2023 (8) TMI 864 - HC - Customs

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 ... Limitation under Section 28(9) of the Customs Act (unamended) - adjudication of show cause notice within prescribed period - the qualification 'where it is possible to do so' - extension under Section 28(9A) and proviso to Section 28(9) - Explanation 4 to Section 28 (Finance Act, 2018 / Finance Act, 2020) - temporal application of amended provisions - DRI as issuing authority and the Canon India principle on proper officerLimitation under Section 28(9) of the Customs Act (unamended) - the qualification 'where it is possible to do so' - Explanation 4 to Section 28 (Finance Act, 2018 / Finance Act, 2020) - extension under Section 28(9A) - Adjudication of the show cause notice dated 14.02.2018 is barred by limitation under the unamended Section 28(9) and has lapsed. - HELD THAT: - The Court confined its decision to whether the impugned show cause notice issued on 14.02.2018 lapsed under the unamended Section 28(9). Explanation 4 and subsequent legislative changes clarify that notices issued prior to the Finance Act, 2018 are governed by the pre-amendment provision. The unamended provision required the proper officer to determine duty within six months or one year 'where it is possible to do so,' which affords the Department a limited, fact-specific flexibility; however the onus is on the Department to demonstrate that it was not practicable to determine the duty within the prescribed period. The material produced showed long periods of inaction and repeated adjournments without plausible justification; the adjudicating authority did not take steps from 29.04.2019 until October 2020 and otherwise failed to demonstrate that determination within twelve months was not possible. The Board's instruction of 17.03.2021 keeping certain DRI notices in abeyance and Section 28(9A) relief operate only where the amended provisions apply or where specific conditions in (9A) arise; on the facts, those extensions were not available to revive the impugned 14.02.2018 notice. In the absence of any material establishing impossibility or a statutorily recognised ground to defer computation, the limited flexibility under the phrase 'where it is possible to do so' cannot be equated to an indefinite or unexplained delay by the Department. Therefore the show cause notice has lapsed and cannot now be adjudicated. [Paras 44, 45, 46, 47, 48]The impugned show cause notice dated 14.02.2018 has lapsed for want of adjudication within the time prescribed by the unamended Section 28(9) and cannot be adjudicated.Final Conclusion: Writ petition allowed; adjudication of the show cause notice dated 14.02.2018 is barred by limitation under the unamended Section 28(9) of the Customs Act and the notice has lapsed. 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.