2023 (1) TMI 61 - HC - Customs

Court quashes outdated notices, upholds challenge due to significant delay. Respondents restrained from enforcing notice.

Zodiac Clothing Co. Ltd. Versus The Union of India Commissioner of Central Excise, Customs and Service tax, Daman,

The court ruled in favor of the Petitioner, quashing the notices from 2015 and upholding the challenge against the show cause notice from 1997 due to ... Adjudication of SCN after a long gap - time limitation - gross delay and resultant prejudice to the Petitioner - when the Petition has come up for hearing in 2022, whether the Petitioner can be subjected to further proceedings in furtherance of the show cause notice dated 7 July 1997 that is 25 years (including the period of interim order)? HELD THAT:- Assertion of the Petitioner that the Petitioner was not informed that the file of the Petitioner was transferred to the call book has not been controverted. The position continued for 18 years. The fact situation where show cause notice has been transferred to the Call book and the noticee is not informed about the pendency for an unreasonable period of time has been considered in various decisions. It has been held that not only it is necessary that the show cause notice should be taken to its logical end at the earliest as a matter of administrative discipline, but keeping the show cause in Call book without informing the notice for a long period of time causes severe prejudice, as the notice may act on the premise that the proceedings have been dropped and it is also likely that the record and proceedings are not available. In the present case the show cause notice was kept dormant and the notice for personal appearance was issued 18 years ago. There is no dispute and cannot be any dispute regarding the above position of law laid down in these decisions. The petition was admitted and Rule was issued, and thus, the position has continued for 25 years. Notice dated 8 April 2015 and 7 July 2015 calling the petitioner for personal hearing in consequence of show cause notice dated 7 July 1997 are quashed and set aside. The Respondents are restrained from enforcing the impugned show cause notice dated 7 July 1997 - petition allowed. Issues:Challenge to notice dated 8 April 2015 and 7 July 2015 issued pursuant to show cause notice dated 7 July 1997 due to gross delay and prejudice to the Petitioner.Analysis:The Petitioner, a 100% export-oriented company, received a show cause notice in 1997 under the Customs Act, 1962, demanding recovery of a substantial amount and imposition of penalties for non-compliance with certain conditions. The company's predecessor had been granted permission to set up an export-oriented unit in the 1980s, and the Petitioner took over this permission. Despite replying to the show cause notice in 1997, no further communication or action was taken by the authorities for many years.A Final De-bonding Order for the Export Oriented Unit was issued in 1998, confirming the fulfillment of export obligations. However, the Petitioner was called for a personal hearing in 2015 regarding the show cause notice from 1997, prompting the Petitioner to challenge the notice in court due to the significant delay. The court acknowledged the gross delay of 25 years, including the period of interim orders, and the prejudice caused to the Petitioner.The court considered various legal precedents cited by the Petitioner, emphasizing the importance of timely administrative actions and the avoidance of prolonged delays that can lead to prejudice against the affected party. The court found the delay in this case unjustified and not in line with administrative discipline. The Respondent's argument that the delay was due to an audit and subsequent adjudication was not accepted, especially considering the lack of communication with the Petitioner regarding the status of the case.Ultimately, the court ruled in favor of the Petitioner, quashing the notices from 2015 and upholding the Petitioner's challenge against the show cause notice from 1997. The Respondents were restrained from enforcing the 1997 notice, and the court made the rule absolute without imposing any costs.In conclusion, the judgment highlighted the significance of timely administrative actions, the avoidance of unjustified delays, and the prevention of prejudice to parties involved in legal proceedings. The ruling provided relief to the Petitioner after a prolonged period of uncertainty and inaction by the authorities.