IMPORTANT POINT
The show cause notice which was issued by appellant u/s 111(o) r/w 28(1) of Customs Act, 1962 on 6.4.93 to the respondent beyond the period of one year of the import of the life saving equipment under OGL on 18.10.1988 is covered by the provisions of Section 28(1) proviso of the Customs Act, 1962 and, therefore, is not time barred being within extended period of limitation of 5 years.

Headnote:Customs Act, 1962-Sections 5, 28(1) proviso r/w Section 111(o)-Show cause notice under-Limitation-Ordinary and extended-Ordinary limitation one year from date of import-Date of import of life saving equipment under open General Licence under N. No. 208/81 being 18.10.1988-Show cause issued on 6.4.93-Extended period of limitation 5 years-Whether can be invoked-Collector invoked it-Levied duty-CEGAT holding that Collector cannot invoke the extended period of limitation of 5 years as respondent had not concealed free import for export-Appeal against to Supreme Court-Construction of Exemption Notification No. 208/1981-Whether suggests that import is free of duty if for use in India? (Yes)-Effect-Respondent was not entitled to claim exemption-Whether respondent can take shelter behind ignorance of exemption for? (No)-Extended period of limitation can be invoked u/s 28(1) proviso-Appeal allowed-CEGAT set aside and Collector s order restored -Case law referred.
       Held : After hearing the counsel for the parties, we are of the opinion that in view of the decision of this Court, in M.J. Exports case (supra) there can be no doubt that any item which was imported under OGL which fell in the category of life saving drugs or medicines or equipment clearly implied that the import was for India and not for being exported to another country. (Para 8)
       It is, therefore, clear that if on construction it necessarily follows that the goods though imported under OGL were to be used only in India then such a construction could be properly placed. (Para 9)
       The notification of exemption has been issued under Section 25 of the Customs Act. The heading of the Schedule indicates that the exemption relates to life saving drugs or medicines as well as to life saving equipments. Just as this Court in M.J. Exports case has observed that inherent in the import for life saving drugs or medicines as per List 2 of Appendix is the condition that the goods imported must be for use in India, similarly when the exemption is granted under Section 25 from the total amount of customs duty in respect of life saving drugs or medicines, it necessarily implies that it is only with respect to those life saving drugs or medicines which are used in India. Furthermore, the notification under Section 25 has to be read along with the OGL permitting such import of life saving drugs or medicines and equipments and reading the two together it would follow that when import of such items is only for use in India then the exemption from payment of customs duty necessarily has to be of those items only, namely, those which are used in India. This being the case, the respondent was not entitled to claim the benefit of exemption as provided by Notification No.208 of 1981. (Para 10)
       From what has been stated hereinabove, it must follow, logically, that inherent in the import of the life saving equipment was the condition that the same had to be used only in India. That condition also stood attached to the terms of Exemption Notification No. 208/1981. There was an obligation on the respondent not to claim exemption on the import so made if the respondent intended to export the life saving equipment to Russia. There can be little doubt, and the examination of the respondent s Director makes it very clear, that the equipments were imported from abroad solely with the intention of exporting the same to Russia. This being the position, the respondent could not have claimed exemption under the said Notification No.208/1981. If in law such exemption could not be claimed because the goods were to be exported from India, then it is by suppressing such a fact that the goods were cleared at Bombay without payment of customs duty. It is contended by Mr. Andhyarujina that the bill of entry does not require the importer to indicate the purpose for which the goods were being imported. That may be so but when in law benefit of exemption notification can only be availed of if the goods are to be used in India, then by claiming the exemption what is given out to the customs authorities is that the goods are not going to be exported. That was a suppression of correct fact, namely, that in fact the goods were to be exported. If this fact had been known, import duty would have been levied and benefit of exemption notification would not have been allowed. It is to be seen that when the imported items were sought to be exported merely within two months of the import, the goods were detained at Kandla. The customs authorities were, therefore, quite clear in their mind that such life saving equipments when imported under the OGL could not be re-exported. This was the correct position in law as has been upheld by this Court. If at the time of import on 19th October, 1988, it had been known that the goods imported are not to be used in India but are to be exported, then the benefit of exemption notification would not have been granted. By not disclosing the correct fact that the goods were meant for re-export, the benefit of exemption was availed of. In our opinion, therefore, the provisions of the proviso to Section 28(1) was applicable and the show cause notice issued by the customs authorities on 6th April, 1993 was valid. (Para 11)
       Further this is not a case of mere failure or negligence on the part of the exporter, it was clearly a design on its part to import and then export. (Para 12)
       Finally held : For the aforesaid reasons, this appeal is allowed and the decision of CEGAT is set aside and that of the Collector of Customs is restored. (Para 13)

JUDGMENT

Kirpal, J.-The main question which arises for consideration in the present case is whether the show cause notice which was issued by the appellant to the respondent beyond the period of one year of the import of the items in question is covered by the provisions of Section 28(1) proviso of the Customs Act, 1962 (for short "the Act") and, therefore, within time.

2. Briefly stated the facts are that on 19th October, 1988 the respondent imported and cleared 55 units of Haemodialysers under the Open General Licence (OGL). It claimed the benefit of Customs Notification No.208 of 1981 and no duty was paid on the said import.

3. The goods were then taken to Kandla and were sought to be exported to USSR. On 2nd December, 1988, the customs authorities at Kandla were of the opinion that the goods which had been imported from abroad could not be so exported to Russia. On advice having been received from Joint Chief Controller of Import & Export, a show cause notice on 25th March, 1989 was issued by the Deputy Collector of Customs, Kandla for confiscation of the goods under Section 113(d) of the Act. The respondent was also asked to show cause why short charged customs duty of Rs. 2,94,42,867/- should not be recovered since the goods had been cleared at NIL rate of duty claiming the benefit of Customs Notification No. 208 of 1981. It may here be stated that on a bond being executed, the goods in question were in fact allowed to be exported to Russia.

4. On 22nd October, 1990, the Collector of Customs, Kandla, ordered confiscation of goods under Section 113(d) and imposed a penalty of Rs. 50 lakhs. As regards the recovery of short duty, the Collector observed that the counsel for the respondent, had submitted that Collector of Customs, Kandla, had no jurisdiction to demand duty for the goods imported through Bombay. The Collector agreed with this contention but added that even otherwise Notification No. 208/1981 exempted the goods unconditionally from import duty. The demand of duty was, therefore, dropped.

5. The decision of the Collector of Customs, Kandla imposing the penalty of Rs. 50 lakhs was challenged in appeal before the CEGAT but without success. Appeal was then filed to this Court and was contended by the respondent that under the OGL the goods could be imported and cleared and thereafter there was no prohibition in re-exporting the same. By judgment dated 14th May, 1992 reported as M.J. Exports Ltd. v. CEGAT1, this Court while dismissing the appeal of the respondent, inter alia, came to the conclusion that in the OGL List 2 of the Schedule permitted import of life saving equipment. The Court interpreted this to mean that the life saving equipment appearing in List No. 2 of Appendix 6 of the Import & Export Policy had to be such as for use in India. It was on this basis that the Court came to the conclusion that the goods could not have been validly exported and the penalty levied was upheld. The Court also noticed the contentions on behalf of the Revenue regarding the import of goods free of duty by relying on the said Notification and in this respect it observed as follows:

"25. … ….. ...

(1) Much emphasis has been laid by the counsel for the Revenue on the circumstance that the appellant had obtained the import of the goods free of duty by relying on the notification granting exemption from customs duty. It is obvious that it could not have been the intention of the legislature to grant exemption from customs duty in respect of vital goods of the nature in question in order that an importer may make profit by selling them abroad. The notification is, therefore, relevant for the issue before us to the limited extent that it lends supports to the construction of List 2 of Appendix 6 in the manner we have interpreted it. This apart, we are not concerned here with the questions whether the attempt of the assessee to export the goods (which has, in the event, been successful) would amou

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