Inordinate delay in adjudicating show cause notices beyond a reasonable period vitiates assessment proceedings as being arbitrary and violative of natural justice.

The Petitioner, a Public Sector Undertaking, transport petroleum products via pipeline to its Vashi Terminal within the jurisdiction of the Navi Mumbai Municipal Corporation (NMMC)

For the financial year 2010-11, the Petitioner filed monthly returns and annual statements

On August 24, 2011, the Cess Officer issued a show-cause notice (Form-H) proposing best judgment assessment

After the Petitioner’s response on September 9, 2011, the matter remained dormant for nearly nine years until July 18, 2023, when the Cess Officer requested further documents

Consequently, the Respondent passed the impugned assessment order (Form-I) and demand notice (Form-J) in August 2023

The Petitioner challenged these orders as being barred by limitation and unreasonable delay

1. Whether an assessment order passed after a lapse of ten years from the issuance of the initial notice in Form-H is barred by limitation and conceptually unreasonable

2. Whether the mandate of Rule 25 of the Maharashtra Municipal Corporations (Cess on entry of goods) Rules, 1996, requires completion of assessment within a reasonable time even where no outer limit is explicitly prescribed for final adjudication

The Court primarily applied Rule 25 (specifically sub-rules 3, 4, 5, and 7) of the Cess Rules, 1996, which contemplates assessment within three years from the end of the relevant year for unregistered dealers or those failing to file returns

It relied heavily on the precedent Siemens Limited v. The State of Maharashtra (WP No. 3124 of 2020), which established that while the statute might not fix an outer limit for completing assessment, it must be concluded within a "reasonable period," and a delay of ten years is unreasonable

The Court also invoked the doctrine of lex dilationes abhorret (the law abhors delay) as affirmed in Coventry Estates Pvt. Ltd. v. Joint Commissioner CGST

The Court noted that for the assessment year 2010-11, the initial notice was issued in 2011, but the final order was only passed in 2023

Applying the Siemens precedent, the Court held that the Corporation cannot wait "endlessly" for an assessee to produce documents

The Court reasoned that keeping a show-cause notice pending for a decade causes irreversible prejudice to the assessee, violating principles of natural justice and Article 14 of the Constitution

The Court further observed that the Corporation had erroneously sought to apply Local Body Tax (LBT) Rules to a Cess proceeding, indicating a lack of due application of mind

Since the delay exceeded the ten-year threshold deemed "unreasonable" in Siemens, the proceedings were found to be legally unsustainable

The High Court allowed the Writ Petitions, quashed the impugned assessment orders and demand notices for the relevant periods, and made the Rule absolute in terms of the prayers seeking a declaration that the orders were barred by limitation