Safiya Malik

On December 19, 2024, the Delhi High Court quashed a show-cause notice issued by the Directorate of Revenue Intelligence (DRI) in April 2015 against Shri Balaji Enterprises. The bench, comprising Justice Pratibha M. Singh and Justice Amit Sharma, held that the prolonged delay in adjudicating the notice was unjustifiable, citing the statutory timelines mandated under the Customs Act, 1962.

The petitioner, Shri Balaji Enterprises, challenged the show-cause notice issued for recovery of customs duty amounting to ₹1,33,73,392/-, along with interest and penalties, for alleged under-valuation of imported car accessories. The case raised pertinent questions regarding adherence to statutory timelines for adjudication of notices under Section 28(9) of the Customs Act.

The show-cause notice, issued on April 17, 2015, demanded duties and penalties from Shri Balaji Enterprises for alleged under-valuation of goods imported between 2010 and 2013. While the declared assessable value of the goods was ₹63,32,323/-, the authorities re-determined the value as ₹4,07,08,928/-, significantly increasing the duty payable. Despite these allegations, adjudication of the notice was delayed, as it was repeatedly placed in the "call book" owing to procedural uncertainties.

The timeline of events revealed that the notice was first placed in the call book on July 21, 2016, following the Delhi High Court’s decision in Mangli Impex Ltd. v. Union of India. It was retrieved briefly in 2017, leading to two hearings that year. However, the notice was again placed in the call book in 2021, and further hearings were not held until mid-2023. The petitioner filed the present writ petition in response to continued delays.

Section 28(9) of the Customs Act, 1962, mandates that adjudication of show-cause notices must occur within six months (extendable to one year) from the date of issuance. The petitioner contended that the delay of nearly eight years contravened these statutory timelines, rendering the notice invalid. Counsel for the petitioner relied on several precedents, including Swatch Group India Pvt. Ltd. v. Union of India and Vos Technologies India Pvt. Ltd. v. Principal Additional Director General, which affirmed that delays beyond statutory limits undermine the validity of such notices.

In defense, Senior Standing Counsel for the Department argued that the delays were attributable to procedural uncertainties, including disputes between the DRI and the Customs Department regarding jurisdiction. Counsel also cited the Supreme Court’s decision in Commissioner of GST and Central Excise v. Swati Menthol and Allied Chemicals Ltd., where delays were condoned due to exceptional circumstances.

The Court, examining the facts, rejected the Department’s justification for the delays. The Court observed that while the notice was issued in 2015, no substantial steps were taken for adjudication until 2023. The bench noted, “There existed no reason for the non-adjudication of the show-cause notice for nearly eight years. The delay cannot be justified by merely relying on procedural hurdles or the phrase ‘where it is possible to do so’ in Section 28(9).”

The Court further held that placing the matter in the call book did not exempt the authorities from adhering to statutory timelines. It stated, “The practice of placing matters in the call book cannot serve as a pretext for indefinite delays. Such actions undermine the interests of both the assessee and the exchequer.”

The bench referred to the decision in Swatch Group India Pvt. Ltd., which held that the phrase “where it is possible to do so” under Section 28(9) does not permit indefinite deferment of adjudication. The Court remarked, “The indifference of the concerned officer to complete adjudication within the mandated time frame cannot be condoned. Such delays are detrimental to the taxpayer and the revenue.”

After examining the legal and factual matrix, the High Court quashed the impugned show-cause notice dated April 17, 2015. It held that the delay of nearly eight years in adjudication was not justified under the statutory framework, and the notice had lapsed as per law. The Court stated, “Following established judicial precedents, the impugned show-cause notice stands quashed. The Department is directed to ensure stricter adherence to statutory timelines in future proceedings.”

Case Title: Shri Balaji Enterprises v. Additional Director General, New Delhi & Ors.

Case Number: W.P.(C) 11207/2023

Bench: Justice Pratibha M. Singh and Justice Amit Sharma

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