowers them to issue notice within one year in the case of Government, any individual, educational, research or charitable institution or hospital. Hence, the appellant being a State Government Undertaking, the notice issued within one year was a valid notice.

The appellant is incorporated as a company under the Companies Act, 1956 and though they are State Government Undertaking are incorporated as a company under the Companies Act, 1956. The  Kerala High Court in the Food Corporation of India ( FCI ) vs. Angamali Municipality rejected the claim of FCI that it is not liable to pay tax,

It was observed by the court that “The Corporation on the other hand is an autonomous body capable of acquiring, holding and disposing of property and having power to contract…… But the Act has given the Corporation an individuality, apart from the Government so that it cannot be equated with the central government though it may be an agency or instrumentality thereof….”

In view of the observations and because the appellant was registered under the Companies Act, 1956, the two-member bench of Mr P A Augustian, Member ( Judicial ) and Mrs R Bhagya Devi, Member ( Technical ) rejected the question of considering as Government undertaking for issuance of notice. The appeal on the ground of limitation was rejected.

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