Court Sets Aside Orders After Finding Proceedings Barred by Limitation and Violating Principles of Natural Justice
In a significant judgment, the Madras High Court has quashed the recovery proceedings initiated against A. Kiyasdeen, a former sole proprietor of M/s. Amrush Oversees, on the grounds of inordinate delay and violation of principles of natural justice. The proceedings were aimed at recovering a sum of Rs. 38,77,104 towards drawbacks availed by the petitioner, along with a penalty of Rs. 1,00,000. The proceedings were initiated by the Assistant Commissioner of Customs (Chennai IV) after a delay exceeding seven years, which the court deemed unreasonable in the absence of any allegations of fraud or suppression of facts.
Justice Hemant Chandangoudar presided over the case, emphasizing that while Rule 16 of the Customs Central Excise Duties and Services Tax Drawback Rules, 1995 empowers the recovery of erroneously paid drawbacks, it does not specify a limitation period. Consequently, any action under this rule must be initiated within a reasonable period, which the court determined had not been met due to the unexplained delay.
The petitioner argued that the delay in initiating the recovery proceedings violated principles of natural justice, as he was not served with the necessary show-cause notice and was denied an opportunity for a hearing. The court concurred with the petitioner, highlighting that the delay was excessive, particularly since the petitioner's export business had ceased operations in 2011.
The court examined precedents set by previous judgments, including those of the Gujarat High Court and its own Coordinate Bench, which had established a three-year period as a reasonable timeframe for initiating recovery proceedings. Given the absence of fraud allegations and the considerable lapse in time, the court found the actions of the customs authorities unjustifiable.
Justice Chandangoudar concluded that the impugned proceedings lacked statutory authority due to the absence of timely action and set aside the orders dated 20.03.2021 and subsequent communications. The writ petition was allowed, offering relief to the petitioner without any order as to costs.
The judgment underscores the necessity for government authorities to adhere to reasonable time limits when exercising powers under statutes that do not explicitly prescribe limitation periods, thus safeguarding the rights of individuals against undue procedural delays.
Bottom line:-
Recovery of drawback erroneously paid under Rule 16 of Customs Central Excise Duties and Services Tax Drawback Rules, 1995 must be initiated within a reasonable time. Proceedings initiated after an inordinate delay of more than 7 years are barred by limitation, in the absence of allegations of fraud or suppression of facts.
Statutory provision(s): Customs Act, 1962 Section 117, Customs Central Excise Duties and Services Tax Drawback Rules, 1995 Rule 16
A. Kiyasdeen v. Assistant Commissioner of Customs, (Madras) : Law Finder Doc id # 2939906
