Court demands explanation for prolonged issuance of notices from Customs Department, citing potential quashing under delay and laches principles.
The Delhi High Court, in a significant judgment, has addressed the prolonged issuance of show cause notices by the Customs Department to M/s Nautilus Metal Craft Pvt. Ltd. and others, potentially impacting customs procedural norms. The bench comprising Justices Prathiba M. Singh and Shail Jain, in their decision dated December 9, 2025, has directed the Customs Department to provide an affidavit explaining the delay in issuing show cause notices, which pertain to transactions from 2011 to 2019 but were issued only in 2023.
The petitioners, represented by Advocate V. Lakshmikumaran, argued that such a delay in issuing notices renders them time-barred, drawing on the rationale from the Supreme Court decision in M/s S.J.S. International v. Union of India. The petitioners seek quashing of the notices dated July 11, 2023, and August 17, 2023, under the principle of delay and laches, which the Court has acknowledged as warranting examination.
The Department, represented by Senior Standing Counsel Anurag Ojha, countered by presenting a timeline of their investigation, suggesting that the complexity of unraveling the alleged modus operandi, coupled with the COVID-19 pandemic, justified the issuance delay. The Department claims the investigation revealed attempts by the petitioners and related entities to overvalue goods for duty drawbacks, only coming to light in 2019.
While the Court has allowed the continuation of proceedings under the show cause notices, it has stipulated that no order be enforced until the reasonableness of the delay is examined. The Court has directed the Customs Department to submit an affidavit within four weeks, detailing the rationale behind the delay, with subsequent rejoinders to be filed thereafter.
Furthermore, the Court addressed procedural fairness issues raised by the petitioners, directing them to appear before the Department to obtain all relevant documents, ensuring the proceedings proceed with due process. The petitioners have been permitted to file a reply and request cross-examination, which the Department must consider according to law.
In a related procedural matter, the Court has asked both parties to explore the possibility of consolidating adjudication proceedings, given the shared investigative background by the Directorate of Revenue Intelligence (DRI). The case is scheduled for further discussion on January 21, 2026, regarding consolidation, with substantive proceedings set for March 19, 2026.
This case underscores the judiciary's commitment to upholding procedural fairness and timely action in administrative processes, setting a precedent for the scrutiny of delayed government actions under the Customs Act, 1962.
Bottom Line:
Issuance of show cause notices after a long period of time is subject to scrutiny under the principle of delay and laches, and may be liable to be quashed if deemed unreasonable as per judicial precedents.
Statutory provision(s): Customs Act, 1962
