2021 (5) TMI 596 - HC - Customs

Court quashes Delayed Demand Notice violating natural justice. Revenue's inaction infringes fair adjudication.

ADANI PORTS AND SPECIAL ECONOMIC ZONE LTD. Versus UNION OF INDIA

The court quashed the Less Charge Demand Notice dated 2.8.2007 due to prolonged delay, lack of communication, and violation of natural justice principles. ... Adjudicating SCN after long gap of 11 years - Matter was kept pending - Validity of Less Charge Demand Notice - concessional rate of duty - Import of certain second hand equipments, i.e. capital goods/professional equipments - whether the respondent authorities could now be permitted to adjudicate the Demand Notice dated 2.8.2007, more particularly, when no intimation was issued to the petitioner No.1 – company communicating about keeping the adjudication of the Demand Notice in abeyance? - HELD THAT:- This Court, in the case of SIDDHI VINAYAK SYNTEX PVT LTD. VERSUS VERSUS UNION OF INDIA & 2 [2017 (3) TMI 1534 - GUJARAT HIGH COURT] has in detail held and observed that where the department has kept the proceedings in call books, it would be impermissible for the department to reactivate the same after years together and more particularly, when the noticee has not been informed or communicated about transferring the matter to the call book and therefore, the action would be in breach of the principles of natural justice. Clearly, the petitioners by this petition, have challenged the Demand Notice dated 2.8.2007 mainly on the ground that after the issuance of said notice, no steps worth the name have been taken by the respondent authorities for adjudicating the said notice. Perceptibly, not a single communication has been addressed by the respondent to the petitioners, intimating it about keeping the show-cause notice in abeyance. Furthermore, in the reply filed by the respondent, limited explanation is offered in paragraph 3.3 to the effect that due to reorganization of the department, shifting of the office documents have taken place, and during such shifting, the documents might have been misplaced. It is further averred that the office has tried to find out the documents related to the concerned Demand Notice dated 2.8.2007, however, the same are not traceable. Clearly, the Revenue has thoroughly failed to justify its lapse for not adjudicating the Demand Notice dated 2.8.2007 for more than 11 years. Quite apart, as is discernible from the contents of paragraph 3.3 of the reply, during the shifting of the office, papers pertaining to the Demand Notice dated 2.8.2007 are not traceable. Thus, allowing the Revenue at this stage to proceed with the adjudication of the notice dated 2.8.2007, would be an exercise in futility, in breach of the principles of natural justice and against the principle laid down by this Court. The demand notice quashed - petition allowed. Issues Involved:1. Validity of the Less Charge Demand Notice dated 2.8.2007.2. Alleged contravention of the DFSECC Scheme and Notification No.54/2003.3. Delay in adjudication of the Demand Notice.4. Applicability of principles of natural justice.5. Relevance of previous judgments on similar issues.Issue-wise Detailed Analysis:1. Validity of the Less Charge Demand Notice dated 2.8.2007:The petitioners sought to quash the Less Charge Demand Notice issued on 2.8.2007, demanding Rs. 25,03,414/- in duty. The notice was based on the alleged misuse of duty benefits under Notification No.27/2002 and Notification No.54/2003. The petitioners contended that they had re-exported the imported goods after use, thus complying with the conditions of the notifications.2. Alleged Contravention of the DFSECC Scheme and Notification No.54/2003:The Revenue alleged that the petitioners contravened the DFSECC Scheme and Notification No.54/2003 by transferring or selling the imported goods, which was against the conditions of the notification. The petitioners denied these allegations, stating that the goods were re-exported after use and not transferred or sold.3. Delay in Adjudication of the Demand Notice:The petitioners highlighted that despite filing a reply to the Demand Notice on 8.10.2007, no further steps were taken by the Revenue for 11 years. The Revenue attributed the delay to the reorganization and shifting of their office, during which the relevant documents were misplaced. The court found this explanation insufficient and indicative of a failure to act within a reasonable time frame.4. Applicability of Principles of Natural Justice:The court emphasized that the principles of natural justice were breached due to the long delay in adjudicating the Demand Notice without informing the petitioners. The court referred to previous judgments where similar delays were deemed unlawful and arbitrary, leading to the quashing of show-cause notices and orders-in-original.5. Relevance of Previous Judgments on Similar Issues:The court relied on several precedents, including Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India, where it was held that reactivating proceedings after a long delay without informing the noticee breaches natural justice principles. The court noted that similar cases had been quashed due to inordinate delays and lack of communication from the authorities.Conclusion:The court quashed the Demand Notice dated 2.8.2007, considering the prolonged delay, lack of communication, and the principles established in previous judgments. The court held that the Revenue's failure to act promptly and transparently violated the petitioners' rights to a fair adjudication process. The petition was allowed, and the Demand Notice was set aside.