2025 (1) TMI 1313 - HC - Customs

Challenge to SCN - SCN issued by the Directorate of Revenue Intelligence (DRI) is barred by limitation under Section 28 of the Customs Act 1962 or not - violation of the principles of natural justice - HELD THAT - The issue raised in the petition is no longer res-integra. Section 28 (9) of the Act unamended and amended have been considered in detail by the Coordinate Benches of this Court in Swatch Group India Pvt. Ltd. 2023 (8) TMI 864 - DELHI HIGH COURT as also M/s Vos Technologies India Pvt. Ltd. v. The Principle Additional Director General Anr. 2024 (12) TMI 624 - DELHI HIGH COURT where it was held that there is no material to show that it was not possible for the proper Officer to determine the amount of duty within the prescribed period. The mention of the words where it is not possible to do so in our opinion does not enable the Department to defer the determination of the notices for an indeterminate period of time. The legislature in its wisdom has provided a specific period for the authority to discharge its functions. The indifference of the concerned officer to complete the adjudication within the time period as mandated cannot be condoned to the detriment of the assessee. Such indifference is not only detrimental to the interest of the taxpayer but also to the exchequer. The passing of the impugned Order-in-Original while the impugned SCN was under challenge before this Court would amount to initiation of parallel proceedings rendering the scrutiny of the Court as infructuous. A similar situation has been dealt by the High Court of Bombay in Parle International Ltd. v. Union of India 2020 (11) TMI 842 - BOMBAY HIGH COURT wherein the SCN was not adjudicated for over 13 years and after the same was assailed before the High Court the concerned authority passed the order-in-original. Conclusion - The impugned SCN and the Order-in-Original due to the delay in adjudication and violation of natural justice principles. Petition allowed.

ISSUES PRESENTED and CONSIDERED

The primary issues considered by the Court were:

1. Whether the Show Cause Notice (SCN) dated 23rd May 2008 and the subsequent Order-in-Original dated 31st January 2024 were valid, given the substantial delay in adjudication.

2. Whether the delay in adjudication of the SCN violated the provisions of Section 28(9) of the Customs Act, 1962, which prescribes specific time limits for determining the amount of duty or interest.

3. Whether the principles of natural justice were violated due to the non-provision of relied upon documents (RUDs) to the Petitioners.

4. Whether the initiation of parallel proceedings by passing the Order-in-Original during the pendency of a writ petition challenging the SCN was permissible.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the SCN and Order-in-Original due to Delay in Adjudication

Relevant legal framework and precedents: The Court examined Section 28(9) of the Customs Act, 1962, which mandates that the proper officer shall determine the amount of duty or interest within six months or one year from the date of notice, depending on the case. The Court also considered precedents such as Swatch Group India Pvt. Ltd. v. Union of India & Ors. and M/s Vos Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr., which emphasize the necessity of adjudicating SCNs within a reasonable period.

Court's interpretation and reasoning: The Court found that the delay of nearly 15 years in adjudicating the SCN was unjustifiable. It held that the phrase "where it is possible to do so" in Section 28(9) does not permit indefinite delays, and the statutory timeline must be adhered to unless there are compelling reasons.

Key evidence and findings: The record showed repeated placements of the SCN in the call book and subsequent removals, with no substantial progress in adjudication. The Court noted the lack of explanation for these delays.

Application of law to facts: The Court applied the legal principles from the cited precedents and concluded that the SCN had lapsed due to the inordinate delay, rendering it non-adjudicable.

Conclusions: The Court quashed the SCN dated 23rd May 2008 due to the failure to adjudicate within the statutory period.

2. Violation of Principles of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that all relevant documents relied upon in proceedings be provided to the parties involved. The Petitioners argued that they were not provided with all the RUDs, impacting their ability to defend themselves.

Court's interpretation and reasoning: The Court did not specifically address this issue in detail, as the primary focus was on the delay in adjudication. However, it acknowledged the Petitioners' claims of non-receipt of RUDs.

Conclusions: The issue of non-provision of RUDs was rendered moot by the quashing of the SCN and Order-in-Original.

3. Initiation of Parallel Proceedings

Relevant legal framework and precedents: The Court considered the impropriety of passing the Order-in-Original while the validity of the SCN was under judicial scrutiny, citing Parle International Ltd. v. Union of India and Harihar Collections v. Union of India.

Court's interpretation and reasoning: The Court held that passing the Order-in-Original during the pendency of the writ petition was inappropriate and rendered the judicial review process infructuous.

Conclusions: The Order-in-Original was quashed as it was based on a SCN that was under judicial challenge, and the proceedings were deemed parallel and improper.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The indifference of the concerned officer to complete the adjudication within the time period as mandated, cannot be condoned to the detriment of the assessee. Such indifference is not only detrimental to the interest of the taxpayer but also to the exchequer."

Core principles established: The Court reaffirmed that statutory timelines for adjudication must be strictly adhered to, and indefinite delays cannot be justified. It also emphasized the impropriety of conducting parallel proceedings during judicial scrutiny.

Final determinations on each issue: The Court quashed both the SCN dated 23rd May 2008 and the Order-in-Original dated 31st January 2024, citing the unreasonable delay in adjudication and the initiation of parallel proceedings.

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