Can Customs Reopen Decade-Old Duty Drawback Claims? Delhi High Court To Examine

In March, the Delhi High Court is set to examine whether customs authorities can revive decade-old export transactions through belated show cause notices (SCNs) without running afoul of the doctrine of delay and laches.

On December 9, 2025, a Division Bench of the Delhi High Court comprising Justices Prathiba M. Singh and Shail Jain heard a batch of petitions concerning the validity of SCNs issued in relation to the availment of duty drawback.

The issue arose from the issuance of SCNs to the petitioner, Nautilus Metal Craft Pvt. Ltd., by the Delhi (TKD) Commissionerate and the Vijayawada Commissionerate in July and August 2023, in relation to export transactions carried out during the period 2011 to 2019.

The petitioner, represented by Advocate V. Lakshmikumaran, challenged the SCNs on the ground that they were legally time-barred due to delay and laches. Reliance was placed on the Supreme Court's decision in S.J.S. International, where the Court held that administrative powers must be exercised within a reasonable period.

The petitioner contended that the issuance of notices several years after the completion of exports subjected settled transactions to perpetual jeopardy, rendering the proceedings unsustainable in law.

The Customs Department justified the delay by alleging a complex modus operandi involving the deliberate overvaluation of readymade garments to wrongfully avail duty drawback benefits. It was submitted that the full extent of the alleged scheme came to light only in 2019 during a common investigation conducted by the Directorate of Revenue Intelligence (DRI). The department further argued that it was entitled to exclude the period impacted by the COVID-19 pandemic while computing delay, and therefore the SCNs could not be said to be barred.

In its December 9 order, the Delhi High Court permitted the Customs Department to proceed with adjudication and to pass a final order. However, the Court directed that any such order shall not be given effect to until it examined whether the delay in issuing the SCNs was legally reasonable. The Bench framed two questions for consideration:

• Whether the period between the dates of exports and the issuance of the show cause notices was reasonable; and
• Whether the show cause notices themselves would be liable to be quashed on the ground of delay and laches.

The court also directed the department to file an affidavit explaining the complete chronology and timeline of events leading to the issuance of the SCNs. The petitioner was granted liberty to file a rejoinder thereafter.

The bench further recorded the petitioner's grievance that relied-upon documents had not been fully supplied, and directed the petitioner to appear before the Department on December 24, 2025 to obtain copies of all such documents. The Court clarified that the petitioner's request for cross-examination would be considered in accordance with law before a reasoned order is passed.

Noting that the basic investigation by the DRI was common, the Court directed the parties to seek instructions on whether common adjudication proceedings could be conducted for the SCNs issued by the Delhi and Vijayawada Commissionerates.

The matter has been listed on January 21, 2026, for considering the issue of consolidation of proceedings, and for substantive arguments on March 19, 2026

Case Title: Nautilus Metal Crafts Limited vs. Additional Commissioner of Customs (Export)

Case Number: W.P.(C) 14040/2024 & CM APPL. 58767/2024

Citation: 2026 LLBiz HC (DEL) 13