Gujarat HC quashes show cause notice revived after seventeen years citing unreasonable delay and prejudice

The Gujarat HC allowed a petition challenging the revival of adjudication proceedings after seventeen years. The respondents had issued a show cause notice in 1998 regarding draw winding of yarns manufacturing activity, then transferred the matter to a call book without informing the petitioner. The court found the delay unreasonable and prejudicial, noting the petitioner's factory had closed and been sold during the interim period. Relying on Shirish Harshavadan Shah v. Deputy Director, Enforcement Directorate, the HC held that revival of proceedings after such prolonged inaction without proper explanation was unlawful and arbitrary. The court emphasized that documentary evidence may have been lost, key personnel unavailable, and the petitioner's position had changed considerably. The delay breached principles of natural justice, making it impossible for the petitioner to mount an effective defense. Consequently, the impugned show cause notice and subsequent order-in-original were set aside.

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Issues Involved:
1. Legality of the prolonged delay in adjudication.
2. Violation of principles of natural justice.
3. Validity of transferring the case to the "call book".
4. Maintainability of the writ petition despite the availability of an alternative remedy.

Detailed Analysis:

1. Legality of the Prolonged Delay in Adjudication:
The petitioner challenged the delay in adjudicating the show cause notice issued on 3.8.1998, which was kept pending for more than seventeen years. The petitioner argued that such an inordinate delay vitiates the proceedings. The court noted that the delay was primarily due to the case being transferred to the "call book" to await the outcome of a similar case. The court emphasized that the delay was unreasonable and not justified, especially since the statutory provisions under Section 11A of the Central Excise Act prescribe a time limit for determining the duty of excise. The court held that the concept of the "call book" is contrary to the statutory mandate and the instructions to transfer cases to the call book are beyond the scope of the Central Board of Excise and Customs (CBEC)'s authority.

2. Violation of Principles of Natural Justice:
The petitioner contended that the impugned order was passed ex parte, without affording them an adequate opportunity of being heard. The court observed that the notices for personal hearing were issued in quick succession and were not served properly, as they were returned undelivered. The court found that the respondents did not make serious efforts to trace the petitioner's whereabouts for the personal hearing, which they managed to do easily when it came to recovery of dues. The court concluded that the revival of proceedings after such a long delay without proper notice was in complete breach of the principles of natural justice.

3. Validity of Transferring the Case to the "Call Book":
The respondents justified the delay by stating that the case was transferred to the call book due to a pending similar case. The court scrutinized the legality of the call book concept and found that it was not supported by any statutory provision under the Central Excise Act or the rules. The court held that the CBEC's circular providing for the call book was not issued under any authority of law and was contrary to the statutory mandate requiring timely adjudication. The court emphasized that the adjudicating authority must decide each case as it comes unless restrained by a higher forum, and the delay caused by transferring the case to the call book was unlawful and arbitrary.

4. Maintainability of the Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative statutory remedy of appeal. The petitioner argued that the impugned order was without jurisdiction and in violation of the principles of natural justice. The court noted that it is well-settled that a writ petition can be entertained in cases where there is a violation of natural justice or the authority concerned lacks jurisdiction. The court held that the writ petition was maintainable as the petitioner had demonstrated that the delay was unreasonable and the proceedings were revived without proper notice, causing prejudice to the petitioner.

Conclusion:
The court quashed and set aside the impugned order-in-original dated 11.3.2016 and the show cause notice dated 3.8.1998, ruling that the prolonged delay without proper explanation and the breach of natural justice rendered the proceedings unlawful and arbitrary. The court emphasized that the concept of the call book was contrary to the statutory provisions and the instructions issued by the CBEC were beyond its authority. The petition was allowed, and the rule was made absolute with no order as to costs.

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