M/S Upkar International PVT. LTD. vs. Union Of INDIA And Ors

Facts

The petitioner, M/s Upkar International Pvt. Ltd., sought a writ of certiorari to quash adjudication order dated 25.07.2016, appeal order dated 21.02.2018, and adjudication order dated 26.03.2021, which collectively held an amount of Rs.18,42,089/- recoverable in cash along with interest and penalty. These orders were passed pursuant to a show cause notice dated 03.11.2010. The petitioner contended that the impugned orders were passed after a significant delay of approximately 06 years from the issuance of the show cause notice, which contravened sub-section 11 of Section 11A of the Central Excise Act. The respondents are the Union of India and other authorities.

Held

The Court allowed the petition, quashing the impugned orders due to inordinate delay. The Court found that the adjudication order dated 25.07.2016, appeal order dated 21.02.2018, and adjudication order dated 26.03.2021 were passed after a significant delay of approximately 06 years from the issuance of the show cause notice dated 03.11.2010. The Court relied on its previous judgments in CWP No.6157 of 2021 (Suraj Innovative Tehnologies) and CWP No.11860 of 2021 (M/s Shree Baba Exports), which also dealt with similar delays. The Court noted that the Supreme Court had dismissed the Special Leave Petition filed by the revenue against the judgment in M/s Shree Baba Exports' case. The reasoning was that such inordinate delay, without proper explanation, renders the proceedings unlawful and arbitrary, violating principles of natural justice and statutory provisions like Section 11A(11) of the Central Excise Act. The ratio decidendi is that proceedings initiated by show cause notices that are concluded after an inordinate and unexplained delay are liable to be set aside. The operative direction was to set aside the impugned orders.

Key Issues

1. Whether the impugned orders, passed after a delay of approximately 06 years from the issuance of the show cause notice, are liable to be quashed on grounds of inordinate delay, in contravention of Section 11A(11) of the Central Excise Act? The petitioner argued that the delay in passing the adjudication and appeal orders, approximately 06 years after the show cause notice dated 03.11.2010, was inordinate and rendered the proceedings unlawful and arbitrary. They relied on the Supreme Court judgment in State of Punjab vs. Bathinda District Co-op Milk P. Union Ltd., which suggested a reasonable period of five years for assessment order revision in the absence of prescribed time limits. The petitioner also cited Gujarat High Court's decision in Siddhi Vinayak Sintex Pvt. Ltd. vs. Union of India, which held that significant delays without proper explanation are unlawful. Furthermore, they referred to this Court's own decisions in CWP No.6157 of 2021 (Suraj Innovative Tehnologies) and CWP No.11860 of 2021 (M/s Shree Baba Exports), where similar delays led to the quashing of orders, noting that the revenue's SLP against the latter was dismissed by the Supreme Court. The respondents argued that the delay was justified as the petitioner's case was kept in 'call book' as per a circular (R-1), and therefore, the delay of 10 years (in a cited case) could not be a ground to quash the show cause notice. They also noted that an SLP against the Siddhi Vinayak Sintex Pvt. Ltd. judgment was pending before the Supreme Court.