Customs Dept’s Delay adjudication of SCN within 1 Year amount to denying Principle of Natural Justice: CESTAT [Read Order]

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the customs department’s obligation to adjudicate show cause notice (SCN) within 1 year amount to denying principle of natural justice.

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The Embraer Phenom 1004 is the aircraft owned by the appellant/assessee, Innovale Investment Pte. Ltd. An deal dated 06.05.2011 was signed to lease this aircraft to Aviators for use in India. Aviators claimed the benefit of a notification dated 01.03.2002, as revised by a notification dated 01.03.2011, and filed a Bill of Entry dated 24.06.2011 for the evaluation and clearance of the aircraft for domestic use.

In an attempt to deny the appellant, SSL, and Aviators the benefit of the notification, a show-cause notice was sent. Recovering differential duty on imported aircraft from Aviators, imported spare parts from Aviators, and imported aircraft from Aviators and SSL were also suggested in the show cause notice.

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The appellant argued that the order might be overturned for the sole reason that the show cause notice was adjudicated with excessive delay. According to learned senior counsel, the show cause letter was sent out, but it wasn't decided until almost ten years later. Nothing in the record indicates that the show cause notice could not be decided within the one-year window allowed by section 28(9) of the Customs Act, and the appellant was not at anyway accountable for the adjudication delay.

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The department argued that it was impossible to decide the show cause within a year, and it heavily used the circumstances in the Commissioner's decision of January 19, 2023, to support this claim. Even on its own merits, the appellant had no case, and the Principal Commissioner's imposition of the redemption fine and penalty on the appellant was lawful.

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The tribunal ruled that a delay in deciding the show cause notice would be equivalent to a denial of fairness, judgment, non-arbitrariness, and the potential to apply natural justice principles in a meaningful way. A legal, equitable, and efficient quasi-judicial adjudication would be the opposite of the arbitrary and capricious administrative behavior in deciding a show cause notice. These are the same ideas that are implied in the Latin proverb "lex dilationes abhorret," which means "law abhors delay."

To Read the full text of the Order CLICK HERE

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