Recovery demand quashed for delay beyond three years under natural justice principles and prior precedent

The HC quashed the impugned order demanding recovery of duty drawback after a 12-year delay, ruling it amounted to inordinate delay beyond the permissible three-year period as established by prior precedent. The court found violation of natural justice principles since the respondent failed to consider the petitioner's requests for further time and issued personal hearing notices belatedly. Consequently, the writ petition was allowed, setting aside the recovery demand issued after an unreasonable lapse of time.

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1. ISSUES:

1. Whether the impugned order directing recovery of duty drawback benefits after a lapse of more than 12 years from the date of export shipments is valid under the principles of natural justice and statutory limitation.

2. Whether the delay of over 12 years in issuing the show cause notice constitutes an inordinate delay rendering the recovery demand unreasonable and liable to be quashed.

3. Whether the failure to consider the petitioner's requests for extension of time to submit detailed replies violates the principles of natural justice.

2. RULINGS / HOLDINGS:

1. The Court held that the impugned order was passed in violation of the principles of natural justice as the petitioner's requests for extension of time to submit detailed replies were not considered and are not reflected in the order.

2. The Court ruled that a demand for recovery of duty drawback benefits made after a lapse of more than 12 years from the date of export shipments constitutes an "inordinate delay" and cannot be treated as a "reasonable period."

3. The Court rejected the contention that non-appearance at personal hearing notices issued belatedly (after 12 years) justified the impugned order, emphasizing that such notices themselves were issued beyond a reasonable time and did not cure the violation of natural justice.

4. Consequently, the impugned order dated 27.05.2022 directing recovery of duty drawback benefits was quashed.

3. RATIONALE:

1. The Court applied the principle established in the cited Supreme Court decision that "any demand from any statutory authority will have to be made within a reasonable period."

2. Reliance was placed on a precedent from the Gujarat High Court holding that "3 years' period is the maximum period" for recovery of erroneously paid amounts, and any demand beyond that period amounts to an inordinate delay.

3. The Court emphasized adherence to the principles of natural justice, particularly the requirement to consider requests for extension of time and to provide a fair opportunity to respond before passing an order.

4. The Court noted no unique interpretation or doctrinal shift but affirmed established legal standards on limitation and natural justice in the context of duty drawback recovery proceedings.

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