2025 (6) TMI 127 - HC - Customs

Delay in adjudication of the matter for a period - limitation on issuance of the SCN - Seeking to avail of the appellate remedy under Section 128 of the Customs Act 1962 - scope and applicability of Rule 16 of the Duty Drawback Rules - violation of principles of natural justice - HELD THAT - In Rajbir Singh 2025 (4) TMI 1122 - DELHI HIGH COURT had considered the Rule 16 of the Duty Drawback Rules and the argument of limitation as raised by the Petitioner. The Court had held that there is no specific period of limitation prescribed under Rule 16 of the Duty Drawback Rules. In Rajbir Singh (supra) the Court had followed the decision in Commissioner of Customs v. Sans Frontiers 2023 (12) TMI 695 - DELHI HIGH COURT where in a similar fact situation the Court had relegated the party to seek the appellate remedy. In view of the above even in this case the documents placed on record by the Department would reveal that repeatedly the Petitioner has merely sought documents or adjournments on one ground or the other. Thus there is no violation of principles of natural justice. The impugned order is an appealable order and therefore the Petitioner is permitted to avail of the appellate remedy under Section 128 of the Customs Act 1962. The impugned order is of 31st January 2025. Accordingly time is granted to the Petitioner to file the appeal by 15th July 2025. If the same is filed by the said date then the appeal shall be adjudicated on merits and shall not be dismissed on the ground of being barred by limitation. Petition is disposed of in these terms.

Summary

The core legal questions considered by the Court are: (i) whether the Show Cause Notice (SCN) issued after a delay of five years is maintainable or barred by limitation; and (ii) whether the delay in adjudication of the matter for a period of five years violates principles of natural justice and warrants quashing of the proceedings.

Regarding the first issue of limitation on issuance of the SCN, the Court examined Rule 16 of the Customs Central Excise Duties and Service Tax Drawback Rules, 1995 ("Duty Drawback Rules"), which governs repayment of erroneously or excessively paid drawback amounts. The rule does not prescribe any specific period of limitation for initiating proceedings to recover such amounts. This absence of a statutory limitation period was confirmed by the Court's reliance on a prior decision which held that no limitation period applies under Rule 16. The Court also referred to a precedent where a similar limitation challenge was rejected, and the affected party was directed to exhaust the statutory appellate remedies instead of seeking writ relief. The cited precedent emphasized that limitation issues under Rule 16 must be adjudicated by the designated revision authority under the Customs Act, rather than through writ petitions.

In analyzing the second issue concerning delay in adjudication, the Court scrutinized the procedural history of the case post issuance of the SCN. It was noted that from December 2022 through January 2025, multiple personal hearings were scheduled and notified to the Petitioner and related parties. The record revealed that the Petitioner and associated entities repeatedly failed to appear at these hearings, often requesting copies of relied-upon documents but not filing substantive replies. Several hearing notices were returned undelivered or unattended. The Court found that the delay in adjudication was largely attributable to the Petitioner's non-cooperation and requests for adjournments rather than any fault of the Department. Consequently, the Court concluded that the delay did not violate principles of natural justice or justify quashing the proceedings.

The Court further emphasized that the impugned order is an appealable order under Section 128 of the Customs Act, 1962. It granted the Petitioner an opportunity to file an appeal within an extended time frame, explicitly stating that the appeal shall be adjudicated on merits and not dismissed on limitation grounds if filed by the stipulated date. This approach aligns with the principle of providing adequate opportunity to the affected party to seek statutory remedies before invoking writ jurisdiction.

In addressing competing arguments, the Petitioner relied on a decision advocating for quashing of the SCN due to delay. The Court distinguished this by highlighting that in the present case, the delay was not attributable to the Department, and the Petitioner had ample opportunity to participate in the proceedings but failed to do so. The Department's contention that no limitation period applies under Rule 16 and that the Petitioner's repeated adjournment requests caused delay was accepted by the Court.

Significant holdings include the following verbatim legal reasoning: "A perusal of the above provision reveals that there is no specific period of limitation prescribed for proceeding against availing of excess duty drawback." The Court also held that "delay cannot be attributed to the Department in this case" given the repeated hearings afforded and the Petitioner's failure to participate meaningfully.

The core principles established are: (i) absence of a statutory limitation period under Rule 16 of the Duty Drawback Rules for initiating recovery proceedings; (ii) delay in adjudication attributable to the party's conduct does not violate natural justice; and (iii) statutory appellate remedies must be exhausted before invoking writ jurisdiction in such matters.

On final determinations, the Court dismissed the writ petition challenging the SCN and impugned order on grounds of limitation and delay. It upheld the maintainability of the SCN despite the five-year gap and found no procedural infirmity in the delayed adjudication. The Petitioner was granted liberty to file an appeal within a specified extended period, with assurance that limitation would not be a bar to the appeal's adjudication on merits.