Customs Dept Cannot Run Parallel Proceedings By Passing Penalty Order While Challenge To SCN Is Pending Before Court: Delhi HC

The Delhi High Court has set aside a final order of penalty passed by the Customs Department against a paper trader for alleged undervaluation of imported goods, stating that the same was passed during pendency of challenge to the show cause notice (SCN) issued to the trader.A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed, “passing of the impugned Order-in-Original while the impugned SCN was under challenge before this Court would amount to initiation of parallel proceedings rendering the scrutiny of the Court as infructuous.”Suspecting misdeclaration of imported goods, the Directorate of Revenue Intelligence had issued the impugned SCN to the Petitioner, holding it liable for payment of differential duty under Section 28(1).Since the impugned SCN was not adjudicated for about 15 years, the Petitioner filed a writ petition seeking quashing of the same. However, during the pendency of the challenge, the concerned assessing officer passed the impugned Order, ordering confiscation of imported goods and imposing interest and penalty upon the Petitioner.Petitioner claimed there is a specific time-period fixed for the purpose of adjudication of show-cause notices and determination of amount of duty or interest. The period specified in the said provision is six months and a maximum period of one year. The Customs Department on the other hand submitted that during the relevant period for adjudication of the impugned SCN, the decision Mangli Impex Ltd. v. Union of India & Ors. (2016) was rendered where the Delhi High Court had questioned the power of DRI officers to exercise functions under the Customs Act or to issue show-cause notices and recover duties. Thus, the impugned SCN was put in the call book.The High Court observed it is well settled that a SCN as also the final order becomes liable to be quashed if there is unjustified delay in adjudication.In the case at hand, the Court noted that Mangli Impex (supra) was rendered in 2016 whereas SCN remained pending since 2008 and there was no explanation for the same.Heavy reliance was placed on M/S VOS Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr. (2024) wherein a coordinate bench of the High Court had discussed the 'flux' in legal position with respect to power of DRI officers to take action under Customs Act. It was also held therein that a statute (Section 28 Customs Act) enabling an authority to conclude proceedings within a stipulated period of time “where it is possible to do so” cannot be countenanced as a license to keep matters unresolved for years.So far as passing of final order during pendency of challenge to the SCN is concerned, the bench cited Parle International Ltd. v. Union of India (2020) where also the SCN was not adjudicated for over 13 years and after the same was assailed before the Bombay High Court, the concerned authority passed the order in-original. The Bombay High Court had proceeded to quash both the impugned SCN therein and the consequential proceedings resulting in the order-in-original.Following the same course, the High Court allowed the writ petition and quashed the proceedings against Petitioner.Appearance: Mr. Tarun Gulati, Senior Advocate with Prem Ranjan Kumar and Ms. Shruti, Advocates for Petitioner; Mr. Harpreet Singh, Senior Standing Counsel along with Mr. Suhani Mathur and Shivang Chawla, Advs. for R-2.Case title: Vijay Enterprises & Anr v. The Principal Commissioner Of Customs & AnrCitation: 2025 LiveLaw (Del) 84Case no.: W.P.(C) 5809/2024Click here to read order

Customs Dept Cannot Run Parallel Proceedings By Passing Penalty Order While Challenge To SCN Is Pending Before Court: Delhi HC

Kapil Dhyani

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