' NASIM SIKANDAR, J.---The appellant a private limited company was granted an Open Bond Manufacturing Licence on 6-1-1991. They availed the facility and got cleared 4 knitting machines valuing at Rs,48,13,454. Subsequently, on 30-9-1993, the concerned Collector of Customs revoked the Licence on the ground that the Company had failed to fulfil the requirements of S.R.O.
No,722(1)/89, dated 10-7-1989. That order appears to have been maintained by Member (Judi.) vide his order in Appeal No,5 of 1994, dated 3-1-1994.
2. On 23-12-1997, the Collector Multan issued a notice to the Company requiring them to show cause as to why custom duties and other taxes leviable on machinery in all amounting to Rs,16,95,209 should not be recovered from them and penal action under section 56(1) of the Customs Act, 1969 be initiated against them. In reply, the appellant raised a number of objections.
The most mentionable amongst them being that the demand was time-barred under section 32 of the Customs Act. The Collector, however, rejected the objection on the ground that in this case Custom duties and other taxes were conditionally exempted under S.R.O. 962(1)/90 read with S.R.O.
No,722(1)/89 which was subject to the condition that dues would be recovered if the beneficiary failed to fulfil the conditions prescribed in the said S.R.O. Within a period of 7 years. On merits, the claim of the appellant that during the subsistence of Licence no condition was violated was also rejected through order in original, dated 31-8-1989 whereby the appellant was found to have failed in complying with the conditions of the aforesaid S.R.O. And was therefore found liable to remit the aforesaid sums on account of Customs duty, Surcharge, Iqra surcharge respectively due at Rs,9,63,691, 4,84,345 and Rs,2,42,173.
3. Before the Customs Excise and Sales Tax Appellate Tribunal, the appellant repeated his objections both legal as well as factual but without any success. According to the Division Bench of the learned Tribunal, the show cause notice issued on 23-12-1997 was well within time inasmuch as the applicable provisions of law in their view was sections 156(1)10A and not section 32(2) of the Customs Act, 1969. Their having maintained the order in original on all scores has brought the appellant in appeal before us under section 196 of the Customs Act, 1996.
4. The learned counsel for the appellant claims that both the Collector as well as the learned Tribunal were misdirected in holding that the show-cause notice issued after more-than 4 years of the cancellation of open bond manufacturing licence on 30-3-1997 was within time. By relying upon 1990 CLC 1337 Re: Nigina Cotton Mills Limited v. Pakistan through the Secretary, Ministry of Finance, Islamabad and 4 others 1992 CLC 841 Re: Messrs Central Cotton Mills Ltd. v. Collector of Central Excise & Land Customs and 3' others and 1983 CLC 1736 Re: Messrs Qaid Cap House v.
Collector of Customs and 2 others he contends that the provisions of subsection (3) of section 32 of the Customs Act were attracted in this .Case which required issuance of a show cause notice within 6 months of the relevant date which in this case was 30-9-1993 when the said licence was cancelled by the Collector. The learned counsel also relies upon CGO No,11 of 1996, dated 30-5-1996 and C.G.O No, 16 of 1996, dated 16-6-1996 to claim that both the aforesaid notifications having been delinked, no penal action against the appellant could have been taken for violating any conditions of S.R.O. No,962(1) 90, dated 12-9-1990. Lastly it is claimed that the Collector who recorded order in original in this case himself on 25-7-1998 almost one and a half year earlier to issuing the aforesaid show-cause notice wrote to the Central Board of Revenue that "the Department has reached a dead end because the case became barred under section 32 of the Customs Act, 1969 long ago."
5. The learned counsel for the Revenue, however, supports the order of the Collector as well as that of the Tribunal for the reasons recorded therein.
6. After hearing the learned counsel for the appellant as well as for the revenue we will not take long to conclude that the Department had absolutely no legal or moral authority to issue show- cause notice after a lapse of more than 4 years of the cancellation of the licence. The moment the Collector cancelled the Licence the aforesaid amounts became payable by the appellant. The silence of the Department for over 4 years be on account of inadvertance, error or misconstructions deprived it of their powers to hound the appellant who was, in the words of Sajjad Ali Shah, in Re: Messrs Qaid Cap House (supra) "justified in thinking the matter closed." Both the Collector as well the Tribunal attempted to confuse the issue by alluding to provisions of sections 156(1), 10-A of Customs Act, 1969. A specific mention was made of the provision in show cause notice but no penalty provided in Column 2 of the Table contained therein was ever invoked. As such we are not in agreement with the contention of the appellant that the aforesaid letter of Collector Custom created a kind of estoppel against the Department yet we will agree that in all fairness he should not have changed his opinion with regard to the limitation involved. The issuance of a show-cause notice in this case when seen in the background given in the order in original clearly points out the fact that it was done only to save the officer who remained uncertain for a couple of years as to the authority of the Collector who could issue a show-cause notice in this case. As noted above, on cancellation of the Licence, the appellant Company became immediately liable to pay duties. To make demand a show-cause notice had to be issued and that show-cause notice could not be issued under any provision except subsection (3) of section 32 of the Act. The period of 7 years given in sub-clause (4) of the said S.R.O. No,962(1)/90 restraining shifting of plant and machinery imported under the concession could not by any rule of interpretation be brought in to extend the period of limitation for issuance of a show-cause notice to effect recovery which had already become due. We are also in agreement with the submissions at the bar that the order of the Tribunal is cursory and does not betray serious application of mind to the issues involved.
7. The three cases relied upon by the learned counsel for the appellant support the submissions made at the bar. In Re:' Messrs Qaid Cap House (supra), the Revenue issued a notice after 7 years of the clearance of consignment on the ground that the duty had been short levied. The notice so issued was found time-barred. In Re: Messrs Central Cotton Mills Ltd. (supra), the importers were granted rebate under Exemption Notification on machinery imported by them. The Revenue after sometime coming to the conclusion that the petitioners were wrongly exempted sought to make recoveries on the ground that the machinery imported by them being manufactured in Pakistan, was not entitled to the concession. A Division Bench of the Karachi High Court in Constitutional jurisdiction inter-alia concluded that demandcum-show-cause notice issued to importers, long after expiry of six months was barred by time. In Re: Nagina Cotton Mills Limited (supra), it was found that section 32 figured in Chapter V of the Act which dealt with "Levy and exemption from customs duties". According to the learned Division Bench of the Karachi High Court, it laid down a condition precedent namely service of notice and a bar of limitation for serving it. Also that unless a person is served with a notice of demand the amount cannot be determined by the appropriate officer and consequently no demand could be made against him. It was also concluded that even if the petitioner had 'knowledge of the duty payable by him, the service of notice of demand could not be dispensed with.
8. The principles of law settled in the aforesaid cases squarely attract to the fact in hand. Therefore, for the various reasons given in the penultimate para, this appeal is accepted with the result that the impugned order of the Tribunal as well as that of Collector raising the aforesaid demand shall be set at naught.