In a significant ruling, the Bombay High Court has quashed a show cause notice issued by the Customs Department in 2008, citing an inordinate and unexplained delay in adjudicating the matter. The case highlights the legal consequences of administrative delays and the duty of the authorities to act within a reasonable time frame, especially in the context of enforcement proceedings under the Customs Act, 1962.

The petition challenges a show cause notice issued by the Respondents on 16 May 2008, seeking to impose a penalty under Section 112(a) of the Customs Act, 1962. The notice alleged that the Petitioner had been involved in the clandestine clearance of 663 import consignments without paying the appropriate customs duties. The Petitioner filed detailed responses to the notice in October and December 2008, but despite these efforts, the proceedings remained stagnant for years.

From 2008 to 2021, the matter saw no progress. Personal hearings scheduled in 2008 were ineffective, and no further hearings or resolutions occurred until December 2011. Even after multiple hearings in 2017 and 2021, the Petitioner’s counsel was unable to secure a substantive resolution, with the authorities failing to provide a proper hearing or even a functioning platform for virtual hearings.

After a prolonged period of inaction, the show cause notice was transferred to the "call book" in March 2021, but no intimation was provided to the Petitioner regarding this transfer.

The Petitioner relied on previous decisions of the Bombay High Court, which dealt with cases involving significant delays in the adjudication of show cause notices. In cases such as Coventry Estates Pvt Ltd v. The Joint Commissioner CGST and The Great Eastern Shipping Company Ltd v. Union of India, the courts had ruled that when faced with gross and unexplained delays in adjudication, the show cause notices must be quashed to prevent further prejudice to the parties involved.

The Respondents, in their defense, referenced an order passed by the Supreme Court in Commissioner, GST and Central Excise Commissionerate II v. M/S Swati Menthol And Allied Chemicals Ltd. (July 2023), where a similar delay was addressed. However, the Bombay High Court found that the Supreme Court’s order did not lay down a blanket rule excusing all inordinate delays in show cause proceedings. Moreover, the Supreme Court order in question was contextual and did not apply to cases where the delay was gross, unjustified, and without reasonable explanation, as in this case.

The Court observed that the delay in this case—from 2008 to 2021—was not only inordinate but also unexplained. The Respondents had failed to offer a justifiable explanation for the long delay or provide any evidence of the actual transfer of the show cause notice to the call book. The Court also noted that the Petitioner was not informed about the transfer, violating the procedural requirements under Section 28(9) of the Customs Act.

The Bombay High Court reiterated the established legal position that when a show cause notice is left unresolved for years without valid reasons, it creates an unfair situation for the party involved. In such circumstances, prejudice is inherent, and continuing the proceedings would be prejudicial to the rights of the affected party.

The Court cited multiple decisions in which similar delays led to the quashing of show cause notices. Notably, in cases such as Bhushan Vohra v. Union of India and Eastern Agencies Aromatics (P) Ltd v. Union of India, the Bombay High Court had previously held that such delays cannot be condoned. The Court emphasized that failure to adjudicate show cause notices in a timely manner harms the party under investigation, potentially affecting their business operations and causing irreversible prejudice.

This ruling underscores the need for government and regulatory bodies to adhere to timelines and procedural fairness when issuing show cause notices or imposing penalties. The Court’s decision is a reminder that administrative delay—especially when unexplained—can have serious legal consequences. It sends a clear message that authorities must act within a reasonable time frame, ensuring that the rights of parties involved are not unduly affected by protracted proceedings.

The Bombay High Court, by quashing the show cause notice issued in 2008 and restraining the Respondents from further proceedings, reinforced the importance of timely justice. It also highlighted the broader legal principle that inordinate and unexplained delays in enforcement proceedings violate procedural fairness and can severely prejudice the affected party. The judgment is a crucial step in protecting individuals and businesses from administrative inaction and ensuring that regulatory processes are carried out efficiently and equitably.