The Bombay High Court has quashed a notice issued under the Customs Act observing that the proceedings were initiated for recovery of duty foregone after a delay of 26 years. The court noted that such a prolonged delay in initiating the proceedings cannot be considered “reasonable”.
The HC was hearing a petition by Mahindra and Mahindra Ltd challenging the notice issued by the Office of Commissioner of Customs (Export) on December 15, 2022 seeking to recover duty foregone under Section 143 of the Customs Act, 1962. Section 143 of the Customs Act deals with the powers of customs officials to allow import or export of goods on the execution of bonds. However, the provision does not provide any time limit for recovery of duty foregone.
The petitioner argued that notice was issued to recover the duty for the non submission of the Export Obligation Discharge Certificate dated September 23, 1996. The notice was thus issued after almost 26 years after the non submission of the certificate. Its counsel submitted that the proceedings are “hopelessly barred by delay” in as much as the proceedings are initiated after almost 26 years. Although there is no limitation provided under the Customs Act, the proceedings ought to have been taken within a “reasonable period”.
However, the advocate for the Customs submitted that under Section 143 of the Customs Act, no time limit is provided for enforcement of the bond executed. Therefore, the impugned notice is not barred by limitation.
The bench noted that “admittedly” no time limit is provided under Section 143 of the Customs Act for recovery of duty foregone. “However, it is a settled position that where the Act is silent on the limitation, the proceedings have to be initiated within a reasonable period, and the said reasonable period has to be ascertained based on a holistic reading of the Scheme of the Act,” a bench of Justice MS Sonak and Justice Jitendra Jain said on November 19.
In the present case, the notice is issued for non-submission of Export Obligation Discharge Certificate dated September 23, 1996, after almost 26 years. “In our view, on a reading of the Customs Act, the reasonable period for initiating any proceedings for recovery of dues can certainly not be 26 years, even where a bond may have been executed,” the bench concluded while quashing the notice.
