Dept cannot initiate proceedings when assessee had time to fulfill statutory obligations

In the instant case, Bharat Enterprises (Petitioner) filed a writ petition before the Hon’ble Madras High Court challenging the Order passed by the Revenue wherein it was alleged that the Petitioner had not fulfilled the export obligations as were required under the license issued to the Petitioner within the stipulated period of 8 years. Therefore, the Petitioner was directed to pay duty amount of Rs. 5,11,350/-under the Customs Act, 1962 (Customs Act).

The Hon’ble Madras High Court observed that the Petitioner was granted a time period of 8 years to fulfil the export obligations. However, the Department had initiated the proceedings before the expiry of stipulated period of 8 years. Therefore, the Hon’ble High Court held that initiation of proceedings in such a case was completely arbitrary and faulty. It was further held that proceedings should only have been initiated if the Petitioner had not fulfilled the export obligations as per the license conditions and commencement of proceedings before the end of stipulated time period would lead to failure of substantial justice. Accordingly, the demand raised against the Petitioner was set aside.