Customs Refund Battle: Delhi HC De-tags Appeals to Address Section 28 Adjudication Timelines - 2025-01-24

Navigating the Clock: Delhi High Court Intervenes in Customs Refund Dispute

The Delhi High Court has taken a significant step in determining the jurisdictional limits of the Customs Department concerning the recovery of "erroneously" granted refunds. In a recent order involving M/S Vishal Video and Appliances Pvt Ltd , the bench comprising Justice Prathiba M. Singh and Justice Dharmesh Sharma de-tagged a batch of appeals to specifically examine whether protective Show Cause Notices (SCNs) were adjudicated within the strict timelines mandated by the Customs Act, 1962.

The Backdrop: A Refund Dispute

The appellant, a trader of electronic goods, had previously secured custom duty refunds following a 2016 Delhi High Court decision that aligned with the Supreme Court’s landmark ruling in SRF Ltd. vs. Commissioner of Customs, Chennai . However, the Department subsequently issued "protective" SCNs in 2018 seeking to claw back these refunds, citing the pendency of their appeal in the Supreme Court ( ITC Ltd. v. Commissioner of Central Excise ).

After the Supreme Court dismissed the Department's stance in the ITC case in 2019, the Customs authorities confirmed the recovery of the refunds. The appellant challenged this before the CESTAT, arguing that the mandatory timeline for adjudicating SCNs under Section 28 had long since expired.

The Crux of the Argument

The core legal question before the High Court centers on the interaction between Section 28(9) and 28(9A) of the Customs Act. * The Appellant’s Stance : The appellant contends that the Department failed to adhere to the six-month statutory deadline for concluding adjudication once the cause for delay—pending litigation—ceased to exist. Consequently, they argue the recovery orders are time-barred and void. * The Respondent’s Stance : The Revenue authorities maintain that the timeline was essentially “paused” during the pendency of the ITC matter at the Supreme Court and further extended by the statutory relaxation granted during the height of the COVID-19 pandemic.

Key Observations from the Court

The High Court’s deliberation focused heavily on the mechanics of the Customs Act’s limitation clauses. As noted in the Tribunal's proceedings referenced by the Bench:

> "It is seen that after the notice has been issued under sub section (1) of section 28, the proper officer has to determine the amount of duty under sub-section (8), but this has to be done within six months from the date of notice as contemplated under sub-section (9) of the Customs Act."

> "Where the proper officer is unable to determine the amount of duty under sub-section (8)... the proper officer shall inform the person concerned the reason for non-determination of the amount of duty and in such case, the time specified in sub-section (9) shall apply not from the date of notice, but from the date when such reason ceases to exist."

Procedural Reform and Next Steps

Beyond the substantive legal battle, the High Court took a stern view of ongoing procedural delays by the Customs Department. The Bench implemented a new directive requiring that all advance copies of petitions be served to dedicated email addresses for specific Commissionerates. Furthermore, the Court has ordered the Department to formulate a Standard Operating Procedure (SOP) to ensure that counsel are properly instructed upon receipt of notice, preventing future instances of matters going in default.

By de-tagging the appeals to prioritize the limitation issue, the Court has signaled its intention to clarify whether the Department’s reliance on past pandemic-related extensions holds up against the strict letter of the Customs Act. The matter is currently listed for further hearing on March 20, 2025. In the interim, the Court has granted the appellant protection from any coercive recovery measures.