Lanvin Synthetics Private Ltd. vs Union of India

By this Writ Petition filed under Article 226 of the Constitution of India, the petitioners are seeking the following relief''s:-

"(a) For a writ of certiorari, or a writ, order or direction in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the show cause notice and after considering the same quashing and/or setting aside the same.

(b) For a writ of mandamus, or a writ direction or order in the nature of mandamus or any other appropriate writ direction or order under Article 226 of the Constitution of India directing the Respondents to:

(i) forthwith with law and/or cancel the show cause notice qua both the petitioners; and

(ii) Forthwith return to the petitioners the amount of Rs. 2,07,57,074/- crores deposited under protest during investigation together with interest in accordance with law."

Since the earlier order has been complied with and an affidavit in reply has been filed, so also the petitioners proceeding on the basis of denials that we dispose of this Writ Petition by consent of the parties finally. Hence, Rule. Respondents waive service. By consent heard forthwith.

The petitioners complain that the first petitioner procured yarn and grey fabric from the local market which was sent to different dyeing firms for processing. After processing, the fabrics were cut and packed for export under the DEEC scheme or the Drawback scheme. The exports were handled by one export house agent known as M/s. Amol Shipping Agency. The first petitioner obtained 33 advance licences on the condition that the fabrics would be exported. The claim of the petitioners is that this obligation was completed and fulfilled. The licences were made freely transferable. The licences were, then, sold to various independent parties in the market. The parties obtaining the licences utilized them by importing materials without payment of duty. An investigation was carried out sometime in August, 1995. The second petitioner was arrested but directed to be released on bail on 4-9-1995. During this period, many accused in similar cases were detained vide detention orders under the COFEPOSA. Since the petitioners were apprehending arrest of the second petitioner, they deposited a sum of Rs. 2,07,57,074/- under protest between 13-5-1996 to 27-5-1996. The second respondent eventually issued a show cause notice dated 13-3-1997 alleging that the first petitioner had been issued advance licences with the condition that they would export polyester/viscose blended fabrics. It was alleged that the second petitioner in collusion with Ashok Pokharkar of M/s. Amol Shipping Agency furnished copies showing incorrect/manipulated or false information regarding quantities, weight, composition of export goods. Thus, they wrongfully availed of the benefits of the licences by claiming fulfillment of export obligation. They secured a bond waiver and further obtained endorsement in respect of 33 advance licences making them freely transferable. Since these advance licenses were sold to various parties who imported goods from several countries without payment of duty, there was a loss caused to the exchequer and that is why a show cause notice was issued demanding a sum of Rs. 2,83,59,851/- and to be adjusted against the deposit.

The complaint of the petitioners is that this show cause notice a copy of which is at ''Exhibit D'' was never adjudicated though the petitioners approached the department between April, 1997 and January, 2000. There are several letters during this period and the copies of some of the letters are at ''Annexures E and F''. The petitioners complained that finally by a letter dated 7-4-2014 the second respondent was requested to adjudicate upon the show cause notice. There is no reply to this letter at ''Annexure G'' nor is any compliance made with the requisitions contained therein. The petitioners relied upon the information obtained under the Right to Information Act, 2005, disclosing that the office of the second respondent could not trace any document or file and therefore, nothing can be intimated to the petitioners.

The petitioners, therefore, complained that if for seventeen long years the matter has remained un-adjudicated, then, retention of money paid under protest or deposited without prejudice, would violate the mandate of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India. It is in such circumstances that this Writ Petition has been filed.

On the earlier occasion, we have heard Mr. Shroff, learned Senior Advocate appearing on behalf of the petitioners extensively. After hearing him and Mr. Jetly, learned Counsel appearing on behalf of the respondent-revenue, we had on 1-7-2015 passed an order. In that order we have indicated to the respondents as to why an explanation should not be demanded by the Court from them for having kept the matter pending for adjudication for 17 long years. The second respondent was also called upon to inform the Court as to why such proceedings are kept pending and if there are any more complaints of this nature, then, remedial and corrective steps should also be indicated.

An affidavit has been filed of Assistant Commissioner of Customs and who is incharge of the Preventive Section. He has deposed on behalf of the Commissioner of Customs (Preventive). Mr. Jetly, learned Counsel appearing on behalf of the Revenue, submits that this is the adjudicating authority and this affidavit indicates how this adjudicating authority has not received the record pertaining to this show cause notice for adjudication. The affidavit may be indicating that a compliance is made with the requirement of early or expeditious adjudication and 74 show cause notices were adjudicated. But as far as the subject notice is concerned, all that has been indicated is that there had been reorganization of Customs Commissionerate in the year 1997, 2002 and 2014 and even after thorough search by a special Team, the records of this case could not be located and traced. The Commissionerate learnt about the subject show cause notice only on receipt of copy of this writ petition. A copy of show cause notice alongwith the relied upon documents was never received in the Commissionerate of Customs (preventive). This admission is contained in paragraphs 5 and 6 of this affidavit. The affidavit indicates the efforts which have been made to dispose of the show cause notices. The deponent states that the Department is ready and willing to adjudicate the matter provided the petitioners and who have copies of the documents in support of the allegations, co-operate and produce the same and with their assistance the show cause notice can still be adjudicated. A request is made that as there is a fraud perpetrated on public revenue, this liberty be given.

Mr. Jetly relied upon this affidavit and annexures thereto to submit that the respondents deserve an opportunity to adjudicate the show cause notice and as the delay has been satisfactorily explained.

However, Mr. Shroff, learned Senior Advocate brings to our notice the two decisions rendered by two Division Benches of this Court, one in the case of Shirish Harshavadan Shah Vs. Deputy Director, E.D., (2010) 254 ELT 259 . The second decision is also of the same Division Bench rendered in the case Cambata Industries (P.) Ltd. Vs. Additional Director of Enforcement, (2010) 6 BomCR 418 : (2010) 254 ELT 269 : (2010) 99 SCL 262 ".

In the first decision which we have perused with the assistance of Mr. Shroff, the factual position was that the department/Revenue was seeking to adjudicate and decide the show cause notice which came to be issued to the petitioner therein in the month of January, 2004. The show cause notice was issued 13 years back, and there was no explanation as to why the show cause notice was not adjudicated during this period. The Division Bench of this Court after hearing both sides came to the conclusion that if the matter was as old as of 1980-1982, the show cause notices were issued after lapse of more than 12 years. Though there is no period of limitation prescribed in the statute to complete the adjudication proceedings, but whenever the powers of this nature are conferred, the Law is that they have to be exercised within a reasonable time. Reiterating this legal position and finding no justification for the inaction, this Court allowed the Writ Petition. This Court quashed the proceedings against the petitioners.

In the case of "Cambata Industries Pvt. Ltd." (supra) the show cause notices were issued in September, 1973 and June, 1974, no action was taken by the department despite the petitioner failing to appear and failing to file reply. If for seventeen long years no steps were taken, then, the justification given for reopening the proceedings was not accepted by this Court and in holding so once again the Division Bench reiterated the rule in the case of Government of India Vs. Citedal Fine Pharmaceuticals, Madras and Others, AIR 1989 SC 1771 : (1989) 24 ECR 440 : (1989) 42 ELT 515 : (1990) 184 ITR 467 : (1989) 3 JT 118 : (1989) 2 SCALE 44 : (1989) 3 SCC 483 : (1989) 3 SCR 465 : (1989) 2 UJ 368 " where the Hon''ble Supreme Court was pleased to hold that in the absence of any period of limitation, it is settled law that every authority should exercise the power within a reasonable period. What would be the reasonable period would depend upon the facts of each case, no hard and fast rule can be laid down in this behalf.

After hearing both sides, we are of the view that there is no denial of the fact that the investigations were carried out in this case way back in the year 1995. If the investigations were carried out in August, 1995, the show cause notice came to be issued on the conclusion thereof in March, 1997, then, we do not see any reason for the Revenue/Department not passing an adjudication order for 17 long years. The petitioners cannot be faulted for having approached this Court belatedly as is the contention of the Revenue. In the present case, it is the petitioners who brought to the notice of the department and repeatedly that the show cause notice is pending adjudication and that the department has retained the sum deposited. It is the petitioners who sought information by making an application under the Right to Information Act, 2005. The records were not available and there was no information available with regard to this show cause notice. The admitted position today is that the concerned Commissionerate is unable to trace the file and locate the record. It has given no explanation as to why show cause notice was not adjudicated for 17 long years. The explanation now placed on affidavit does not inspire confidence. We do not countenance the submission and as made belatedly that the department with the assistance of the petitioners will pass a adjudication order within a time frame and it deserves that opportunity. We do not find that the statements made on affidavit are enough to grant such opportunity. If the law postulates early end to such proceedings and there is no period of limitation prescribed, does not mean that the proceedings initiated could be concluded at the sweet will and fancies of the department. The department should not have blamed the petitioners for having approached this Court belatedly, but the department must appreciate that the petitioners are seeking two relief''s one is for quashing of proceedings and secondly, a direction to the department forthwith refund the deposit and with interest.

We can take note of the department''s objection with regard to the petitioner''s approaching this Court after a lapse of several years for return of money but certainly we cannot refuse any relief to the petitioners of quashing of the proceedings of the show cause notice once the legal principles are well settled. The period that has been taken in this case for adjudication of the show cause notice cannot be said to be reasonable. If within a reasonable time the proceedings have to be concluded then in the present case 17 years can never be said to be a reasonable period or time. The department and going by the settled legal principles, cannot pass an adjudication order on the show cause notice and as requested by Mr. Jetly.

As a result of the above discussion, we make the Rule absolute in terms of prayer clause (a). We quash the show cause notice and we prohibit the respondents from passing any adjudication order in furtherance thereof.

However, finding some merit in the objection raised but not expressing any opinion thereon, we grant liberty to the petitioners to institute such proceedings as are permissible in law for recovery of sums deposited with accrued interest. We clarify that all objections with regard to the jurisdiction of the forum where the proceedings may be instituted and maintainability thereof, of both sides are kept open. We conclude this matter with some pain and anguish. If delay on the part of the department results in loss to the exchequer and as directed presently no recovery can be made of the sums demanded, then, it is for the superiors to initiate all steps and measures. Our order should not be taken as relieving officials concerned of their duties and obligations in terms of the law including the departmental rules and circulars. We would highly appreciate if the Secretary in the Ministry of Finance, Government of India directs initiation of departmental and other legal proceedings so that all guilty of causing loss to public exchequer are brought to book. A copy of this order be forwarded to the Secretary in the said department by the Registry. The Additional Prothonotary and Senior Master (Judicial) to take the requisite steps and communicate this order expeditiously.