Invocation of Extended Period of Limitation Requires Proof of Intent to Evade Customs Duty: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that invocation of the extended period of limitation under Section 28 of the CustomsAct, 1962 requires proof of a deliberate intention to evade customs duty and cannot be sustained merely on account of a dispute regarding eligibility to an exemption.

The appellant imported diamond and ruby-studded gold jewellery from Thailand under Bills of Entry, claiming exemption under Notifications No. 85/2004-Cus and 101/2004-Cus (N.T.) on the basis of Certificates of Origin issued by the competent authority of the Government of Thailand. The imported goods were assessed and cleared after the Customs authorities accepted the Certificates of Origin.

Subsequently, the Special Intelligence and Investigation Branch (SIIB) initiated an investigation alleging that the Local Value Added Content (LVAC) declared at 22% in the Certificates of Origin was incorrect and that the actual value addition was only about 6.5%. A show cause notice was issued proposing denial of the exemption benefit, recovery of differential duty amounting to ₹5,68,802, confiscation of goods, and imposition of penalties. The adjudicating authority confirmed the demand and penalties under Sections 114A and 114AA of the Customs Act, 1962, which was later affirmed by the Commissioner (Appeals).

The counsel for the appellant, contended that the exemption had been claimed on the basis of valid Certificates of Origin issued under the Indo–Thailand Free Trade Agreement and the Interim Rules of Origin. It was argued that all relevant documents, including the Certificates of Origin, had been furnished at the time of import and accepted by the Customs authorities, thereby ruling out any allegation of suppression or wilful misstatement.

The Department, on the other hand, argued that the appellant had failed to establish compliance with the minimum value addition requirement of 20% prescribed under the Interim Rules of Origin. It was further contended that an importer cannot blindly rely on Certificates of Origin and is responsible for ensuring the correctness of exemption claims. According to the Department, the failure to verify the actual value addition justified denial of exemption, invocation of the extended period of limitation, and imposition of penalties.

A Division Bench comprising P. Dinesha (Member-Judicial) and Vasa Seshagiri Rao (Member-Technical) observed that the Department must establish a conscious intent to evade duty before invoking the extended limitation period. The Tribunal noted that the appellant had produced Certificates of Origin issued by the competent authority in Thailand at the time of import and that the same had been accepted by the Customs authorities after due verification.

The Tribunal relied on the Supreme Court's decision in Aban Loyd Chiles Offshore Ltd. v. Commissioner of Customs, wherein it was held that the proviso to Section 28 can be invoked only where non-payment of duty results from collusion, wilful misstatement, or suppression of facts. The Court had clarified that the term “wilful” qualifies both “misstatement” and “suppression of facts”, making it necessary for the Department to establish a deliberate intention to evade duty before resorting to the extended period of limitation.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates