CESTAT Quashes Customs Recovery Proceedings Against Hindustan Copper Over Absence of SCN, 23-Year Delay

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside customs recovery proceedings initiated against Hindustan Copper Ltd., holding that the entire adjudication was legally unsustainable due to the absence of a proper show cause notice under Section 28 of the Customs Act, 1962 and an extraordinary delay of nearly 23 years in adjudication. The bench of Ajay Sharma (Judicial Member) observed that Section 28 unequivocally mandates issuance of a show cause notice before fastening any liability for short levy, non-levy or erroneous refund. It observed that a show cause notice is not a mere procedural formality but an essential safeguard rooted in principles of natural justice. According to the Tribunal, such notice must specifically invite the noticee to explain why the proposed recovery should not be confirmed. The appeal arose from an Order-in-Appeal whereby the Commissioner of Customs (Appeals), Mumbai Customs Zone-I, had upheld the Order-in-Original passed on 22 March 2018 confirming recovery of refund along with interest against Hindustan Copper Ltd. The dispute dates back to September 1990, when Hindustan Copper Ltd. imported tyres, tubes and flaps and paid applicable customs duties, including Countervailing Duty (CVD) and Special Additional Duty (SAD). Subsequently, the company reviewed the assessment and claimed that excess CVD had been collected. A refund application was filed on 26 April 1991, and after reassessment, customs authorities determined that the duty payable was substantially lower than the original levy. Consequently, a refund of Rs. 8.42 lakh was sanctioned and paid to the company on 30 March 1994. However, the Central Revenue Audit later objected to the reassessment, contending that the concessional excise duty rate under Notification No. 41/1989-CE was applicable only to tyres used in motor vehicles and not to off-the-road vehicles. Acting on this audit objection, the department issued a demand notice in December 1995 seeking recovery of the allegedly excess refund amounting to around Rs. 8 lakh. The matter thereafter remained dormant for almost two decades. The first personal hearing notice was issued only on 7 March 2014, nearly nineteen years after the demand notice. During the proceedings, Hindustan Copper informed the department that most employees associated with the original import transaction had retired and the current staff had no knowledge of the case due to the antiquity of the dispute. Despite this, the adjudicating authority passed an order in March 2018 confirming recovery of Rs. 8.42 lakh with interest, which was later upheld by the Commissioner (Appeals). The Tribunal identified a fundamental defect in the proceedings. It noted that while the original demand notice sought recovery of Rs. 8,00,485, the adjudicating authority eventually confirmed a higher amount of Rs. 8,42,613 without issuing any supplementary or amended notice. The Tribunal observed that a quasi-judicial authority cannot travel beyond the scope of the notice initiating proceedings, and any demand beyond the amount specified in the notice amounts to excess exercise of jurisdiction. A major issue before the Tribunal was whether the department had complied with the mandatory requirement of issuing a proper show cause notice under Section 28 of the Customs Act. The Revenue argued that the demand notice substantially fulfilled the purpose of a show cause notice because it informed the assessee about the proposed liability. However, the Tribunal rejected this contention. CESTAT further clarified that a unilateral demand directing payment of money cannot be equated with a valid show cause notice. The distinction between a demand notice and a show cause notice is substantive because the latter defines the boundaries of adjudication and ensures a fair opportunity of defence. In the absence of such notice, the entire proceeding becomes legally void. Reliance was placed on the Supreme Court’s ruling in Metal Forgings v. Union of India , where the apex court held that issuance of a proper show cause notice is a mandatory legal requirement. The Tribunal also strongly criticised the extraordinary delay in adjudication. It observed that adjudication after twenty-three years was “egregious” and fundamentally unfair. The Bench noted that business records relating to a 1990 import transaction were naturally unavailable after such a long period and that retired employees could no longer assist in the defence. According to the Tribunal, the right to a fair hearing necessarily includes the right to timely adjudication so that the affected party can effectively defend itself. It held that no business entity can reasonably be expected to preserve institutional memory, documents or witnesses for nearly a quarter century. The Bench relied upon the Bombay High Court’s decision in Parle International Ltd. v. Union of India , where delayed adjudication was held to defeat the very purpose of issuing a show cause notice. Applying the same principle, the Tribunal held that the Revenue’s prolonged inaction amounted to constructive abandonment of proceedings and caused grave prejudice to the appellant. Accordingly, the Tribunal set aside the impugned order and allowed the appeal filed by Hindustan Copper Ltd. with consequential reliefs in accordance with law. Case Details Case Title: M/S. Hindustan Copper Ltd Versus Customs Commissioner Citation: JURISHOUR-1214-CES-2026(MUM) Case No.: CUSTOMS APPEAL No.85750 OF 2022 Date: 07.05.2026 Counsel For Appellant: Ankit Totuka, Advocate Counsel For Respondent: L B D’Costa (AR) Click Here To Read Order Read More: Trichy Customs Seizes Silver Bars, Gold and Royal Enfield Bike in Ramanad Operation

CESTAT Quashes Customs Recovery Proceedings Against Hindustan Copper Over Absence of SCN, 23-Year Delay

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