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February 11, 2019
All Articles by: Mr. M. GOVINDARAJAN       View Profile
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Time limit in adjudication process

In some Acts (especially in taxation) specific limitation will be given in all aspects that is to issue show cause notice, filing reply, deciding the adjudication process, filing appeals, disposal of appeals etc.,  In some Acts no such limitation will be prescribed.  It does not implied that the adjudication process can be conducted for a longer period of time. 

Reasonable period

In ‘Collector of Central Excise, Jaipur v. Raghuvar (India) Limited’ – 2000 (5) TMI 40 - SUPREME COURT OF INDIA the Supreme Court pointed out that, any law or stipulation, prescribing a period of limitation to do or not to do a thing after the expiry of the period, so stipulated, has the consequence of creation and destruction of rights, and, therefore, must be specifically enacted and prescribed there for.  It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period.

In Parekh Shipping Corporation v. The Assistant Collector of Customs, Bombay and another’ – 1995 (6) TMI 27 - BOMBAY HIGH COURT the steamer agent contended that it is impossible for the Department to show cause as to which the goods were short landed 12 years before the date of show cause notice.  The High Court held that the exercise of powers under Section 116 of the Customs Act must be undertaken within a reasonable time, and in the said case, the show cause notice was issued beyond the period of limitation of five years from the date of vessel leaving the port, which was held to be arbitrary and unreasonable.  The period of five years is more than reasonable as the bond executed by the Agents is for a period of five years. 

In ‘Wilco & Company v. Union of India’ – 2002 (8) TMI 116 - MADRAS HIGH COURT, a show cause notice was issued towards short landing after a period of six years.  The petitioner contended that, even though section 116 of the Act does not provide any minimum period of limitation, the Courts have repeatedly interpreted the provision to the effect that the levy should be made within a reasonable period and in accordance with the rulings, a maximum period could be only five years and not more.  The High Court accepted the contentions of the petitioner.  The High Court held that the Authority has to exercise powers within a reasonable period, and, whenever question regarding the inordinate delay was in issue, it would be open to the assessee to contend that it was bad on the ground of delay.

The Government of India, the revisionary authority, in ‘Shipping Corporation of India’ in their order dated 27.09.2000, allowed the revisions, as the proceedings were delayed for more than a period of five years and relied upon the earlier decision passed by the Government, wherein, it had been held that, adjudication proceedings would have to be completed within the five years from the date, the Ocean going vessel called at the Port or that the bond binding the agents should be current while imposing the penalty under Section 116 of the Customs Act

Consequences of delayed proceedings

The delayed proceedings will cause to quash the entire proceedings void.  In ‘United Spirits Limited v. Government of India’ in WP 33945 of 2007 decided on 22.03.2010 a show cause notice was issued after a gap of 8.5 years.  The High Court allowed the writ petition and quashed the proceeding on the ground of unreasonable delay.

In J.M. Baxi and Co. v. The Government of India, New Delhi and others’ – 2016 (6) TMI 813 - MADRAS HIGH COURT the vessel completed the offloading on 31.07.1992 and the landing certificate was issued after a period of more than 2 years had passed and the importer had cleared the cargo on 30.09.1994.  The High Court upheld the claim made by the steamer agent in the said case.

In ‘Transworld Shipping Services Private Limited v. Government of India’ – 2018 (3) TMI 283 - MADRAS HIGH COURT the vessel ‘M.V. Merini’ carrying urea in bulk, weighing 30,000 MTs under two Bills of Lading arrived at the Port of Cuddalore on 13.11.1992.  The vessel commenced discharge of the cargo on 23.11.1992 and completed on 19.02.1993 indicating discharge of 29,483 MTs of cargo.  The draft survey report was prepared on the same day on behalf of the shipper, indicates discharge of 29,963.50 MTs.  The survey report confirmed the full discharge of the cargo, as per the Bills of Lading and the Import Manifest filed with customs.  On 13.09.1993 landing certificate was issued by Superintendent of Customs, confirming the survey reports of the petitioner and shipper, indicating short landing of 483.789 mts of cargo. 

On 09.03.1995 the Assistant Collector, Cuddalore issued a show cause notice, proposing to impose penalty of ₹ 34,05,093/- for the short landing.  The petitioner submitted a reply on 15.04.1995.  The order-in-original was passed on 04.08.1999 imposing a penalty of ₹ 30 lakhs.  The petitioner filed appeal against the said order within the period of limitation with the Appellate Authority.  The appeal was dismissed on 31.01.2003.  The petitioner, then, filed revision petition before the Government.  The same was disposed on 31.03.2004 granting partial relief to the petitioner by reducing the penalty to ₹ 14,55,556.56.

Against this order the petitioner filed this present writ petition before the High Court, Madras.   The main grounds on which, the orders are under challenge are-

  • delay in adjudication process; and
  • the quantity mentioned in Bills of Lading is not prima facie evidence for the quantity loaded on board the vessel.

The petitioner submitted the following arguments before the High Court-

  • Show cause notice was issued after a period of two years from the date of discharge of cargo;
  • The order on the show cause notice was issued after a lapse of four years;
  • In terms of section 5 of Carriage of Goods by Sea Act, the quantity mentioned in the Bills of Lading is not even a prima facie evidence of the cargo loaded in the vessel, and thus, any orders passed in this respect, relying upon the quantity mentioned in Bill of Lading and the quantity arrived at the weighment point, off the shore, cannot be considered as the correct quantity discharged by the vessel.
  • The shortage of landing may be due to the following reasons-
  • The Cuddalore port, being an Anchorage Port, without berthing facilities, the cargo, which is discharged by slings in non-standardized and the minimum stitched bags into the barges, would result in loss of cargo and further loss will occur at the pier point, where the laborers use hooks to carry the goods;
  • Further loss of storing may occur at the time of storing which is not the petitioner’s liability.
  • The Landing Certificate issued by the Superintendent of Customs cannot be a basis for coming to a conclusion that there was a shortage, as there are various other reasons, which would lead to shortage.
  • There is a huge delay in passing the adjudication order viz., for a period of six years and such a long delay will vitiate the entire proceedings.
  • No liability can be fastened on the petitioner, who is a Streamer Agent of the vessel.

The Department contended the following-

  • In terms of section 30 of the Act, a person in charge of the vessel, includes the agent of the vessel, who is responsible to deliver the goods to the proper officer, an import manifest prior to the arrival of the Vessel.
  • It is an obligation case upon the person in charge of the vessel to declare the gross weight.
  • Section 116 prescribes penalty for the non observance of these statutory duties and responsibilities on the part of the carrier or the Agent.
  • There is no period of limitation to conclude the adjudication process in the Act.
  • In this case, the import took place in 23.11.1992 and the show cause notice for short landing was issued on 09.03.1995 and the same is well within time.
  • The third respondent rightly granted 1% tolerance limit which is 300 mts and therefore the short landing has been reckoned only as 216.5 mts.
  • The visible shortage occurred on account of pilferage, loss on pier, spillage/handling loss due to cyclone etc., have been carefully taken into consideration while issuing the Landing Certificate by the Superintendent of Customs, Cuddalore.
  • If the steamer agent was of the view that the import manifest or import report is in any way incorrect or incomplete, they should have taken steps to amend the same.They having not done so, the petitioner should be made to pay penalty.

The High Court heard the submissions made by both the parties.  The High Court held that though the cargo was completely discharged on 19.02.1993, it took two years for the Department to issue show case notice.  The petitioners filed appeal within the time limit.  Nothing happened thereafter for four years.  The petitioner filed second appeal immediately which also took four years to complete.  The Government, as revisionary authority, took one year to dispose the revision petition.  Only saving grace being that the penalty was reduced.

The High Court held that the inordinate delay in concluding the adjudicating proceedings is unreasonable.  The High Court vacated the penalty imposed on the petitioner, on entirety.


By: Mr. M. GOVINDARAJAN - February 11, 2019


Discussions to this article


Nice compilation Sir. One can say Justice delayed is a justice denied.

By: Ganeshan Kalyani
Dated: 19/02/2019


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