Show Cause Notice limitation under Customs Act: adjudication delayed beyond prescribed period results in lapse and relief granted

Whether a show cause notice is time-barred under the prescribed limitation for adjudication was decided by applying the statutory requirement that the proper officer must determine duty within the specified period and that extension is permissible only by a senior officer upon satisfaction of exceptional circumstances. The court found no material to show impossibility of determination within the statutory period and recorded prolonged departmental inaction; consequently the show cause notice issued earlier lapsed for want of adjudication within the prescribed time and relief was granted to the taxpayer.

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Issues Involved:
1. Jurisdiction of Respondent No. 2 under Section 2(34) of the Customs Act.
2. Adjudication of the Show Cause Notice within the prescribed time limit under Section 28(9) of the Customs Act.

Summary:

Jurisdiction of Respondent No. 2:
The petitioners challenged the show cause notice (SCN) issued by Respondent No. 2/DRI on the grounds that Respondent No. 2 is not a proper officer appointed under Section 2(34) of the Customs Act for assessment and re-assessment of goods under Section 28 of the Customs Act. This argument was supported by the judgment in Canon India Private Limited v. Commissioner of Customs, where it was held that such notices issued by DRI officers would be without jurisdiction. The respondents admitted that the SCN was issued by DRI and stated that the adjudication of the SCN is kept in abeyance following CBIC instructions dated 17.03.2021, pending a review petition before the Supreme Court.

Adjudication of the Show Cause Notice:
The petitioners argued that the SCN, issued in February 2018, was not adjudicated within the 12-month period as mandated by Section 28(9) of the Customs Act, making any subsequent adjudication time-barred. The respondents contended that the SCN was governed by the unamended Section 28(9) of the Customs Act, which did not provide strict timelines for determining duty. They argued that the phrase "where it is possible to do so" provided flexibility, and the adjudication was delayed due to various procedural steps and communication exchanges.

Court's Analysis:
The court confined its judgment to whether the adjudication of the SCN was barred by limitation under Section 28(9) of the Customs Act. It noted that the unamended Section 28(9) required the proper officer to determine the amount of duty within six months or one year from the date of notice, with some flexibility provided by the phrase "where it is possible to do so." However, the court emphasized that this flexibility could not be equated with departmental lethargy. The court found that the department had not made sincere efforts to adjudicate the SCN within the prescribed period and had been inactive for significant periods.

Conclusion:
The court concluded that there was no material to show that it was not possible for the proper officer to determine the amount of duty within the prescribed period. The indifference of the concerned officer to complete the adjudication within the mandated time could not be condoned. Therefore, the SCN had lapsed and could not be adjudicated. The writ petition was allowed on these grounds.

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