Sunder System PVT.LTD. vs. Union Of INDIA & Ors.

Held

The Court held that the adjudication proceedings were barred by limitation. It referred to Section 73(4B)(a) and (b) of the Finance Act, 1994, which prescribes time limits of six months and one year, respectively, from the date of the notice for adjudication. The Court also cited a coordinate bench's decision in National Building Construction Co. Ltd. Vs. Union of India, 2019 (20) G.S.T.L. 515 (Del.), which affirmed that sub-section 4B fixes the time period for adjudication. Furthermore, the Court noted that even in the absence of a prescribed time limit, statutory authorities must exercise their jurisdiction within a reasonable period, citing Supreme Court and other High Court judgments. The Court found that it was possible for the adjudicating authority to have adjudicated the show-cause notice within one year of the conclusion of arguments on February 3, 2015, if not earlier. Since this did not happen, the writ petition was allowed on the ground of limitation alone. The show-cause notice was quashed, and the respondents were directed to refund the amount to the petitioner within four weeks.

Facts

The petitioner, Sunder System Pvt. Ltd., filed a writ petition challenging adjudication proceedings initiated by a show-cause notice dated November 25, 2011, and subsequent hearing notices and corrigendum. The petitioner sought the quashing of these proceedings and the refund of Rs. 1,13,56,468/- with interest, primarily on the grounds that the adjudication was barred by limitation under Section 73(4B)(b) of the Finance Act, 1994. The petitioner had filed a reply to the show-cause notice on February 22, 2012, and a hearing concluded on February 12, 2015. However, no order was communicated. The respondents contended that there was no prescribed time limit for adjudication and that the delay was not inordinate.

Key Issues

1. Whether the adjudication proceedings initiated by the show-cause notice dated November 25, 2011, are barred by limitation under Section 73(4B)(b) of the Finance Act, 1994? Petitioner's arguments: The petitioner argued that Section 73(4B)(b) of the Finance Act, 1994, prescribes a limitation period of one year from the date of the notice for adjudication in cases falling under the proviso to sub-section (1) or proviso to sub-section (4A). The petitioner contended that this period was violated. They relied on Board Circular No. 732/48/2003-CX dated August 5, 2003, and instructions dated September 17, 2015, emphasizing timely adjudication, and the Bombay High Court's decision in Hindustan Lever Ltd. Vs. UOI, 2011 (24) STR 97 (Bom.). Respondents' arguments: The respondents argued that there is no provision prescribing a time limit for conducting adjudication proceedings. They also submitted that the delay in this case was not inordinate, as courts have only allowed writ petitions when the delay exceeded ten years.