2022 (1) TMI 777 - HC - Customs

DEEC Scheme - fraudulent export of polyester fabrics and duty-free import of Polyester Filament Yarn and other items - proceedings initiated, but was not completed during the 23 years - pendency of proceedings for such a long period can be construes as reasonable period or not - HELD THAT - There are no justification to hold that the respondents have acted in the manner law requires them to act. It is not in dispute that after the show-cause notice was issued on 30th April 1997, the petitioners were called upon for a hearing in the year 2006. At least, till 2006, it can be inferred that the issue was live. However, why no final order was passed immediately after the hearing was granted to the petitioners is not disclosed in the affidavit-in-reply. The respondents seem to have slipped into deep slumber thereafter. While the respondents right in law to initiate proceedings for violation of the provisions of the Act can never be disputed, at the same time they do not have the unfettered right to choose a time for its termination and conclude proceedings as per their convenience - Indeed, the words reasonable period call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of two decades without the respondents sufficiently explaining as to what prevented them to conclude the proceedings has to be seen as unreasonable and the reasons assigned in the affidavit-in-reply as mere excuses for not adjudicating the show-cause notice according to law. The respondents should be granted liberty to conclude the proceedings. It is the petitioners who have approached the Court to have the impugned show-cause notice set aside. Had the petitioners not invoked the writ jurisdiction of this Court, the show-cause notice would have continued to gather dust. The petitioners, in such circumstances, cannot possibly be worse off for seeking a Constitutional remedy and thereby suffer an order to facilitate conclusion of the proceedings which, because of the inordinate delay in its conclusion, is most likely to work out prejudice to them. The sum of ₹ 2 crore which the petitioners were required to deposit in course of investigation shall be returned with interest @ 12% per annum. Let such return be effected with interest within two months of receipt of a certified copy of this order by the respondents - Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Validity of the show-cause notice issued under the Customs Act, 1962.
2. Reasonableness of the delay in adjudicating the show-cause notice.
3. Entitlement to the return of the amount deposited under protest along with interest.

Issue-wise Detailed Analysis:

1. Validity of the show-cause notice issued under the Customs Act, 1962:
The petitioners challenged the show-cause notice dated 30th April 1997 issued to the Company under section 124 read with section 28 of the Customs Act, 1962, alleging fraudulent export and duty-free import in contravention of the Act’s provisions. The petitioners argued that the notice was invalid due to the inordinate delay in adjudicating the proceedings, which remained pending for 23 years.

2. Reasonableness of the delay in adjudicating the show-cause notice:
The petitioners contended that the delay of nearly two and a half decades in concluding the proceedings was unreasonable. They cited several precedents, including a decision in Writ Petition No.12904 of 2019 (Parle International Limited v. Union of India and Others), where a delay of 13 years was deemed unreasonable. The respondents, in their affidavit-in-reply, failed to provide a satisfactory explanation for the delay, attributing it to departmental restructuring and loss of sight of the case file. The Court noted that the respondents had not acted as required by law and that the delay was unreasonable. It emphasized that the power to initiate proceedings must be exercised reasonably and rationally, and the excessive delay without sufficient explanation constituted an arbitrary exercise of power.

3. Entitlement to the return of the amount deposited under protest along with interest:
The petitioners sought the return of ?2 crore deposited under protest during the investigation, along with accrued interest. The respondents argued that the claim for the return of money was in the nature of a money claim and could not be entertained by the writ Court. However, the Court disagreed, stating that the relief for the return of the amount was consequential to the principal relief of setting aside the show-cause notice. The Court referred to several decisions, including Kuil Fireworks Industries v. Collector of Central Excise & another and Commissioner of Central Excise, Hyderabad v. ITC Ltd., where interest at 12% per annum was awarded. The Court directed that the sum of ?2 crore be returned with interest at 12% per annum within two months of receipt of a certified copy of the order by the respondents.

Conclusion:
The Court set aside the show-cause notice dated 30th April 1997 and all subsequent proceedings due to the unreasonable delay in adjudication. It ordered the return of ?2 crore deposited under protest, with interest at 12% per annum, to be effected within two months. The writ petition was allowed, with each party bearing its own costs.