The Delhi High Court has reinforced the principle of timely adjudication in tax matters. It ruled that Section 11A of the Central Excise Act, 1944, which allows authorities to recover unpaid or short-paid duties, aligns with similar provisions in the Customs Act, Finance Act, and CGST Act. The ruling was made in the case of M/S VOS Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr. (2024) and extends to recovery proceedings under the Central Excise Act.
Background of the Case
In Vos Technologies, the Court addressed delays in Show Cause Notices (SCNs) and adjudication proceedings under tax laws. It held that statutory timelines must be adhered to and that authorities cannot keep matters unresolved for years. The judgment emphasizes that such delays defeat the purpose of the law and place an undue burden on taxpayers.
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The case involved petitions where goods were confiscated under Rule 25 of the Central Excise Rules, 2002, back in 2011. However, penalties were imposed only after 11 years, in 2023. The Respondent authorities justified the delay citing:
- The restructuring of tax departments after the CGST Act (2017) came into force.
- Disruptions due to COVID-19.
- Petitioners' alleged delay in submitting replies to SCNs.
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Rejecting the justifications provided by the authorities, the Court stated:
“There is no plausible reason as to why the adjudication could not be done between 2011-17. The inaction for this period remains unexplained.”
The Court reaffirmed that Section 11A(11) of the Central Excise Act mandates tax authorities to determine the duty amount within six months to two years from the date of notice, where possible.
It ruled that provisions similar to Section 11A exist in the Customs Act, Finance Act, and CGST Act, making the Vos Technologies judgment applicable in recovery proceedings under these laws. The Respondents failed to explain why the SCN remained undecided for over a decade.
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The judgment provides significant relief to taxpayers facing prolonged adjudication delays. It clarifies that:
- Delays cannot be justified by procedural changes like the introduction of the CGST Act.
- The phrase “where possible” does not mean indefinite delays.
- Authorities must proceed with adjudication even if taxpayers delay responses—they can act ex-parte if required.
- Timely tax adjudication is essential to maintaining fairness in tax administration.
The Delhi High Court quashed the penalty orders issued against the Petitioners and directed the authorities to release the Bank Guarantees furnished by them within six weeks. The Court reiterated that revenue authorities must not misuse statutory timelines and should conduct adjudication within a reasonable timeframe.
Case title: Paras Products v. Commissioner Central Gst, Delhi North (and batch)
Case no.: W.P.(C) 6235/2023 and batch
