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IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 11th DAY OF SEPTEMBER, 2013

BEFORE

THE HON’BLE MR.JUSTICE H.BILLAPPA

WRIT PETITION Nos.44217-219/2011 (T)

BETWEEN: 1. Gemini Dyeing & Printing Mills Ltd., No.16-B, Phase – I, Peenya Industrial Area,

Bangalore – 560 058. Rep. by its Managing Director Mr.Gullu.G.Talreja. 2. M/s.R.V.Corporation, V P K No.108, Survey No.21/22/23, T.Dasarahalli,

Bangalore – 57. Rep. by its Partner Mr.Gullu.G.Talreja. 3. M/s.Gemini Fashions (P) Ltd., Now known as M/s.Aryan Garments Pvt. Ltd.,

1E, II Phase, 1st Main Road, Peenya Industrial Area, Bangalore – 560 058. Rep. by its Director Mr.Gullu.G.Talreja. …Petitioners

(By Sri.K.Parameshwaran, Adv.,)

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AND: 1. The Commissioner of Customs, C.R.Building,

No.1, Queens Road, Bangalore – 01. 2. The Revisionary Authority, The Joint Secretary to the Government of India u/s.129DD of the Customs Act, 1962

Ministry of Finance, Department of Revenue, 14, Hudco Vishala Building, B Wing, 6th Floor, Bhikaji Cama Place, New Delhi – 110 066. …Respondents

(By Sri.P.S.Dinesh Kumar, Adv., for R1 & 2) ******

These petitions are filed under Articles 226 and 227 of the Constitution of India praying to set aside and quash the said common order dated 4.7.2011 passed by the second respondent herein under the provisions of 129DD of the

Customs Act, 1962 vide Annexure – A, as vitiated bad in law and unsustainable thereto. These petitions coming on for Dictating Judgment this

day, the Court made the following:-

O R D E R

In these writ petitions under Articles 226 and 227 of the

Constitution of India, the petitioners have called in question,

the common order dated 4.7.2011 bearing No.131-133/11-

CUS passed by the second respondent vide Annexure-A.

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2. By the impugned order at Annexure-A, the second

respondent has confirmed the order-in-Original vide

Annexure-H and the order passed in appeal No.168/2008

vide Annexure-J.

3. Aggrieved by that, the petitioners have filed these

writ petitions.

4. Briefly stated the facts are:

The 1st petitioner is a Company incorporated under the

Companies Act. It is engaged in the activity of independent

processors of textiles falling under Chapters 52, 55, 58 and

60 of the Schedule to the Central Excise Tariff Act, 1985. The

1st petitioner exports products like readymade garments and

claims duty drawback after preparing necessary documents

and complying with all requirements stipulated.

5. The second petitioner is a partnership concern. It

exports readymade garments to various countries from its

factory situated at T.Dasarahalli, Bangalore. It claims duty

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drawback after preparing necessary documents and

complying with all requirements stipulated.

6. The third petitioner is a Private Limited Company

incorporated under the Companies Act, 1956. Presently it is

known as M/s Aryan Garments Private Limited. It is engaged

in the manufacture of readymade garments and exports to

various countries. The third petitioner has been claiming

duty drawback after preparing necessary documents and

complying with all requirements stipulated.

7. A common show cause notice dated 18.7.2001

was issued to the petitioners along with others alleging that

the duty drawback claimed and paid for export of readymade

garments of cotton was irregular/fraudulent. The same was

proposed to be recovered from the 100% EOU of Gemini

Textile Industries. The petitioners were asked to show cause

as to why the penalty should not be imposed u/s 114(iii) of

the Customs Act. Thereafter on 19.9.2001 Corrigendum was

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issued requiring the petitioners to show cause to the

Additional Commissioner of Customs instead of

Commissioner of Customs.

8. The petitioners submitted their reply on

20.12.2001. Thereafter, on 2.5.2002 Addendum to the initial

show cause notice dated 18.7.2001 read with Corrigendum

dated 19.9.2001 was issued altering the basis and scope of

the show cause notice dated 18.7.2001. The petitioners were

required to show cause as to why the duty drawback should

not be recovered as irregular duty drawback was claimed by

suppressing the factual position. There was proposal for

imposition of penalty also.

9. On 5.8.2002 the petitioners submitted their

detailed reply mainly contending that the demands made

would be hit by limitation. Thereafter, personal hearing was

given on 19.2.2008.

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10. On 3.4.2008 common order-in-Original

No.29/2008 ADC was passed by the Additional Commissioner

of Customs vide Annexure-H confirming the demands made

in the show cause notice and imposing penalties. The

petitioners preferred appeals in Appeal Nos.206/08, 207/08,

208/08, 209/08-Cus (B). The Commissioner of Customs

(Appeals), Bangalore, by order dated 31.12.2008 rejected the

appeals confirming the order in Original No.29/2008 dated

3.4.2008.

11. Aggrieved by that, the petitioners preferred

revisions in F.Nos.373/82, 83, 84/DBK/09-RA before the

Government of India. The Revisional Authority by its order

dated 13.7.2011 has rejected the revisions confirming the

order-in-Original and also the order in appeal.

12. Aggrieved by that, the petitioners have filed these

writ petitions.

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13. The learned counsel for the petitioners contended

that the impugned order cannot be sustained in law. He also

submitted that the original show-cause notice was issued on

18.7.2001. In the original show-cause notice, the petitioners

were asked to show-cause as to why penalty should not be

imposed on them. The petitioners were not asked to show-

cause as to why the duty drawback drawn by them should

not be recovered. It is only in the addendum which was

issued on 2.5.2002 the petitioners were asked to show-cause

as to why the drawback amount paid to the petitioners

should not be recovered and penalty should not be imposed.

The addendum was issued on 2.5.2002. The duty drawback

drawn by the petitioners relate to the year 1996-97.

Therefore, the addendum was clearly barred by limitation.

The addendum cannot be read into the original show-cause

notice. It is a fresh demand beyond the period of limitation.

The addendum completely changes the structure of the

original show-cause notice and therefore, barred by

limitation. In the original show-cause notice, the petitioners

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were asked to show-cause as to why penalty should not be

imposed, but in the addendum the petitioners have been

asked to show-cause as to why duty drawback should not be

recovered. It is clearly afterthought and beyond limitation.

Further he also submitted that though limitation is not

prescribed to recover duty drawback, the reasonable time

could not be beyond five years. He also submitted that the

authorities have failed to consider the matter in proper

perspective and the impugned order is devoid of reasons and

therefore, it cannot be sustained in law.

14. Placing reliance on the decision of the Gujarat

High Court reported in 2013 (287) E.L.T. page 290, the

learned counsel for the petitioners submitted that where

statutory provision does not prescribe any period of

limitation, a reasonable period has to be read and what is

reasonable period would depend upon the facts and

circumstances of each case. In the present case, the original

show-cause notice was issued asking the petitioners to show-

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cause as to why penalty should not be imposed. Thereafter,

after the lapse of some time, addendum has been issued

asking the petitioners to show-cause as to why drawbacks

should not be recovered. It is clearly barred by limitation.

Therefore, the authorities were not justified in upholding the

demand made in the show-cause notice. He, therefore,

submitted that the impugned order cannot be sustained in

law.

15. As against this, the learned counsel for the

respondents submitted that the impugned order does not call

for interference. He also submitted that the original show-

cause notice was issued to 16 noticees including the

petitioners also. The petitioners have responded to the show-

cause notice. Further he submitted that the show-cause

notice was not barred by time as no limitation has been

prescribed to recover duty drawbacks. He also submitted

that Section 28 of the Customs Act is not applicable to the

present case. It is only section 75(a) and 75(a)(ii) which is

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applicable to the present case. He also submitted that in the

original show-cause notice all details were given asking the

petitioners to show-cause as to why penalty should not be

imposed. But, there was no mention regarding recovery of

duty drawbacks. Thereafter, addendum has been issued

asking the petitioners to show-cause as to why duty

drawbacks should not be recovered. There is no structural

change. Based on the same facts stated in the original show-

cause notice, the petitioners have been asked to show-cause

as to why duty drawbacks should not be recovered and

penalty should not be imposed. Therefore, it cannot be said

that the show-cause notice or addendum is barred by time.

Further he submitted that the authorities on proper

consideration of the material on record have rightly passed

the orders confirming the demand made in the show-cause

notice. Therefore, the impugned orders do not call for

interference.

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16. Placing reliance on the decision of the Gujarat

High Court reported in 2010 (260) E.L.T. page 61 and also

of this Court reported in 1963 Income Tax Reports page

808, the learned counsel for the respondents submitted that

no limitation is provided for recovery of duty drawbacks in

Customs, Central Excise Duties and Service Tax Drawback

Rules, 1995. When limitation is not provided by the Statute,

the Court cannot prescribe any limitation. For recovery of

drawbacks, no limitation has been prescribed. However, even

assuming that under section 28 of the Customs Act the

limitation prescribed is five years, then also, the show-cause

notice is within time. Therefore, the impugned order does not

call for interference.

17. I have carefully considered the submissions made

by the learned counsel for the parties.

18. The point that arises for my consideration is,

Whether the impugned order calls for interference?

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19. It is relevant to note, show-cause notice dated

18.7.2001 has been issued to M/s.Gemini Textile Industries

along with 15 others including the petitioners herein. The

allegations made in the show cause notice against the

petitioners are at para 22(i) to (vi). They read as follows:

22. Now therefore, M/s.Gemini Textile Industries,

Bangalore are hereby required to show cause

to the Commissioner of Customs,

C.R.Building, PB No.5400, Queen’s Road,

Bangalore – 1 as to why

(i) Licence bearing No.26/96 dated 1.5.96

should not be cancelled in as much as they

have violated the conditions of the provisions

relating to 100% EOU.

(ii) The duty drawback amounting to

`.4,40,455/- in respect of goods valued at

`.21,19,984/-, exported through Bangalore

Air Cargo Complex should not be recovered as

per the provisions of sub section 2 of Section

75A and also the interest on the same as

contemplated under Section 28AA of the

Customs Act 1962 read with Rule 2(d) of

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Customs & Central Excise Duties Drawback

Rules, 1995 as contemplated in Notification

49/96 Customs (NT) dated 1.10.96 in as

much as M/s Gemini Textile Industries have

manufactured the goods in their 100% EOU

premises and had cleared the finished goods

in the name of M/s Gemini Fashions Private

Limited (GFPL) of Gemini group who in turn

had claimed irregular duty draw back by

suppressing the factual positions.

(iii) The duty drawback amounting to `.64,432/-

in respect of goods valued at `.4,29,549/-

exported through Bangalore Air Cargo

Complex should not be recovered as per the

provisions of Sub-section 2 of Section 75A and

also the interest on the same as contemplated

under Section 28AA of the Customs Act, 1962

read with Rule 2(d) of Customs & Central

Exercise Duties Draw Back Rules, 1995 as

contemplated in notification 49/96 Customs

(NT) dated 01.10.96 in as much as

M/s.Gemini Textile Industries have

manufactured the goods in their 100% EOU

premises and had cleared the finished goods

in the name of M/s.R V Corporation (RVC) of

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Gemini group who in turn had claimed

irregular duty drawback by suppressing the

factual positions.

(iv) The duty amounting to `.9,56,981/- in respect

of goods valued at `.45,57,058/- exported

through Bangalore Air Cargo Complex which

has been claimed as drawback amount by

Gemini Fashions Pvt. Ltd. (GFPL) a DTA unit

of Gemini group should not be demanded

under Sub section 2 of Section 75 A of

Customs Act, 1962 read with Rule 2(d) of

Customs and Central Exercise Duties

Drawback Rules, 1995 as contemplated in

notification 49/96 Customs (NT) dated

01.10.1996 in as much as M/s.Gemini Textile

Industries had sent ready made garments for

some specific job work without obtaining

permission from the Customs Department and

the same were not sent back after completion

of job work but were exported in the name of

DTA unit of Gemini Group claiming duty draw

back.

(v) The duty amounting to `.53,618/- in respect

of goods valued at `.2,55,322/- exported

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through Bangalore Air Cargo Complex, which

has been claimed as drawback amount by

M/s.Gemini Dyeing and Printing Mills Ltd.

(GDPM) a DTA unit of Gemini group should not

be demanded under Sub section 2 of Section

75 A of Customs Act, 1962 read with Rule

2(d) of Customs & Central Excise Duties

Drawback Rules, 1995 as contemplated in

notification 49/96 Customs (NT) dated

01.10.1996 in as much as M/s.Gemini Textile

Industries had sent ready made garments for

some specific job work without obtaining

permission from the Customs Department and

the same were not sent back after completion

of job work but were exported in the name of

DTA unit of Gemini group claiming duty draw

back.

(vi) The duty amounting to `.21,625/- in respect

of goods valued at `.1,02,974/- exported

through Bangalore Air Cargo Complex, which

has been claimed as drawback amount by

M/s.R V Corporation (RVC) a DTA unit of

Gemini Group should not be demanded under

Sub section 2 of section 2 of Section 75 A of

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Customs Act, 1962 read with Rule 2(d) of

Customs & Central Excise Duties, Drawback

Rules, 1995 as contemplated in notification

49/96 Customs (NT) dated 1.10.1996 in as

much as M/s.Gemini Textile Industries had

sent ready made garments for some specific

job work with out obtaining permission from

the Customs Department and the same were

not sent back after completion of job work but

were exported in the name of DTA unit of

Gemini group claiming duty draw back.

20. In para 23, the petitioners were called upon to

show-cause as to why penalty should not be imposed on them

under section 114(iii) of the Customs Act, 1962. It reads as

follows:

23. M/s.Gemini Fashions Pvt.Ltd., (GFPL) 1

– E, Peenya Industrial Area, Phase –II, 1st Main

Road, Bangalore 58, M/s.Gemini Fashions, Plot

No.6, Abbigere Main Road, Kammagondanahally,

Bangalore – 15, M/s.Gemini Dyeing and Printing

Mills Ltd., 16-B, Peenya Industrial Area, 1st Phase,

Bangalore – 58, M/s.Fashion Today, 600/27, 7th

Main, K N Extension, Yeshwanthpur, Bangalore 22,

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M/s.Time Textile Industry, Shed No.198-A, 4th

Cross, Peenya Industrial Estate, Bangalore -57 and

M/s.R V Corporation, VPK No.108, Survey

No.21/22/23, Dasarahalli, Bangalore – 57 are all

required to show cause to the Commissioner of

Customs, C.R.Building, PB No.5400, Queen’s Road,

Bangalore – 1, as to why penalty should not be

imposed on them under Section 114 (iii) of the

Customs Act 1962 in as much as they have

received and sent raw materials as well as finished

goods from M/s.Gemini Textile Industries and

claimed undue benefit of duty drawback in

respect of goods manufactured by M/s.Gemini

Textile Industries, thereby contravening the

provisions of Customs Act 1962 read with

provisions (iii) to Rule 3(i) of the Customs and

Central Excise Drawback Rules, 1995.

21. By addendum dated 2.5.2002, changes have been

made to the original show-cause notice. The relevant paras

read as follows:

3. In para 20 page 17 of the show cause

notice in the 40th line after the words Section 28 AA

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of the Customs Act, 1962 the following be

incorporated.

“However, duty is demanded only in respect

of claims made through Bangalore Air Cargo

Complex.”

4. Para 22 (i) to (ix) in pages 18, 19 and 20

may be deleted and the following be substituted.

Para 22. Now therefore, M/s.Gemini Textile

Induatries, Bangalore and hereby required to show

cause to the Additional Commissioner of Customs,

C.R.Building, P.B.No.5400, Queens Road,

Bangalore – 1, as to why;

(i) License bearing No.26/96 dtd. 1.5.96 should

not be cancelled in as much as they have

violated the conditions of the provisions

relating to 100 EOUs.

(ii) Duty amounting to `.3,04,788/- on the raw

materials valued at `.4,29,652/- should not

be recovered under Section 72 of Customs

Act, 1962 in as much as M/s.Gemini Textile

Industries had removed duty free raw

materials under their own private Delivery

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challans to various other DTA units and also

had not received back the said duty free

materials and no permission was obtained

from the Customs Department thereby

M/s.Gemini Textiles Industries have violated

the provisions of Sub Section 4b of Section 72

of Customs Act, 1962.

(iii) The 1329 nos of readymade garments valued

at `.1,32,900/- found in the premises on the

day of visit of officers of Customs belonging to

M/s.Alka International, Bangalore should not

be confiscated as per the provisions of Section

11 (o) of the Customs Act, 1962.

(iv) Penalty should not be imposed on them under

Section 114(ii) of the Customs Act, 1962 in as

much as M/s.Gemini Textiles Industries has

utilized the infrastructure for the

manufacture of goods in their 100% EOU

premises and removed the said raw materials

as well as finished goods to the DTA units of

Gemini Group who in turn have exported and

claimed undue drawback benefit thereby

contravening the provisions of Section 72 read

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with proviso (ii) of Rule 3(1) of Customs and

Central Excise Duties Drawback Rules, 1995.

Para 23. M/s.Gemin Fashions Pvt. Ltd., (GFPL)

IE, Peenya Industrial Area, Phase – II, 1st Main

Road, Bangalore, are hereby required to show

cause to the Additional Commissioner of Customs,

C.R.Buildings, P.B.No.5400, Queen’s Road,

Bangalore – 1, as to why

(i) The duty drawback amounting to

`.4,40,455/- in respect of goods valued at

`.21,19,984/- exported through Bangalore Air

Cargo Complex should not be recovered as

per the provisions of Sub Section 2 of Section

75 A and also the interest on the same as

contemplated under Section 28 AA of the

Customs Act, 1962 read with Rule 16 of the

Customs Act and Central Excise Duties

Drawback Rules, 19555 as contemplated in

para 2(d) of the Notification 49/96 Cus (NT)

dated 1.10.1996 in as much as M/s. Gemini

Textile Industries have manufactured the

goods in their 100% EOUs premises and had

cleared the finished goods in the name of

M/s.Gemini Fashion (P) Ltd., (GFPL) of Gemini

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Group who in turn had claimed irregular duty

drawback by suppressing the factual

position.

(ii) The duty amounting to `.9,56,981/- in respect

of goods valued at `.45,57,058/- exported

through Bangalore Air Cargo Complex which

has been claimed as drawback amount by

M/s.Gemini Fashions Pvt. Ltd., (GFPL), a DTA

unit of Gemini Group should not be demanded

under sub section 2 of Section 75 A of

Customs Act, 1962, read with Rule 16 of the

Customs and Central Excise Duties Drawback

Rules, 1995 as contemplated in para 2(d) of

Notification 49/96 Cus(NT) dated 1.10.1996

in as much as M/s.Gemini Textile Industries

had sent ready made garments for some

specific job work without obtaining

permission from the Customs Department and

the same were not sent back after completion

of job work but exported in the name of DTA

unit of Gemini Group claiming duty

drawback.

(iii) Why penalty should not be imposed on them

under section 114(iii) of Customs Act, 1962, in

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as much as they had received and sent raw

materials as well as finished goods from

M/s.Gemini Textile Industries and claimed

undue benefit of duty drawback in respect of

goods manufactures by M/s.Gemini Textile

Industries, thereby contravening the

provisions of Section 75 of the Customs

Act,1962 read with Rule 16 of the Customs

Act and Central Excise Duties Drawback

Rules, 1995.

Para 24. M/s.R.V.Corporation, VPK No.108,

Survey No.21/22/23, Dasarahalli, Bangalore -57 is

hereby required to show cause to the Additional

Commissioner of Customs, Bangalore, as to:

(i) Why the duty drawback amounting to

`.64,432/- in respect of goods valued at

`.4,29,549/- exported through Bangalore

Air Cargo Complex should not be recovered as

per the provisions of sub section 2 of Section

75 A and also the interest on the same as

contemplated under Section 28AA of the

Customs Act, 1962, read with Rule 16 of the

Customs and Central Excise Duties Drawback

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Rules, 1995 as contemplated in para 2(d) of

the Notification 49/96 Cus (NT) dated

1.10.1996, in as much as M/s.Gemini Textile

Industries have manufactured the goods in

the name of M/s.R V Corporation (RVC) of

Gemini Group who in turn have claimed

irregular duty drawback suppressing the

factual position.

(ii) Why the duty amounting to `.21,625/- in

respect of goods valued at `.1,02,974/-,

exported through Bangalore Air Cargo

Complex, which has been claimed as

drawback amount by M/s.R V Corporation

(RVC) a DTA unit of Gemini Group should not

be demanded under sub section 2 of Section

75A of the Customs Act, 1962 readwith Rule

16 of the Customs and C.Excise Duties

Drawback Rules 1995 as contemplated in

para 2(d) of the Notification 49/96 Cus (NT)

dated 1.10.1996 in as much as M/s.Gemini

Textile Industries had sent ready made

garments for some specific job work without

obtaining permission from the Customs

Department and the same were not sent back

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after completion of job work but were

exported in the name of DTA unit of Gemini

Group claiming duty drawback.

(iii) Why penalty should not be imposed on them

under section 114(iii) of Customs Act, 1962, in

as much as they had received and sent raw

materials as well as finished goods from

M/s.Gemini Textile Industries and claimed

undue benefit of duty drawback in respect of

goods manufactures by M/s.Gemini Textile

Industries, thereby contravening the

provisions of Section 75 of the Customs

Act,1962 read with Rule 16 of the Customs

Act and Central Excise Duties Drawback

Rules, 1995.

Para 25. M/s.Gemini Dyeing and Printing

Mills Ltd., 16B, Peenya Industrial Area, 1st Phase,

Bangalore – 58 is hereby called upon to show

cause to the Additional Commissioner of Customs,

C.R.Buildings, Queen’s Road, P.B.No.5400,

Bangalore, as to why;

(i) the duty amounting to `.53,618/-, in respect

of goods valued at 2,55,322/- exported

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through Bangalore Air Cargo Complex which

has been claimed as drawback amount

M/s.Gemini Dyeing and Printing Mills Ltd.,

(GDPM) a DTA unit of Gemini group should not

be demanded under Sub section 2 of Section

75A of the Customs Act, 1962 read with Rule

16 of Customs and C.Excise Duties Drawback

Rules, 1995,as contemplated in Notfn.

No.49/96 Customs (NT) dated 1.10.1996 in

as much M/s.Gemini Textile Industries had

sent readymade garments for some specific

job work without obtaining permission from

the Customs Department and the same were

not sent back after completion of job work but

were exported in the name of DTA unit of

Gemini Group claiming duty drawback.

(ii) Why penalty should not be imposed on them

under Section 114 (iii) of the Customs Act,

1962 in as much as they have received and

sent raw materials as well as finished goods

from M/s.Gemini Textile Industries and

claimed undue benefit of duty drawback in

respect of goods manufactured by

M/s.Gemini Textiles Industries, thereby

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contravening the provisions of Section 75 of

the Customs Act, 1962 read with Rule 16 of

the Customs and C.Excise Duties Drawback

Rules, 1995.

22. The learned counsel for the petitioners contended

that the addendum completely changes the structure of the

original show cause notice and it is barred by limitation.

Placing reliance on the decision of the Gujarat High Court

reported in 2013 (287) E.L.T. page 290, the learned counsel

for the petitioners submitted that in the absence of any

provision with regard to specific period of limitation, a

reasonable period of limitation has to be read into the Rule.

In the present case, though there is no limitation prescribed

for recovery of drawbacks, keeping in view section 28 of the

Customs Act, a reasonable period cannot be beyond five

years. The addendum issued is beyond five years and

therefore, barred by limitation.

23. The learned counsel for the respondents

submitted that when the Statute does not fix any period of

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limitation, the Courts cannot prescribe any period of

limitation. He placed reliance on the decisions reported in

2010 (260) E.L.T. page 61 and 1963 Income Tax Reports

page 808.

24. In PRATIBHA SYNTEX LTD. vs. UNION OF

INDIA reported in 2013 (287) E.L.T. page 290, the Gujarat

High Court has observed as follows:

20. In Collector of Central Excise, Jaipur

v.M/s.Raghuvar (India) Pvt. (supra), the Supreme

Court held that any law or stipulation prescribing a

period of limitation to do or not to do a thing after

the expiry of period so stipulated has the

consequence of creation and destruction of rights

and, therefore, must be specifically enacted and

prescribed therefor. It is not for the courts to

import any specific period of limitation by

implication, where there is really none, though

courts may always hold when any such exercise of

power had the effect of disturbing rights of a citizen

that it should be exercised within a reasonable

period.

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21. In Torrent Laboratories Pvt. Ltd. v.

Union of India (supra), a Division Bench of this

Court in the context of Rule 57-1 of the Central

Excise Rules, 1944 held that in absence of any

provision with regard to specific period of limitation,

reasonable period of limitation has to be read into

the rule.

22. Thus, it is a settled legal proposition

that where a statutory provision does not prescribe

any period of limitation for exercise of power

thereunder, a reasonable period has to be read

therein. As to what is a reasonable period would

depend upon the facts of each case.

23. Examining the facts of the present cases

in the light of the aforesaid legal position, in all

these cases, drawback had been paid to the

petitioners between December 1995 and August

1996. Thereafter, despite a clarification having

been issued as regards the interpretation of

condition (c) of the Note under SS No.5404(1)(i) of

the Drawback Schedule, no action was taken by

the concerned authorities at the relevant time. It is

only after a period of more than three years that

show cause notices came to be issued to the

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petitioners seeking to recover the differential

amount of drawback erroneously paid to them.

Judging the period of delay from the armchair of a

reasonable man, under no circumstances can the

period of more than three years be termed to be a

reasonable period for recovery of the amount

erroneously paid. As held by the Supreme Court in

the case of Collector of Central Excise, Jaipur v.

M/s.Raghuvar (India) Ltd. (supra), where no period

of limitation is prescribed, the courts may always

hold that any such exercise of powers which has

the effect of disturbing the rights of citizen should

be exercised within a reasonable period of time. In

the present case, the drawback had been paid

more than three years prior to the issuance of the

show cause notices, and despite the fact that

clarification in respect of condition (c) of the Note

under SS No.5404 (1)(i) of the Schedule had been

issued way back in the year 1996, no efforts were

made to recover the drawback paid to the

petitioners at the relevant time. Thus, the

petitioners were entitled to form a belief that the

matter has attained finality and arrange their

finances accordingly. Now, when after a period of

more than three years has elapsed, if the

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respondents seek to recover the amount of

drawback paid, it cannot be gainsaid that such

exercise of powers would have the effect of

disturbing their rights. Under the circumstances,

reading in the concept of reasonable period in Rule

16 of the Rules, this Court is of the view that the

show cause notices in question were clearly time-

barred.

24. Insofar as the decision of this court in

the case of Dadri Inorganics Pvt. Ltd. v.

Commissioner of Customs (supra) on which reliance

has been placed by the learned counsel for the

respondents is concerned, a perusal of the said

decision indicates that the said case fell within the

ambit of willful misstatement or suppression of fact

as envisaged under the proviso to Section 28 of the

Customs Act. It is, therefore, in the light of the

peculiar facts of the said case that the court had

held that the contention that the extended period of

limitation could not be invoked was misconceived.

The decision cannot be said to be laying down any

absolute proposition of law to the effect that since

Rule 16 of the Drawback Rules does not provide for

any limitation for recovery of amount of drawback

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erroneously paid, such powers can be exercised at

any point of time, even beyond a reasonable period.

25. In DADRI INORGANICS Pvt. Ltd. vs.

COMMISSIONER OF CUSTOMS reported in 2010 (260)

E.L.T. page 61, the Gujarat High Court has observed as

follows:

11. Another contention advanced on behalf

of the appellant is that in the light of the provisions

of Section 28 of the Customs Act, the extended

period of limitation could not have been invoked.

However, the said contention does not merit

acceptance, inasmuch as a perusal of the Customs,

Central Excise Duties and Service Tax Drawback,

Rules, 1995 (‘the Drawback Rules”) which have

been framed in exercise of the powers conferred

under Section 75 of the Act, it is apparent that the

provisions regarding drawback are self-contained

provisions. The Drawback Rules nowhere provide

for any limitation for recovering any amount of

drawback erroneously paid. In the circumstances,

the contention that the extended period of limitation

could not have been invoked is misconceived.

Even otherwise, in light of the fact that the

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appellant had claimed drawback on the excise duty

component without there being any supporting

manufacture, the claim would squarely fall within

the ambit of willful misstatement or suppression of

fact as envisaged under the proviso to Section 28 of

the Act. Hence, even if the provisions of Section 28

were applicable, the extended period of limitation

could have been validly invoked.

26. The Division Bench of this Court in N.SUBBA RAO

vs. THIRD INCOME-TAX OFFICER, CITY CIRCLE II,

BANGALORE reported in 1963 INCOME TAX REPORTS

page 808, has observed as follows:

We may now proceed to consider the second

contention of Sri.Srinivasan. He strenuously urged

that a notice of demand issued four years after the

assessment was made is clearly illegal. Section 29

does not prescribe any period of limitation for

issuing a notice. Wherever the legislature thought it

necessary, it has prescribed periods of limitation in

the Act. No support for the contention of

Sri.Srinivasan can be gathered from the language

of section 29. But he bases his contention on some

decided cases which have taken the view that a

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notice of demand under section 29 should be

issued within a reasonable time. The first decision

cited is the one decided by the Patna High Court, In

the matter of Narayan Bhanja Deo. Delivering the

judgment of the court, Dawson-Miller, Chief Justice,

repelled the contention of the learned counsel

appearing for the assessee that a notice of demand

should be issued in the year of assessment. This is

what the learned Chief Justice observed:

“I cannot believe, however, that it was

intended by prescribing a form of notice of this sort

to create a limitation period within which such

notice must be given. If it had been the intention of

the legislature to prescribe a period of limitation for

such notices I think that such an important

provision would have found place in the body of the

Act itself indicating that intention. In other sections

of the Act we do find that where certain notices

have to be given the period within which they have

to be given is prescribed. But so far as section 29

is concerned no period at all is prescribed in the

Act. Again it is quite possible that in certain cases

no demand could be made within the actual year

for which the tax is payable. Provision is made for

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disputes which may arise as to the acceptance or

rejection of the assessee’s return. If his return is

not accepted then an enquiry takes place, evidence

may be demanded of him and much time may be

expended in carrying on the enquiry, and it is quite

possible that such enquiry would not terminate

until after the year of assessment and I do not

think it can be suggested that because the ordinary

form prescribed for such a demand contemplates

that it will be issued during the current year of

assessment, it is tantamount to an enactment that

it cannot be issued afterwards. If any part of the

form should be applicable to the particular facts of

the case then I presume it can be altered in the

ordinary course before the form is sent out, but the

mere fact that forms are prescribed under the Act

does not seem to me to carry with it the result that

unless everything is done exactly as provided by

the form it is of no force and effect.”

The above observations are undoubtedly of no

assistance to Sri.Srinivasan’s client. On the other

hand, they repel the contention advanced by

Sri.Srinivasan. But Sri.Srinivasan wants us to

reply on the further observation:

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“Although no time is prescribed for issuing the

notice in question I suppose it may be said that

such a notice must be issued within a reasonable

time. What would be a reasonable time might vary

according to circumstances.”

This observation of the learned Chief Justice

is clearly obiter. If the legislature did not choose to

prescribe any period of limitation, we very much

doubt whether the court could step in and prescribe

its own period of limitation by bringing in the ides

of “reasonable time.” It would not be correct to

assume that every claim, to be valid, must be made

within some period and that is no period of

limitation is prescribed by the statute, then it

should be done within a reasonable time. Unless a

period of limitation is prescribed, the courts are not

justified in prescribing any period in the nature of

limitation. We do not think that the observation of

the learned Chief Justice can be taken advantage

of for contending that the period taken in the

instant case is an unreasonable period. If the

decision above referred to had stood by itself

Sri.Srinivasan’s contentions would have been

extremely weak. But fortunately for him a Bench of

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the Single Judicial Commissioner’s Court in Firm

Khemchand Ramdas v. Commissioner of Income

Tax held that the form of notice of demand under

section 29, Income Tax Act, 1922, provided by the

Income-Tax Rules shows a simultaneous demand

both for income-tax and super-tax; that in order to

be valid a demand for super-tax should be made

within a reasonable time of the assessment for

income tax. The Bench further held that two years

and four months or thereabouts was a wholly

unreasonable time. For this proposition they placed

reliance on the decision in Rajendra Narayan’s

case which we have already considered. With

respect, we dissent from the view expressed in he

above case as in our view that decision does not

lay down the law correctly. When that case,

Khemchand’s case, was taken up in appeal to the

Judicial Committee, the Judicial Committee

observed in Commissioner of Income tax v.

Khemchand, Ramdas thus:

“Aston, A.J.C., considered that the demand

for super-tax should be made within a reasonable

time of the assessment for income-tax, meaning no-

doubt, by assessment the service of the notice of

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demand for income-tax which normally completes

the assessment. Rupchand Bilaram, A.J.C., was of

opinion, that the demand for super-tax should be

made within a reasonable time, and therefore,

almost simultaneously with the demand for income-

tax. Both of them held for this reason (amongst

others) that the service of the notice of demand of

May 4, 1929, was illegal and inoperative to impose

liability upon the respondents. Their Lordships do

not find it necessary to express any opinion upon

this point inasmuch as in their view and for the

reasons which they will now proceed to give it does

not call for determination in the present case.”

Even if we had agreed with the contention

that a notice under section 29 should be issued

within a reasonable time, we are of the opinion that

in the circumstances of this case the notice issued

to the assessee petitioner was within a reasonable

time.

27. From the above decisions, it is clear, if the

limitation is not prescribed by the Statute, the Court cannot

prescribe any limitation. However, in the facts and

circumstances of each case, the Court can consider whether

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the exercise of power had the effect of disturbing rights of a

citizen.

28. In the present case, the show-cause notice has

been issued to the petitioners along with others on 18.7.2001.

In the show-cause notice all facts have been mentioned. The

petitioners have been called upon to show-cause as to why

penalty should not be imposed on them under section 114(iii)

of the Customs Act, 1962. In the original show-cause notice,

the petitioners were not asked to show-cause as to why the

duty drawbacks should not be recovered. However, in the

addendum dated 2.5.2002, the petitioners have been asked to

show-cause as to why the duty drawbacks drawn by them

should not be recovered. A careful reading of the addendum

shows that the changes to the original show cause notice do

not structurally alter the show cause notice. Whatever is

alleged in the show-cause notice is virtually repeated in the

addendum except calling upon the petitioners to show-cause

as to why the duty drawbacks should not be recovered.

- 39 -

Therefore, it cannot be said that the addendum structurally

alters the nature of the show-cause notice and it is barred by

limitation. In fact no limitation has been prescribed for

recovery of duty drawbacks. Therefore, I do not find any

merit in the contention that the addendum structurally alters

the nature of show cause notice and it amounts to fresh

show-cause notice. When Statute does not prescribe any

limitation, the court cannot prescribe it. However, depending

upon the facts and circumstances of each case court can

consider whether the exercise of power has the effect of

disturbing the rights of a citizen.

29. In the present case, though there is some delay in

issuing addendum, the facts stated in the addendum are

substantially the same as stated in the original show-cause

notice. Therefore, it does not structurally alter the nature of

the original show-cause notice. Therefore, it cannot be said,

the addendum amounts to fresh show cause notice and it is

barred by limitation. Accordingly, it is rejected. The

- 40 -

authorities considering the material on record and assigning

reasons have confirmed the demand made in the show-cause

notice and called upon the petitioners to pay duty drawbacks

and also the penalty. The impugned order as well as the

order passed by the original authority and also the appellate

authority do not call for interference. There is no merit in

these writ petitions and therefore, they are liable to be

dismissed.

Accordingly, the writ petitions are dismissed.

Sd/- JUDGE Dvr/Bss.