JUDGMENT

R.N.Manjula, J.

This Appeal has been filed under Section 130 of the Customs Act, 1962 (hereinafter referred to as “the Act”), challenging the order dated 02.12.2013 made in Final Order No.40601 of 2013 on the file of the Customs, Excise &

Service Tax Appellate Tribunal, Chennai (for brevity “the Tribunal”).

2. The Appellant has raised the following substantial questions of law for consideration of this Court :-

(i) Whether the Tribunal is right in confirming the demand for the period 17.03.1994 to 04.10.1995 which is barred by limitation under Section 28 of Customs Act?

(ii) Whether extended period of limitation can be invoked against the appellants for the period 17.03.1994 to

04.10.1995 for demanding duty during the said period?

(iii) Whether the imposition of penalty under Section 112 against the appellants is sustainable when Tribunal has not got any power to impose penalty under Section 112 of Customs Act for the first time, when there was no proposal in the show cause notice, nor the adjudicating authority has imposed such penalty under Section 112?

3. Heard Mr.T.Ramesh, learned counsel appearing for the appellant and M/s.R.Hemalatha, learned Standing Counsel appearing for the respondents.

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4. The 1 Appellant is engaged in Manufacture and Export of Silk Sarees and nd the 2 and third Appellants are the sister concerns of the first Appellant. The fourth appellant is the Managing Partner of the first appellant and he is a partner of the second and third appellants and he takes care of the import and utilization of the goods. The first Appellant has obtained eight advance licenses from the Joint Director General of Foreign Trade (JDGFT), Bangalore for the import of Mulberry Raw Silk without payment of customs duty with an obligation to export finished goods like Silk Sarees. The said condition forms part of the Duty Exemption Entitlement Certificate (DEEC). The exemption of customs duty is covered under Notification No.203/92-Cus dated 19.05.1992 for Value Based Advance Licenses (VABAL) and 204/92-Cus dated 19.05.1992 for Quantity Based Advance License (QBAL). The present Appeal relates to duty free import of Raw Silk under Advance License No.2310212 dated 25.01.1993 under Customs Notification No.203/92-Cus and Exemption Notification No.204/92-Cus dated 19.05.1992.

5. The First Appellant imported Mulberry Raw Silk by availing duty exemption between the period from 17.03.1994 to 04.10.1995 on the condition to fulfill the export obligation. The first Appellant has failed to fulfill the export obligation. And the imported duty free materials were utilized for manufacturing of Silk Sarees and selling them in the local market through its sister concerns M/s.Varalakshmi Handlooms and M/s.Varalakshmi Silk House (who are the Appellants 2 and 3 herein).

6. After issuing show cause notice for the above violation, the Commissioner of Customs issued the following order :-

“(i) I demand from M/s.Varalakshmi Exports, Bangalore customs duty amounting to Rs.83,00,745/- payable on mulberry raw silk imported under advance licence No.23120212 dated 15.01.93 and 3035148 dated 16.5.94 in terms of undertaking furnished under the conditions of the notification read with proviso to Section 28(1) of the Customs Act 1962.

(ii) I impose a penalty of Rs.83,00,745/- equal to the amount of duty evaded under Section 114A of the Customs Act, on the said M/s.Varalakshmi Exports, Bangalore.

(iii) I demand from M/s.Varalakshmi Exports, Bangalore, interest @ 24% per annum from the date of import.

(iv) Rs.17,00,000/- remitted vide Challan dated 3.2.99 and

17.2.99 should be appropriated towards the above dues.

(v) I impose a penalty of Rs.1,00,000/- (Rupees one lakh only) on Shri K.H.Subramani partner of M/s.Varalakshmi Exports, Bangalore under Section 112(a)(2) of Customs Act. (vi) I also impose a penalty of Rs.25,000/- (Rupees twenty five thousand only) each on M/s.Varalakshmi Handlooms, Bangalore and M/s.Varalakshmi Silk House, Bangalore under Section 112(a)(2) of