In a tax system as vast and complex as India’s, time-bound adjudication is not merely a procedural ideal, it is also an essential pillar that promotes ease of doing business, upholds taxpayer trust, promotes administrative efficiency, and sustains the integrity of revenue collection. On the other hand, persistence of cases where adjudication lingers for a decade or more raises troubling questions.
The issue of delayed adjudication is a legal conundrum at the intersection of regulatory authority and constitutional due process. Several taxpayers receive show cause notices or orders even after 10-15 years from the date of import or supply. These demands pertain to periods for which they are not legally obligated to preserve any financial records. In such circumstances, it can be challenging for taxpayers to argue and justify their respective cases because even the individuals responsible for managing the documents could have left several years ago. In this situation, the Hon’ble Supreme Court’s order in Union of India v. GMR Infrastructure[1] brings to the forefront a persistent issue in India’s indirect tax regime — inordinate delays in adjudication under the Customs Act, 1962 (“Customs Act”), Central Goods and Services Tax Act, 2017 (“CGST Act”), and the Finance Act, 1994, compounded by the revenue department’s practice of relegating matters to a “call book”.[2]
The Anatomy of Delay
Delays in tax adjudication can stem from various factors, such as administrative, strategic, and genuine complexity or due to pendency in higher fora of administration/ judiciary. In provisional assessments or matters in which a bond is executed for the fulfilment of certain conditions without any expiry date, the department conducts investigations, in certain cases, even years after the transaction. In such cases, the timeline becomes unpredictable.
From the department’s perspective, this only happens when vital facts are unearthed through departmental diligence. In such cases, the department argues that limitation clocks should not restrict their right to adjudicate, particularly where provisional assessments are in place, and continuity bonds exist. However, in the event of a prolonged delay, the department may face challenges in effectively presenting its perspective. The successor occupying the predecessor’s position might lack familiarity with the case’s circumstances and therefore may struggle to fully understand and advocate for the department’s standpoint.
From a legal standpoint, prolonged delays also prejudice a taxpayer’s right to a fair hearing. Over time, records are lost, and key personnel may no longer be in service due to innumerable reasons, including job switching, illness, lack recollection, etc. Courts have repeatedly held that such delays erode the quality of adjudication and violate the principles of natural justice. Furthermore, delayed orders often attract interest and penalties for periods entirely attributable to administrative inertia, thereby burdening the taxpayer with a liability that is both financially excessive and legally unjust. This defeats the purpose of time-bound adjudication envisioned under the indirect tax legislations.
Taxpayers often argue that any adjudication, especially those involving tax demands, must be concluded within a reasonable timeframe, even if it is not statutorily prescribed. The Customs Act imposes a limitation of five years for cases involving suppression, fraud or wilful misstatement, with intention to evade taxes. Courts have consistently interpreted such timeline to be the hard stop. There is no justification for extending timelines under any circumstances.
The heart of the taxpayer’s argument is one of finality. If no final order was passed for a long period of time, and if all documents were submitted or reasonably demanded, the assessment should be deemed concluded.
Jurisprudence till now
While certain timelines may be directory, excessive delay can vitiate the entire proceeding. Provisional assessments are not a carte blanche to defer adjudication indefinitely. Even in cases involving provisional assessments under customs laws, it is imperative that the department act within a reasonable timeframe.
The Hon’ble Delhi High Court in Gautam Spinners, v. Commissioner of Customs (Import), New Delhi & Anr.[3], held that the proceedings initiated are liable to be brought to a close, in accordance with the statutory timelines mentioned in Section 28(9) of Customs Act. The amendment specifically deleted the words “where it is possible to do so”, thereby inferring that the period of one year is mandatory.
Similarly, in Swatch Group India Pvt. Ltd. & Ors. v. Union of India & Ors.[4] the Hon’ble Delhi High Court held that if there is no valid reason for the officer’s inability to determine the duty amount within the stipulated period, it shall be presumed that the proceedings have lapsed, and cannot be adjudicated. The Hon’ble High Court also held that time extension would be applicable only if the proper officer encountered “insurmountable exigencies” and further recourse was “impractical or impossible”.
Various other High Courts, such as the Hon’ble Bombay High Court[5] and the Hon’ble Jharkhand High Court[6] in similar situations, have quashed show cause notices for inordinate and unexplained delay. The Hon’ble Bombay High Court remarked that “If the sword of Damocles, in the form of the impugned SCN is kept hanging over the Petitioners for over 21 years, it would make it impossible for the Petitioners to plan their business or make provisions for any contingent liabilities.”[7]
The issue before the Hon’ble Supreme Court
The Hon’ble Delhi High Court ruling too echoed similar concerns. It observed that the proceedings in the case prolonged unnecessarily with no plausible explanation.[8] The Hon’ble High Court further observed, while the legislation gives a degree of flexibility, it is limited to such situations where the proper officer may have found it impracticable or impossible to conclude proceedings.
Against this, an appeal was filed in the Hon’ble Supreme Court, wherein an interim direction was passed to CESTAT/ High Courts that if any matter comes up for hearing before the tribunal or any of the High Courts on the subject in question, the hearing may be deferred till there is a judgement by the Hon’ble Supreme Court.
The Hon’ble Supreme Court’s interim order to defer hearings in related matters, pending its final decision, aims to ensure uniformity, but risks perpetuating delays, potentially clashing with the expedition principle upheld by the High Court. The final ruling will hopefully clarify the scope of “reasonable time”, the legitimacy of call book practices, and the extent of administrative discretion. By addressing these issues, the Supreme Court has the opportunity to streamline indirect tax adjudication, curb misuse of the call book, and reinforce taxpayer protections, ensuring that justice delayed does not result in justice denied.
Closing Remarks
Not all delays are malicious. At times, the department may be overburdened, under-resourced, or awaiting critical evidence from parallel proceedings. Taxpayers, on the other hand, genuinely misread requirements or face operational bottlenecks.
But what happens when an honest taxpayer, acting in good faith, finds himself or herself caught in a regulatory time warp? The impact is not just financial. When show cause notices or adjudication proceedings remain pending for years, without any resolution, taxpayers are left in a state of procedural limbo, unable to determine their actual tax liability or pursue appropriate legal remedies. This uncertainty often leads to creation of provisions of contingent liability in the balance sheets. Uncertainty around pending assessments also impairs investment decisions, affects compliance strategy, and in cases involving multinational players, casts a long shadow over India’s attractiveness as an investment destination.
In the end, certainty is the bedrock of compliance. When time limits are adhered to, both sides benefit, with the department getting timely realisation, and taxpayers getting closure. The need of the hour is not to dilute the law in favour of either side, but to respect it equally for time, in tax as in life, must not be a victim of delay. Mandatory timelines, backed by accountability mechanisms, will ensure neither side can indefinitely postpone closure. Digital integration and documentation tracking within tax administrations, such as automated follow up, auto-generated deficiency identification and internal escalation alerts, can prevent bottlenecks from internal delays by jurisdictional officer.
Notably, Section 73(10) of the CGST Act uses the words “shall issue” and does not adopt the “where it is possible to do so” phraseology as employed by the Customs Act. Hence, hopefully such delay in adjudication would not be faced by taxpayers under the GST regime.
The Supreme Court’s eventual decision in GMR Infrastructure will likely become a precedent of great import. It is high time the Courts mandate that strict timelines apply as much to revenue authorities, as they do to taxpayers.
For further information, please contact:
S.R. Patnaik, Partner, Cyril Amarchand Mangaldas
sr.patnaik@cyrilshroff.com
[1] Union of India v. GMR Infrastructure, Special Leave to Appeal (C) No.5392/2025.
[2] Call book refers to an internal administrative device used to defer adjudication pending litigation in higher forums, but has no basis in the parent statutes. While the CBIC through Circular No. 162/73/95-CX dated October 14, 1995, permits call book placement under certain circumstances, multiple decisions have challenged the legality of call book related procedures.[2]
[3] Gautam Spinners, v. Commissioner of Customs (Import), New Delhi & Anr., 2023 (386) E.L.T. 62 (Del.)
[4] Swatch Group India Pvt. Ltd. & Ors. Vs. Union of India & Ors. 2023 (386) E.L.T. 356 (Del.)
[5] Bhushan Vohra Vs The Union of India & Ors 2024 (9) TMI 713 (Bom); The Great Eastern Shipping Company Ltd Vs Union of India & Ors Writ Petition No. 3605 of 2024; and Paresh H. Mehta Versus The Union Of India, 2024 (10) TMI 1412 (Bom).
[6] M/s. Bihar Foundry & Castings Ltd. v Union of India & Ors. 2024 (3) TMI 371 – JHARKHAND HIGH COURT
[7] M/s. Esjaypee Impex Pvt. Ltd., Shri Mahendrakumar P. Parmar Managing Director of M/s. Esjaypee Impex Pvt. Ltd., Versus The Union of India, Additional Director General, Directorate of Revenue Intelligence, Mumbai, Commissioner of Customs (Import-I), Mumbai – 2024 (11) TMI 622 – Bombay High Court.
[8] M/S Vos Technologies India Pvt. Ltd. v. The Principal Additional Director General, WP(C) No. 6548/2024.
