Facts of the Case

The petitioner, Shri M.N. Kumar, approached the Karnataka High Court challenging Order-in-Original No. 20/2021-22 dated 17.12.2021 passed by the Principal Commissioner of Central Tax.

A Show Cause Notice dated 16.04.2019 had been issued by the respondent. Pursuant thereto, the petitioner appeared before the respondent and submitted his reply along with supporting documents. A personal hearing was conducted on 12.06.2020. Thereafter, the petitioner submitted further written submissions along with additional documents on 26.06.2020.

Despite completion of the proceedings and submission of written arguments and documents, the respondent passed the impugned adjudication order only on 17.12.2021, after a delay of more than one and a half years.

The petitioner contended that no further opportunity of hearing was granted before passing the impugned order. It was further argued that such prolonged delay was contrary to Clause 14.10 of the Circular dated 10.03.2017, which contemplated that the adjudication order should be passed within one month from the date of completion of proceedings.

The petitioner also referred to the circumstances arising from the COVID-19 pandemic and contended that, in the absence of proper intimation from the respondent, additional replies and documents could not be furnished.

Accordingly, the petitioner sought quashing of the impugned Order-in-Original and a direction for fresh adjudication after granting an effective opportunity of hearing.

Issues Involved

  1. Whether an adjudication order passed more than one and a half years after completion of proceedings and submission of written arguments could be sustained in law.
  2. Whether the prolonged delay between conclusion of proceedings and passing of the adjudication order was contrary to Clause 14.10 of the Circular dated 10.03.2017.
  3. Whether the impugned order stood vitiated on account of violation of the principles of natural justice.
  4. Whether the petitioner was entitled to a fresh opportunity to submit additional pleadings, documents and supporting material before reconsideration of the matter.
  5. Whether delay in passing a quasi-judicial adjudication order after completion of hearing could cause prejudice sufficient to justify interference under Articles 226 and 227 of the Constitution of India.

Petitioner’s Arguments

The petitioner submitted that the Show Cause Notice dated 16.04.2019 had been duly responded to by filing a reply along with relevant documents.

It was argued that a personal hearing had already taken place on 12.06.2020 and further written submissions with documents were filed on 26.06.2020. Therefore, the proceedings had effectively stood completed by that stage.

However, the impugned order was passed only on 17.12.2021, after an unexplained delay of more than one and a half years. According to the petitioner, such an excessive gap between completion of proceedings and passing of the adjudication order was legally impermissible and prejudicial.

The petitioner specifically relied upon Clause 14.10 of the Circular dated 10.03.2017 and contended that the adjudication order was required to be passed within one month from completion of the proceedings.

It was further submitted that no fresh opportunity of hearing was provided after the prolonged interval. The petitioner also relied upon the difficulties caused by the COVID-19 pandemic and submitted that, due to non-intimation by the respondent, further replies and documents could not be placed on record.

The petitioner requested that one additional opportunity be granted to file further documents and pleadings and that the matter be reconsidered afresh in accordance with law.

The petitioner relied upon the following judicial precedents:

  • Union of India vs Arviva Industries (I) Ltd. — 2007 (209) E.L.T. 5 (SC)
  • Innovative Security Solutions vs Commissioner of GST & C.Ex., Chennai — 2019 (31) G.S.T.L. 18 (Mad.)
  • Infra Dredge Services Pvt. Ltd. vs Union of India — 2020 (372) E.L.T. 691 (Bom.)

Respondent’s Arguments

The respondent opposed the writ petition and contended that sufficient opportunities had already been granted to the petitioner.

It was argued that despite such opportunities, the petitioner had failed to submit sufficient information and documents necessary for proper adjudication.

Accordingly, the respondent maintained that the impugned order was fully justified and did not warrant interference by the High Court in exercise of its writ jurisdiction.

Court Order / Findings

The Karnataka High Court noted that it was an undisputed fact that the petitioner had submitted written submissions along with documents on 26.06.2020, following which the proceedings stood completed.

Despite this, the respondent passed the impugned order only on 17.12.2021, resulting in a delay of more than one and a half years.

The Court held that such delay was contrary to Clause 14.10 of the Circular dated 10.03.2017.

The High Court took note of the legal principles concerning delayed pronouncement of adjudication and quasi-judicial orders and relied upon the reasoning in Infra Dredge Services Pvt. Ltd. vs Union of India.

The Court observed that prolonged delay after completion of hearing can adversely affect proper consideration of submissions, documents and evidence placed on record and may cause prejudice to the affected party.

The Court also referred to the broader judicial principle that authorities exercising adjudicatory or quasi-judicial functions are expected to dispose of proceedings expeditiously after conclusion of hearing so that all submissions remain properly considered and confidence in the adjudicatory process is maintained.

In the facts of the case, the High Court concluded that the impugned order deserved to be quashed and the matter required fresh reconsideration in accordance with law.

Final Order

The High Court passed the following directions:

  1. The writ petition was allowed.
  2. The matter was remitted back to the respondent for fresh reconsideration in accordance with law.
  3. Liberty was reserved in favour of the petitioner to submit additional pleadings, documents and other relevant material before the respondent.
  4. The respondent was directed to consider such additional material and proceed further in accordance with law.

Important Clarification

The judgment establishes that an adjudication order passed after an excessive and unexplained delay following completion of proceedings may be vulnerable to judicial interference, particularly where the delay is inconsistent with binding or applicable departmental instructions and has the potential to prejudice proper consideration of the party’s submissions.

The decision does not lay down that every delay automatically invalidates an adjudication order. The significance of delay must be considered with reference to the facts of the case, the applicable procedural framework, the nature of prejudice caused and the requirement of fair adjudication.

A particularly important aspect of the judgment is that the Court found a delay of more than one and a half years between the petitioner’s written submissions dated 26.06.2020 and the impugned order dated 17.12.2021 to be contrary to Clause 14.10 of the Circular dated 10.03.2017.

The ruling further reinforces the requirement that quasi-judicial authorities should pass orders expeditiously after conclusion of hearing and should meaningfully consider the pleadings, documents and submissions placed on record.

Sections / Legal Provisions Involved

  • Articles 226 and 227 of the Constitution of India — Writ and supervisory jurisdiction of the High Court.
  • Clause 14.10 of CBEC Circular dated 10.03.2017 — Relating to expeditious passing of adjudication orders after completion of proceedings.
  • Section 119 of the Income-tax Act, 1961 — Referred to in the context of the principle that departmental circulars issued by competent authorities are binding upon the Revenue.
  • Principles of Natural Justice — Requirement of fair hearing, proper consideration of submissions and fair adjudicatory procedure.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783679078_2113compressed.pdf

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