2020 (11) TMI 842 - HC - Central Excise

Validity of delayed adjudication of SCN - Inordinate delay of 13 years in adjudication of SCN - whether in the facts and circumstances of the case, such delayed adjudication of the show-cause notices would be just, proper and legal? - HELD THAT - This Court held that a show-cause notice issued a decade back should not be allowed to be adjudicated upon by the revenue merely because there is no period of limitation prescribed in the statute to complete such proceedings. Larger public interest requires that revenue should adjudicate the show-cause notice expeditiously and within a reasonable period. What would be the reasonable period would depend upon the facts and circumstances of each case but certainly a period of 13 years cannot be termed as a reasonable period. Secondly, regarding keeping the show-cause notice in the dormant list or the call book, this Court held that such a plea cannot be allowed or condoned by the writ court to justify inordinate delay at the hands of the revenue. To accept such a contention would defeat the rule of law itself. Taking cognizance of such an aspect would amount to giving credence to extraneous matters. In any case such a procedure internally adopted by the respondents is not binding on the Court. In the present case, it is evident that the delay in adjudication of the show-cause notices could not be attributed to the petitioner. The delay occurred at the hands of the respondents. For the reasons mentioned, respondents have kept the show-cause notices in the call book but without informing the petitioner. Upon thorough consideration of the matter, we are of the view that such delayed adjudication after more than a decade, defeats the very purpose of issuing show-cause notice. When a show-cause notice is issued to a party, it is expected that the same would be taken to its logical consequence within a reasonable period so that a finality is reached. A period of 13 years as in the present case certainly cannot be construed to be a reasonable period. Petitioner cannot be faulted for taking the view that respondents had decided not to proceed with the show-cause notices. An assessee or a dealer or a taxable person must know where it stands after issuance of show-cause notice and submission of reply. If for more than 10 years thereafter there is no response from the departmental authorities, it cannot be faulted for taking the view that its reply had been accepted and the authorities have given a quietus to the matter. Also, respondents had not taken any action pursuant to the show-cause notices for long 13 years till issuance of notice for personal hearing on 13.08.2019. After the petitioner approached this Court by filing the present writ petition on 06.09.2019 with due intimation to the respondents, respondent No.3 went ahead and passed the order-inoriginal dated 11.11.2019. We fail to understand when the respondents could wait for 13 long years after issuance of the show-cause notices, there could not have been any earthly reason to proceed at such great speed and pass the order-in-original before the Court could adjudicate on the correctness of the action of the respondents. There are no hesitation to hold that respondents were not justified in commencing adjudication proceeding 13 years after issuance of the show-cause notices dated 01.06.2006 and 28.11.2006. Such adjudication proceeding is therefore, held to be invalid - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Legality of adjudication of show-cause notices after a 13-year delay.
2. Validity of the order-in-original dated 11.11.2019.
3. Compliance with principles of natural justice.
4. Procedural fairness and transparency in revenue administration.
5. Impact of delayed adjudication on the petitioner's ability to defend.

Detailed Analysis:

1. Legality of Adjudication of Show-Cause Notices After a 13-Year Delay:
The petition challenged the adjudication of show-cause notices issued on 01.06.2006 and 28.11.2006 after a 13-year delay, asserting it was illegal, void, and bad in law. The court noted that the petitioner had responded to the notices in 2006 and 2007 and received no further communication from the respondents until 2019. The respondents argued that the delay was due to the show-cause notices being kept in the call book pending related litigation. The court held that such a long delay in adjudicating show-cause notices was unreasonable and contrary to procedural fairness, emphasizing that a period of 13 years cannot be considered reasonable.

2. Validity of the Order-in-Original Dated 11.11.2019:
The petitioner argued that the order-in-original dated 11.11.2019, which confirmed the demand of central excise duty as per the show-cause notice dated 01.06.2006, was issued to frustrate the writ petition. The court found that the respondents proceeded with undue haste to pass the order-in-original after the petitioner had filed the writ petition, which was an attempt to circumvent the court's proceedings. Consequently, the court declared the order-in-original invalid and set it aside.

3. Compliance with Principles of Natural Justice:
The petitioner contended that the delayed adjudication violated the principles of natural justice. The court agreed, stating that the petitioner was not informed that the show-cause notices were kept in abeyance and would be revived later. This lack of communication deprived the petitioner of the opportunity to safeguard evidence and defend the proceedings effectively. The court held that such delayed adjudication was unfair and violated natural justice principles.

4. Procedural Fairness and Transparency in Revenue Administration:
The court emphasized the importance of procedural fairness and transparency in revenue administration. It noted that the respondents' practice of keeping show-cause notices in the call book without informing the petitioner was not acceptable. The court referred to previous judgments, including Sanghavi Reconditioners Private Limited and Raymond Limited, which highlighted that revenue authorities must adjudicate show-cause notices within a reasonable time and inform the parties if the notices are kept in abeyance.

5. Impact of Delayed Adjudication on the Petitioner's Ability to Defend:
The court recognized that the 13-year delay in adjudication severely hampered the petitioner's ability to defend the proceedings. The petitioner argued that relevant records and personnel might no longer be available, making it impossible to mount an effective defense. The court found this argument compelling, noting that such a long delay without any fault on the petitioner's part was prejudicial and violated procedural fairness.

Conclusion:
The court held that the respondents were not justified in commencing adjudication proceedings 13 years after issuing the show-cause notices. The delayed adjudication was deemed invalid, and the order-in-original dated 11.11.2019 was set aside and quashed. The writ petition was allowed, and the court emphasized the need for timely and transparent adjudication by revenue authorities to uphold procedural fairness and natural justice.

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