2019 (1) TMI 1621 - HC - Customs

Principles of Natural Justice - SCN was kept pending for than 15 to 16 years - Adjudication of SCN not completed - breach of the statutory mandate of Section 11A(11) of the Customs Act - HELD THAT - It is undisputed fact that the issue involved in the impugned show cause notice had for the year 2001. It also emerges that it is undisputed fact that the respondent Authority had issued show cause notice on 25.09.2002 and in response to the same, on 12.07.2003, the petitioner made detailed reply along with written submissions. It is also undisputed fact that the respondents after keeping the impugned show cause notice in the call book, have not chosen to follow up it for unduly long period. The act on the part of the respondents of keeping the impugned show cause notice in call book for unduly long period, without disclosing cogent reason for delay is arbitrary in exercise of powers and is also in violation of provisions of Section 11A of the Customs Act. It would vitiate the entire proceedings. Impugned notice set aside - appeal allowed.

Summary

Issues Involved:

1. Validity of the show cause notice dated 25.09.2002.
2. Delay in adjudication and its impact on the principles of natural justice.
3. Applicability of Section 11A of the Customs Act.
4. Legitimacy of placing the case in the call book.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice Dated 25.09.2002:
The petitioners sought quashing of the show cause notice dated 25.09.2002, arguing that it was issued based on quotations and imports by another company, which were not reliable for enhancing the value of imported goods. The petitioners contended that the notice was not adjudicated within a reasonable period, thus violating the principles of natural justice. The Court noted that the petitioners had filed detailed replies to the notice but received no further communication from the Customs Department for about 15 to 16 years. The Court relied on precedents, including the case of M/s. Siddhi Vinayak Syntex Pvt. Ltd., to conclude that the prolonged delay in adjudication rendered the show cause notice invalid.

2. Delay in Adjudication and Its Impact on the Principles of Natural Justice:
The petitioners argued that the delay of 15 to 16 years in adjudicating the show cause notice was a gross violation of the principles of natural justice. The Court agreed, emphasizing that such an inordinate delay without any plausible explanation was fatal to the proceedings. The Court cited previous judgments, including Shivkurpa Processors Pvt. Ltd. and Siddhi Vinayak Syntex Pvt. Ltd., which held that delays in adjudication result in the denial of natural justice and vitiate the proceedings.

3. Applicability of Section 11A of the Customs Act:
The Court examined Section 11A of the Customs Act, which prescribes time limits for issuing and adjudicating show cause notices. The Court observed that the legislature intended for the duty to be determined within specified time frames where possible. The Court noted that the Central Board of Excise and Customs (CBEC) had no authority to extend these time limits indefinitely by placing cases in the call book. The Court concluded that the prolonged delay in adjudicating the show cause notice was contrary to the statutory mandate of Section 11A and vitiated the proceedings.

4. Legitimacy of Placing the Case in the Call Book:
The respondents argued that the case was placed in the call book, and personal hearing notices were issued to the petitioners. However, the Court found that the concept of the call book, as created by the CBEC, was contrary to the statutory provisions of the Customs Act. The Court held that transferring matters to the call book without a plausible explanation for the delay was arbitrary and unlawful. The Court emphasized that the CBEC had no power to issue instructions that contravened the statutory mandate of adjudicating cases within the prescribed time limits.

Conclusion:
The Court quashed and set aside the impugned show cause notice dated 25.09.2002, ruling that the prolonged delay in adjudication violated the principles of natural justice and the statutory provisions of Section 11A of the Customs Act. The Court made the rule absolute and directed that each party bear its own costs.