2015 (8) TMI 387 - HC - Customs

Customs show cause notice proceedings quashed after 17 years due to administrative delays and lost records

Lanvin Synthetics Pvt. Ltd. And Another Versus The Union of India And Another

The Bombay HC quashed customs show cause notice proceedings pending for 17 years due to administrative delays and departmental reorganizations in 1997, ... Refund of amount deposited during Investigation – Delay in Adjudication – Pendency of Proceedings – Commissionerate learnt about the subject show cause notice only on receipt of copy of this writ petition. - Held that :- Petitioner claims quashing of proceedings and refund of amount on account of pendency of proceedings for 17 years – Affidavit filed on record indicated that as reorganization of Customs Commissionerate occurred year 1997, 2002 and 2014, records of case could not be located and traced – Though there are no period of limitation prescribed in statute to complete adjudication proceedings, but Law is that they have to be exercised within reasonable time – Petitioners cannot be faulted for having approached Court belatedly as contention of the Revenue – Explanation placed on affidavit does not inspire confidence – Department on going by settled legal principles, cannot pass adjudication order on show cause notice – Therefore show cause notice hereby quashed and respondents prohibited from passing any adjudication order in furtherance thereof – Liberty granted to petitioners to institute proceedings as permissible in law for recovery of sums deposited with accrued interest – Decided in favour of Petitioner. The core legal questions considered by the Court include:(1) Whether the prolonged delay of seventeen years in adjudicating the show cause notice violates the principles of reasonable time and due process under the Constitution of India;(2) Whether the retention of a substantial amount of money deposited under protest by the petitioners, without adjudication or refund, infringes constitutional protections, including Articles 14, 19(1)(g), 265, and 300A;(3) Whether the department's failure to locate and adjudicate the show cause notice justifies quashing the proceedings and prohibiting further adjudication;(4) Whether the petitioners are entitled to a refund of the deposited amount with interest;(5) The applicability of legal precedents concerning the reasonable period for adjudication and the consequences of inordinate delay in revenue proceedings;(6) The permissibility of reopening or continuing proceedings after such a delay, and the scope of departmental liability or responsibility for the delay;(7) The procedural and jurisdictional questions concerning subsequent recovery proceedings for the deposited sums.Issue-wise detailed analysis:1. Delay in Adjudication and Reasonableness of TimeThe relevant legal framework includes the constitutional mandate under Article 14 (equality before law), and settled judicial principles that administrative or quasi-judicial powers must be exercised within a reasonable time. Although no statutory limitation period is prescribed for adjudication of show cause notices under customs law, the Supreme Court and High Courts have repeatedly held that powers must be exercised expeditiously to prevent injustice and arbitrariness.Precedents relied upon include the Division Bench decisions in 'Shirish Harshavadan Shah' and 'Cambata Industries Pvt. Ltd.' which emphasized that a delay of over a decade in adjudication is unreasonable and cannot be condoned. The Supreme Court's ruling in 'Government of India vs. Citedal Fine Pharmaceuticals' further underlines that the absence of a statutory limitation does not grant unlimited time for adjudication; rather, the power must be exercised within a reasonable period, tailored to the facts of each case.The Court noted that the investigation was completed in August 1995, and the show cause notice was issued in March 1997. Despite this, no adjudication order was passed for seventeen years. The department's affidavit admitted the non-receipt of records for adjudication and the inability to trace the file despite reorganization and search efforts. The department's explanation for delay was found unsatisfactory and lacking in credibility.The Court rejected the department's plea for an opportunity to adjudicate the matter afresh, holding that the legal principle of timely adjudication precludes such indefinite delay. The Court emphasized that the petitioners' repeated efforts to obtain adjudication and information, including through RTI applications, were ignored, further aggravating the injustice.2. Retention of Deposit Without Adjudication and Constitutional ViolationsThe petitioners had deposited Rs. 2,07,57,074/- under protest during the investigation period. The retention of this sum without any adjudication for seventeen years was challenged as violative of Articles 14, 19(1)(g), 265, and 300A of the Constitution, which guarantee equality, freedom to carry on trade, protection against arbitrary taxation, and protection of property respectively.The Court agreed with the petitioners that retention of the deposit without adjudication or refund for such an inordinate period amounts to arbitrary and unjustified deprivation. The department's failure to act on the show cause notice and to return the money or pay interest was held to be contrary to constitutional mandates and principles of natural justice.3. Quashing of Proceedings and Prohibition of Further AdjudicationGiven the unreasonable delay and the department's inability to produce records or justify the pendency, the Court invoked its writ jurisdiction under Article 226 to quash the show cause notice and prohibit any further adjudication proceedings based on it. The Court underscored that the department cannot revive or continue proceedings at its own sweet will after such a lapse, as it would violate settled legal principles and cause prejudice to the petitioners.4. Entitlement to Refund and InterestWhile quashing the show cause notice, the Court granted liberty to the petitioners to institute appropriate proceedings for recovery of the deposited sums with accrued interest. The Court refrained from expressing any opinion on the maintainability or jurisdiction of such proceedings, leaving these issues open for determination in the appropriate forum.5. Treatment of Competing ArgumentsThe department contended that the delay was due to reorganization of the Customs Commissionerate and loss of records, and that it should be given an opportunity to adjudicate with the petitioners' cooperation. The Court found these explanations insufficient and unconvincing, emphasizing that administrative convenience or reorganization cannot justify denial of justice or indefinite delay.The petitioners contended that the delay was deliberate or negligent, and that the department's failure to adjudicate violated their constitutional rights and caused financial prejudice. The Court accepted these contentions, relying on the petitioners' documented attempts to seek adjudication and information, and the department's admission of record loss.6. Responsibility and Accountability of Departmental OfficialsThe Court expressed serious concern over the delay and loss to the public exchequer caused by departmental inaction. It directed that a copy of the order be forwarded to the Secretary in the Ministry of Finance for initiation of departmental and legal proceedings against officials responsible for the loss and delay, emphasizing that the order does not absolve officials of their duties.Significant holdings:'Though there is no period of limitation prescribed in the statute to complete the adjudication proceedings, but whenever the powers of this nature are conferred, the Law is that they have to be exercised within a reasonable time.''If within a reasonable time the proceedings have to be concluded then in the present case 17 years can never be said to be a reasonable period or time.''The department and going by the settled legal principles, cannot pass an adjudication order on the show cause notice and as requested by Mr.Jetly.''We quash the show cause notice and we prohibit the respondents from passing any adjudication order in furtherance thereof.''Our order should not be taken as relieving officials concerned of their duties and obligations in terms of the law including the departmental rules and circulars.'The Court established the core principle that administrative adjudication must be completed within a reasonable time, failing which the proceedings become liable to be quashed to prevent injustice. It affirmed that retention of deposits without adjudication violates constitutional protections and that delay caused by administrative lapses cannot be excused.Final determinations include quashing the show cause notice issued seventeen years prior, prohibiting any further adjudication based on it, and granting liberty to the petitioners to seek recovery of the deposited amount with interest through appropriate legal channels. The Court also mandated administrative accountability for the loss caused by delay.