Sharat Industries Limited vs. Union Of INDIA

Held

The Court allowed the writ petition, quashing the proceedings before the 2nd respondent. The Court found that the continuation of proceedings after an inordinate delay of 19 years from the issuance of the show cause notice was not sustainable. The Court relied on the settled legal position, particularly the judgment in *Parle International Limited Vs. Union of India and Others*, which was followed by other High Courts and upheld by the Supreme Court. The principle established was that a show cause notice, even without a prescribed limitation period, must be adjudicated within a reasonable period. A delay of 13 years (as in the cited case) or 19 years (in the present case) was considered unreasonable and violative of the principles of natural justice. The Court held that such delayed adjudication, where the delay is attributable to the revenue, is unfair and cannot be sustained. The Court did not consider the alternative remedy of appeal as the primary issue was the unsustainable delay in the adjudication process itself.

Facts

The petitioner, Sharat Industries Limited, filed a writ petition challenging an order dated April 23, 2024, passed by the 2nd respondent. This order confirmed demands for proportionate Customs duty and Central Excise duty totaling over Rs. 7.5 crores, along with interest, on imported raw materials, indigenous consumables, imported Artemia, and imported Aerators. It also confirmed a demand of Rs. 239.06 Lakhs for Central Excise duty on shrimp cleared into the Domestic Tariff Area (DTA) between 1993-94 and 2001-2002. Penalties were also imposed. The petitioner's primary contention was that the show cause notice was issued on February 10, 2005, and after a delay of 19 years, the proceedings were revived, violating principles of natural justice. The petitioner argued they had no records for such old periods. The respondents contended that the show cause notice was kept in 'call book' and that the petitioner had an alternative remedy of appeal.

Key Issues

1. Whether the adjudication of a show cause notice issued on February 10, 2005, after a delay of 19 years, is sustainable in light of the principles of natural justice and the concept of reasonable period for adjudication, as contemplated under the relevant provisions of the Customs Act, 1962, and Central Excise Act, 1944 (now subsumed under GST provisions)? Petitioner's arguments: The petitioner argued that the revival of the show cause notice after 19 years is a perverse act and violates the principles of natural justice. They contended that they no longer possessed records from such an old period, making it impossible to respond effectively. They relied on the Bombay High Court's decision in *Parle International Limited Vs. Union of India and Others* and subsequent decisions, which held that inordinate delay in adjudication, especially when not attributable to the petitioner, defeats the purpose of the show cause notice and is unsustainable. Respondent's arguments: The respondents argued that the show cause notice was kept in 'call book' and that the petitioner had an alternative remedy of appeal against the impugned order. They did not explicitly counter the petitioner's argument regarding the delay or the principles of natural justice, but rather focused on the procedural aspect of alternative remedy.