• Dated 07^th November, 2025

Inordinate Delay of 17 Years in Issuance of Show Cause Notice for Non-Production of EODCs Held Unreasonable: Madras High Court

Brief Facts:

Chemplast Sanmar Ltd., a manufacturer and exporter of specialty chemicals, imported goods under 24 Advance Licences issued during the period 1998–2000 without any duty, by executing bonds under Notification No. 30/97-Customs dated 01.04.1997. Later, the Customs department issued a Bond Enforcement-cum-Demand Notice on 08.02.2019 (after 17 years of expiry of such licenses) for non-production of Export Obligation Discharge Certificates (EODCs) and again reopened the proceedings in 2021-22 (22 years later).

The company contended that all export obligations had been duly fulfilled and EODC has also been obtained against all the licenses. However, currently EODCs for only 13 licences were traceable and the EODC against the remaining licenses is not traceable due lapse of time. The issue was before the Hon'ble Madras High Court that whether SCN can be issued or any proceeding can be initiated against the licenses pertaining to such old period.

Assessee's Contention:

The Assessee submitted that the Show Cause Notice (SCN) was issued after 17 years was inordinate and unreasonable. Even though Section 143 of the Customs Act, 1962 (bond enforcement) and Rule 226A of the Central Excise Rules, 1944 did not fix a limitation period, SCNs must be issued within a reasonable time.

Further, the Assess relied on some judicial precedents such as Mahindra & Mahindra Ltd. v. Union of India (Bombay HC, 2024) and other 3 judgements wherein it has been decided that on account of the inordinate delay in issuing the show cause notice for non-production of EODCs, the order has been quashed.

Department's Contention:

The department argued that Section 143 of the Customs Act, 1962 permits bond enforcement without any express limitation. Further, the department also relied to Supreme Court's order in UOI v. GMR Airport Infrastructure Ltd. (SLP (C) No. 5392/2025), where delayed adjudication was under consideration and seeking the similar treatment here.
Further, the department also requested to relied on the Circular dated 07-05-2025.

Decision Held by Hon'ble HC:

The Hon'ble HC post hearing and understanding the contention of both Assessee and respondent held that even in absence of an express time limit, the SCN must be issued within a reasonable period. The 17-year delay in issuing the SCN was inordinate and beyond any reasonable yardstick.

Further, the court also hold that SC Order referred by the department is dealing with inordinate delay in adjudication and not inordinate delay in issuance of show cause notice. Accordingly, the impugned Order-in-Original (dated 24-05-2022) was quashed, and the writ petition allowed.

BTA's Remarks

This judgment reinforces the principle of "reasonable limitation" in absence of statutory timelines, ensuring fairness and certainty for exporters. The said judgement is likely to influence departmental SOPs and internal audit practices to ensure time-bound bond enforcement. Further, it aligns with similar rulings (Mahindra & Mahindra, Venus Apparels, Raghav International) emphasizing that administrative silence for decades cannot revive liabilities. Practically, it limits Customs' power to reopen very old Advance Licence cases unless action was taken within 3–5 years. Further, the court clearly separated delay in adjudicating an already issued SCN from delay in issuing the SCN itself.

Case Reference: CHEMPLAST SANMAR LTD. vs DEPUTY COMMISSIONER OF CUSTOMS (EXPORT), MUMBAI, W.P. No. 22298 of 2022 and W.M.P. No. 21329 of 2022, decided on 20-6-2025.

Author: Saket Shaw

Edited by: Shaily Gupta