2023 (2) TMI 954 - HC - Customs

Validity of SCN - recovery of excess of the duty drawback - time limitation - SCN issued by the respondent Authority after a period of about more than six/ten years, which are not permissible as per the settled legal position - HELD THAT - This Court had an occasion to deal with the identical issue in the case of M/S SJS INTERNATIONAL VERSUS UNION OF INDIA 2021 (12) TMI 1339 - GUJARAT HIGH COURT and held that the authority cannot be issue show-cause notice after a period of three years for assessment / export. When the issue is covered as per the decision of this Court in the case of M/s. S J S International, these petitions are allowed accordingly, quashing and setting aside the impugned showcause notices issued by the respondent authorities, which are admittedly beyond the period of three years. Since the impugned show-cause notices are quashed by this Court, the consequent action of the respondent authorities qua those show-cause notices are also quashed. Petition allowed.

Summary

Issues Involved:
1. Validity of show-cause notices issued after a period of six to ten years.

Issue-wise Detailed Analysis:

1. Validity of Show-Cause Notices Issued After Six to Ten Years:

The petitioners challenged the show-cause notices issued by the respondent Authority after a period of six to ten years, arguing that such notices are impermissible as per the settled legal position. The petitions involved were Special Civil Applications Nos. 7165, 8600, 8685, and 10699 of 2021. The petitioners contended that the show-cause notices under Rule 16 of the Duty Drawback Rules, 1995, could not be issued beyond a reasonable period of three years since no specific limitation period is provided under the Act or the Rules.

The petitioners in each application were engaged in the export business, and their shipping bills from 2011 to 2016 had been assessed and finalized by the proper officer, with duty drawback benefits granted accordingly. The respondent Authority issued show-cause notices in 2021, seeking recovery of excess duty drawback paid during the assessment period. The petitioners argued that these notices were issued beyond the reasonable period of three years.

The Court observed that the main issue to be decided was whether the respondent Authority could issue show-cause notices for assessment/export after a period of six to ten years. The petitioners relied on the decision in the case of M/s. S J S International versus Union of India, where it was held that show-cause notices for assessment/export beyond three years were impermissible. The respondent's counsel acknowledged that the issue was covered by the decision in M/s. S J S International.

The Court noted that Rule 16 of the Drawback Rules provides for the recovery of erroneously or excessively paid duty drawback but does not prescribe a time limit for issuing show-cause notices. However, it is a settled legal proposition that in the absence of a specific limitation period, actions must be taken within a reasonable time. The Court referred to several precedents, including the Supreme Court's decision in Government of India v. Citedal Fine Pharmaceuticals, which held that powers must be exercised within a reasonable period even if no specific limitation is prescribed.

The Court concluded that issuing show-cause notices after a period of more than three years was unreasonable and time-barred. It emphasized that the reasonable period for issuing such notices should be three years from the date of payment of the duty drawback. Consequently, the Court quashed the impugned show-cause notices issued by the respondent authorities, as they were beyond the reasonable period of three years. The Court also quashed the consequent actions taken by the respondent authorities based on these notices.

Conclusion:

The Court allowed the petitions, quashing and setting aside the impugned show-cause notices issued by the respondent authorities beyond the period of three years. The Court reaffirmed the principle that in the absence of a specific limitation period, actions must be taken within a reasonable period, which, in this case, was determined to be three years. The rule was made absolute to the extent of quashing the show-cause notices and the consequent actions.