Law: Customs Act, 1969

Section: 32(3)

 Summary The Supreme Court allowed PSO’s petition, holding the Show Cause Notice dated 26.06.2002 was time-barred. The Court found the allegations amounted only to a misconstruction of Section 106 (i.e., no fraud or concealment), so Section 32(3) (as then in force) applied with a six-month limitation from the relevant date (11.11.1999). Because the notice was issued after that period and the earlier authorities had not properly examined limitation, the Order-in-Original, the Tribunal order and the High Court judgment were set aside. Core points  Petition by Pakistan State Oil Company Ltd. (PSO) challenged High Court judgment dismissing its reference and answering limitation against PSO. PSO had supplied HSD to Pakistan Naval ships under longstanding departmental practice, via shipping bills, without customs duty, relying on Section 106. Show Cause Notice dated 26.06.2002 alleged unpaid duties (Rs.257,000) for transaction dated 11.11.1999; adjudicating authority and Tribunal confirmed demand. High Court confined reference to limitation but relied on earlier Supreme Court decisions and dismissed the reference. Supreme Court held allegations showed only misconstruction of law (no fraud, collusion, concealment or penal finding), so Section 32(3) applied. Section 32(3) prescribed six months limitation for notices in 1999 (amended to three years in 2000), so notice issued on 26.06.2002 was time-barred. Earlier Supreme Court precedents relied upon did not address the limitation point; High Court’s reliance on them was misplaced. Result: petition converted to appeal and allowed; impugned High Court judgment, Tribunal order and Order-in-Original set aside; Show Cause Notice declared of no legal effect. Law and section Issue Statute / Provision Relevant text / effect Application in this case Limitation for notices based on misconstruction/error Customs Act, 1969 — Section 32(3) (as in 1999) “Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied ... the person liable ... shall be served with a notice within six months of the relevant date requiring him to show cause ...” Transactions…