2024 (8) TMI 1555 - HC - Customs

Time limitation for issuance of SCN - the period involved is Assessment Year 2013 to 2016 while the show cause notice has been issued on 1st April 2021 - HELD THAT - The action of the respondent authority was belated and accordingly the show cause notice deserves to be set-aside. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the issuance of show cause notices relating to assessment years 2013 to 2016, with notices dated 1st April 2021, is barred by delay and latches under the applicable legal framework;

(b) Whether the delay in issuance of such notices without any explanation justifies quashing the show cause notices and related proceedings;

(c) The applicability and binding effect of Supreme Court precedents on delay and latches in issuance of assessment notices, particularly in analogous cases involving belated notices issued after several years;

(d) Whether the present writ petition seeking quashing of the show cause notice dated 1.4.2021 and consequential proceedings is maintainable and should be allowed in light of the above considerations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Delay and Laches in Issuance of Show Cause Notices

The legal framework governing issuance of assessment or show cause notices includes principles of limitation, fairness, and adherence to procedural timelines to prevent abuse of process. The doctrine of delay and latches operates to bar stale claims or actions where there has been undue delay without sufficient explanation, causing prejudice to the affected party.

The Court relied heavily on Supreme Court precedents, which have consistently held that issuance of notices after an inordinate delay of 5 to 10 years, without any explanation for such delay, is liable to be quashed. The cited judgments demonstrate that such delay violates principles of natural justice and procedural fairness, rendering the action unsustainable.

In the present case, the show cause notice was issued on 1st April 2021 for assessment years 2013 to 2016, thus involving a delay of approximately 5 to 8 years. The Court found no explanation offered by the respondent authority for this delay. This factual matrix mirrors the circumstances in the Supreme Court's earlier rulings, where similar delays led to quashing of the notices.

The Court's reasoning emphasized that the delay and latches doctrine is not merely procedural but substantive, protecting the rights of the petitioners against belated and oppressive actions. The absence of any justification for the delay was a critical factor in the Court's conclusion.

Issue (c): Precedential Impact of Supreme Court Decisions

The Court extensively analyzed relevant Supreme Court decisions, including:

- The judgment dismissing the special leave petition arising from the Gujarat High Court's quashing of belated notices for assessment years 2011-2016, where the Supreme Court condoned delay in filing the petition but upheld the High Court's finding of delay and latches in issuance of notices.

- The review petition dismissed by the Supreme Court on 16th July 2024, affirming the correctness of the earlier order and rejecting any error apparent on the face of the record.

- Another Supreme Court order dated 19.10.2023 in a similar case involving belated issuance of show cause notices for assessment years 2011-2015, where the notices were quashed due to unexplained delay, and the special leave petition was dismissed.

The Court interpreted these precedents as authoritative and binding, establishing a clear legal principle that unexplained delay in issuance of assessment notices spanning several years is impermissible and justifies quashing of such notices and related proceedings.

Issue (d): Maintainability and Outcome of the Present Writ Petition

Applying the above legal framework and precedents to the facts, the Court found that the petitioners' challenge to the show cause notice dated 1.4.2021 was well-founded. The delay of approximately 5 to 8 years in issuing the notice without explanation rendered the action liable to be set aside.

The Court also considered the absence of any substantive objection from the respondents to pre-pone the hearing date, reflecting a lack of contest on procedural grounds.

Consequently, the Court allowed the writ petition, quashed the show cause notice dated 1.4.2021, and set aside all proceedings initiated thereunder. Pending miscellaneous applications were also disposed of accordingly.

3. SIGNIFICANT HOLDINGS

The Court crystallized the following core principles and determinations:

"In respect of the said period, the date of issuance of the show cause notice is 24.03.2021 which means that the show cause notice was issued 5 to 10 years thereafter. There is no explanation whatsoever for the delay in issuance of notices to the respondents-herein. In the circumstances, a challenge made to the show cause notices before the High Court was successful inasmuch as the action of the respondent authority was held to be belated and hit by delay and latches. Consequently, the show cause notices were quashed."

"Having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned."

"Delay in filing the special leave petition is condoned. Having heard learned counsel for the petitioners and learned counsel for the respondent(s)-caveator, we find that this special leave petition arises out of Special Civil Application... wherein, the dates of issuance of the show cause notices are... which means that the show cause notices were issued 6 to 10 years thereafter. There is no explanation whatsoever for the delay in issuance of notices to the respondents-herein. In the circumstances, a challenge made to the show cause notices before the High Court was successful inasmuch as the action of the respondent authority was held to be belated and hit by delay and latches."

Final determinations:

- The issuance of show cause notices after an unexplained delay of 5 to 10 years violates principles of natural justice and is liable to be quashed.

- The writ petition challenging the show cause notice dated 1.4.2021 for assessment years 2013-2016 is allowed.

- All proceedings initiated pursuant to the said show cause notice are set aside.

- Pending miscellaneous applications are disposed of.