2025 (4) TMI 1248 - AT - Customs

Challenge to adjudication of the show cause notice as being time barred - Inordinate delay in adjudication of SCN - SCN was issued on 31.07.2013 but it was adjudicated only on 19.01.2023 after a period of about ten years - whether the department can take advantage of expression where it is possible to do so for not adjudicating the show cause notice within one year? - HELD THAT - The Delhi High Court then relied upon an earlier decision of the Delhi High Court in Sundar System Pvt. Ltd. vs. Union of India 2020 (1) TMI 199 - DELHI HIGH COURT and observed that the legislature in its wisdom has provided a specific period for the authority to discharge its functions and indifference of the concerned officer to complete the adjudication within the time period cannot be condoned to the detriment of the assessee for such indifference is not only detrimental to the interest of the taxpayer but also to the interest of the exchequer. It would be seen from the aforesaid judgment of the Delhi High Court in Swatch Group that the High Court made it amply clear that the incorporation of words like where it is possible to do so merely give a certain degree of flexibility to the department where there are circumstances or insurmountable exigencies which make it impracticable or not possible for the authorities to adjudicate and in such cases the authorities can deviate from the time limit provided in the Statute. The High Court further held that when the legislature has specifically provided flexibility only to the extent that it was not practicable/possible to adjudicate within the stipulated time the period can be extended only on satisfaction of such circumstances. The Delhi High Court specifically observed that the phrase where it is possible to do so would only mean wherever it is not practicable or possible to do a certain act the period can be extended but the same cannot provide endless time limit to the department without any plausible justification. In the present case none of the aforesaid situations existed for extension of the time limit. It would also be useful to refer to decisions that hold that even if a time limit is not prescribed for deciding a matter it would still have to be decided within a reasonable period of time. The factual position leaves no manner of doubt that the adjudicating authority despite the specific mandate contained in sub-section (9) of section 28 of the Customs Act to adjudicate the show cause notice within one year completely failed to discharge the statutory obligation cast upon it. The phrase where it is possible to do so does give a certain degree of flexibility to the adjudicating authority when circumstances are such that make it not possible for the adjudicating authority to decide or there are insurmountable exigencies but such exceptional circumstances or exigencies do not exist in the present case. In the present case it is seen that there was no justifiable reason for the department to place the show cause notice in the call book and thereby delay the adjudication contrary to the specific mandate of sub-section (9) of section 28 of the Customs Act. Conclusion - i) The phrase where it is possible to do so would only mean that wherever it is not practicable or possible to do a certain act the period can be extended. The same however cannot be an endless period without any plausible justification. ii) The adjudicating authority failed to discharge the statutory obligation cast upon it under section 28 (9) of the Customs Act to adjudicate the show cause notice within one year and no exceptional circumstances existed to justify the delay. The order dated 19.01.2023 passed by the Principal Commissioner adjudicating the show cause notice dated 31.07.2013 is accordingly set aside and the appeal is allowed.

The core legal questions considered by the Tribunal include:

(i) Whether the adjudication of the show cause notice issued under section 28 of the Customs Act was barred due to inordinate delay exceeding the statutory time limit;

(ii) The interpretation and scope of the phrase "where it is possible to do so" in sub-section (9) of section 28 of the Customs Act with respect to the time frame for adjudication;

(iii) Whether the department was justified in placing the show cause notice in the call book for prolonged periods, thereby delaying adjudication;

(iv) The applicability of extended limitation periods or exceptions due to judicial proceedings or administrative instructions;

(v) Whether the appellant complied with the conditions of the relevant Customs Notification and whether the aircraft was liable to confiscation under sections 111 (d) and 111 (o) of the Customs Act;

(vi) The validity of imposition of redemption fine under section 125 and penalty under section 112 (a) of the Customs Act on the appellant.

Issue-wise Detailed Analysis:

1. Delay in Adjudication of Show Cause Notice and Time Limit under Section 28(9) of Customs Act

The legal framework revolves around section 28 of the Customs Act, which mandates the issuance of a show cause notice for recovery of duties not levied or short paid, and subsection (9) which requires adjudication within six months or one year "where it is possible to do so." The relevant statutory language prior to amendment on 29.03.2018 stipulated a one-year period for cases under sub-section (4) of section 28.

The Court examined the phrase "where it is possible to do so" and held, relying on authoritative precedents, that this phrase confers limited flexibility only in cases where insurmountable exigencies or impracticability prevent timely adjudication. It cannot be construed to permit indefinite or unexplained delay. The adjudicating authority bears the burden to demonstrate that circumstances prevented timely adjudication.

Key precedents relied upon include decisions of the Delhi High Court in Swatch Group India Pvt. Ltd., VOS Technologies India Pvt. Ltd., and Balaji Enterprises, which emphasize that the statutory time limit is mandatory and delays caused by departmental lethargy or mechanical placement of matters in the call book are impermissible. The Court further noted that the legislature's intention in prescribing the time limit is to avoid uncertainty and prejudice to the assessee and the exchequer.

In the present case, the show cause notice was issued on 31.07.2013 and adjudication was completed only on 19.01.2023, almost ten years later. The department's explanation for delay included judicial pronouncements (notably the Delhi High Court's Mangali Impex decision and the Supreme Court's stay and later rulings) and administrative instructions that led to repeated placement of the matter in the call book.

The Tribunal found that none of these reasons constituted insurmountable exigencies justifying the delay. The adjudicating authority failed to recall the show cause notice from the call book promptly after the Supreme Court stayed the Delhi High Court's adverse ruling. Further, the decision of the Tribunal in Airmid Aviation, favorable to the appellant, was wrongly used as a ground to defer adjudication again. The Court emphasized that the statutory period had long expired and the department's indifference could not be condoned.

The Tribunal also referred to Supreme Court decisions establishing that even where no specific limitation is prescribed, adjudication must occur within a reasonable time. It highlighted that prolonged delay causes prejudice to the assessee and may adversely affect the revenue interest.

Thus, the Tribunal concluded that the show cause notice had lapsed due to inordinate and unjustified delay, and the department was not entitled to adjudicate beyond the statutory period.

2. Legality of Placing the Show Cause Notice in the Call Book

The Tribunal examined the department's practice of placing the show cause notice in the call book as a reason for delay. It relied on Delhi High Court rulings in Balaji Enterprises and VOS Technologies which categorically held that mechanical or routine placement of matters in the call book without application of mind or plausible justification is impermissible and cannot justify non-adjudication within the prescribed period.

The Tribunal found that the department's repeated placement of the show cause notice in the call book was unjustified and contributed to the inordinate delay. This practice violated the statutory mandate and principles of natural justice.

3. Applicability of Extended Limitation or Exceptions under Section 28(9A)

The Tribunal noted that sub-section (9A) of section 28 provides for extension of time where adjudication is prevented due to pending appeals, interim stays, specific Board directions, or Settlement Commission proceedings. However, in the present case, no such circumstances existed to justify extension.

The judicial pronouncements cited by the department did not amount to such exceptional circumstances. The Supreme Court's stay on the Delhi High Court's Mangali Impex judgment was temporary and the subsequent dismissal of the department's appeal further negated any justification for delay. The Tribunal found no valid ground for invoking extended limitation.

4. Compliance with Customs Notification and Liability for Confiscation

The appellant had imported an aircraft under a Notification granting concessional duty on condition of use for Non-Scheduled Air Transport Services. The appellant leased the aircraft initially to Aviators and subsequently to SSL, both holding permits from the Directorate General of Civil Aviation. The appellant claimed compliance with all statutory requirements and no contravention of conditions.

The department alleged fraudulent availing of exemption and sought confiscation under sections 111 (d) and 111 (o) of the Customs Act. However, since the adjudication was set aside on procedural grounds, the Tribunal did not delve into the merits of confiscation or penalty.

5. Imposition of Redemption Fine and Penalty

The Principal Commissioner had imposed a redemption fine of Rs. 1 crore under section 125 and a penalty of Rs. 25 lakhs under section 112 (a) on the appellant. The appellant challenged these on the ground of delay in adjudication and absence of contravention.

Given the setting aside of the adjudication order on limitation grounds, the Tribunal did not examine the merits of these impositions.

Conclusions:

The Tribunal held that the adjudicating authority failed to comply with the mandatory statutory time limit for adjudication under section 28 (9) of the Customs Act. The phrase "where it is possible to do so" does not permit indefinite delay and requires plausible justification for extension, which was absent. The repeated placement of the show cause notice in the call book was impermissible and contributed to unjustified delay.

The Tribunal set aside the order dated 19.01.2023 passed by the Principal Commissioner, quashing the adjudication and allowing the appeal on the ground of inordinate delay.

Significant Holdings:

"The phrase 'where it is possible to do so' would only mean that wherever it is not practicable or possible to do a certain act, the period can be extended. The same, however, cannot be an endless period without any plausible justification."

"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."

"It is not permissible to place the show cause notice in the call book and take it up after several years. Such mechanical or casual actions without application of mind cannot justify non-adjudication within a reasonable period."

"Even where no period of limitation is prescribed, the authority must exercise its jurisdiction within a reasonable time, failing which the adjudication is liable to be quashed."

"The adjudicating authority failed to discharge the statutory obligation cast upon it under section 28 (9) of the Customs Act to adjudicate the show cause notice within one year and no exceptional circumstances existed to justify the delay."

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