[Delhi HC] Delayed Adjudication under Customs Act Results in Violation of Principles of Natural Justice

Introduction

In a significant ruling, the High Court of Delhi, in the case of *Vijay Enterprises v. Principal Commissioner of Customs & Ors. *[i] addressed the issue of inordinate delay in the adjudication of a show cause notice (‘SCN’) and the subsequent passing of an Order-in-Original. The Court quashed both the SCN and the Order-in-Original, highlighting the importance of timely adjudication and adherence to the principles of natural justice. This case focuses on the legal implications of delayed proceedings and the statutory obligations of authorities under the Customs Act, 1962 (‘Act’).

Brief Facts

• Vijay Enterprises (‘Petitioner’) was engaged in the business of importing and trading various types of paper and paperboard, including newsprint and lightweight coated paper. The Directorate of Revenue Intelligence (‘DRI/Respondent’) suspected misdeclaration and undervaluation of imported goods by the Petitioner. It was alleged that the Petitioner, under the control of one Mr. Prakash Garg, had fraudulently imported consignments by suppressing the actual value of the goods. The DRI also claimed that the imported goods were being diverted to the local market instead of being used for newspaper and magazine printing, violating a Customs notification[ii].

• In December 2005, the Respondent conducted searches at the premises of Mr. Garg and the Petitioner. During the investigation, the Petitioner was allegedly coerced into submitting a bank guarantee of Rs. 6,16,941/- for the provisional release of their consignment. In May 2008, the DRI issued a SCN under s. 28(1) of the Act, demanding differential duty and alleging undervaluation.

• The Petitioner repeatedly requested the DRI to provide all relied-upon documents (‘RUDs’) but was not provided with the same. Further, personal hearings were conducted on multiple occasions, but no final adjudication was placed. Consequently, the SCN remained pending for nearly 15 years, during which it was placed in the ‘call book’ multiple times due to reasons such as pending court decisions and internal instructions from the Central Board of Indirect Taxes and Customs (CBIC). Accordingly, the Petitioner filed a writ petition before the High Court, challenging the validity of the SCN on the grounds that it was barred by limitation.

• During the pendency of this writ petition, the Respondent passed an Order-in-Original, imposing penalties and confiscating goods. Consequently, the Petitioner filed another writ petition contending that the order was passed during the pendency of the earlier writ petition, rendering it invalid as it violated the principles of natural justice.

Held

• The Court allowed the appeal, quashed the SCN, and held that the 15-year delay in adjudication was unreasonable and violated the statutory mandate under s. 28(9) of the Act. Consequently, the Order-in-Original, which was based on the quashed SCN, was also set aside. The Court noted that the Petitioner was not provided with all the RUDs despite repeated requests, which violated the principles of natural justice, apart from the 15-year delay in adjudicating the SCN, which was unjustified and rendered the proceedings invalid.

• The Court emphasised that s. 28(9) of the Act mandates that the proper officer must determine the amount of duty or interest within six months to one year from the date of the notice, ‘where it is possible to do so’. The Court rejected the Respondent’s argument that the phrase ‘where it is possible to do so’ does not permit indefinite delays and that the authorities must act with reasonable expeditions. It was also reiterated that placing a matter in the call book does not justify prolonged delays, especially when the delay spans over a decade.

• The Court noted that the issue, in this case, was no longer res integra, as similar cases had been adjudicated in Swatch Group India Pvt. Ltd.[iii] and Vos Technologies[iv], where it was held that inordinate delays in adjudication could be condoned and had quashed both the SCN and the Order-in-Original due to similar delays.

• The Court criticized the Respondent for passing the Order-in-Original during the pendency of the writ petition challenging the SCN. It held that such parallel proceedings undermine the judicial process and render the court’s scrutiny redundant. The Court referred to the Bombay High Court’s decision in Parle International Ltd.[v], where similar conduct by the authorities was condemned.

Our Analysis

The Court’s decision clarifies that statutory authorities cannot indefinitely delay proceedings by placing matters in the call book or attributing delays to administrative inefficiencies. Such actions not only violate the principles of natural justice but also undermine the statutory framework intended to ensure the prompt resolution of disputes.  This ruling serves as a judicial reminder to Customs authorities to strictly adhere to statutory timelines and avoid initiating parallel proceedings that conflict with judicial review. 

In conclusion, the judgment is a significant step towards ensuring accountability and efficiency in the adjudication process under the Act. It emphasises the principle that justice delayed is justice denied and that statutory authorities must act with due diligence and within the prescribed timelines to uphold the rule of law. It reaffirms that administrative inefficiency or procedural delays cannot be used as a tool for indefinite harassment of businesses.

End Notes

[i] 2025 SCC OnLine Del 284.

[ii] ITC (HS) & Customs Notification No. 21/2002 dated 01.03.2002.

[iii] 2023 SCC OnLine Del 4938.

[iv] 2024 SCC OnLine Del 8756.

[v] 2020 SCC OnLine Bom 8678.

Authored by Nitish Solanki, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.