Appeals pending in CESTAT allowed if order not passed within one year of SCN

Kopertek Metals Pvt Ltd Vs Commissioner of CGST (West) (CESTAT Delhi)

In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi, in the case of Kopertek Metals Pvt Ltd vs Commissioner of CGST (West), set aside orders issued beyond the statutory adjudication timeline of one year from the issuance of the show cause notice (SCN). The judgment, delivered on November 25, 2024, reiterated the necessity of adhering to statutory time limits under Section 11A(11) of the Central Excise Act.

Case Background

The case revolved around a show cause notice issued on April 28, 2015, to Kopertek Metals Pvt Ltd, directing the company to respond within 30 days. The SCN warned that failure to respond would lead to ex parte adjudication. Despite this, the adjudicating authority failed to resolve the matter within the prescribed one-year period, which ended on April 27, 2016.

The adjudication process began only on September 7, 2016, five months after the statutory deadline, and subsequent delays further stretched the timeline. Cross-examinations were conducted sporadically from 2018 to 2021, with the final personal hearing concluding in 2021. The order was eventually pronounced on June 14, 2022, exceeding the permissible time frame.

Key Legal Arguments

Appellant’s Contention

The appellant argued that the delayed adjudication violated the one-year statutory limit under Section 11A(11). They emphasized that the adjudicating authority failed to cite any “insurmountable exigencies” justifying the delay, which made the proceedings untenable.

Department’s Argument

The department defended the delay, citing the principles of natural justice. They claimed the adjudicating authority allowed sufficient time for cross-examinations and personal hearings to ensure fair proceedings. The department also relied on various judicial precedents, arguing that certain delays could be condoned when reasonable.

Tribunal’s Observations

1. Mandatory Nature of the Time Limit
   The tribunal noted that Section 11A(11) of the Central Excise Act explicitly prescribes a one-year timeline for adjudication of SCNs. The provision mandates adherence unless exceptional circumstances are documented, which was not done in this case.
2. Balancing Natural Justice and Timeliness
   The tribunal rejected the department’s argument that principles of natural justice justified the delay. It held that these principles do not override statutory timelines and emphasized the importance of timely adjudication for procedural efficiency.
3. Precedents Examined
   The tribunal reviewed several precedents, including:
   • Principal Commissioner of Customs vs Unison Clearing Pvt Ltd, where procedural timelines were deemed directory, not mandatory.
   • Conybio Healthcare Pvt Ltd vs Commissioner of Customs, which discussed elasticity in statutory timelines.
   • Collector of Central Excise vs Bhagsons Paint Industry, where the Supreme Court allowed adjudication despite long delays.

The tribunal distinguished these cases, emphasizing that in the present matter, no compelling reasons for delay were cited.

Ruling

The CESTAT concluded that the adjudicating authority failed to justify the extended timeline and violated the statutory mandate. Consequently, it quashed the impugned order and allowed the appeals, including 209 related cases involving similar delays.

Impact of the Judgment

This ruling reinforces the importance of adhering to statutory timelines in adjudication proceedings. It also underscores the necessity for adjudicating authorities to document and justify any delays.

The decision is likely to have broader implications for pending cases where adjudication timelines have been breached, providing a precedent for appellants to challenge such delays effectively.

Conclusion

The Kopertek Metals Pvt Ltd judgment serves as a reminder for authorities to adhere to statutory timelines in the adjudication of SCNs. By setting aside delayed orders, the CESTAT has reinforced the principle of procedural discipline, ensuring fairness and accountability in tax adjudication processes.

FULL TEXT OF THE CESTAT DELHI ORDER

Excise Appeal No. 52178 of 2022 has been filed by M/s. Kopertek Metals Pvt. Ltd.¹ to assail the common order dated 14.06.2022 passed by the Additional Director General (Adjudication)² disallowing CENVAT credit and confirming the demand under the provisions of rule 14 of the CENVAT Credit Rules, 2004³ read with section 11A of the Central Excise Act, 1944⁴ with interest and penalty.

2. At the time of hearing of the appeals, learned counsel appearing for Kopertek raised three issues and submitted that in the event these issues are decided against Kopertek, they will make submissions on merit. Learned counsel appearing for other appellants also made submissions on these three issues.

3. The three issues that arise for consideration in these appeals, basis the provisions of the Central Excise Act will, therefore, be dealt with at this stage and they are:

i. The order impugned deserves to be set aside for the reason that the Central Excise Officer determined the amount of duty under sub-section (10) of section 11A of the Central Excise Act beyond the period prescribed under sub-section (11) of section 11A of the Central Excise Act;

ii. The provisions of section 36B of the Central Excise Act were not adhered to for admissibility of electronic evidence; and

iii. The provisions of section 9D of the Central Excise Act relating to relevance of statements under certain circumstances were not complied with.

4. The first issue that has been raised by the learned counsel for Kopertek and the learned counsel appearing for the other appellants that the impugned orders deserve to be set aside for the sole reason that the Central Excise Officer did not determine the amount of duty of excise under sub-section (10) of section 11A within the period stipulated in sub-section (11) of section 11A shall be examined first, because in the event this issue is decided in favour of the appellants, it may not be necessary to examine the other two issues that have been raised by the learned counsel for the appellants.

5. To examine this issue, it would be appropriate to reproduce sub-sections (10) and (11) of section 11A.

6. Sub-section (10) of section 11A is as follows:

“11A(10) The Central Excise Officer shall, after allowing the concerned person an opportunity of being heard, and after considering the representation, if any, made by such person, determine the amount of duty of excise due from such person not being in excess of the amount specified in the notice.”

7. Sub-section (11) of section 11A, was thrice amended, and is reproduced, as it stood during the relevant period:

From 28.04.15 to 13.05.2015

11A(11) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10) –

a. within six months from the date of notice where it is possible to do so, in respect of cases falling under sub-section (1);

b. within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4) or sub-section (5).

From 14.05.2015 to 13.05.2016

11A(11) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10) –

a. within six months from the date of notice where it is possible to do so, in respect of cases falling under sub-section (1);

b. within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4).

From 14.05.2016 upto 29.03.2018

11A(11) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10) –

a. within six months from the date of notice where it is possible to do so, in respect of cases falling under sub-section (1);

b. within two years from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4).

8. The facts relating to the Excise Appeal filed by Kopertek shall be referred to, as the facts of this appeal were placed at length by the learned counsel for Kopertek and the learned authorized representative for the department.

9. The show cause notice in this appeal was issued on 28.04.2015 by the Principal Additional Director General. It was adjudicated on 14.06.2022 by the Adjudicating Authority. As the notice was issued on 28.04.2015, it would be governed by the provisions of sub-section (11) of section 11A, as it stood during the period from 28.04.2015 to 13.05.2015. Sub-section (11) of section 11A, as it stood during this period, provided that the Central Excise Officer shall determine the amount of duty within six months from the date of notice, where it was possible to do so, in respect of cases falling under sub-section (1). However, in respect of cases falling under sub-section (4) or sub-section (5), the Central Excise Officer shall determine the amount of duty within one year from the date of notice, where it is possible to do so. The show cause notice in this appeal was issued under sub-section (4) of section 11A. Thus, the Central Excise Officer had to determine the amount of duty within one year from the date of notice, where it was possible to do so.

10. The learned authorized representative appearing for the department has, in the written submissions, provided a date and event chart regarding the proceedings undertaken by the Adjudicating Authority pursuant to the issuance of the show cause notice. It is reproduced below:

Date	Event
28.04.2015	Show cause notice issued requiring the noticee to show cause within 30 days, failing which the case would be decided ex parte without any further communication.
07.09.2016	1st personal hearing fixed. Only M/s. Arihant Trading and Metals requested for supply of Relied Upon Documents
22.02.2018	Cross-examination allowed. However, none of the witness appeared
10.04.2018	Cross-examination allowed
11.04.2018	Cross-examination allowed
17.04.2018	Cross-examination allowed
20.09.2018	Cross-examination allowed
04.04.2019	Cross-examination allowed
17.06.2019	Cross-examination allowed
17.10.2019	Cross-examination allowed
20.10.2019	Cross-examination adjournment
12.01.2021	Cross-examination allowed
22.03.2021	Cross-examination allowed. Counsel was not available
26.07.2021	2nd Personal Hearing. Counsel requested for postponement
24.08.2021	3rd Personal Hearing. Counsel requested for adjournment
24.09.2021	4th Personal Hearing. KMPL and others filed written submission
14.06.2022	Impugned order was issued

11. What is important to note is that the show cause notice that was issued on 28.04.2015 was required to be adjudicated latest by 27.04.2016; the first personal hearing was fixed by the Adjudicating Authority almost after five months from 27.04.2016 on 07.09.2016; dates for cross-examination were fixed from 22.02.2018 to 22.03.2021; personal hearings were held on 26.07.2021, 24.08.2021 and 24.09.2021; and the order was passed by the Adjudicating Authority on 14.06.2022.

12. It was incumbent upon the Adjudicating Authority to determine the amount of duty within one year from 28.04.2015, where it was possible to do so. The discussion and findings in the impugned order start from paragraph 117 but no reason has been given in the impugned order by the Adjudicating Authority for not being able to determine the duty within the stipulated period of one year from the date of issuance of the show cause notice.

13. Learned authorized representative appearing for the department has, however, submitted that the adjudication was completed within nine months from the completion of the last hearing on 24.09.2021. Prior to this hearing, it was incumbent upon the Adjudicating Authority to “scrupulously adhere to the principles of natural justice by giving ample opportunities to the noticees to make their written submissions, allow cross-examination and opportunities for personal hearing” as contemplated in section 33A of the Central Excise Act. Learned authorized representative submitted that if the adjudication was completed without providing the aforesaid opportunities, Koperek could have raised an issue relating to violation of principles of natural justice. Learned authorized representative also submitted that the time limit of one year specified in sub-section (11) of section 11A is not mandatory in nature, but is merely directory which is explicit from the use of the words “where it is possible to do so”. Learned authorized representative also placed reliance upon certain decisions, to which reference shall be made at the appropriate stage.

14. Learned counsel for Kopertek, however, submitted that the department has not been able to substantiate that the Adjudicating Authority was prevented by “such circumstances or insurmountable exigencies” from concluding the adjudication proceedings within the stipulated period contemplated under sub-section (11) of section 11A. In this connection, learned counsel placed reliance upon the judgment of the Delhi High Court in Swatch Group India Pvt. Ltd. Union of India⁵, wherein the provisions of section 28(9) of the Customs Act, 1962⁶, which also require the proper officer to determine the amount of duty within a specified period, when it was possible to do so. Learned counsel placed reliance upon certain other decisions of High Courts, to which reference shall be made at the appropriate stage.

15. The said submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.

16. The provisions of sub-section (11) of section 11A of the Central Excise Act have been reproduced above. Sub-section (9) of section 28 of the Customs Act which came up for consideration before the Delhi High Court in Swatch Group, therefore, requires to be reproduced. It was amended on 29.03.2018. The said sub-section, as it stood prior to amendment, is reproduced below:

“28(9) The proper officer shall determine the amount of duty or interest under sub-section (8), –

a. within six months from the date of notice, where it is possible to do so, in respect of case falling under clause (a) of sub- section (1);

b. within one year from the date of notice, where it is possible to do so in respect of cases falling under sub-section (4)”

(emphasis supplied)

17. Section 28(9) and (9A) of the Customs Act, after the said amendment, read as under:

“28(9) The proper officer shall determine the amount of duty or interest under sub-section (8), —

a. within six months from the date of notice, in respect of case falling under clause (a) of sub­section (1);

b. within one year from the date of notice, [xxx] in respect of cases falling under sub-section (4):

Provided that where the proper officer fails to do so determine within the specified period, any officer senior in rank to the proper officer may, having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or interest under sub-section (8), extend the period specified in clause (a) to a further period of six months and the period specified in clause (b) to a further period of one year:

Provided further that where the proper officer fails to determine within such extended period, such proceeding shall be deemed to have concluded as if no notice had been issued.

28(9A) Notwithstanding anything contained in sub­section (9), where the proper officer is unable to determine the amount of duty or interest under sub­section (8) for the reason that —

a. an appeal in a similar matter of the same person or any other person is pending before the Appellate Tribunal or the High Court or the Supreme Court; or

b. an interim order of stay has been issued by the Appellate Tribunal or the High Court or the Supreme Court; or

c. the Board has, in a similar matter, issued specific direction or order to keep such matter pending; or

d. the Settlement Commission has admitted an application made by the person concerned,

the proper officer shall inform the person concerned the reason for non-determination of the amount of duty or interest under sub­section (8) and in such case, the time specified in sub-section (9) shall apply not from the date of notice, but from the date when such reason ceases to exist”

18. In the context of the un-amended provisions of section 28(9) of the Customs Act, which are pari materia to sub-section (11) of section 11A of the Central Excise Act, the Delhi High Court made the following observations:

“31. Therefore, the question, which requires consideration now is whether in terms of erstwhile Section 28(9) of the Customs Act, the impugned SCN dated 14-2-2018 has lapsed having not been adjudicated within the period of 12 months. In other words, whether in the facts and circumstances of the present case, it was not possible for the Revenue to adjudicate the impugned SCN within the period of 12 months from the date of issuance.

32. The unamended Section 28(9) of the Customs Act, specifically provides that the proper officer ‘shall’ determine the amount of duty within six months or within one year, as the case may be, from the date of notice. It only provides certain degree of inbuilt flexibility by incorporating the words ‘where it is possible to do so’.

33. The phrases “as far as possible” and “as far as practicable” appear in other statutes as well came up for consideration before the Apex Court in C.N. Paramasivam and Another v. Sunrise Plaza : (2013) 9 SCC 460/[2013] 30 com 320 (SC). It is observed that the words “possible” and “practicable” are more or less interchangeable along with the other words such as feasible, performable etc. The incorporation of such words gives certain degree of flexibility to the Department such as if some circumstances or insurmountable exigencies arise, which makes the recourse unpracticable or not possible, the authorities can deviate from what was required to be done in terms of the statute. When the challenge is laid to the act of the authorities deviating from the rule, the onus shifts on the authority to prove that it was not practicable or possible to follow the rule. The same is to be adjudicated on the facts and circumstances of each case.

34. The flexibility, at the same time, in our opinion, cannot be equated with the lethargy of the Department or its officers. The Legislature has mandated the show cause notices to be adjudicated within six months or one year as the case may be; it has provided flexibility only to the extent that if the same is not practicable/possible the period can be extended. The phrase ‘where it is possible to do so’ would only mean that wherever it is not practicable/possible to do certain act, the period can be extended. The same, however, cannot be an endless period without any plausible justification.”

(emphasis supplied)

19. The Delhi High Court then relied upon an earlier decision of the Delhi High Court in Sundar System Pvt. Ltd. vs. Union of India⁷ and observed:

“40. It is apparent from the documents and the timelines reflects by them that no sincere efforts have been made by the Department for adjudicating the impugned SCN. Despite being aware of the provisions of the Customs Act, admittedly, no steps were taken by the Department from 29-4­2019 that is the date, the Adjudicating Officer sent a letter to DRI seeking certain clarifications of the documents, and 15-10-2020 when they issued another letter granting personal hearing to the petitioners. It is, thus, admitted that the Department for almost a period of 17 months slept over the matter despite the specific mandate of even the unamended Section 28(9) of the Customs Act that the duty shall be levied within a period of 12 months from the date of issuance of the notice.

41. It is also significant to note that the record of personal hearing dated 9-2-2021 specifically notes that the advocate appearing for the noticee had reiterated its written submissions dated February, 2019. The impugned SCN is stated to have been kept in abeyance thereafter pursuant to the circular dated 17-3-2021.

42. The respondent has merely produced various letters received from the petitioner, DRI, and others, and has contended that some adjournments were asked for by the petitioners. Admittedly, the matter was listed from time to time for a personal hearing. However, no justification has been provided as to why it was not possible for the Department to determine the amount of Customs duty within the prescribed period of time.

43. We have perused the documents and letters produced by the Department as referred above. It is seen that for a period of almost three years, various letters were exchanged. The matter was fixed for personal hearing on more than five occasions. No reason has been provided as to why the hearings were not concluded on the said dates and the duties payable, if any, were not determined.

****

46. In our view, there is no material to show that it was not possible for the proper officer to determine the amount of duty within the prescribed period. The mention of the words, “where it is not possible to do so”, in our opinion, does not enable the Department to defer the determination of the notices for an indeterminate period of time. The Legislature in its wisdom has provided a specific period for the authority to discharge its functions. The indifference of the concerned officer to complete the adjudication within the time period as mandated, cannot be condoned to the detriment of the assessee. Such indifference is not only detrimental to the interest of the taxpayer but also to the exchequer.

47. In the absence of any ground that it was not possible for the officer to determine the amount of duty within the prescribed period, the impugned SCN has lapsed and cannot be adjudicated.”

(emphasis supplied)

20. It would be seen from the aforesaid judgment of the Delhi High Court in Swatch Group that the High Court made it amply clear that the incorporation of words like “where it is possible to do so” merely give a certain degree of flexibility to the department where there are circumstances or insurmountable exigencies which make it impracticable or not possible for the authorities to adjudicate, and in such cases the authorities can deviate from the time limit provided in the Statute. The High Court further held that when the legislature has specifically provided flexibility only to the extent that it was not practicable/possible to adjudicate within the stipulated time, the period can be extended only on satisfaction of such circumstances. The Delhi High Court specifically observed that the phrase “where it is possible to do so” would only mean wherever it is not practicable/possible to do a certain act, the period can be extended but the same cannot provide endless time limit to the department without any plausible justification.

21. The provisions of sub-section (11) of section 11A of the Central Excise Act also came up for consideration before a Division Bench of the Punjab and Haryana High Court in GPI Textiles Limited vs. Union of India⁸ and the relevant paragraphs are reproduced below:

“17. Section 11A(11) of the Act provides that Central Excise Officer shall determine the amount of duty within six months in case notice has been under sub­section 1 thereof, whereas in the case of fraud, collusion, etc., the period prescribed is one year. No doubt, the words ‘where it is possible to do so’ have been used, however, that will not stretch the period to decades as is in the cases in hand.

18. In Bhatinda District Co-op. Milk P. Union Limited’s case (supra), Hon’ble the Supreme Court upheld a Division Bench judgment of this Court where opinion expressed was that where no period of limitation is provided for exercise of any power, any notice issued more than five years thereafter was held to be unreasonable.

19. For the reasons mentioned above, we find that the notices in the present cases having been issued more than decade back and the proceedings having not been concluded within reasonable time, the same deserves to be quashed.”

22. The Delhi High Court in Nanu Ram Goyal vs. Commissioner of CGST and Central Excise, Delhi⁹ considered the provisions of section 73 of the Finance Act, 1994¹⁰. At the relevant time, this section did not provide for determination of the amount of service tax by the Central Excise Officer within a certain period, since sub-section (4B) of section 73 was introduced in the Finance Act w.e.f. 06.08.2014. Section 73(4B) of the Finance Act provides that the Central Excise Officer shall determine the amount of service tax within six months from the date of notice where it is possible to do so, in respect of cases falling under sub-section (1) of section 73 and within one year from the date of notice where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A) of section 73 of the Finance Act. It is in this context that the Delhi High Court, after referring to the judgments of the Supreme Court in Government of India vs. Citedal Fine Pharmaceuticals, Madras & ors.¹¹ and State of Punjab & ors. vs. Bhatinda District Cooperative Milk Producers Union Ltd.¹², observed:

“16. As noticed at the outset, the principal controversy to be addressed is whether the respondents are precluded from proceeding with the impugned show cause notice on the ground of inordinate delay.

17. Section 73 of the Act, as in force at the material time, did not stipulate any time period. However, by virtue of the Finance (No. 2) Act, 2014, sub-section (4B) was introduced in Section 73 of the Act which stipulates that where it is possible to pass an order, the Central Excise Officer would determine the amount of service tax within a period of one year in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A), and within a period of six months from the date of notice in cases falling under Section 73(1) of the Act.

*****

19. It is settled law that where there is no period stipulated for exercising jurisdiction, the same must be done within a reasonable period. In Government of India v. Citedal Fine Pharmaceuticals, Madras & Ors. [(1989) 3 SCC 483 = 1989 (42) E.L.T. 515 (S.C.) = 1989 taxmann.com 618 (SC)], the Supreme Court had observed as under :

“6. Learned Counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submission. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case.”

20. In a later decision in State of Punjab & Ors. v. Bhatinda District Cooperative Milk Producers Union Ltd. [(2007) 11 SCC 363 = 2007 (217) E.L.T. 325 (S.C.)], the Supreme Court had reiterated the aforesaid principle in the following words :

“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.”

21. As noted above, Section 73 of the Act, as in force at the material time, did not stipulate any period within which the show cause notice was required to be adjudicated. It merely stipulated the period within which the show cause notice was required to be issued. However, there is no cavil that the authority conferred with the jurisdiction is required to exercise the same within a reasonable period. *****”

(emphasis supplied)

23. In UPL Ltd. vs. Union of India¹³, the Bombay High Court also examined a case where a show cause notice was issued on 21.10.2010 before the insertion of sub-section (4B) to section 73 of the Finance Act but was not adjudicated for a long period of thirteen years and in this context observed:

“4. We were constrained to make the above observations as we take judicial notice of series of petitions reaching this Court on the ground that the concerned jurisdictional officers exercising such enormous powers not only under the Finance Act, 1994, but also under the other Central Acts, for reasons which are totally ill-conceived and contrary to law, have not adjudicated and/or taken forward the show cause notice for unduly long periods and in some case about 10 years. In our opinion, a serious view in this regard is required to be taken by the Ministry of Finance in regard to the officers who are not diligently discharging such vital duties and who in fact are playing with the public revenue. In such context, in our decision in Coventry Estates Pvt. Ltd. v. Joint Commissioner CGST and Central Excise & Anr. [Writ Petition No. 4082 of 2022, decided on 25 July, 2023] [(2023) 10 Centax 38 (Bom.)] which concerned delayed adjudication of a show cause notice, considering the binding statutory provisions, we have observed that such lethargic approach of the concerned officer not to adjudicate show cause notice within the time-frame as prescribed by law, would be an action on the part of the concerned officer contrary to law, who cannot be expected to violate the mandate of law. As such issues vitally affect the public revenue, we also observed that such inaction on the part of such officers would adversely affect the interest of the revenue. We also observed that if prompt adjudication of the show cause notice is not undertaken, such lapse of time and certainly a long lapse of time is likely to cause irreversible changes frustrating the whole adjudication.*****

*****

17. In our opinion, even in absence of the provisions of sub-section (4)(B) of Section 73, respondent No. 2 could not have acted oblivious to the settled principle of law, that a show cause notice would be required to be adjudicated within a reasonable time depending the facts of each case. However, as observed by us in our decision in Coventry Estates Pvt. Ltd. v. Joint Commissioner, CGST and Central Excise & Anr. (supra), reasonable time would not be an egregious, unjustified and unexplained inordinate delay. Having perused the reply affidavit, we find that no justification whatsoever is given by the Deputy Commissioner in Commissioner not adjudicating the show cause notice. We are thus of the opinion that the present case is clearly covered by our decision in Coventry Estates Pvt. Ltd. v. Joint Commissioner CGST and Central Excise & Anr. (supra) in regard to the legal position we have set out.

18. In the light of the above discussion, we are certain that this petition is required to be allowed. It is accordingly allowed in terms of prayer clauses (a) and (b).”

(emphasis supplied)

24. It would also be useful to refer to the judgment of the Bombay High Court in Coventry Estates Pvt. Ltd. vs. The Joint Commissioner, CGST and Central Excise¹⁴, which judgment was followed by the Bombay High Court in UPL. The show cause notice was issued on 16.03.2012, but it was not adjudicated for a long period of more than ten years. The relevant observations of the Bombay High Court are as follows:

“8. The primary contention as canvassed by Mr. Raichandani, learned counsel for the petitioner is that there is no warrant for the adjudicating authority to adjudicate the show cause notice, after such long and unreasonable delay of more than 10 years, as the adjudication of the show cause notice after such inordinate delay is severely prejudicial to the rights of the petitioner. In support of such contention, Mr. Raichandani has drawn our attention to the provisions of Section 73(4B) of the Finance Act, 1994, which according to him in clause (a) thereof provides a time frame for the Central Excise Officer to determine the amount of service tax due under sub-section (2), within six months from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (1) and as per the provisions of clause (b) of subsection (4B), within one year from the date of notice where it is possible to do so in respect of cases falling under the proviso to sub­section (1) or the proviso to sub-section (4A). ***** It is hence submitted that by no stretch of imagination, in the absence of any justifiable reason, the show cause notice can be adjudicated after a long delay of 10 years. In support of such contention, Mr. Raichandani has placed reliance on the decision of a co-ordinate Bench of this Court in ATA Freight Line (I) Pvt. Ltd. vs. Union of India & Ors. [Writ Petition No. 3671 of 2022] , against which Special Leave Petition (Civil) Diary No. 828 of 2023 filed by the Union of India came to be dismissed; in CMA-CGM Agencies (India) Pvt. Ltd. vs. Union of India & Ors. [Writ Petition No. 1313 of 2021]; decision of this Court in Shreenathji Logistics vs. Union of India & Ors. [Writ Petition No. 540 of 2020]; in Sushitex Exports (India) Ltd. & Ors. vs. Union of India & Anr. [2022 SCC Online Bom 191]; in Sanghvi Reconditioners Pvt. Ltd. vs. Union of India, through the Secretary, Department of Revenue & Ors. [2017 SCC Online Bom 9781]; in Reliance Industries Ltd. vs. Union of India [2019 (368) E.L.T. 854 (Bom.)] and in Parle International Ltd. vs. Union of India [2021 (375) E.L.T. 633 (Bom.)].

9. Mr. Raichandani would submit that all these decisions would show a consistent view being taken by the Court that the show cause notice cannot be adjudicated after inordinate delay and the same would be required to be dropped, accepting the well-settled principles of law, that not only the proceedings are required to be initiated within a reasonable period but they are required to be adjudicated within a reasonable period. It is his submission that in the present case, there is nothing to indicate that the delay in any manner could be justified by the department. *****

15. Considering the plain consequences, Section 73(4B)(a) and (b) would bring about, it would be an obligation on the Central Excise Officer to determine the amount of service tax due under sub-section (2), within six months from the date of notice or within a period of one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A). Thus, the statute itself prescribes for such period within which the service tax would be required to be determined. Sub-section (1) of Section 73 would also be relevant when it restricts the liability to service tax, to the period of five years under the situations falling below the proviso to sub-section (4) in cases of fraud, collusion, wilful mis-statement, suppression of facts, contravention of any of the provisions of Chapter V of the Finance Act, 1994.

16. We are thus of the opinion that there has to be a holistic approach and reading of the provisions of Section 73, when it concerns the obligation and repository of the power to be exercised by the concerned officer to recover service tax, in adjudicating any show cause notice, issued against an assessee considering the raison d’etre of the provision. It is hence expected that the approach and expectation from the officer adjudicating the show cause notice would be to strictly adhere to the timelines prescribed by provisions of the Act, as there is a definite purpose and intention of the legislature to prescribe such time limits, either under Section 73(4B) of six months and one year respectively or of five years under Section 73(1).

17. In our opinion, in the facts of the present case, such requirement and obligation the law would mandate is completely overlooked by the officer responsible for adjudicating the show cause notice. We are not shown any provision, which in any manner would permit any authority to condone such inordinate delay on the part of the adjudicating officer to adjudicate show cause notice. There can be none, as the legislature has clearly intended to avoid uncertainty, which otherwise can emerge. Thus, what would become applicable are the settled principles of law as laid down in catena of judgments, that the period within which such adjudication should happen is as mandated by law and in any case it needs to be done within a reasonable period from the issuance of the show cause notice. Further, whether such period is a reasonable period would depend upon the facts and circumstances of each case.

18. An inordinate delay is seriously prejudicial to the assessee and the law itself would manifest to weed out any uncertainty on adjudication of a show cause notice, and that too keeping the same pending for such a long period itself is not what is conducive.

19. It is well said that time and tide wait for none. It cannot be overlooked that the pendency of show cause notice not only weighs against the legal rights and interest of the assessee, but also, in a given situation, it may adversely affect the interest of the revenue, if prompt adjudication of the show cause notice is not undertaken, the reason being a lapse of time and certainly a long lapse of time is likely to cause irreversible changes frustrating the whole adjudication.

20. We are also of the clear opinion that a substantial delay and inaction on the part of the department to adjudicate the show cause notice would seriously nullify the noticee’s rights casuing irreparable harm and prejudice to the noticee. A protracted administrative delay would not only prejudicially affect but also defeat substantive rights of the noticee. In certain circumstances, even a short delay can be intolerable not only to the department but also to the noticee. In such cases, the measure and test of delay would be required to be considered in the facts of the case. This would however not mean that an egregions delay can at all be justified. This apart, delay would also have a cascading effect on the effectiveness and/or may cause an abridgement of a right of appeal, which the assessee may have. Thus, for all these reasons, delay in adjudication of show cause notice would amount to denying fairness, judiciousness, non-arbitrariness and fulfillment of an expectation of meaningfully applying the principles of natural justice. We are also of the clear opinion that arbitrary and capricious administrative behaviour in adjudication of show cause notice would be an antithesis to the norms of a lawful, fair and effective quasi judicial adjudication. In our opinion, these are also the principles which are implicit in the latin maxim “lex dilationes abhorret”, i.e., law abhors delay.”

(emphasis supplied)

25. It transpires from the aforesaid decisions that:

i. The phrases “ as far as possible” and “as far as practicable” are more or less inter-changeable along with the word “feasible”;

ii. Only when circumstances or insurmountable exigencies make it impracticable or not possible for the adjudication to take place within the stipulated period that the authorities may deviate from the time limit prescribed under the Statute;

iii. The mandate of the legislature that the show cause notice should be adjudicated within six months or one year, as the case may be, only provides flexibility for extension of the period when it is not practicable or possible to adjudicate it within the said time limit. The time limit period cannot be extended endlessly without any plausible justification;

iv. The indifference of the Adjudicating Authority to complete the adjudicating process within the statutory time limit cannot be condoned to the detriment of the assessee or detrimental to the interest of the exchequer;

v. There is a definite purpose and intention of the legislature to prescribe such time limit. The legislature has clearly intended to avoid uncertainly, which otherwise can emerge;

and

vi. Even if no time limit is prescribed for adjudication of a show cause notice, then too the adjudication has to be done within a reasonable period. However, what would be a reasonable period would depend upon the nature of the Statute, rights and liabilities thereunder and other relevant factors.

26. It is in the light of the aforesaid principles that the facts of the appeal would have to be examined.

27. The show cause notice, in the present case, was issued on 28.04.2015. It called upon the noticees to show cause within thirty days from the date of receipt of notice, failing which it was specifically provided that the matter would be adjudicated ex parte without any further communication. It is seen that the period one year from 28.04.2015 expired on 27.04.2016. Even if cause was not shown by the noticees to the said notice, the Adjudicating Authority should have proceeded to decide the matter ex parte, but what is seen is that the Adjudicating Authority even let this statutory time limit of one year pass without even adhering to the stipulation contained in the show cause notice that the matter would be decided ex parte even if no cause is shown within thirty days. It appears that it is only on 07.09.2016 i.e. almost after a period of five months after the expiry of one year that the first hearing was fixed by the Adjudicating Authority on 07.09.2016. The chart submitted by the department further shows that after the first hearing was fixed on 07.09.2016, the matter was taken up on 22.02.2018 for cross-examination which period is itself after more than one year, and this cross-examination continued from 22.02.2018 to 22.03.2021 and though five dates for cross-examination were fixed in 2018, four dates were fixed in 2019 and thereafter two dates for cross-examination were fixed in 2021. There is absolutely no reason assigned in the written submissions or in the date and event chart as to why the cross-examination process continued for almost three years from 2018 upto 2021, when the adjudication itself was required to be completed within one year. Three dates for personal hearing were fixed in 2021 at an interval of almost one month and thereafter the show cause notice was adjudicated after nine months from the last date of personal hearing on 14.06.2022.

28. A clear statutory time limit of one year is provided in sub-section (11) of section 11A for the Adjudicating Authority to adjudicate the show cause notice but no reason has been given in the impugned order as to why it was not feasible or practicable for the Adjudicating Authority to adjudicate the show cause notice. It was incumbent upon the Adjudicating Authority to have clearly spelt out the “insurmountable exigencies” leading to delayed adjudication but none has been pointed out in the impugned order. The Adjudicating Authority has to record reasons in the order adjudicating the show cause notice and not leave it to the department to speculate why the Adjudicating Authority could not adhere to the time limit provided to it under a Statute to adjudicate the show cause notice.

29. Learned authorized representative appearing for the department only submitted that the delay occurred on account of the appellant as the appellant did not file a reply to the show cause notice within the period of one month stipulated in the show cause notice and, in fact, no reply was filed till 07.09.2016, which was the date fixed for hearing by the Adjudicating Authority. In this connection, learned authorized representative appearing for the department not only placed reliance upon section 33A of the Central Excise Act, but also contended that since the Adjudicating Authority is required to strictly adhere to the principles of natural justice that require adequate opportunities to be given to the noticees before the adjudicating the show cause notice the Adjudicating Authority was justified in granting time to the noticees to cross-examine and also provide adequate personal hearing.

30. It is not possible to accept this contention of the learned authorized representative appearing for the department.

31. The principles of natural justice do not admit of such delayed adjudication where time limit is fixed under a Statute to adjudicate the matter. The Adjudicating Authority cannot endlessly wait and has to utilize its discretion in a fair and reasonable manner so as to balance between the principles of natural justice and the time set out in the Statute for adjudication of the show cause notice. The show cause notice required the noticees to file a reply within thirty days, failing which it was mentioned that the matter would be adjudicated ex parte. Assuming that no reply was filed by the noticees, still the Adjudicating Authority should have proceeded to adjudicate the show cause notice ex parte as it was bound to adjudicate in show cause notice within one year, unless there were strong and compelling reasons for it not to adjudicate the show cause notice within the stipulated time. Learned authorized representative appearing for the department is, therefore, not justified in making this submission. Nothing has been shown which can even remotely demonstrate that there were circumstances, much less insurmountable exigencies, which prevented the Adjudicating Authority from completing the adjudication process within the stipulated term.

32. Learned authorized representative appearing for the department placed reliance upon the following decisions to support his contention:

a. Principal Commr. of Cus. (General), Mumbai Unison Clearing P. Ltd.¹⁵;

b. Conybio Healthcare (India) Pvt. Ltd. Commissioner of Customs, Chennai¹⁶;

c. Collector of Central Excise, New Delhi Bhagsons Paint Industry (India)¹⁷; and

d. M/s. Maggie Marketing Pvt. Ltd. and others Commissioner, Customs-Patparganj¹⁸

33. In Unison Clearing, the issue that arose for consideration before the Bombay High Court was whether the time limit prescribed in regulation 20 of the Customs Brokers Licence Regulations, 2013 is directory or mandatory in nature. This is not the situation in the present case. In view of the judgments of the High Courts referred to above, it was incumbent upon the Adjudicating Authority to adjudicate the show cause notice within the time limit of one year fixed under sub-section (11) of section 11A, unless it was not possible to do so which phrase has also been explained in detail in these judgments.

34. In Conybio Healthcare, the Madras High Court held that the time limit prescribed under sub-section (9) of section 28 of the Customs Act is elastic and not rigid. This decision would have to be examined in the light of the limitations placed upon extension of the time period by various decisions of the High Courts referred to above.

35. In Bhagsons Paint, the Supreme Court held that there is no statutory bar to adjudicate the matter even after nine lapse of nine years after issue of the show cause notice. In a subsequent judgment rendered in Citedal Fine and Bhatinda District, the Supreme Court held that even when no time limit is prescribed, it does not mean that the show cause notice has not to be adjudicated within a reasonable period of time. These two judgments of the Supreme Court have been followed by the Delhi High Court in Nanu Ram. The Bombay High Court in UPL and Coventry Estates also held that even when no time period is prescribed for adjudication of a show cause notice, the same has to be adjudicated within a reasonable period of time.

36. In Maggie Marketing, the main contention advanced by the learned counsel for the appellant was regarding retrospective application of the amendment made on 29.03.2018 in section 28(9) of the Customs Act. It was contended that though the show cause notice was issued on 17.10.2017, but still section 28(9) of the Customs Act, as amended on 29.03.2018, would be applicable. This is evident from paragraphs 9 and 10 of the decision of the Tribunal and the relevant portions are reproduced below:

“9. The records indicate that in response to the show cause notice dated 17.10.2017, the appellant submitted an interim reply dated 07.04.2021 and contended that though section 28 (9) was amended on 29.03.2018, but it will also be applicable to show cause notices issued prior to this date and so in view of the amended provisions of section 28(9) of the Customs Act, such proceedings shall be deemed to have been concluded as if no notice has been issued since the show cause notice was not adjudicated within the stipulated time. *****

10. Thus, in effect, what was sought to be contended by the appellant in response to the show cause notice was that even though the show cause notice was issued on 17.10.2017, it would still be governed by the amended provisions of section 28(9) of the Customs Act and, therefore, the proceeding should be concluded as the show cause notice had not been issued within the stipulated time.”

(emphasis supplied)

37. This contention of the appellant was not accepted by the Division Bench of the Tribunal in Maggie Marketing and the relevant portions of the order contained in paragraphs 16 and 17 are reproduced below:

“16. It needs to be noted that unamended and amended sections 28(9) of the Customs Act were examined at length by the Delhi High Court in Swatch Group India Pvt Ltd. vs. Union of India [2023 (386) ELT 356 (Del.)]. The Delhi High Court considered the decision of the Punjab & Haryana High Court in Harkaran Dass Vedpal and also the substituted Explanation 4 added on 27.02.2020 and rejected the contention about retrospectively application of the amended section 28(9) of the Customs Act. *****

17. It has therefore, to be held, in view of the aforesaid discussion, that the show cause notice dated 17.10.2017 issued to the appellant would be governed by the unamended provisions of section 28(9) of the Customs Act.”

(emphasis supplied)

38. The decision of the Delhi High Court in Swatch Group was examined in connection with this contention advanced on behalf of the appellant regarding retrospective amendment of section 28(9) of the Customs Act.

39. In respect of the unamended provision of section 28(9) of the Customs Act, the Division Bench found that due to Covid restrictions and the fact that the show cause notice was not served that it was not possible to adjudicate the show cause notice within the time stipulated.

40. The facts of each case have to examined to find out whether there were circumstances or insurmountable exigencies which made it impracticable for the adjudication to take place, as has been held by the Delhi High Court in Swatch Group.

41. The decisions relied upon by learned authorized representative appearing for the department, therefore, do not help the department.

42. The aforesaid discussion would lead to the inevitable conclusion that the impugned order would have to be set aside only for the reason that the adjudication was not completed within the time limit prescribed under sub-section (11) of section 11A of the Central Excise Act.

43. It would, therefore, not be necessary to examine the other two contentions raised by the learned counsel for the appellants.

44. The first issue that has been decided also arises for consideration in all the remaining 209 appeals that have been filed by the assessees for setting aside the impugned order. This would be apparent from the chart annexed as “Annexure A” to this order wherein details of the Excise Appeals, date of show cause notice, and the date of order has been provided.

45. It is evident that in all the 209 cases, the adjudication has taken place beyond the period stipulated in sub-section (11) of section 11A of the Central Excise Act and there is no plausible explanation as to why it was not possible for the Adjudicating Authority to complete the adjudication process within the stipulated time.

46. Thus, the impugned orders that have been assailed in all the 210 Excise Appeals would have to be set aside and are set aside. The appeals are, accordingly, allowed with consequential relief(s), if any to the appellant.

(Order pronounced on 25.11.2024)

Notes:

¹ Kopertek

² the Adjudicating Authority

³ the Credit Rules

⁴ the Central Excise Act

⁵ 2023 (386) E.L.T. 356 (Del.)

⁶ the Customs Act

⁷ 2020 (33) G.S.T.L. 621 (Del.)

⁸ 2018 (362) E.L.T. 388 (P & H)

⁹ 2023 (74) G.S.T.L. 17 (Del.)

¹⁰ the Finance Act

¹¹ 1989 (42) E.L.T. 515 (S.C.)

¹² 2007 (217) E.L.T. 325 (S.C.)

¹³ 2023 (79) G.S.T.L. 225 (Bom.)

¹⁴ (2023) 10 Centax 38 (Bom.)

¹⁵ 2018 (361) E.L.T. 321 (Bom.)

¹⁶ (2022) 1 Centax 97 (Mad.)

¹⁷ 2003 (158) E.L.T. 129 (S.C.)

¹⁸ Customs Appeals No. 50025 of 2022 decided on 21.08.2024