TaxTMI 
TaxTMI 
Tax Adjudication Cannot Sleep for Fourteen Years
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....ax Adjudication Cannot Sleep for Fourteen Years<br>By: - Raj Jaggi<br>Customs - Import - Export - SEZ<br>Dated:- 19-8-2026<br>Delay in Adjudication Is Not a Harmless Procedural Defect The Madras High Court judgment in M/s. T.T. Enterprises Versus The Principal Commissioner of Customs (Preventive) Chennai - 2026 (8) TMI 1012 - MADRAS HIGH COURT, is an important ruling on delayed customs adjudication. The case arose under the Customs Act, 1962, but its principle travels beyond Customs. It reminds us that adjudication is not meant to remain pending endlessly after issuance of a show cause notice. Once the Department proposes a demand, the law expects the matter to reach a lawful conclusion within the statutory period or, at the very least, within a reasonable time. The petitioner imported apples from M/s Evans Fruit Company, USA, through Chennai and Tuticorin Ports during the period 2006 to 2008. The Directorate of Revenue Intelligence alleged undervaluation of imported goods and claimed that differential amounts had been remitted outside regular banking channels. According to the Department, electronic records recovered from the petitioner's office computer, including ....
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....e-mails, invoices and payment particulars, showed that two sets of invoices had been generated. One set allegedly reflected the actual transaction value, while the other showed a lower value for customs assessment. On this basis, a show cause notice dated 05.08.2009 was issued under Section 28(4) of the Customs Act, 1962. The notice proposed rejection of the declared transaction value, re-determination of the assessable value, confiscation of goods, recovery of differential customs duty with interest, and imposition of penalties. However, the adjudication did not reach a conclusion for many years. The matter was transferred between Commissionerates and was also kept in the Call Book due to pending litigation regarding the jurisdiction of DRI officers. Eventually, the Order-in-Original was passed only on 19.02.2024. The delay, therefore, was almost fourteen years from the date of the show cause notice. Section 28 Requires Adjudication, Not Endless Pendency Section 28 of the Customs Act, 1962 deals with the recovery of duties not levied, not paid, short-levied, short-paid, or erroneously refunded. Section 28(4) applies to serious cases involving collusion, wilful misstatemen....
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....t, or suppression of facts. Where such allegations are made, the statute permits a longer period for issuing the notice. However, once the notice is issued, adjudication must proceed under Section 28(9). When the show cause notice in this case was issued on 05.08.2009, Section 28(9) provided that the proper officer shall determine the amount of duty or interest within one year from the date of notice in cases falling under Section 28(4), "where it is possible to do so". The Department's implied position was that this expression gave flexibility and that the delay could be explained by administrative and legal circumstances. The petitioner argued that the expression could not be converted into permission to keep proceedings alive indefinitely. The High Court accepted the petitioner's broad submission. The expression "where it is possible to do so" does not render the statutory time limit meaningless. It provides limited flexibility where adjudication within the stated period is not practicable. However, the Department must demonstrate why completion within time was not possible. The phrase cannot be read as an open-ended licence to postpone adjudication for fourteen ye....
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....ars. Such an interpretation would defeat the very object of limitation. "Where It Is Possible" Means Practicable, Not Optional A significant part of the judgment lies in the interpretation of the expression "where it is possible to do so". The Court referred to CN. Paramsivan Versus Sunrise Plaza TR. Partner - 2013 (6) TMI 135 - Supreme Court, where the Supreme Court discussed expressions such as "as far as possible" and explained that such language indicates practicability. It does not mean that the authority may ignore the statutory requirement at will. It only allows departure where compliance is not practicable in the facts and statutory context. This principle is important because many tax provisions use flexible language. Such language is sometimes misunderstood as conferring wide administrative discretion. The Madras High Court has clarified that flexibility is not the same as a lack of discipline. If the law requires something to be done within a period "where it is possible to do so", the authority must ordinarily act within that period. If it does not, it must show why it was not practicable. The Court also relied on STATE OF PUNJAB Versus BHATINDA DISTRI....
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....CT CO-OP. MILK P. UNION LTD. - 2007 (10) TMI 300 - Supreme Court , and SB. Gurbaksh Singh Versus Union of India and Others - 1976 (1) TMI 153 - Supreme Court. These judgments recognise that even where no express limitation is prescribed, statutory power must be exercised within a reasonable time. The reason is simple. Public power cannot remain hanging over a citizen indefinitely. Delay of that kind creates uncertainty, affects defence, and may become arbitrary. Limitation Goes to the Root of Jurisdiction The Court treated limitation as a jurisdictional issue, a crucial aspect of the ruling. Limitation is not merely a technical defence available to a taxpayer. It determines whether the authority still has power to proceed. If the authority acts beyond the permissible time, the resulting order may be treated as without jurisdiction. For this principle, reliance was placed on ITW SIGNODE INDIA LTD. Versus COLLECTOR OF CENTRAL EXCISE - 2003 (11) TMI 114 - Supreme Court, where limitation was recognised as going to jurisdiction. The Court also referred to Commissioner Of Income-Tax Versus Alagendran Finance Ltd. - 2007 (7) TMI 304 - Supreme Court ,....
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.... where an order barred by limitation was treated as a nullity. This approach is important for tax adjudication. A demand may involve serious allegations and substantial revenue. Even a serious demand must be adjudicated within legal limits. If the Department issues a notice and keeps it pending for years without lawful justification, the taxpayer's position cannot be left permanently uncertain. Limitation protects legal certainty, commercial stability and fairness in adjudication. Reasonable Time Still Matters Even Without a Strict Consequence The judgment also draws strength from a broader principle: where a statute does not prescribe a strict consequence for delay, the authority must still act within a reasonable time. This principle has repeatedly been applied in fiscal cases because tax proceedings directly affect civil rights, business records, financial planning and legal certainty. The Court referred to M/s. J.M. Baxi & Co. Versus The Government of India - 2016 (6) TMI 813 - MADRAS HIGH COURT, where delay in adjudication was held unsustainable. The Court also referred to Mr. J. Sheik Parith (Mr. J. SheikParith) Versus The Commissioner of Customs (Seaport....
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....-Exports) Chennai, The Additional Director General Directorate of Revenue Intelligence South Zonal Unit, Chennai - 2020 (9) TMI 311 - MADRAS HIGH COURT, which dealt with delayed customs proceedings and collected several authorities on the point. In that decision, reference was made to cases such as Premier Ltd. (formerly known as The Premier Automobiles Ltd.), Maitreya V. Doshi Versus The Union of India, The Commissioner of Central Excise, The Assistant Commissioner of Central Excise - 2017 (2) TMI 981 - BOMBAY HIGH COURT, Sanghvi Reconditioners Pvt. Ltd. Versus Union of India, The Commissioner of Customs, Air Cargo Complex (Import), & The Additional Director General, DRI - 2017 (12) TMI 906 - BOMBAY HIGH COURT, M/s. Transworld Shipping Services Pvt. Ltd. Versus The Government of India, The Commissioner of Customs and Central Excise (Appeals), The Joint Commissioner of Customs - 2018 (3) TMI 283 - MADRAS HIGH COURT and SURENDRALAL GIRDHARILAL MEHTA Versus UNION OF INDIA - 2018 (5) TMI 1841 - CALCUTTA HIGH COURT . The principle emerging from these cases is practical and fair. If the Department issues a show cause notice, it must take responsibility f....
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....or adjudicating it promptly. A taxpayer should not be forced to defend a case after a decade or more, when documents may have been lost, witnesses may not be available, business records may no longer be required to be preserved, and commercial memory may have faded. Delay does not merely affect convenience. It can affect the substance of the defence. The 2018 Amendment Could Not Revive a Dead Proceeding The Department also faced another difficulty. Section 28(9) was amended by the Finance Act, 2018. The earlier words "where it is possible to do so" were omitted, and a proviso was inserted permitting a senior officer to extend the time. In cases under Section 28(4), the one-year period could be extended by a further year. The further proviso also provided that if the proper officer failed to determine the amount within the extended period, the proceeding would be deemed to have concluded as if no notice had been issued. The petitioner submitted that even if the amended provision applied, the adjudication should have been completed within two years of the amendment's date. The amendment took effect on 29.03.2018. Even reckoning from that date, the adjudication should hav....
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....e been completed by 28.03.2020. The Order-in-Original was passed only on 19.02.2024, almost four years thereafter. The Court went further. It held that the 2018 amendment could not revive a claim or proceeding that had already become dead under the earlier legal position. The notice was issued on 05.08.2009. Adjudication was expected within one year unless impracticability was shown. By the time the amendment came into effect in 2018, the matter had already been pending for about nine years. A later amendment could not rescue such a proceeding. A Longer Limitation Cannot Bring Back a Dead Claim The Court relied on settled principles governing limitation amendments. Limitation is generally procedural and may operate retrospectively. However, a critical exception applies. A later law extending limitation cannot revive a remedy or proceeding that had already become barred before the amendment took effect. Reliance was placed on Union of India And Others Versus Uttam Steel Ltd. - 2015 (5) TMI 214 - Supreme Court, where the Supreme Court held that a longer limitation period introduced by amendment cannot revive a dead claim. The same principle was supported by T. K....
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....ALIAMURTHI & ANR. Versus FIVE GORI THAIKAL WAKF & ORS. - 2008 (8) TMI 881 - Supreme Court, NEW INDIA INSURANCE CO. LTD. Versus SMT. SHANTI MISRA, ADULT - 1975 (10) TMI 101 - Supreme Court, JP Jani, Income-Tax Officer, Circle IV, Ward G, Ahmedabad, And Another Versus Induprasad Devshanker Bhatt - 1968 (8) TMI 13 - Supreme Court, and SS. Gadgil Versus Lal And Company - 1964 (4) TMI 19 - Supreme Court. This principle is valuable because tax statutes are frequently amended. If a proceeding has already become barred under the applicable law, a later amendment cannot automatically revive it unless the legislature clearly says so and the constitutional limits are satisfied. Limitation provisions protect not only procedural discipline but also vested certainty. Once a proceeding has become stale or dead, a later procedural expansion cannot ordinarily disturb that position. Call Book Cannot Become a Storage Place for Stale Demands The Department attempted to explain the delay by referring to Call Book pendency. It was stated that matters were kept pending because of litigation relating to the jurisdiction of DRI officers, including the issue later considered in ....
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....M/s CANON INDIA PRIVATE LIMITED Versus COMMISSIONER OF CUSTOMS - 2021 (3) TMI 384 - Supreme Court. Canon India dealt with the question whether DRI officers could be treated as proper officers for certain purposes under the Customs Act. The High Court did not accept this explanation in the present case because sufficient material was not placed on record. A general statement that the matter was kept in the Call Book was insufficient. If the Department relies on a Call Book transfer or the pendency of another litigation to explain delay, it must show the relevant record, the period of such pendency, the reason for placing the matter in the Call Book, and why adjudication was not practicable. This is a useful administrative lesson. The Call Book procedure may have a limited role in suitable cases. But it cannot become a silent storage mechanism that keeps show cause notices alive for years without active adjudication. If the notice is issued, the taxpayer is under a legal cloud. The Department must either adjudicate within time or justify why it could not. A mere reference to the Call Book is not a substitute for legal justification. Article 14 Controls Unreasonable Tax ....
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....Administration One of the judgment's strongest features is its link between delayed adjudication and Article 14 of the Constitution. Article 14 does not merely prohibit hostile discrimination. It also prohibits arbitrary State action. If a tax proceeding is kept pending for an excessive and unexplained period, the resulting action may become arbitrary. The Court observed that construing "where it is possible to do so" as permitting indefinite pendency would defeat the purpose of limitation and could render the provision vulnerable to challenge as arbitrary. In any event, failure to complete adjudication within a reasonable period would be arbitrary and would fall foul of Article 14. This reasoning strengthens the taxpayer's procedural protection. Tax administration must be firm, but it must also be timely and fair. The Order Could Not Survive On the facts, the show cause notice was issued on 05.08.2009, and the Order-in-Original was passed on 19.02.2024, amounting to a delay of nearly fourteen years. The Department failed to show that adjudication within the statutory or reasonable period was impracticable. The 2018 amendment could not revive the proceeding. ....
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....Even if the amended provision was applied from the date of amendment, the order was still far beyond any possible extended period. The Call Book explanation was also unsupported by adequate material. The Madras High Court therefore set aside the impugned Order-in-Original as barred by limitation. It further held that, in any view, adjudication after fourteen years was unreasonable, arbitrary, and violative of Article 14. The writ petition was disposed of, with no order as to costs, and the connected miscellaneous petitions were closed. The judgment does not decide whether undervaluation had actually taken place. It does not examine the evidence in detail. The case was decided on the more fundamental ground that the adjudication itself had become legally unsustainable due to delay and limitation. This distinction is important. A procedurally dead proceeding cannot be revived merely because the Department alleges serious facts. The GST Usefulness of This Customs Ruling Although this judgment arises under the Customs Act, its underlying principle can be applied effectively in GST litigation. Many provisions of GST law also use flexible expressions such as "where it is poss....
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....ible to do so", "as far as practicable", or similar language. Such expressions should not be read as conferring unlimited power to keep matters pending indefinitely. They provide administrative flexibility, not administrative immunity. This principle may assist taxpayers in GST cases involving delayed adjudication, delayed refund processing, delayed effect of appeal, delayed rectification, delayed revocation processing, delayed provisional attachment review, or delayed completion of proceedings where the statute expects action within a stated period. Even where GST law does not provide an express consequence for breach of such a timeline, unreasonable delay may still be challenged on the ground of arbitrariness under Article 14. A Proceeding Must Move, or It May Lose Its Force A show cause notice is not meant to remain alive forever. Once the Department invokes statutory power, it must carry the proceeding forward within the time contemplated by law. Where the statute uses flexible language, that flexibility must be justified by real impracticability. It cannot be converted into endless pendency. For Customs, this judgment strengthens the discipline of Section 28(9). Fo....
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....r GST, it offers a useful interpretative principle wherever statutory timelines are softened by expressions such as "where it is possible to do so". For tax administration as a whole, it gives a simple rule worth remembering: delay may sometimes be explainable, but indefinite delay is not adjudication. It is arbitrariness waiting to be corrected. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....