L&T Construction Equipment Ltd. Vs Assistant Commissioner of Customs (Chennai-IV) (Madras High Court)
The Madras High Court allowed the writ petition challenging the order-in-original dated 27.05.2022 passed under Rule 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, whereby the petitioner was directed to repay the duty drawback received on exports.
The petitioner challenged the order on the grounds that it violated the principles of natural justice, failed to consider the petitioner’s replies dated 28.08.2017 and 13.04.2022 seeking additional time to submit a detailed response because the exports related to the years 2004–2005, and that the show cause notice dated 16.08.2017 had been issued after an inordinate delay of more than 12 years from the exports.
In support of its case, the petitioner relied upon Government of India Vs. Citedal Fine Pharmaceuticals [1989 (42) ELT 515 (SC)], which held that statutory demands must be made within a reasonable period, and Pratibha Sytex Ltd Vs. Union of India [2013 (287) ELT 290 (Guj.)], wherein the Gujarat High Court held that, in recovery of erroneously paid duty drawback, a period of three years is the maximum reasonable period for raising a demand.
The respondent contended that a personal hearing notice dated 04.04.2022 had been issued directing the petitioner to appear on 18.04.2022, but the petitioner neither appeared nor submitted a reply, and therefore the writ petition was not maintainable.
The High Court noted that it was undisputed that the exports related to 2004–2005, while the show cause notice seeking recovery of duty drawback was issued only on 16.08.2017, more than 12 years later. It also recorded that the petitioner had submitted replies on 28.08.2017 and 13.04.2022 requesting additional time to file a detailed reply due to the age of the transactions, but those requests were neither considered nor reflected in the impugned order.
Referring to the Supreme Court’s decision in Government of India Vs. Citedal Fine Pharmaceuticals, the Court reiterated that statutory demands must be made within a reasonable period. It further agreed with the Gujarat High Court’s decision in Pratibha Sytex Ltd Vs. Union of India that a demand beyond three years in a similar duty drawback recovery matter constituted an inordinate delay.
The Court held that the respondent’s attempt to recover duty drawback after a lapse of 12 years could not be regarded as being within a reasonable period. It also rejected the respondent’s reliance on the personal hearing notices, observing that those notices themselves had been issued only after the same prolonged delay. Additionally, the respondent had failed to consider the petitioner’s requests for further time, resulting in a violation of the principles of natural justice.
Accordingly, the High Court quashed the order dated 27.05.2022, allowed the writ petition, made no order as to costs, and closed the connected miscellaneous petitions.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This writ petition has been filed challenging the impugned order-in-original dated 27.05.2022 passed under Rule 16A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, as amended upto 13th July, 2006. Under the impugned order, the petitioner has been directed to pay the duty drawback benefit they had received in respect of their exports.
2. The petitioner has challenged the impugned order on the following grounds:-
(a) The impugned order has been passed in violation of the principles of natural justice.
(b) Despite sending replies dated 28.08.2017 and 13.04.2022 to the show cause notice dated 16.08.2017, the respondent has failed to consider the request of the petitioner. In those replies, a specific request was made by the petitioner seeking for extension of time to submit a detailed reply in view of the fact that the exports were very old.
(c) The shipments made by the petitioner pertain to the years 20042005, but, the show cause notice was issued seeking for recovery of duty drawback only on 16.08.2017 after a lapse of more than 12 years.
Therefore, on the ground of inordinate delay in issuing the show cause notice, the impugned order has to be quashed.
3. In support of his contention, the learned counsel for the petitioner drew the attention of this Court to the following authorities:-
(a) A decision of the Hon’ble Supreme Court in the case of Government of India Vs. Citedal Fine Pharmaceuticals [1989 (42) ELT 515 (SC)] for the proposition that any demand from any statutory authority will have to be made within a reasonable period.
(b) A decision of the Gujarat High Court in the case of Pratibha Sytex Ltd Vs. Union of India [2013 (287) ELT 290 (Guj.)], whereby it is held that 3 years’ period is the maximum period, which can be considered as a reasonable one for recovery of any amount erroneously paid.
4. However, the learned standing counsel for the respondent would submit that although personal hearing notice dated 04.04.2022 was issued to the petitioner by the respondent directing them to appear on 18.04.2022, despite receipt of the said notice, the petitioner never came forward to submit their reply or appeared in person aggrieved by the impugned order. Therefore, according to him, this writ petition is not maintainable.
5. The following are the undisputed facts:-
(a) The show cause notice seeking for recovery of duty drawback from the petitioner is dated 16.08.2017 pertaining to the export of shipments made by the petitioner during the years 2004-2005.
(b) The said show cause notice was issued after a lapse of more than 12 years from the date when the shipments were made by the petitioner.
(c) Replies dated 28.08.2017 and 13.04.2022 were sent by the petitioner requesting further time to submit a detailed reply in view of the fact that the shipments pertain to the years 2004-2005, which are old shipments. The said request of the petitioner has not been considered under the impugned order and the same is also not reflected in the impugned order.
6. The Hon’ble Supreme Court in the decision relied upon by the learned counsel for the petitioner in Citedal’s case (cited supra) has held that any demand from any statutory authority will have to be made within a reasonable period.
7. In a similar issue seeking for recovery of duty drawback, Gujarat High Court in Pratibha Syntex Ltd’s case (cited supra) has held that under no circumstances, can a demand be made beyond the period of three years and it is further held that 3 years’ period is the maximum period and beyond the said period, it would amount to an inordinate delay.
8. In the case on hand, the shipments for which a recovery of the duty drawback is sought for from the petitioner are pertaining to the years 2004-2005, whereas a demand has been made by the respondent for recovery of the same through a show cause notice only in the year 2017, after a lapse of 12 years, which, in the considered view of the Court, is an inordinate delay and cannot be treated as a reasonable one. This Court is in agreement with the view taken by the Gujarat High Court in the aforesaid decision involving a similar issue.
9. Though the learned standing counsel for the respondent submitted that personal hearing notices were sent in the year 2017 to the petitioner and the same was not responded to, the said contention has to be rejected, since those personal hearing notices were also sent belatedly, i.e., after a lapse of 12 years from the date when the petitioner had made shipments. The respondent has also not considered the replies dated 28.08.2017 and 13.04.2022 sent by the petitioner seeking further time for submitting a detailed reply, and the said replies are also not reflected in the impugned order passed by the respondent. Therefore, on the ground of violation of the principles of natural justice as well as on the ground that the impugned order has been passed after a lapse of 12 years from the date when the shipments were actually made by the petitioner, this Court has to necessarily quash the impugned order. Accordingly, the impugned order dated 27.05.2022 passed by the respondent is quashed and the writ petition is allowed. No Costs. Consequently, connected miscellaneous petitions are closed.
