2019 (6) TMI 909 - HC - Customs

High Court directs respondent to proceed with Show-Cause Notice adjudication focusing on limitation; emphasizes exhausting alternative remedies in revenue matters.

The High Court directed the respondent to proceed with the adjudication of the Show-Cause Notice (SCN) and corrigendum, focusing first on the issue of ... Writ jurisdiction to quash show-cause notice - Exercise of discretion under Article 226 in revenue matters - Limitation and reasonable time - Adjudication of show-cause notice after preliminary limitation determination - Exceptions permitting quashing of show-cause notice (lack of jurisdiction, settled law reopened, mala fides, pre-determination)Writ jurisdiction to quash show-cause notice - Exercise of discretion under Article 226 in revenue matters - Whether the High Court should quash the impugned show-cause notice at the pre-adjudication (SCN) stage. - HELD THAT: - The Court applied settled principles that writ jurisdiction under Article 226 is discretionary and ordinarily a High Court should not quash a show-cause notice or charge-sheet at the notice stage. Interference is permissible only in rare and exceptional circumstances such as absence of jurisdiction, reopening of a settled position of law, palpable mala fides, or clear pre-determination by the authority. On the facts of this petition, none of those exceptional circumstances is established. The court therefore declined to exercise its discretion to quash the impugned show-cause notice and corrigendum at the SCN stage, preferring that the statutory adjudicatory process be allowed to run its course. [Paras 15, 16, 17, 18]The writ petition seeking quashing of the impugned show-cause notice is refused and the SCN and corrigendum are not set aside at this stage.Limitation and reasonable time - Adjudication of show-cause notice after preliminary limitation determination - Procedure to be followed regarding the limitation defence raised against the impugned notice. - HELD THAT: - Although the petitioner contends that the SCN is time-barred and relied on the principle that, where no statutory period is prescribed, powers must be exercised within a reasonable time, the Court observed that what constitutes a reasonable period is fact-sensitive. Rather than resolve the limitation question on writ, the Court directed that the authority must decide the limitation point as the first step in the adjudication. The authority was required to consider and decide the limitation objection while completing the adjudication, and to do so within a stipulated timeframe so that the question is determined in the statutory proceedings rather than by pre-emptive writ relief. [Paras 8, 9, 11, 18, 19]Limitation is to be determined by the adjudicating authority first in the statutory proceedings; the authority is directed to decide the SCN (including the limitation issue) within the time-frame ordered by the Court.Adjudication of show-cause notice after preliminary limitation determination - Directions as to conduct and timeline of further proceedings on the impugned show-cause notice. - HELD THAT: - The Court directed procedural steps to ensure expeditious adjudication: the petitioner to file further response with supporting documents within a fortnight; the respondent to adjudicate the SCN (deciding the limitation point first) within one month of receipt of the objections; and to serve a copy of the adjudication order on the petitioner within 10 working days. The Court clarified that the limitation decision need not be a separate order but must be addressed within the same adjudicatory process, and that the proceedings will continue irrespective of whether the limitation decision goes against the petitioner. [Paras 18, 19]The Court directed filing of response, adjudication within one month (with limitation decided first), and service of the adjudication order within 10 working days; the writ petition is disposed subject to these directions.Final Conclusion: The petition to quash the show-cause notice and corrigendum is refused; the matter is remitted to the adjudicating authority to decide the limitation objection first and to complete adjudication within the time-frame prescribed by the Court, with the petitioner permitted to file a response and the authority to communicate its order to the petitioner thereafter. Issues Involved:1. Validity of the Show-Cause Notice (SCN) and corrigendum.2. Limitation period for issuing the SCN.3. Jurisdiction and discretion of the High Court in interfering at the SCN stage.4. Procedural directions for adjudication.Detailed Analysis:1. Validity of the Show-Cause Notice (SCN) and corrigendum:The petitioner challenged the SCN dated 24.08.2018 and its corrigendum dated 28.02.2019 issued by the respondent. The SCN called upon the petitioner to show cause why the drawback of Rs. 65,08,939/- should not be demanded, why the already paid amount of Rs. 49,00,000/- should not be appropriated, why interest should not be levied, why the consignments should not be confiscated, and why a penalty should not be imposed under Section 114AA of the Customs Act, 1962. The petitioner argued that the SCN and corrigendum were barred by limitation.2. Limitation period for issuing the SCN:The petitioner contended that no specific time frame for issuing the SCN was prescribed under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, or the new Rules of 2017. The petitioner referenced Section 28 of the Customs Act, which prescribes a two-year or five-year period for recovery of duties not levied, not paid, short levied, short paid, or erroneously refunded. The petitioner cited the Gujarat High Court judgment in Pratibha Syntex Ltd. v. Union of India, which held that when no limitation is prescribed, the power must be exercised within a reasonable time. The petitioner argued that the SCN issued nearly a decade after the exercise was clearly barred by limitation.3. Jurisdiction and discretion of the High Court in interfering at the SCN stage:The respondent argued that the Gujarat High Court judgment was factually distinguishable as it dealt with a post-adjudication stage, not the SCN stage. The respondent emphasized that limitation is a mixed question of law and facts, and the matter should not be scuttled at the SCN stage. The Court agreed with the respondent, referencing the Kunisetty Satyanarayana case, which held that writ jurisdiction is discretionary and should not ordinarily be exercised to quash an SCN unless it is wholly without jurisdiction or illegal. The Court also cited the Satyawati Tandon case, emphasizing the need for caution in revenue matters and the importance of exhausting alternative remedies.4. Procedural directions for adjudication:The Court concluded that this was not a fit case for interfering at the SCN stage. The Court directed the respondent to decide the issue of limitation first and then proceed with the adjudication. The petitioner was instructed to file a further response to the SCN and corrigendum within a fortnight. The respondent was directed to complete the adjudication within one month from the date of filing of objections, with the limitation aspect to be decided first but not requiring a separate order. Post-adjudication, a copy of the order should be served on the petitioner within ten working days.Conclusion:The writ petition was disposed of with directions to carry the SCN and corrigendum to their logical end. The petitioner was allowed to file further responses, and the respondent was instructed to adjudicate within a specified time frame, considering the limitation aspect first. There was no order as to costs, and the connected miscellaneous petition was closed.