Facts of the Case

  • Petitioners (Paras Products, Sai Enterprises, and Jaina Polymers) were engaged in manufacturing footwear and soles.
  • Searches were conducted on 29.04.2011, and goods including finished goods, raw materials, scrap, and a vehicle were seized.
  • A Show Cause Notice dated 25.10.2011 was issued proposing:
    • Confiscation under Rule 25 of Central Excise Rules, 2002
    • Appropriation of deposited duty
    • Imposition of penalties
  • Adjudication of the SCN was completed only in 2022–2023, i.e., after more than 11 years.
  • The adjudicating authority passed Orders-in-Original confiscating goods and imposing penalties.

Issues Involved

  1. Whether adjudication of SCN after an inordinate delay of 11 years is legally sustainable?
  2. Whether the phrase “where it is possible to do so” under Section 11A permits indefinite delay?
  3. Whether administrative reasons such as GST transition and COVID-19 justify such delay?

Petitioner’s Arguments

  • The delay of over 11 years is arbitrary and violates principles of natural justice.
  • Section 11A mandates adjudication within a reasonable time (6 months / 2 years).
  • Reliance placed on precedents:
    • Vos Technologies India Pvt. Ltd. v. Director General
    • Sunder System Pvt. Ltd. v. Union of India
    • Siddhi Vinayak Syntex Pvt. Ltd. v. Union of India
  • Proceedings should be quashed solely on ground of delay.

Respondent’s Arguments

  • Delay was due to:
    • Introduction of GST regime (2017)
    • COVID-19 pandemic disruptions
    • Petitioners’ failure to file timely replies and attend hearings
  • Reliance placed on Supreme Court judgment:
    • Commissioner v. Swati Menthol & Allied Chemicals Ltd.

Court Findings / Order

  • SCN issued in 2011 but adjudicated only in 2022–2023 → delay of 11 years is excessive and unjustified.
  • Section 11A requires adjudication within reasonable time; delay cannot be indefinite.
  • The expression “where it is possible to do so”:
    • Does not permit administrative lethargy
    • Applies only in cases of genuine impossibility
  • Reasons such as GST transition and COVID-19:
    • Do not justify delay prior to 2017
  • Authorities could have proceeded ex parte if petitioners delayed.

Final Order

  • Impugned Orders-in-Original dated 30.12.2022 and 02.03.2023 were quashed.
  • Department directed to release bank guarantees within 6 weeks.

Important Clarification by Court

  • Statutory phrase “where it is possible to do so” ≠ unlimited discretion
  • Authorities must:
    • Act with due expedition
    • Justify delay with valid and unavoidable reasons
  • Long-pending proceedings involving financial liabilities or penalties cannot be kept alive indefinitely

Sections Involved

  • Section 11A, Central Excise Act, 1944
  • Rule 25, Central Excise Rules, 2002
  • Relevant references:
    • Section 73 & 74, CGST Act (for comparative interpretation)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/68020032025CW62352023_171234.pdf

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