2017 (12) TMI 712 - HC - Central Excise

Activation of adjudicating proceedings after a long gap over a decade - SCN was kept in abeyance - case of the Department, which now emerges is that on account of the fact that a similar issue is pending before the Supreme Court, the proceedings were kept in abeyance - case of appellant is that proceedings were kept in abeyance for over 15 years without any reason or explanation and the reason for the same was never communicated to the petitioners - Held that - the show cause notices were issued in the years 2001 and 2004. After petitioners filed their replies, no further development took place. No hearing was conducted. Without communication to the petitioners or reason for keeping the proceedings in abeyance, the proceedings were sent to call book. The proceedings were activated in the year 2017, again without any indication or reasons. The proceedings, which prompted the Department to defer the adjudication, came to be decided by the Supreme Court in the year 2012. In the meantime, the unit was shut down since long. Reliance placed in the case of SIDDHI VINAYAK SYNTEX PVT LTD. Versus Versus UNION OF INDIA & 2 2017 (3) TMI 1534 - GUJARAT HIGH COURT , where it was held that After seventeen years, the persons who were conversant with the case may not be available, documentary evidence may have been displaced. Thus, the delay in deciding the proceedings, that too without bringing it to the notice of the petitioner that the case was transferred to the call book and was therefore pending, causes immense prejudice to the petitioner. The revival of the proceedings, therefore, is in complete breach of the principles of natural justice and hence, the impugned show cause notice and the order-in-original passed pursuant thereto, cannot be sustained. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Delay in adjudication of show cause notice proceedings.
2. Prejudice caused to petitioners due to the delay.
3. Legality of keeping proceedings in abeyance.
4. Applicability of the decision in Siddhi Vinayak Syntex Pvt. Ltd. case.

Issue 1: The petitions involved challenges to an Order in Original dated 21.03.2017, where the petitioners, a Private Limited Company and its Director, were engaged in manufacturing textile goods for exports. Show cause notices were issued in 2001 and 2004, but no progress was made for a long time. The Department suddenly activated the proceedings in 2017, leading to duty demands being confirmed, which the petitioners contested through written submissions.

Issue 2: The petitioners argued that the delay of over 15 years in adjudicating the show cause notices without any reason or communication caused prejudice. They highlighted that the unit was closed in 2005, making it difficult to provide necessary documents. The petitioners relied on various judgments to support their position.

Issue 3: The Department contended that keeping the proceedings in abeyance was to avoid multiplicity of litigation and claimed that no prejudice was suffered by the petitioners due to the delay. However, the Court noted that the proceedings were kept pending without communication or reasons, and the revival of proceedings after a long delay was deemed unlawful and arbitrary.

Issue 4: The Court referred to the decision in Siddhi Vinayak Syntex Pvt. Ltd. case, emphasizing the statutory provisions governing adjudicatory proceedings and the importance of determining duty within specified time frames. It was held that transferring matters to a call book for an extended period, without informing the parties, could cause immense prejudice and breach principles of natural justice.

The judgment quashed the Orders in Original in each petition, following the principles established in the Siddhi Vinayak Syntex Pvt. Ltd. case and subsequent similar cases. The Court found the delay in adjudication and lack of communication regarding the proceedings to be unlawful, ultimately ruling in favor of the petitioners and setting aside the impugned orders.