Not Required To Show Prejudice, Where There Is Violation Of Fundamental Rights – Bombay High Court Directs Customs To Pay Rs. 2cr For 23 Year Delay

A division bench of the Chief Justice Dipankar Datta and Justice MS Karnik observed while setting aside the demand notice.

"While the respondents' right in law to initiate proceedings for violation of the provisions of the Act can never be disputed, at the same time they do not have the unfettered right to choose a time for its termination and conclude proceedings as per their convenience."

Sushitex Exports (India) Ltd. had approached the HC challenging a demand notice of Rs 4.9 crore issued to them under sections 124 r/w section 28 of the Customs Act, 1962 in 1997. The department accused the company of fraudulent export of polyester fabrics and duty-free import of Polyester Filament Yarn and other items.

The petitioners were arrested and paid two crores of the demand notice so that the department doesn't object to their release.

Senior Advocate DB Shroff for the company submitted that by no interpretation of the law could the case be kept pending for an unreasonably long period of 23 years.

Senior Advocate Pradeep Jetly for customs accepted that there was no specific reason for the delay, however, the requirement of verification from the Directorate General of Foreign Trade, Mumbai, for cancellation of the licenses could be one of the reasons.

Infact the department blamed the petitioners for not seeking adjudication after 2006 and sought time to conclude the proceedings pending before the department.

At the outset, the bench observed that the customs department seems to have slipped into a "deep slumber" after they heard the petitioners in 2006.

The court held that the words "reasonable period" would call for a flexible construction but two decades without a plausible explanation for delay in adjudication, has to be seen as "unreasonable" and the reasons given as mere excuses.

"Indeed, the words 'reasonable period' call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of two decades without the respondents sufficiently explaining as to what prevented them to conclude the proceedings has to be seen as unreasonable and the reasons assigned in the affidavit-in-reply as mere excuses for not adjudicating the show-cause notice according to law."

The court further held that It would amount to an arbitrary exercise of power if proceedings initiated in 1997 are not taken to their logical conclusion for over two decades and more more time is sought .

The bench relied on the SC's decision in Parle International Limited (supra) as it lays down the law that if proceedings are not completed within a "reasonable period" keeping with the facts of each case, the matter should not be allowed to proceed further.

"On facts and in the circumstances, we are satisfied that the proceedings arising out of the impugned show-cause notice having remained dormant for about fourteen years since hearing was given to the petitioners, it should not be allowed to be carried forward further in the absence of a satisfactory explanation."

The bench said that Article 14 (equality) of the Constitution, is an admonition to the State against arbitrary action. "The State action in this case is such that arbitrariness is writ large, thereby incurring the wrath of such article. It is a settled principle of law that when there is violation of a Fundamental Right, no prejudice even is required to be demonstrated."

Therefore , the court set aside the demand notice and directed the department to refund Rs. 2 crore with interest.

Case Title: Sushitex Exports (India) Ltd. & Ors. Vs. The Union of India & Anr

Citation:  2022 LiveLaw(Bom) 24

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