'And Then One Day You Find, Ten Years Have Got Behind You': Quoting Pink Floyd, Gujarat HC Quashes Customs SCN, Flags Inordinate Delay

The Gujarat High Court quashed two show cause notices issued by customs department to a chemical manufacturing company after noting that the notices had been pending adjudication for 15 and 13 years respectively and deserved to be set aside due to "inordinate lapse of time". 

Quoting 'Time' by British rock band Pink Floyd, a division bench of Justice Bhargav Karia and Justice DN Ray in its order observed:

The impugned SCNs have remained pending for more than 15 years and 13 years respectively. Considering the aforesaid decisions, this Court has no hesitation in holding that due to an inordinately long lapse of time , the impugned show cause notices dated 08.03.2010 and 03.11.2011 can no longer remain pending for adjudication and must be quashed and set aside on that score alone. Accordingly, the petition succeeds and the impugned Show Cause Notices F No.DRI/AZU/INV45/2009 dated 08.03.2010 and 03.11.2011 are hereby quashed and set aside. 

The court in its order was considering whether a show cause notice issued by customs department which has remained un-adjudicated for a long period of time–for over 10 years in the case before the court–should be quashed on this ground alone.

The petitioner company was engaged in the manufacture and export of dyes and chemicals and took export of synthetic dyes under to shipping bills both dated 14.09.2009, from the Inland Container Depot (ICD) at Ahmedabad. It availed the benefits of the Duty Entitlement Pass Book Scheme (DEPB).

On 15.09.2009 the Directorate of Revenue Intelligence (DRI) conducted a search at the petitioner's factory and registered office suggesting that the exports involved mis-declaration of the products. 

The Chemical Examiner, in his report dated 29.09.2009, mentioned that, even when these products are clearly black coloured powder in the form of “synthetic organic dye acids”, the samples of one of the shipping bill No. 1393015, dated 14.09.2009 would be “Acid Black 234” and not “Acid Black 210” as declared by them. 

Based on the probe, the DRI issued a Show Cause Notice dated 08.03.2010, stating that the Petitioner wrongfully availed the benefits under the DEPB Scheme and thus, proposed the confiscation of goods. 

Another show cause notice was issued by DRI  under Section 111(o) read with Section 28 of the Customs Act, for past exports of the product “Acid Black 210”, and suggested that, all such exports were based on mis-declaration and accordingly sought the recovery of the benefits availed.

The Petitioner filed reply dated 15.06.2012 and clarified that there has been no mis-declaration by them, and further mentioned that the “Acid Black 210” and “Acid Black 234” are similar and identical products, and there is no difference in their chemical composition or structure.

Meanwhile in a parallel proceeding the Joint Director General of Foreign Trade agreed with the petitioner and held that, the DEPB benefits had been duly availed. With respect to “Acid Black 234 and Orange 6”, it was found that there has been wrongful availment of the DEPB benefits, for which recovery of Rs.11,68,682 with its interest of Rs.96,316, which was immediately paid by the petitioner, were appropriated under the order. Thus, a token penalty of Rs.11,686 was imposed.

The petitioner argued that Foreign Trade Development Authorities had concluded in petitioner's favour on an identical issue sought to be adjudicated by the Customs Department. However, the petitioner claimed, the custom department had not finally adjudicate its proceedings and had not passed an order. 

The petitioner argued that the Foreign Trade Development Authorities had already adjudicated on common issue; despite this Customs Authority has not adjudicated the same and therefore, today it is too late in the day to permit the Customs Authority to adjudicate the show cause notices.

The bench referred to M/s. Dhultawala Exim Private Ltd. Vs. Union of India & Anr., where the court had adjudicated on the issue of delay in adjudication when proper reason is not provided. 

It thereafter observed, "This Court finds that the notice issued by the Joint Director General Foreign Trade, Ahmedabad is substantially similar to the impugned show cause notices issued by the Customs Authority . This Court finds that even if the merits of the impugned show cause notice are not gone into to compare the similarity with the show cause notice dated 13.04.2010 issued by the Joint Director General Foreign Trade, Ahmedabad, the fact remains that the impugned show cause notices dated 08.03.2010 and 03.11.2011, in spite of personal hearings in the same having been granted in 2012, are yet to be adjudicated".

The court thus quashed the notices. 

Case title: ROHAN DYES AND INTERMEDIATES LIMITED & ANR. Versus UNION OF INDIA & ORS.

Click Here To Read/Download Order 

Citation: 2025 LiveLaw (Guj) 51