2020 (9) TMI 311 - HC - Customs

Customs Department's show cause notice quashed for unreasonable delay in adjudication. Writ petition allowed.

The court quashed the show cause notice dated 22.12.2011, finding the Customs Department failed to complete adjudication within a reasonable period. The ... Abatement of show cause notice - limitation under Section 28(9) of the Customs Act - interpretation of the phrase 'where it is possible to do so' - reasonable time for adjudication - principles of natural justice and prejudice from inordinate delay - entitlement to seized documents (both relied and unrelied)Limitation under Section 28(9) of the Customs Act - interpretation of the phrase 'where it is possible to do so' - reasonable time for adjudication - Validity of show cause notice dated 22.12.2011 in view of limitation under Section 28(9) of the Customs Act as it stood prior to the 2018 amendment. - HELD THAT: - The Court examined whether the respondents had determined duty or interest within the time frames prescribed by Section 28(9) as it stood prior to the 2018 amendment and, if not, whether it was 'possible' for them to have done so. The timeline and sequence of events were admitted by parties; only the supply-of-documents disputes involved contested facts and were eschewed for purpose of the legal question. The limited period of interim injunction (31.10.2012 to 25.07.2013 - 268 days) did not suffice to justify the elapse of many years. The Court applied the statutory wording and established authorities holding that where a legislative time-frame is prescribed 'where it is possible to do so', the authority must decide within that period in the ordinary course unless genuine and justifiable impediments exist (for example large witness lists, bulky records, non-availability of officers). Mere consignment to call-book, long non-action, or administrative remissness are not acceptable explanations. The respondents offered no adequate or persuasive explanation for the prolonged failure to determine the amount of duty or interest within the prescribed period or for a reasonable additional time; consequently the continuation of proceedings was treated as a de facto abatement of the notice. [Paras 15, 16, 17, 18, 26]The show cause notice dated 22.12.2011 is quashed as barred by limitation/abatement for inordinate and unjustified delay.Principles of natural justice and prejudice from inordinate delay - reasonable time for adjudication - Whether the petitioner is disentitled by laches or delay from seeking quashing of the 2011 show cause notice. - HELD THAT: - The Court considered the revenue's contention that the petitioner had delayed in seeking relief and whether Article 226 relief is time-barred by laches. It noted the petitioner repeatedly sought supply of relied and unrelied documents and approached the High Court on multiple occasions to obtain them. The mere fact that the writ challenging the 2011 notice was filed in 2020 did not demonstrate laches where the petitioner had actively pursued the documents and the respondents had been remiss in prosecuting the adjudication. Precedents stating that writs should ordinarily be filed within a reasonable time were noted, but the factual matrix showed continuing engagement by the petitioner and no culpable delay on his part. [Paras 29, 30, 31, 32, 34]The petition is not barred by laches; the petitioner is not disentitled from challenging the show cause notice.Entitlement to seized documents (both relied and unrelied) - Right of the petitioner to obtain copies of documents seized and to have access to both relied and unrelied material to enable reply to the show cause notice. - HELD THAT: - The Court reiterated the settled position that an assessee is entitled to all documents, relied upon as well as unrelied upon, including those seized in searches, so as to enable an effective response to a show cause notice. Although the parties disputed which specific documents had been supplied or remained unavailable and the Court declined to enter into detailed fact-finding about each document in a writ proceeding, the legal entitlement itself was recognised as valid. [Paras 6, 32]The petitioner is entitled to copies of both relied and unrelied documents seized; the Court, however, did not adjudicate the factual disputes about which documents were actually supplied.Final Conclusion: The Customs proceedings founded on the show cause notice dated 22.12.2011 were quashed for inordinate and unjustified delay in adjudication; the writ petition is allowed, no costs. Issues Involved:1. Seizure of undeclared and short-declared goods.2. Issuance and challenge of the show cause notice.3. Supply of seized documents.4. Adjudication delay and limitation period under Section 28(9) of the Customs Act.5. Legal implications of the term 'where it is possible to do so.'Issue-wise Detailed Analysis:1. Seizure of Undeclared and Short-Declared Goods:The petitioner imported consumer goods as a Power of Attorney holder for two proprietary entities. The consignment imported by one of these entities was found to contain undeclared and short-declared goods, leading to seizure by the Department of Revenue (Intelligence) (DRI) and subsequent searches at the residential premises of the petitioner and the customs broker. Voluminous documents were seized during these searches.2. Issuance and Challenge of the Show Cause Notice:A show cause notice dated 22.12.2011 was issued by the DRI under Section 28(4) of the Customs Act, 1962, demanding duty for 84 bills of entry and three Import General Manifests. The petitioner requested copies of the seized documents to furnish a reply, which was denied, leading to summons for a personal hearing. The petitioner challenged the summons in two writ petitions, one of which was dismissed, and the other granted an interim injunction. The petitioner filed another writ petition seeking a quash of the proceedings dated 12.10.2012 and a direction to supply the documents, which was disposed of with directions to the petitioner and respondents.3. Supply of Seized Documents:The petitioner and respondents communicated regarding the supply of documents, with the respondents claiming not all documents were available. The petitioner reiterated requests for the documents, and the court directed the supply of all documents, both relied upon and not relied upon, by 31.12.2019. The petitioner filed another writ petition on 03.01.2020 seeking a quash of the show cause notice dated 22.12.2011.4. Adjudication Delay and Limitation Period Under Section 28(9) of the Customs Act:The court examined whether the show cause notice dated 22.12.2011 was barred by limitation under Section 28(9) of the Customs Act. The provision mandates the proper officer to determine the amount of duty or interest within six months or one year from the date of notice. The court found no legal or otherwise bar preventing the completion of adjudication within this period, except for an interim injunction in force for 268 days. The court cited various precedents emphasizing the need for adjudication within a reasonable period and concluded that the delay of over eight years was unjustifiable.5. Legal Implications of the Term 'Where it is Possible to do so':The court interpreted the term 'where it is possible to do so' in Section 28(9) of the Customs Act, noting that the legislature intended for determinations to be made within the specified time frame unless genuine reasons prevented it. The court found no proper explanation from the revenue for the delay and cited several judgments where delays in adjudication were held to violate principles of natural justice.Conclusion:The court quashed the show cause notice dated 22.12.2011, concluding that the Customs Department failed to proceed with the enquiry and complete the adjudication in time. The writ petition was allowed, and the connected miscellaneous petition was closed.