Case Law Details
Mahindra and Mahindra Ltd. Vs Union of India (Bombay High Court)
The Bombay High Court recently addressed Mahindra and Mahindra Ltd. vs Union of India, involving a customs notice issued after 26 years for non-submission of the Export Obligation Discharge Certificate (EODC). Mahindra, a motor vehicle manufacturer, had availed duty-free imports in 1996 under an advance license issued by the Directorate General of Foreign Trade (DGFT). The Customs Department issued the notice in December 2022, seeking recovery of duty forgone due to alleged non-compliance. Mahindra challenged this notice under Article 226 of the Constitution, citing unreasonable delay.
The High Court quashed the notice, emphasizing that while the Customs Act does not specify a time limit for enforcing bonds under Section 143, actions must be initiated within a reasonable period. Referring to Section 28 of the Act, which allows a maximum of five years for recovering duties in fraud cases, the court held that the 26-year delay was excessive, especially as there were no allegations of fraud or suppression against Mahindra. The court also relied on precedent, including the Supreme Court’s ruling in Union of India vs. Citibank, which deemed a 10-year delay under FERA unreasonable, and a similar Bombay High Court decision in Coventry Estates Pvt. Ltd.
The court rejected the Revenue’s argument that no limitation applied under Section 143. It stressed that administrative actions must align with principles of fairness and natural justice. By setting aside the notice, the judgment reinforces the need for timely enforcement of claims under the Customs Act, ensuring procedural fairness for businesses. This ruling underscores the importance of adhering to reasonable time limits, even in cases where statutes are silent on specific deadlines.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule is made returnable immediately at the request and with the consent of the parties.
2. By this petition under Article 226 of the Constitution of India, the petitioners are challenging the notice dated 15 December 2022 issued by respondent no.2 seeking to recover duty foregone under Section 143 of the Customs Act, 1962, for non-submission of the Export Obligation Discharge Certificate against Advance Authorization No.31000796, dated 23 September 1996.
3. Mr Raichandani, learned counsel for the petitioner, submits that the impugned notice is issued to recover the duty for the non- submission of the Export Obligation Discharge Certificate dated 23 September 1996. It is his submission that the impugned proceedings are hopelessly barred by delay inasmuch as the proceedings are initiated after almost 26 years. It is his submission that although there is no limitation provided under the Customs Act, the proceedings ought to have been taken within a reasonable period and a period of 26 years cannot be treated as a reasonable period in the facts and circumstances of the case. Mr. Raichandani relied upon the Supreme Court’s decision in the case of Union of India vs. Citi Bank 1 in support of his submission.
4. Adik, learned counsel for the respondents submits that under Section 143 of the Customs Act, no time limit is provided for enforcement of the bond executed. Therefore, the impugned notice is not barred by limitation. Thus, he submits that the present petition is devoid of any merit on the grounds of limitation. He made no other submission on behalf of the respondents.
5. We have heard the learned counsel for the petitioner and the learned counsel for the respondents.
6. Admittedly, there is no dispute that no time limit is provided under Section 143 of the Customs Act for recovery of duty foregone. However, it is a settled position that where the Act is silent on the limitation, the proceedings have to be initiated within a reasonable period, and the said reasonable period has to be ascertained based on a holistic reading of the Scheme of the Act. In the instant case, admittedly, the impugned notice is issued for non-submission of Export Obligation Discharge Certificate dated 23 September 1996, after almost 26 years.
7. In our view, on a reading of the Customs Act, the reasonable period for initiating any proceedings for recovery of dues can certainly not be 26 years, even where a bond may have been executed. Section 28 of the Customs Act, and that too, in a case where suppression or fraud is alleged, provides a time limit of 5 years. This period gives a clue and could, therefore, provide guidance in determining a reasonable time when the legislature offers no specific time In this case, there are no allegations of any fraud or suppression. Therefore, there is nothing reasonable in seeking to make recoveries after 26 years. Not even an attempt is made to explain this inordinate delay.
7. Adik also could not point out that the proceedings initiated after 26 years can be considered reasonable. Therefore, in our view, the proceedings commenced by the impugned notice dated 15 December 2022 are barred by inordinate and wholly unexplained delay.
8. Raichandani is justified in relying on the Supreme Court’s decision in the case of Union of India Vs. Citi Bank (supra), where the show cause notice under FERA issued almost a decade after the transaction date, was quashed on the grounds of delay in initiating the proceedings. The Co-ordinate Bench of this Court in the case of Coventry Estates Pvt. Ltd. Vs. The Joint Commissioner, CGST and Central Excise & Anr.2 has analyzed this issue of delayed adjudication and quashed the notices where the adjudication was proposed after a gross delay. This Bench has subsequently and consistently followed the decision.
9. Given the above, respectfully following the decision of the Supreme Court and the Co-ordinate Bench, the impugned notice dated 15 December 2022 is quashed and set aside.
10. Rule is made absolute in the above terms. Accordingly, this petition is disposed of.
Note:
1 2022 (382) E.L.T. 293 (S.C.)
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