2024 (12) TMI 624 - HC - Customs

Seeking quashing of the SCN and pending adjudication proceedings arising out of the Customs Act, 1962, the Finance Act, 1994 and the Central Goods and Services Tax, 2017 - inordinate delay in the finalisation of the adjudication proceedings with the writ petitioners - failure on the part of the respondents to conclude adjudication within a reasonable period of time and inordinately delaying the same for decades together would constitute a sufficient ground to annul those proceedings - the question of 'State of Flux' - Call book and section 28 requirements - The 'State of Flux' question - HELD THAT - It would be pertinent to recall that the First Proviso to Section 28 (9) had stipulated that where a proper officer fails to conclude adjudication proceedings in accordance with the time frames specified in clauses (a) or (b) of Section 28 (9), any officer senior to the proper officer, having regard to circumstances which may have prevailed and prevented conclusion of pending adjudication, to extend the period so specified by a further period of six months and one year respectively. It was, however, the Second Proviso inserted in terms of the 2018 Act which brought closure to pending proceedings and dealt with the contingency where the proper officer was to fail to conclude a determination even within the extended period. In that eventuality, the Second Proviso declared that pending proceedings would be deemed to have come to an end as if no notice had been issued - the respondents while dealing with all proceedings initiated prior to 29 March 2018 were required to adhere to the precept of reasonable period and nothing further. The Legislature had thus introduced appropriate curial provisions in the shape of sub-section (11) and Explanations 2 and 4 so as to enable and empower the respondents to conclude pending proceedings. By the time Canon I came to be pronounced on 09 March 2021, both sub-section (11), as well as Explanation 4 existed on the statute book. Despite these legislative interventions, the respondents continued to abstain from taking proactive and effective steps to conclude proceedings that had been initiated as far back as 2006. Delay in adjudication and its impact - HELD THAT - The leeway provided by the statute when it employed the phrase where it is possible to do so , could not be equated with lethargy or an abject failure to act despite there being no insurmountable factor operating as a fetter upon the power of the proper officer to proceed further with adjudication - this Court had in NANU RAM GOYAL VERSUS COMMISSIONER OF CGST AND CENTRAL EXCISE, DELHI ORS. 2024 (2) TMI 1481 - DELHI HIGH COURT clearly held that placing matters in abeyance for years together or transferring them to the call book would not be liable to be countenanced as factors relevant or germane to explain an inordinate delay in adjudication. Insofar as the precept of reasonable period which would bind the respondents to conclude adjudication or to initiate action notwithstanding a statute not prescribing a period of limitation, it would be pertinent to take note of the observations of the Supreme Court in UNION OF INDIA ANR. VERSUS CITI BANK, N.A. 2022 (8) TMI 1107 - SUPREME COURT , when it had held it would be unfair and unreasonable to countenance such powers being exercised in respect of transactions which had occurred more than eight years ago. Way back in 1969, the Supreme Court in STATE OF GUJARAT VERSUS PATEL RAGHAV NATHA ORS 1969 (4) TMI 90 - SUPREME COURT , had held that while Section 211 of the Land Revenue Code did not prescribe a limitation period for the Commissioner to revise orders, such power must be exercised within a reasonable time, determined by the facts of a case and the nature of the order. Call book and section 28 requirements - HELD THAT - Both in respect of cases falling under Section 28 (1) or 28 (4), the proper officer stood enabled by statute to seek further extension of time. Additionally, and if the respondents were to resort to sub-section (9-A), they were statutorily obliged to inform the importer of the reasons on account of which they were unable to conclude the adjudication. Upon such information and notice being provided, the provisions of sub-section (9) would have ceased to apply and it would have been open for the proceedings to remain suspended till the reasons, which had prompted the respondents to place proceedings in abeyance by virtue of sub-section (9-A), had ceased to exist - The disclosures made in this batch, however, establish that the respondents in each case, adopted a repetitive exercise of placing matters in the call book, retrieval therefrom, followed by those matters being transferred back to that book yet again. These actions appear to have been taken mechanically and casually based solely on the directions of the Board and without any application of mind to the facts obtaining in individual cases or the formation of requisite opinion as contemplated under Section 28 (9-A). Thus, the respondents are bound and obliged in law to endeavour to conclude adjudication with due expedition. Matters which have the potential of casting financial liabilities or penal consequences cannot be kept pending for years and decades together. A statute enabling an authority to conclude proceedings within a stipulated period of time where it is possible to do so cannot be countenanced as a license to keep matters unresolved for years. The flexibility which the statute confers is not liable to be construed as sanctioning lethargy or indolence - A statutory authority when faced with such a challenge would be obligated to prove that it was either impracticable to proceed or it was constricted by factors beyond its control which prevented it from moving with reasonable expedition. This principle would apply equally to cases falling either under the Customs Act, the 1994 Act or the CGST Act. The issuance of innumerable notices would also not absolve the respondents of their statutory obligation to proceed with promptitude bearing in mind the overarching obligation of ensuring that disputes are resolved in a timely manner and not permitted to fester. Insofar as the assertion of the assessees seeking repeated adjournments or failing to cooperate in the proceedings, it may only be noted that nothing prevented the respondents from proceeding ex parte or refusing to reject such requests if considered lacking in bona fides. The SCNs as well as any final orders that may have come to be passed and which stand impugned in this batch of writ petitions are quashed - petition allowed.

Summary

Issues Involved:
1. Inordinate delay in adjudication of Show Cause Notices (SCNs).
2. Validity of SCNs issued by officers of the Directorate of Revenue Intelligence (DRI).
3. Legal implications of transferring cases to the call book.
4. Impact of statutory amendments on pending adjudication proceedings.
5. Requirement of adjudication within a reasonable period.

Issue-wise Detailed Analysis:

1. Inordinate Delay in Adjudication of SCNs:
The primary issue was the significant delay in the finalization of adjudication proceedings under the Customs Act, 1962, the Finance Act, 1994, and the Central Goods and Services Tax, 2017. The petitioners argued that such delays violated the principles of a 'reasonable period' for adjudication, rendering the proceedings invalid. The court emphasized that adjudication must be concluded within a reasonable time, and mere delay, especially without any justifiable reason, could not be condoned. The court referenced several cases, including Parle International Ltd. vs. UOI and Nanu Ram Goyal vs. CCE, where similar delays were deemed unacceptable.

2. Validity of SCNs Issued by DRI Officers:
The judgment addressed the controversy over whether DRI officers were "proper officers" under Section 28 of the Customs Act. The Supreme Court's decisions in Sayed Ali and Canon India were pivotal, with the latter initially questioning the jurisdiction of DRI officers. However, the subsequent review in Canon II clarified that DRI officers were indeed proper officers, thus validating their authority to issue SCNs. The court noted that this decision resolved the long-standing confusion regarding the jurisdiction of DRI officers.

3. Legal Implications of Transferring Cases to the Call Book:
The practice of placing cases in the call book was scrutinized. The court found that this practice often resulted in unjustifiable delays and was not in line with statutory requirements. The court highlighted that the call book procedure lacked transparency and accountability, as affected parties were often not informed, and periodic reviews were not conducted. The court referred to the judgments in Nanu Ram Goyal and ATA Freight Line, emphasizing that such administrative practices could not justify prolonged inaction.

4. Impact of Statutory Amendments on Pending Adjudication Proceedings:
The judgment examined the impact of various statutory amendments, particularly those introduced by the Finance Act, 2018, and the Finance Act, 2022. These amendments aimed to address issues related to the jurisdiction of officers and the timelines for adjudication. The court noted that these legislative changes were intended to empower authorities to conclude pending proceedings and validated actions taken by DRI officers. The amendments also introduced provisions to terminate proceedings if not concluded within specified timelines.

5. Requirement of Adjudication Within a Reasonable Period:
The court reiterated the principle that, even in the absence of a prescribed limitation period, authorities must exercise their powers within a reasonable period. This principle was supported by precedents such as State of Gujarat vs. Patil Raghav Natha and SEBI vs. Sunil Krishna Khaitan. The court emphasized that unreasonable delays could lead to procedural unfairness and prejudice against the parties involved, thus violating principles of natural justice.

Conclusion:
The court allowed the writ petitions, quashing the SCNs and any final orders passed in the cases due to the inordinate delays and procedural lapses. The judgment underscored the necessity for timely adjudication and adherence to statutory provisions, ensuring that administrative practices do not undermine the legal rights of parties involved.