Bombay High Court Makes Customs Department 'Pay' For Delay In Deciding Sushitex Exports Case

The Bombay High Court has ordered the customs department to refund an amount of Rs 2 crore along with interest of 12% per annum to a fabric-export company, for not concluding proceedings in a customs fraud case for 23 years.

Sushitex Exports (India) Ltd. had moved the high court seeking to set aside a show cause notice issued by customs department, in 1997, for alleged breach of provisions of the Customs Act, 1962.

The notice, demanding Rs 4.9 crore, was issued as the company was accused of indulging in fraudulent export and duty-free import of polyester fabrics.

The exporter deposited Rs 2 crore with the department in three installments.

As the matter remained pending for over two decades, the company sought a court direction to quash the show cause notice and related proceedings.

Appearing for the company, Senior Advocate DB Shroff argued that, by no interpretation of the law, can a case be kept pending for such an unreasonably long period, such as 23 years.

Senior Advocate Pradeep Jetly, appearing for the department, said though no there was no reason on record for the pendency of the case, one of the reasons could have been the requirement of verification from the Directorate General of Foreign Trade, Mumbai, for cancellation of the licenses.

Jetly, by way of an affidavit, contended that due to restructuring of the department, the authorities lost sight of the case. Also, post 2006, the company had never approached the department for adjudicating the matter, the court was told.

The department, while requesting for more time to conclude the proceedings, asked the court to not entertain the plea.

The court was not inclined to grant this request.

First, though the company was called up by the department for a hearing in 2006, the court said that it failed to fathom why no final order was passed immediately.

The department has a right to initiate proceedings for violations under the Act. But it does not have an absolute right to choose a time period to conclude proceedings, best suiting its convenience, the court said.

"...but the period in excess of two decades without the respondents sufficiently explaining as to what prevented them to conclude the proceedings has to be seen as unreasonable and the reasons assigned in the affidavit-in-reply as mere excuses for not adjudicating the show-cause notice according to law."

Second, it was the company that knocked the doors of the court to set aside the show cause notice. So, had it not come to court, the show-cause notice would have "continued to gather dust", the court remarked.

In its order, the court also pointed to Article 14 of the Constitution, which urges state governments to refrain from arbitrary action.