2025 (3) TMI 1131 - HC - GST

Confiscation of seized goods - Inordinate delay of over 11 years in the adjudication of the Show Cause Notice (SCN) - Sufficient ground to quash the Orders-In-Original (OsIO) issued on 30.12.2022 and 02.03.2023 or not - Sufficient cause for delay or not - HELD THAT - This court in Vos Technologies India 2024 (12) TMI 624 - DELHI HIGH COURT had the opportunity to consider the effect of inordinate delay and failure on the part of the tax authorities to conclude the adjudication proceedings within a reasonable period of time (arising out of the Customs Act Custom Act 1962 the Finance Act 1994 Finance Act and the CGST Act) and held that such delay/ failure to act within a reasonable period of time constituted sufficient ground to quash such proceedings. This Court also held that the authorities are bound and obliged in law to make endeavors to conclude adjudication with due expedition. The relevant portion of Section 11A of the Act is pari materia to the corresponding provisions of the Customs Act the Finance Act and the CGST Act and thus the mandate of the said judgement is applicable to the present cases. The Respondents in the impugned OsIO have not given any explanation as to why the SCN could not be decided finally for over 11 years. However in the counter affidavits the Respondents have endeavored to give a feeble justification for the delayed adjudication premised on (a) the advent of the CGST Act in 2017 its shortfall in the administrative functioning subsequently (b) COVID-19 and (c) the delay caused by the Petitioners by not filing reply on time or filing belated reply to the SCN and by avoiding joining the physical hearings. In Vos Technologies India this Court categorically held that matters having financial liabilities or penal consequences cannot be kept unresolved for years; and the phrase where it is possible to do so cannot be a license to keep matters pending for years. The flexibility provided by the legislation is not meant to be overused or construed as sanctioning indolence. The statutory leverage cannot be brought into play routinely and in an unfettered manner for years without any due justification or explanation. Conclusion - The statutory authorities must conclude adjudication within a reasonable time and cannot rely on statutory flexibility to justify indefinite delays. The impugned OsIO quashed due to the unjustified delay in adjudication and ordered the release of the Bank Guarantee furnished by the Petitioners - petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the inordinate delay of over 11 years in the adjudication of the Show Cause Notice (SCN) dated 25.10.2011 constitutes a sufficient ground to quash the Orders-In-Original (OsIO) issued on 30.12.2022 and 02.03.2023.
• Whether the reasons provided by the Respondent authorities for the delay in adjudication, including the introduction of the Central Goods and Services Tax Act (CGST Act), COVID-19, and alleged non-cooperation by the Petitioners, justify the delay.
• Whether the Respondent authorities are obligated to release the Bank Guarantee furnished by the Petitioners at the time of the release of the seized goods.

ISSUE-WISE DETAILED ANALYSIS

Inordinate Delay in Adjudication

• Relevant Legal Framework and Precedents: Section 11A of the Central Excise Act, 1944, mandates that authorities determine the amount of duty within six months or two years from the date of notice, where possible. The case law cited, including Vos Technologies India, emphasizes that inordinate delays without reasonable justification can lead to annulment of proceedings.
• Court's Interpretation and Reasoning: The Court observed that the phrase "where it is possible to do so" in Section 11A allows for flexibility but does not permit indefinite delays. The Court emphasized that authorities must conclude adjudication with due expedition and cannot use statutory flexibility as a license for lethargy.
• Key Evidence and Findings: The SCN was issued on 25.10.2011 and adjudicated only on 30.12.2022 and 02.03.2023, amounting to a delay of over 11 years. The Respondents failed to provide a satisfactory explanation for the delay, particularly for the period between 2011-2017.
• Application of Law to Facts: The Court applied the principles established in Vos Technologies India, concluding that the delay was unjustified and the Respondents failed to act within a reasonable time.
• Treatment of Competing Arguments: The Respondents argued that the delay was due to restructuring under the CGST Act, COVID-19, and non-cooperation by the Petitioners. However, the Court found these reasons insufficient to justify the delay, particularly before 2017.
• Conclusions: The Court concluded that the inordinate delay in adjudication without sufficient justification warranted the quashing of the impugned OsIO.

Release of Bank Guarantee

• Relevant Legal Framework and Precedents: The release of the Bank Guarantee is contingent upon the quashing of the OsIO, as the guarantee was furnished for the release of seized goods under the impugned orders.
• Court's Interpretation and Reasoning: Given the quashing of the OsIO, the Court directed the Respondents to release the Bank Guarantee.
• Conclusions: The Court ordered the release of the Bank Guarantee within six weeks.

SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: "Matters which have the potential of casting financial liabilities or penal consequences cannot be kept pending for years and decades together. A statute enabling an authority to conclude proceedings within a stipulated period of time 'where it is possible to do so' cannot be countenanced as a license to keep matters unresolved for years."
• Core Principles Established: The Court reaffirmed that statutory authorities must conclude adjudication within a reasonable time and cannot rely on statutory flexibility to justify indefinite delays.
• Final Determinations on Each Issue: The Court quashed the impugned OsIO due to the unjustified delay in adjudication and ordered the release of the Bank Guarantee furnished by the Petitioners.