Customs Order Passed 14 Years After Show Cause Notice Quashed: Madras HC

T. T. Enterprises Vs Principal Commissioner of Customs (Preventive) (Madras High Court)

Summary: The Madras High Court considered a writ petition challenging Order-in-Original No.105165/2024 dated 19.02.2024 passed by the Principal Commissioner of Customs (Preventive), Chennai-III. The petitioner challenged the order, inter alia, on the grounds of unreasonable delay in adjudicating a Show Cause Notice dated 05.08.2009 and denial of relied-upon documents and cross-examination, allegedly violating principles of natural justice.

The petitioner was a proprietary concern engaged in importing apples from M/s. Evans Fruit Company, USA. During 2006 and 2008, apples were imported through Chennai and Tuticorin Ports. The Directorate of Revenue Intelligence investigated alleged deliberate undervaluation, including alleged remittance of differential amounts outside regular banking channels. A hard disk from the petitioner’s office computer was seized and forensic examination allegedly revealed e-mail correspondence, invoices and payment particulars suggesting that two sets of invoices had been generated. Following investigation, the Show Cause Notice dated 05.08.2009 proposed rejection of the declared transaction value, re-determination of assessable value, confiscation, recovery of differential customs duty with interest and penalties under the Customs Act, 1962.

The petitioner contended that the proceedings remained pending for nearly fifteen years and that the adjudicating authority failed to address the specific objection regarding delay, despite reliance on the decision in J. Sheik Parith. The petitioner also argued that, when the notice was issued, Section 28(9) required adjudication within one year from the date of notice, “where it is possible to do so”. The provision was subsequently amended by the Finance Act, 2018, whereby the expression “where it is possible to do so” was omitted and a proviso permitted extension of the prescribed period in specified circumstances.

The respondents opposed the writ petition, relying upon the statutory appellate remedy under Section 129A of the Customs Act. They also submitted that the investigation had established deliberate undervaluation and that the delay resulted from administrative transfers, restructuring of Commissionerates, litigation concerning the jurisdiction of DRI officers, movement of the matter to and from the Call Book and subsequent statutory developments. It was also submitted that eleven opportunities of personal hearing had been afforded, though the petitioner participated on only two occasions.

The High Court identified three principal questions: whether limitation relates to jurisdiction; the scope of the expression “where it is possible to do so” in Section 28(9) as it stood when the proceedings were initiated; and whether the 2018 amendment to Section 28(9) applied to proceedings initiated before the amendment.

On limitation, the Court observed that limitation goes to the root of jurisdiction and that an order barred by limitation is a nullity. Considering Section 28(9) as it stood when the Show Cause Notice was issued, the Court held that the proper officer was required to determine the duty or interest within one year from the date of notice in cases falling under Section 28(4), “where it is possible to do so”. The Court examined the meaning of that expression with reference to C.N. Paramasivam v. Sunrise Plaza and the distinction between what is possible and what is practicable.

The Court held that the expression “where it is possible to do so” could not be construed as conferring an unrestricted power upon the adjudicating authority to keep proceedings pending indefinitely. According to the Court, adjudication would ordinarily have to be completed within the prescribed period, and any departure had to be supported by circumstances showing that completion within that period was impracticable. The Court further relied upon decisions concerning the requirement that statutory powers be exercised within a reasonable period even where no express limitation is prescribed.

The Court referred, among others, to State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., S.B. Gurbaksh Singh v. Union of India, J.M.Baxi and Co. v. Union of India, J. Sheik Parith v. Commissioner of Customs, Kanthimathy Estate v. The Assistant Commissioner Commercial Taxes and other decisions dealing with unreasonable delay in fiscal adjudication.

The Court held that the impugned order had been passed almost fourteen years after issuance of the Show Cause Notice and that such delay could not be sustained. It also considered the effect of the Finance Act, 2018 amendment to Section 28(9). Referring to authorities on retrospective operation of procedural limitation provisions, including Union of India v. Uttam Steel Ltd., T. Kaliamurthi v. Five Gori Thaikkal Wakf, New India Insurance Co. Ltd. v. Shanti Misra, ITO v. Induprasad Devshanker Bhatt and S.S. Gadgil v. Lal and Co., the Court noted the principle that an extension of limitation cannot ordinarily revive a claim that had already become dead or barred.

Applying that principle, the Court held that the 2018 amendment had been introduced approximately nine years after issuance of the Show Cause Notice. The adjudication could not be treated as surviving indefinitely until the amendment. Even assuming that the proceeding survived until the amendment, the Court held that the amended provision could at most permit adjudication within the extended period contemplated by Section 28(9), which, on the reasoning adopted by the Court, would have expired by 29.03.2020. The impugned order was nevertheless passed only on 19.02.2024.

The Court also considered the respondents’ explanation concerning the Call Book and the litigation relating to DRI jurisdiction. It observed that no material had been placed before the Court to substantiate the explanation for the prolonged delay.

Ultimately, the Madras High Court set aside the impugned Order-in-Original as barred by limitation. It further held that, in any event, the fourteen-year delay in adjudicating the Show Cause Notice was unreasonable, suffered from arbitrariness and fell foul of Article 14 of the Constitution of India. The writ petition was disposed of without costs and the connected miscellaneous petitions were closed.

Cases Discussed

• ITW Signode Ltd. Vs. CCE, 2003 158 ELT 403 — referred to on the proposition that limitation is connected with jurisdiction.
• Commissioner of Income Tax, Chennai Vs. Alagendran Finance Ltd., (2007) 7 SCC 215 — cited in the discussion concerning limitation and jurisdiction.
• C.N. Paramasivam v. Sunrise Plaza, (2013) 9 SCC 460 — considered for the scope of the expression “as far as possible” and the distinction between what is possible and practicable.
• N.K. Chauhan v. State of Gujarat, (1977) 1 SCC 308 — referred to regarding the interchangeable use of “possible” and “practicable”.
• State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., (2007) 11 SCC 363 — relied upon regarding exercise of statutory jurisdiction within a reasonable period where no limitation is prescribed.
• S.B. Gurbaksh Singh v. Union of India, (1976) 2 SCC 181 — referred to on unreasonable delay affecting the validity of statutory proceedings.
• J.M.Baxi and Co. Vs. UOI, 2016 (336) E.L.T. 285 (Mad) — referred to regarding delayed adjudication under fiscal legislation.
• J. Sheik Parith Vs. Commissioner of Customs and another, 2020 (374) E.L.T. 15 (Mad.) — relied upon in the discussion concerning unreasonable delay in adjudication of a Show Cause Notice.
• Premier Ltd. v. UOI, W.P. No. 12780 of 2016 dated 13.02.2017 — referred to in J. Sheik Parith concerning prompt adjudication following issuance of a Show Cause Notice.
• Sanghvi Reconditioners Pvt. Ltd. v. Union of India, 2018 (12) GSTL 290 — referred to regarding fifteen-year delay and proceedings consigned to the Call Book.
• Transworld Shipping Services Pvt. Ltd. v. Government of India, 381 ELT 178 — referred to regarding exercise of statutory power within the stipulated or reasonable period.
• Surendralal Girdharilal Mehta v. Union of India, W.P. No. 322 of 2015 dated 17.05.2018 — referred to on reasonable time for exercise of statutory powers.
• Kanthimathy Estate vs. The Assistant Commissioner Commercial Taxes, W.P.(MD) Nos.3056 of 2016 etc., batch — referred to regarding inordinate delay in completion of fiscal proceedings.
• Union of India v. Uttam Steel Ltd., (2015) 13 SCC 209 — considered regarding retrospective operation of limitation provisions and the principle that an amended provision cannot revive a dead claim.
• T. Kaliamurthi v. Five Gori Thaikkal Wakf, (2008) 9 SCC 306 — referred to on retrospective operation of procedural limitation provisions and the prohibition against revival of a barred right.
• New India Insurance Co. Ltd. v. Shanti Misra, (1975) 2 SCC 840 — referred to regarding the inability of a longer limitation period to revive a dead remedy.
• ITO v. Induprasad Devshanker Bhatt, AIR 1969 SC 778 — considered on the effect of a subsequent amendment where the right to reopen proceedings had already become barred.
• S.S. Gadgil v. Lal and Co., AIR 1965 SC 171 — considered on retrospective operation of an amendment extending limitation and the inability of such amendment to revive proceedings already barred.
• M/s Canon India Pvt. Ltd., 2021 (376) ELT 3 (SC) — referred to in the respondents’ explanation concerning litigation relating to the jurisdiction of DRI officers.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The present Writ Petition is filed challenging the Order-in-Original No.105165/2024 dated 19.02.2024 passed by the Principal Commissioner of Customs (Preventive), Chennai-III.

2. Challenge to the impugned order is inter alia made on the following grounds viz.,

a) Unreasonable delay in adjudication of Show Cause Notice dated 05.08.2009

b) Denial of relied upon documents and cross-examination, resulting in violation of principles of natural justice.

3. Brief Facts:

i) Petitioner is a proprietary concern engaged in import of apples from M/s. Evans Fruit Company, USA. During the period 2006 and 2008, petitioner imported apples through Chennai and Tuticorin Ports.

ii) Directorate of Revenue Intelligence initiated investigation alleging that petitioner deliberately undervalued imported goods, by remitting differential amount outside regular banking channels. During investigation, hard disk of petitioner’s office computer was seized. Forensic examination allegedly revealed e-mail correspondence, invoices and payment particulars indicating that two sets of invoices had been generated, one reflecting the actual transaction value and another showing a lesser value for customs assessment.

iii) On completion of investigation, a Show Cause Notice dated 05.08.2009 came to be issued proposing rejection of the declared transaction value, re-determination of assessable value, confiscation of goods, recovery of differential customs duty with interest and imposition of penalties under the Customs Act, 1962.

iv) Adjudication was pending for several years. During the pendency, proceedings underwent transfers between different Commissionerates and were also kept in the Call Book in view of pendency of litigation relating to the jurisdiction of DRI officers before the Supreme Court. Eventually, the impugned Order-in-Original dated 19.02.2024 came to be passed confirming the demand of duty together with consequential liabilities.

4. Case of Petitioner:

4.1. Mr.Vijay Narayanan, learned Senior Advocate, appearing for petitioner would submit that impugned order is liable to be set aside, primarily on account of the unreasonable and unexplained delay of nearly fifteen years in adjudicating the Show Cause Notice. Though issue of delay had been specifically raised before the Adjudicating Authority relying upon the decision of this Court in J. Sheik Parith, no finding has been rendered in the impugned order.

4.2. Once notice is issued under Section 28 of the Act, the same ought to be adjudicated within the period stipulated in sub-section (9) to Section 28 of the Act. In the present case, show cause notice was issued as early as on 05.08.2009. When the notice came to be issued on 05.08.2009, show cause notice issued under sub section (4) to Section 28 of the Act, ought to be adjudicated within one year from the date of notice, “where it is possible to do so”. The said sub section was amended vide Finance Act, 2018 (Act 13 of 2018) dated 28.03.2018, whereby the expression “where it is possible to do so”, was omitted and proviso was inserted whereby one year period could be extended by a further period of one year, by any officer senior in rank to the proper officer, having regard to the circumstances which prevented the proper officer from completing the adjudication within one year in case of notice issued under Section 28(4) of the Act.

4.3 Assuming amendment to sub-section (9) would apply, same was inserted vide Finance Act, 2018 (Act 13 of 2018) dated 28.03.2018, in terms of the said amendment, entire adjudication process ought to be completed within a period of two years from the date of issuance of notice including the period that may be extended in terms of proviso to Sub Section (9) to Section 28 of the Act. Applying the same to the impugned show cause notice that two years period within which adjudication ought to be completed is reckoned from the date from which Finance Act, 2018 is introduced i.e., 28.03.2018, the impugned order ought to have been completed by 28.03.2020. However, the impugned proceedings were completed only on 19.02.2024 i.e., after four years thereafter.

4.4. Repeated requests for supply of relied upon documents and permission to cross-examine persons connected with overseas documents were rejected without assigning valid reasons.

4.5. Several Bills of Entry had attained finality and relevant records relating thereto were not furnished despite request. Reliance was placed on decisions of the Supreme Court and various High Courts dealing with delayed adjudication, natural justice and jurisdiction of DRI officers. 4.6 Though attempt was made to suggest that delay in adjudication was in view of the matter being consigned to call book, no details of call – book procedure was submitted to this Court, thus the above contention is liable to be rejected.

5. Case of Respondents:

5.1. Learned Standing Counsel appearing for the respondents would submit that writ petition itself is not maintainable in view of the efficacious statutory remedy of appeal available under Section 129A of the Customs Act, 1962. Petitioner cannot bypass the appellate mechanism provided under statute.

5.2. That investigation revealed documentary evidence establishing deliberate undervaluation of imported goods. Electronic records recovered from petitioner’s computer, together with foreign remittance records and contemporaneous correspondence, clearly establish suppression of actual transaction value.

5.3. Delay in adjudication has been satisfactorily explained as in view of successive administrative transfers, restructuring of Commissionerates, pendency of proceedings before Supreme Court relating to jurisdiction of DRI officers, transfer of file to and from the Call Book and subsequent statutory amendments validating actions of DRI officers.

5.4. That matters have to be kept pending in the Call Book because of the fact that the issue relating to the jurisdiction of DRI authorities to adjudicate, pending consideration before the Hon’ble Supreme Court and was resolved in M/s Canon India Pvt. Ltd., supra reported in 2021 (376) ELT 3 (SC).

5.5. That as many as eleven opportunities of personal hearing were afforded to the petitioner, who participated only on two occasions while seeking repeated adjournments.

6. Heard both sides and perused materials available on record.

7. Discussion:

7.1. Against the above background following questions would arise for consideration, viz.,

a) Whether limitation relates to jurisdiction?

b) What is the scope of the expression “where it is possible to do so”, employed in sub section (9) to Section 28 of the Act when the proceedings were initiated, i.e., show cause was issued?

c) Whether amendment to Section 28 (9) vide Act 13 of 2018, whereby the expressions “where it is permissible to do so” was omitted would apply to impugned proceedings initiated prior to the said amendment.

7.2. I shall proceed to answer the above questions in seriatum.

a) Limitation relates to jurisdiction: It is trite that object of limitation is to extinguish stale demands. The question of limitation involves question of jurisdiction. 1 An order barred by limitation is a nullity. 2 It is beyond any doubt that limitation is a matter which goes to the root of jurisdiction.

b) Whether limitation as it existed when show cause notice was issued (or) subsequent amendment to the provisions until the impugned order is made would apply.

7.3. As discussed supra, show cause notice was issued on 05.08.2009, impugned order was passed on 19.02.2024 followed by a 1 ITW Signode Ltd., Vs. CCE, 2003 158 ELT 403. Commissioner of Income Tax, Chennai vs. Alagendran Finance Ltd., reported in (2007) 7 SCC 215 corrigendum dated 03.05.2024.

7.4. To appreciate the scope of amendment to Section 28 of the Act, more importantly, Sub-Section (9) to Section 28 of the Act, it may be relevant rather necessary to compare and contrast the said sub-section as it existed prior and post amendment vide Finance Act, 2018 (Act 13 of 2018). The following Table is relevant in this regard. Prior Finance Act, 2018 Post Finance Act, 2018 The proper officer shall determine the amount of duty or interest under sub-section (8),—

7.5. Limitation under Section 28(9) of the Act, as it existed on date of issuance of show cause notice:-

7.6. From a reading of sub-section (9) to Section 28 of the Act as it existed when the show cause notice dated 05.08.2009 came to be issued, it would be clear that proper officer, shall determine the amount of duty or interest under sub section (8) of the Act, within one year from the date of notice “where it is possible to do so”, in respect of cases falling under sub section (4) to Section 28 of the Act. It may be relevant to note that the expressions, “where it is possible to do so”, in Section 28 of the Act, was omitted vide Finance Act 2018 dated 29.03.2018 and proviso to sub section (9) to Section 28 of the Act was added.

7.7 I shall deal with the scope of the proviso in the following portions of this order. Thus when proceedings were initiated, respondent authority was under a mandate to pass an order within a period of one year from the date of notice in respect of cases falling under sub section (4), “where it is possible to do so”. The expression “where it is possible to do so”, would indicate that it is incumbent on the officer concerned to demonstrate that it was not practicable to complete the adjudication within the stipulated period i.e., one year from the date of issuance of notice. To understand the scope of expression “where it is possible to do so”, it may be relevant to refer to the following judgment:

i) C.N. Paramasivam v. Sunrise Plaza, (2013) 9 SCC 460

“23. It follows that while the phrase “as far as possible”, may be indicative of a certain inbuilt flexibility, the scope of that flexibility extends only to what is “not at all practicable”. In order to show that Rules 57 and 58 of the Second Schedule to the Income Tax Act may be departed from under the RDDB Act, it would have to be proved that the application of these Rules is “not at all practicable” in the context of the RDDB Act.

24. The interchangeable use of the words “possible” and “practicable” was previously established by a three-Judge Bench of this Court in N.K. Chauhan v. State of Gujarat [(1977) 1 SCC 308: 1977 SCC (L&S) 127] wherein this Court observed that in simple Anglo-Saxon practicable, feasible, possible, performable, are more or less interchangeable.

25. Webster’s defines the term “practicable” thus: “practicable.—(1) That can be put into practice; feasible. (2) That can be used for an intended purpose; usable.” Black’s Law Dictionary similarly defines “practicable” as follows: “practicable.—adj. (16c) (Of a thing) reasonably capable of being accomplished; feasible.

26. It is, therefore, reasonable to hold that the phrase “as far as possible” used in Section 29 of the RDDB Act can at best mean that the Income Tax Rules may not apply where it is not at all possible to apply them having regard to the scheme and the context of the legislation”

7.8. It thus appears that normally adjudication must be made within one year from the date of issuance of notice “where it is possible to do so”. In any view, the expression “where it is possible to do so” cannot be understood as enabling or conferring power on the adjudicating authority to keep the assessment pending for an unreasonable period. Any attempt to construe the expression “where it is possible to do so”, in such manner ought to be eschewed, else it would defeat the very purpose and object of prescribing limitation, which is to extinguish stale demands, and may render the provision vulnerable to challenge on the ground of being arbitrary, thereby falling foul of Article 14 of the Constitution of India. Any attempt to understand the expression “where it is possible to do so”, used by the statute while issuing a mandate to complete adjudication within one year from the date of issuance of notice, may also have to be rejected inasmuch as it is trite that even where no limitation is prescribed for taking any action including adjudication or assessment, it must be made within a reasonable time. In this regard, it may be relevant to refer to the following judgments:

(i) State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd. reported in (2007) 11 SCC 363:

“17. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefore, the same would not mean that the suo motu power can be exercised at any time.

18. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors.”

(ii) S.B. Gurbaksh Singh v. Union of India, reported in (1976) 2 SCC 181:

“15…. It may well be that for an exercise of the suo moto power of revision also, the revisional authority has to initiate the proceeding within a reasonable time. Any unreasonable delay in exercise may affect its validity. What is a reasonable time, however, will depend upon the facts of each case.”

7.9 Thus, failure to complete adjudication within a reasonable period would suffer from the vice of arbitrariness, thereby falling foul of Article 14 of the Constitution of India.

7.10. It may be relevant to refer to the following judgments wherein considering adjudication under various fiscal enactments which did not provide for limitation it was held that the proceedings were illegal on the premise that the same has been made after an unreasonable delay:

(i) J.M.Baxi and Co. Vs. UOI reported in 2016 (336) E.L.T. 285 (Mad):

“16. In the order of adjudication dated 07.01.2000, there is nothing to indicate as to what transpired from 23.5.1995 up to 07.01.2000, except for two dates. One is a letter dated 23.10.1999 where the appellant sought an injury to be inflicted upon them voluntarily, reminding the Department of the pendency of the show cause notice. The next date is 04.01.2000 when a personal hearing took place. Therefore, the order of adjudication certainly had not taken place within a reasonable period. Though the statute does not prescribe a period of limitation for passing an order of adjudication, the law is well settled that anything in respect of which no period of limitation is prescribed, should be done at least within a reasonable time. What is reasonable time, would depend upon the facts and circumstances of each case. In cases of this nature, where the weight of the cargo discharged by the vessel of a Steamer Agent is questioned, it is not possible for a Steamer Agent to defend themselves against the show cause notice long after the vessel had sailed. Therefore, the third question of law is also be answered in favour of the appellant.”

(ii) J.Sheik Parith Vs. Commissioner of Customs and another reported in 2020 (374) E.L.T. 15 (Mad.):

“23. In Premier Ltd. v. UOI (W.P. No. 12780 of 2016 dated 13.02.2017), a Division Bench of the Bombay High Court considered a challenge to the show cause – cum- demand notice dated 22.07.1991, in response to which personal hearings were fixed only in 1997. The Court held that such delay would vitiate the validity of the notice itself holding at paragraph 9 that the power to issue a show cause notice carries with it the responsibility to adjducate upon it promptly….

28. In Sanghvi Reconditioners Pvt. Ltd. v. Union of India (2018 (12) GSTL 290), a Division Bench of the Bombay High Court considered the delay of fifteen (15) years from issuance of a show cause notice and thirteen (13) years after a hearing for fresh proceedings had been initiated by the revenue. This was also a case where the proceedings had been consigned to the call book. The petitioner in that matter succeeded on the ground that the inordinate delay had not been justified by the revenue.

29. In Transworld Shipping Services Pvt. Ltd. v. Government of India (381 ELT 178) a learned single Judge of this Court, and in Surendralal Girdharilal Mehta v. Union of India (W.P. No. 322 of 2015 dated 17.05.2018) the Calcutta High Court once again reiterated the settled position that an authority exercising power under the Statute can engage in an action that has the effect of disturbing the rights of a citizen only within the time stipulated and where such limitation was not stipulated, within a reasonable time.”

(iii) Kanthimathy Estate vs. The Assistant Commissioner Commercial Taxes in W.P.(MD)Nos.3056 of 2016 etc., batch:

“7. It is thus clear that a dealer is required to statutorily maintain and preserve books of accounts and all documents connected and ancillary to its business only for a period of five years from the date on which the assessment relating to that year had become final. In the present case, the periods of assessment stretch from 1989-1990 to 1994- 1995. The pre-assessment notices have been sent only on 23.08.1999 and proceedings completed in 2015. Thus even on this score, the time taken for conclusion of proceedings appears inordinately delayed and it thus unacceptable. The impugned orders are quashed.”

7.11. In other words, it would appear that firstly to fall within the expressions “where it is possible to do so”, it must be shown to be completion of adjudication within one year from the date of notice is impracticable and the extended period, if any, cannot be unreasonable. The impugned order passed almost after 14 years from the date of issuance of show cause notice cannot be sustained.

7.12. Limitation vide Finance Act, 2018 (Act 13 of 2018) dated 28.03.2018 – applicability to impugned proceeding:-

The amendment to Sub Section (9) to Section 28 of the Act, vide Finance Act, 2018 (Act 13 of 2018), whereby the expressions “where it is possible to do so”, was omitted and the proviso was added whereby it was provided that the above period of one year may be extended by any officer senior in rank to the proper officer by a period of one year in respect of notice issued under sub subsection (4) to Section 28 of the Act.

It is no longer res integra that limitation is part of procedural law, thus normally retrospective, with one condition superadded namely that than an extended period of limitation would not revive dead claim. In this regard, it may be relevant to refer to the following judgments:

(a) Union of India v. Uttam Steel Ltd., (2015) 13 SCC 209:

“10. We have heard the learned counsel for the parties and Shri Bagaria, the learned amicus curiae at some length. There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was time-barred before an amending Act with a larger period of limitation comes into force. A number of judgments of this Court have recognised the aforesaid proposition:

b). T. Kaliamurthi v. Five Gori Thaikkal Wakf [(2008) 9 SCC 306]:

“40. In this background, let us now see whether this section has any retrospective effect. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of the enactment as also to proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force. However, it must be noted that there is an important exception to this rule also. Where the right of suit is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right.”

c) New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840]:

“7. … ‘(2) … The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation.’”

d) ITO v. Induprasad Devshanker Bhatt [AIR 1969 SC 778]:

“6. In our opinion, the principle of this decision applies in the present case and it must be held that on a proper construction of Section 297(2)

(d)(ii) of the new Act, the Income Tax Officer cannot issue a notice under Section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. It follows therefore that the notices dated 13-11-1963 and 9-1-1964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court [Induprasad Devshanker Bhatt v. J.P. Jani, 1964 SCC OnLine Guj 18: (1965) 58 ITR 559] by the grant of a writ.”

e) S.S. Gadgil v. Lal and Co. [AIR 1965 SC 171]:

“13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income Tax Act before it was amended, ended on 31-3-1956. It is true that under the amending Act by Section 18 of the Finance Act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign party under Section 43 within two years from the end of the year of assessment. Butill not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to Section 18 of the Finance Act, 1956, only a limited retrospective operation i.e. up to 1-4-1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income Tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred.”

7.13. Keeping in view the law laid down on extension of the limitation vis-a-vis dead claim, above amendment to sub-section (9) to Section 28 vide Finance Act, 2018 (Act 13 of 2018) was made after 9 years from the date of notice, which by itself is unreasonable to keep adjudication pending. Moreso, when the legislative policy is reflected insofar as it mandates that adjudication must be completed within a year from the date of issuance of notice, “where it is possible to do so”. Thus adjudication cannot be treated as surviving until the amendment, in other words dead claim, when amendment was made vide Finance Act, 2018 (Act 13 of 2018)

7.14 Assuming impugned proceeding did survive, until 2018 amendment, which is effective from 29.03.2018, the said amendment only enables adjudication to be made within a period of two years from the date of notice, which if one applies from the date of amendment to impugned proceeding would expire by 29.03.2020. However, the impugned order is passed on 19.02.2024 ie., almost four years thereafter. Thus, barred by limitation.

7.15 A faint attempt was made to explain the delay by submitting that matters were assigned to the Call Book in view of judgment of the Supreme Court in Syed Ali’s case referred supra, relating to the jurisdiction of DRI officers to carry on adjudication proceedings. However, no material is placed to support the above contention.

7.16 For all the above reasons, this court does not find any merit in the submission of the learned counsel for the respondent. The impugned order is set aside as barred by limitation, in any view the delay of 14 years in adjudicating show cause notice is unreasonable, thereby suffers from the vice of arbitrariness and falls foul of Article 14 of the Constitution of India, thus unsustainable.

7.17 In view of the above, this Writ Petition stands disposed of. No costs. Consequently, connected miscellaneous petitions are closed. 23.07.2026 Index: Yes/No Neutral Citation: Yes/No Speaking / Non Speaking order mrn/mka To: The Principal Commissioner of Customs (Preventive) Chennai, Custom House, No.60, Rajaji Salai, Chennai -600 001.

Notes: 

1 ITW Signode Ltd., Vs. CCE, 2003 158 ELT 403.

2 Commissioner of Income Tax, Chennai vs. Alagendran Finance Ltd., reported in (2007) 7 SCC 215