COLLECTOR OF CUSTOMS, BOMBAY versus M/S. M.J. EXPORTS LTD.

Citation: [2001] SUPP. 1 S.C.R. 564 · Decided: 14-08-2001 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
c 
COLLECTOR OF CUSTOMS, BOMBAY 
v. 
M/S. M.J. EXPORTS LTD. 
AUGUST 14, 2001 
[B.N. KJRPAL AND SHIVARAJ Y. PATIL, JJ.] 
Customs A ct, 1962 : 
life saving drugs or medicines or equipment-Import of-Customs duty--
Exemption fi-om-Assessee imported life saving drug and paid no duty on it-
Assessee then sought to export the said item to another country-Entitlement 
to exemption from duty-Held: Import of such item is only for use in India 
and not meant for export to another country-Hence, assessee not entitled 
D to exemption Ji-om customs duty-Customs Notification No. 208 of !981. 
Section 28(1) proviso-Show cause notice-Issue of-Extended period 
of limitation-Applicability of-Life saving drugs or medicines or equipment-
Import of-Customs duty-Exemption from-Assessee imported life saving 
drug and paid no duty on it-Intention to export such item not disclosed-
E Show cause notice demanding duty and penalty issued beyond the period of 
one year-Validity of-Held: By not disclosing the/act that the item is meant 
for re-export benefit of exemption is availed of-It is a suppression of correct 
fact-Therefore, extended period of limitation applicable-Hence, show cause 
notice validly issued. 
F 
The respondent imported and cleared life saving goods under the Open 
General Licence and claimed the benefit of exemption under Customs 
Notification No. 208of1981 and no duty was paid on the said import. 
The said item was then sought to be exported to another country. The 
G appellant was of the opinion that the item which had been imported from abroad 
could not be so exported to another country and, therefore, issued a show cause 
notice under the proviso to Section 28(1) of the Customs Act, 1962 for recovery 
H 
of short-charged customs duty and also imposed a penalty. The Customs, Excise 
and Gold (Control) Appellate Tribunal set aside the aforesaid show cause 
notice. Hence this appeal. 
564 
COLLECTOR or CUSTOMS V. M.J. EXPORTS LTD. 
565 
The following question arose before this Court 
Whether the show cause notice which was issued by the appellant to 
the respondent beyond the period of one year of import of the items in question 
is covered by the provisions of Section 28(1) proviso of the Customs Act, 1962 
and, therefore, within time ? 
Allowing the appeal, the Court 
HELD: I. 
Any item which was imported under the Open General 
Licence 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 
A 
B 
exported to another country. 1568-FI 
C 
M.J Exports ltd v. CEGAT, (1992) 6 ELT 161 (SC), relied on. 
Hansraj Gordhandas v. HH. Dave, Assistant Collector of Central Excise 
and Customs, 11969] 2 SCR 253, referred to. 
2. When import of life saving drugs or medicines or equipment is only D 
for use in india then the exemption from payment ofcustoms duty necessarily 
has to be of those items only, namely, those ·whii;_h are used in India. This 
being the case, the respondent was not entitled to claim the benefit of exemption 
as provided by Customs Notification No. 208of1981. 1570-B, q 
3.1. There was an obligation on the respondent not to claim exemption E 
on the import so made if the respondent intended to export the life saving 
drugs to another country. 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 for export without payment of customs 
duty. (570-F, G] 
F 
Padmini Products v. CCE, (1989) 43 ELT 195 (SC) and CCE v. Chemphar 
Drugs and Liniments, 1198912 SCC 127, held inapplicable. 
3.2. 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 G 
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. 
Therefore, the provisions of the proviso to Section 28(1) of the Customs Act, 
· 1962 was applicable and the show cause notice issued by the Customs H 
566 
SUPREME COURT REPORTS [2001) SUPP. I S.C.R. 
A authorities was valid. [570-H; 571-A, B, C, DI 
4. This is not a case of mere failure or negligence on the part of the 
respondent, it was clearly a design on its part to import and the
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