Safiya Malik

The High Court of Bombay at Goa Division Bench of Justice Bharati Dangre and Justice Ashish S. Chavan has allowed writ petitions by an assessee-manufacturer, setting aside two show cause notices seeking central excise duty on the differential portion of sales tax/VAT retained under a Net Present Value incentive scheme. The Court held that the tax authorities cannot proceed to adjudicate these notices after an unexplained lapse of about nine and eight years, as any determination now would lose purpose and impede both sides from tracing the material required for effective adjudication. Observing that such inordinate delay alone justified interference, the Bench quashed the notices and directed that no further adjudication be undertaken in respect of the impugned demands.

Computer Graphics Private Limited, an assessee holding a Central Excise Registration Certificate and engaged in the manufacture of photographic colour paper, graphic art film and medical X-ray products, filed two writ petitions challenging the delay in adjudication of show cause-cum-demand notices issued on 16.03.2016 and 04.01.2017.

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The notice dated 16.03.2016, covering the period April 2011 to June 2015, alleged contravention of Section 4(3)(d) of the Central Excise Act, 1944, stating that the assessee failed to include the transaction value of VAT/CST recovered from buyers and retained under the deferment scheme. It also alleged violation of Rule 6 of the Central Excise Valuation Rules for not including the additional consideration in the form of CST retained by the assessee.

The notice dated 04.01.2017, covering the period July 2010 to March 2011, contained identical allegations under Section 4(3)(d) of the Central Excise Act and Rule 6 of the Valuation Rules.

The petitioner submitted that both notices had remained pending since their issuance in 2016 and 2017. Reliance was placed on earlier decisions, including Sanghvi Reconditioners Pvt. Ltd. and ATA Freight Line India Pvt. Ltd., to raise objections based on the delay.

The Revenue stated in its affidavit that both show cause notices were transferred to the Call Book pursuant to CBEC circulars dated 14.12.1995 and 28.05.2003 because the issues involved were connected with a pending Civil Appeal before the Supreme Court in Union of India vs. Uttam Galva Steels Limited, which was disposed of on 20.09.2024.

The petitioner approached the Court in July 2025 after no steps were taken to resume adjudication even after disposal of the related Supreme Court proceedings.

The Court recorded the petitioner’s objection that adjudication after 9 and 8 years respectively was impermissible and examined the Revenue’s affidavit in light of binding precedents. It quoted extensively from Sanghvi Reconditioners Pvt. Ltd., noting that “the obligation on the respondents to adjudicate the show cause notices with expediency has been repeatedly emphasized” and that adjudication proceedings serve a definite purpose of securing public revenue. “The larger public interest therefore requires that the Revenue and its officials adjudicate the show cause notices expeditiously and within a reasonable time.”

The Court recorded the earlier Division Bench’s statement that in absence of limitation, authorities must act within reasonable time, and that “a period of 13 years… was not termed as reasonable.” It further cited the finding that where matters were kept dormant in the call book, there existed “no bar or embargo, much less in law for adjudicating the show cause notice.”

Quoting the earlier judgement, the Court reproduced: “the Revenue/Department has not been able to justify its lapse… for more than 15 years… Merely because there are number of such cases in the call book does not mean that we should not grant any relief to the petitioner.”

The Court then referred to ATA Freight Line India Pvt. Ltd., which had held that “keeping the show cause notices in dormant list or the Call Book… cannot be allowed or condoned by the writ Court to justify the inordinate delay at the hands of the Revenue.” It recorded the conclusion that the Revenue was responsible for gross delay causing prejudice, and that the assessee could not be expected to preserve evidence over such long periods.

Upon examining the facts of the present case, the Bench stated that even after the connected Supreme Court proceedings were disposed of on 20.09.2024, “more than one year has elapsed, but no steps were taken, which constrained the Petitioner to approach this Court.”

The Bench also recorded that the Supreme Court had disposed of the relevant appeals on the ground of monetary limit, confirming the explanation provided by the Additional Solicitor General. Finally, the Court stated that adjudicating the notices would “defeat its purpose, on account of lapse of time as it will pose difficulty for the Revenue as well as the Assessee to track the necessary material… necessary for effective adjudication.”

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The Court directed that “the show cause notices cannot be adjudicated and are liable to be quashed and set aside only on the ground of gross delay in not adjudicating them, despite lapse of period of 9 and 8 years respectively.”

The writ petitions “are made absolute by quashing and setting aside the impugned show cause notices. No order as to costs.”

Advocates Representing the Parties

For the Petitioner: Mr. Bharat Raichandani (through V.C.), Mr. Vibhav R. Amonkar, Mr. Raj Chodankar

For the Respondents: Ms. Asha Desai, Standing Counsel

Case Title: Computer Graphics Private Limited vs. Union of India & Ors.
Neutral Citation: 2025: BHC-GOA:2035-DB
Case Number: Writ Petition Nos. 2052 & 2054 of 2025
Bench: Justice Bharati Dangre, Justice Ashish S. Chavan