Introduction
The Delhi High Court’s ruling in M/s VOS Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr.[i] sheds light on a critical issue concerning administrative lethargy in adjudication proceedings under the Customs Act, 1962 (‘CA62’), the Finance Act, 1994 (‘Act of 1994’), and the Central Goods and Services Tax Act, 2017 (‘CGST Act’). This decision stemmed from a batch of writ petitions challenging show cause notices (‘SCNs’) and adjudication proceedings remaining unresolved for years and, in some cases, decades. The High Court addressed the Respondents’ reliance on legal uncertainties and procedural ambiguities to justify delays, emphasizing the statutory and judicial mandate to conclude proceedings within a reasonable timeframe. This judgment brings to the fore the interplay between legislative intent, judicial pronouncements, and administrative efficiency, marking a significant step toward ensuring accountability in tax and customs adjudication processes, reiterating that justice delayed is justice denied.
Brief Facts
Multiple writs were filed before the High Court to quash SCNs and adjudication proceedings under the CA62, the Act of 1994, and the CGST Act. Some writs also challenged orders-in-original issued after SCN adjudications, citing unreasonable delays. The Petitioners argued that prolonged delays violated the principle of adjudication within a reasonable timeframe established by various judicial precedents. They emphasized that legislative amendments, particularly the Finance Act, 2018, mandated strict adherence to timeframes in s. 28 of the CA62. The Petitioners contended that delays, stretching over decades in certain cases, rendered the proceedings invalid.
The Respondents defended the delays, citing legal uncertainties stemming from judgments in Commr. Of Customs v. Sayed Ali[ii] and Canon I[iii]. They further argued that legislative amendments created confusion regarding the authority of the Directorate of Revenue Intelligence (‘DRI’) to issue SCNs and conduct adjudication. Additionally, they claimed that certain proceedings were placed in the ‘call book’ due to pending judicial decisions. [‘Call book’ cases are those SCNs, which cannot be adjudicated immediately due to certain specified reasons and adjudication is to be kept in abeyance by transferring such cases to call book[iv]].
The uncertainties referred to by the Respondents arose primarily due to conflicting judicial interpretations of who qualifies as a ‘proper officer’ under the CA62 and whether DRI officers had the authority to issue SCNs. In Sayed Ali (supra), the Supreme Court held that only officers assigned specific functions under the CA62 could act as ‘proper officers’ for issuing SCNs. This narrowed the scope of authority, creating ambiguity in cases where SCNs were issued by DRI officers. In Canon I (supra), the Supreme Court reiterated that DRI officers were not ‘proper officers’ under s. 28 of the CA62, rendering numerous pending proceedings invalid.
Following these decisions, the Customs (Amendment and Validation) Act, 2011 (‘CAV Act’) introduced s. 28(11) to the CA62 to retrospectively validate the authority of officers, including those from the DRI, to act as ‘proper officers’ for the purposes of s. 28 of the CA62. However, this amendment was challenged in Mangali Impex Ltd. v. Union of India[v], where the Delhi High Court struck it down. However, the Supreme Court subsequently stayed the ruling in Mangali Impex (supra), while in Canon II[vi], the Supreme Court reaffirmed that SCNs issued by unauthorized officers were legally unsustainable.
Held
The High Court allowed the writs and quashed the impugned SCNs and orders, emphasizing that adjudication proceedings must conform to statutory and judicially prescribed timelines. It held that decades-long delays contravened the fundamental tenet of adjudicating disputes within a reasonable timeframe in administrative law.
The Court noted that the Finance Act, 2018, introduced amendments to s. 28 of the CA62, inserting a presumption that SCNs not adjudicated within extended timeframes would be deemed as never issued. It was further noted that amendments to ss. 28(9) and 28(11) of the CA62 clarified the legislative intent for timely adjudication, with s. 28(11) retrospectively validating actions initiated by DRI officers before 06.07.2011. The Court pointed out that the intent behind the CAV Act was to overcome the Sayed Ali (supra) decision and validate adjudicatory actions initiated by DRI officers as s. 28(11) introduced a legal fiction to deem all officers appointed under s. 4(1) of the CA62 were ‘proper officers’ for reassessment and reopening under s. 28.
Further, the Court analysed explanation 4 to s. 28 of the CA62, which it noted was untouched by judicial declarations and insulated proceedings pending as of 09.03.2018 from being invalidated due to delays. The Court noted that this legislative intent was crystallized by the Finance Act, 2020, which clarified that proceedings emanating from SCNs issued before 29.03.2018 were to be governed by the pre-2018 provisions of s. 28 of the CA62.
The Court also observed that while authorities were empowered to transfer cases to the call book due to legal or procedural uncertainties, such transfers should have been transparent and in compliance with established guidelines that include informing the noticees and conducting periodic reviews. Hence, it was concluded that despite legislative interventions, the Respondents failed to act in accordance with the legislative mandate and observed that both s. 28(11) and explanation 4, were already in force when Canon I (supra) was pronounced in 2021. Yet, the Respondents continued to delay adjudication in cases initiated as far back as 2006.
Our Analysis
This judgment is a pivotal reaffirmation of the principles of administrative efficiency and adherence to statutory timelines in adjudicatory proceedings. The decision delves into the legislative amendments to s. 28 of the CA62, particularly s. 28(11), and its explanations were designed to provide clarity and continuity in adjudication processes. By retrospectively validating the powers of DRI officers as ‘proper officers’, these amendments effectively superseded the decision of the Supreme Court in Canon I (supra).
Despite these legislative interventions, the Respondents' failure to act on pending cases, some dating back to 2006, demonstrated a disregard for the statutory framework. The Court’s emphasis on legislative intent, as expressed in the Statement of Objects and Reasons for the CAV Act, is noteworthy, as it highlights the expectation that authorities would proactively resolve pending adjudications.
This decision sends a strong signal that reliance on procedural loopholes or the placement of cases in the ‘call book’ without intimation or reviews cannot justify prolonged inaction, especially when statutory provisions explicitly empower authorities to proceed.
Critically, the Court’s approach aligns with the broader jurisprudence on timely adjudication as a fundamental tenet of administrative law. The Court rejected the Respondents’ reliance on various Supreme Court decisions, noting that they did not preclude authorities from assigning adjudication duties to properly designated officers under s. 2(34) of the CA62. This decision effectively bridges the gap between legislative amendments and judicial interpretation, ensuring that administrative inaction does not render statutory provisions ineffective.
The Court also scrutinized the procedural framework governing ‘call book cases’, clarifying the scope of administrative discretion and emphasizing that delays, even in the face of judicial uncertainty, must be minimized through diligent adherence to statutory timelines. This judgment not only holds administrative authorities accountable but also sets a precedent for balancing legislative intent with procedural compliance, thereby promoting a more efficient adjudicatory mechanism under tax laws.
End Notes
[i] 2024 SCC OnLine Del 7825, dated: 10.12.2024.
[ii] 6 (2011) 3 SCC 537.
[iii] Canon India (P) Ltd. v. Commr. Of Customs, 7 (2021) 18 SCC 563.
[iv] All about Concept of Call Book in Indirect Taxes, TaxGuru (2016), https://taxguru.in/excise-duty/all-about-concept-call-book-indirect-taxes.html.
[v] 2016 SCC OnLine Del 2597.
[vi] Commr. Of Customs v. Canon India (P) Ltd., 2024 SCC OnLine SC 3188.
Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.