2023 (12) TMI 1221 - HC - Customs

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, ... Validity of SCN - Power of DRI to issue SCN - delayed adjudication of the show cause notice, which was issued almost about 8 years back - Jurisdiction of adjudicating authority to adjudicate the show cause notices - HELD THAT:- There is no dispute that the impugned show cause notice has been issued by the Director of Revenue Intelligence (DRI). Prima-facie, there are substance in the submission as urged on behalf of the petitioners - as the show cause notice has been issued by the DRI, the same would certainly attract the law laid down by Canon India Pvt. Ltd. [2021 (3) TMI 384 - SUPREME COURT]. Contention of the respondents that show cause notice should be proceeded - reliance placed in this regard on the orders passed by this Court in the case of LAXMI ORGANIC INDUSTRIES LTD VERSUS UNION OF INDIA, THROUGH ITS SECRETARY, DEPARTMENT OF REVENUE & ORS. [2023 (12) TMI 1157 - BOMBAY HIGH COURT] - HELD THAT:- The said decision is not applicable to the facts of the present petitioners. In Laxmi Organic Industries Ltd, show cause notice was of October 2019 which was followed by Covid-19 Pandemic from March 2020 and, therefore, the adjudication of the show cause notice was not of a nature falling on the principles discussed in the case of Coventry Estate Pvt. Ltd. [2023 (8) TMI 352 - BOMBAY HIGH COURT]. In the case of the present petitioners, the show cause notice is dated 29th February 2016 which is thus 8 years old. Therefore, on such facts, the order relied upon by the Respondents in the case of Laxmi Organic Industries Limited would not assist the respondents. The impugned show cause notice dated 29th February 2016 shall remain stayed. Pending hearing and final disposal of the petition - The Respondents are at liberty to move this Court for vacating the interim stay if the Respondents are of the opinion that such orders ought not to be continued and/or after decision of the Supreme Court on the review proceedings filed in Canon India Private Limited and on the final adjudication on the challenge to the Finance Act, 2022. 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.