The Delhi High Court has ruled in favour of several exporters by setting aside a common show cause notice issued by the Directorate of Revenue Intelligence (DRI) fourteen years ago, which had been challenged by the exporters due to the prolonged delay in its adjudication.

The High Court found that the DRI had not made a reasonable effort to adjudicate the notice during this extended period, leading to its dismissal.

The Division Bench comprising of Justice Vibhu Bakhru and Justice Amit Mahajan observed that “the period within which the impugned show cause notice was required to be adjudicated has long since elapsed. The controversy raised is squarely covered by the recent decision of this Court in Swatch Group India Pvt. Ltd. & Ors. v. Union of India & Ors”.

“It is no longer open for the respondents to proceed with the adjudication of the impugned show cause notice. Accordingly, the impugned letters recommencing the adjudication proceedings are set aside. Since the period for adjudication of the impugned show cause notice has elapsed, the same cannot be adjudicated”, added the Bench.

Advocate Kavita Jha appeared for the Petitioner, whereas Advocate Harpreet Singh appeared for the Respondent.

The brief facts of the case were that during the period from 2000 to 2005, the petitioners were engaged in the export business, primarily exporting readymade garments and leather goods to customers in Russia under the Rupee-Rouble Scheme, as well as to other international customers under the Drawback Scheme. In the meanwhile, a show cause notice was issued based on intelligence received by officers of the Delhi Zonal Unit of the DRI. The intelligence suggested that certain Indian companies were engaged in fraudulent exports of readymade garments, leather goods, and fabrics to specific Russian entities. The primary purpose of these exports was to exploit various export incentives, including drawback benefits under the Duty Entitled Pass Book Scheme (DEPB). It was alleged that the Russian companies had not actually imported any goods from the Indian exporters in question, and instead, the goods were diverted to other countries. Furthermore, it was claimed that the Indian exporters had inflated their invoices to obtain higher export incentives.

After considering the submission, the Bench observed that during the prolonged period from Apr 03, 2009 to July 21, 2016, no effective steps were taken for the adjudication of the impugned show cause notice.

The Bench noted that during this prolonged period, there were no impediments for the concerned officers to proceed with the adjudication, and the fact that various communications had been sent by the Adjudicating Authority to the concerned DRI officers for the supply of the RUDs was clearly not a valid reason to justify the delay in adjudicating the impugned show cause notice.

While refusing to accept that it was not feasible or possible for the Adjudicating Authority to adjudicate the show cause notice until Feb 06, 2017, the Bench concluded that deferring the adjudication of the impugned show cause notice due to the Call Book procedure was not justified.

The High Court determined that the period within which the show cause notice was supposed to be adjudicated had long since passed, and therefore, the DRI were no longer allowed to proceed with the adjudication of the impugned show cause notice.

Cause Title: Gala International Pvt Ltd and Ors. v. Additional Director General, Directorate of Revenue Intelligence, Delhi and Ors. [Neutral Citation: 2023: DHC: 7017-DB]

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Delhi High CourtJustice Vibhu BakhruJustice Amit Mahajan

Pankaj Bajpai