DRI loses jurisdiction to pursue 8-year-old show cause notice as HC grants interim stay

The Bombay HC stayed an 8-year-old show cause notice dated 29th February 2016 issued by DRI. The court found substance in petitioners' submissions, applying Canon India Pvt. Ltd. precedent regarding DRI's jurisdiction to issue SCNs. The court distinguished respondents' reliance on Laxmi Organic Industries Ltd., noting that case involved a 2019 SCN delayed by Covid-19 pandemic, unlike the present case's 8-year delay. The court granted interim stay pending final disposal, allowing respondents liberty to seek vacation of stay if circumstances warrant or after SC's review proceedings in Canon India case.

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Issues involved:
The petition challenges the delayed adjudication of a show cause notice issued almost 8 years back and questions the jurisdiction of the Directorate of Revenue Intelligence to issue the notice.

Delayed Adjudication of Show Cause Notice:
The petitioners sought to quash a show cause notice dated 29th February 2016 primarily on the grounds of delayed adjudication, citing settled legal principles. They argued that considering the delay of almost 8 years, the notice should be set aside. The High Court referred to previous cases and emphasized the need for expeditious adjudication, directing the Respondents to complete the process within three months.

Jurisdiction of Directorate of Revenue Intelligence:
The petition raised concerns about the jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue the show cause notice. It contended that the DRI's actions were contrary to a Supreme Court decision, and similar challenges in other cases had led to the issuance of rules and interim reliefs. The Court acknowledged the legal position asserted by the Petitioner and directed the adjudicating officer to consider all contentions, including those related to the Finance Act.

Comparison with Previous Cases:
The Court compared the present case with previous instances where similar issues were raised regarding show cause notices issued by the DRI. It noted that in cases like Kuloday Plastomers Pvt. Ltd., the jurisdiction to issue the notice was questioned, and the Court directed expeditious adjudication while keeping all contentions open for further review. The Court also highlighted the need to address legal contentions related to the Finance Act during the adjudication process.

Stay on Show Cause Notice:
After considering the arguments presented, the Court found merit in the petitioners' submissions regarding the DRI's jurisdiction and the delay in adjudication. It stayed the show cause notice dated 29th February 2016 pending further proceedings, granting the Respondents eight weeks to file a reply affidavit. The Court allowed the Respondents to seek a vacation of the stay order based on certain conditions and scheduled the petition for a joint listing with another related case.

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