In a significant ruling, the Gujarat High Court addressed the prolonged pendency of adjudication proceedings initiated by the Customs Department against a chemical manufacturing company. The division bench, comprising Justice Bhargav Karia and Justice D.N. Ray, quashed two show cause notices (SCNs) that had remained unresolved for over 15 and 13 years, respectively, emphasizing the detrimental impact of such delays on the principles of natural justice.
The petitioner, engaged in the manufacture and export of dyes and chemicals, had exported synthetic dyes under two shipping bills dated September 14, 2009, from the Inland Container Depot (ICD) in Ahmedabad, availing benefits under the Duty Entitlement Pass Book (DEPB) Scheme. Subsequent to these exports, on September 15, 2009, the Directorate of Revenue Intelligence (DRI) conducted searches at the petitioner's factory and registered office, suspecting misdeclaration of the exported products. The Chemical Examiner's report dated September 29, 2009, indicated discrepancies in the declared products, suggesting that the samples did not match the descriptions provided by the petitioner.
Based on these findings, the DRI issued a show cause notice on March 8, 2010, alleging wrongful availing of DEPB benefits and proposing the confiscation of goods. A subsequent SCN was issued on November 3, 2011, under Section 111(o) read with Section 28 of the Customs Act, concerning past exports of the product “Acid Black 210,” suggesting that all such exports were misdeclared. Despite the issuance of these notices, no adjudication took place for over a decade, prompting the petitioner to approach the High Court seeking quashing of the pending SCNs due to inordinate delay.
The court, in its deliberation, underscored the importance of timely adjudication in matters involving financial liabilities or penal consequences. It observed that allowing such proceedings to remain pending for extended periods undermines the principles of natural justice and leads to undue harassment of the parties involved. The bench noted that the impugned SCNs had been pending for more than 15 and 13 years, respectively, and held that such an inordinate lapse of time warranted their quashing.
In its judgment, the court referenced previous decisions emphasizing the necessity of concluding adjudication proceedings within a reasonable timeframe. It highlighted that even in the absence of a prescribed statutory limitation period, authorities are expected to act promptly and not let matters linger indefinitely. The court also pointed out that the internal practice of placing cases in the "call book" or dormant list does not justify or condone such delays.
The ruling aligns with similar judgments from other High Courts addressing the issue of delayed adjudication. For instance, the Bombay High Court, in the case of Bombay Dyeing and Manufacturing Company Limited vs. Deputy Commissioner of CGST and CX, DIV-IX, Mumbai Central GST Commissionerate, held that belated hearing of a show cause notice violates principles of natural justice, as it is unreasonable to expect assessees to preserve evidence or records for extended periods.
Similarly, the Delhi High Court, in Vos Technologies Private Limited v. Principal Additional Director General, quashed decade-long delayed show cause notices, emphasizing that matters with potential financial liabilities or penal consequences cannot be kept pending for years without resolution.
The Gujarat High Court's decision serves as a critical reminder to regulatory authorities about the imperative of timely adjudication. It underscores that prolonged delays not only violate the principles of natural justice but also erode the credibility of administrative processes. The ruling advocates for a more efficient and accountable system where adjudication proceedings are concluded within reasonable timeframes, ensuring fairness and justice for all parties involved.
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