Show cause notices issued beyond reasonable period for recovery of drawback or misclassification of goods are unsustainable.

The petitioner, an importer/exporter of nuts, bolts, washers, and hand tools, classified its goods as "scaffolding items" under Chapter Headings 7318, 8205, and 3926 of the Customs Tariff Act, 1975, to claim duty drawbacks

On January 12, 2016, the Directorate of Revenue Intelligence (DRI) issued a Show Cause Notice (SCN) alleging misdeclaration and asserting that the goods should be classified under CTH 7308

The goods were detained and later provisionally released

In SCA 3130/2019, the petitioner challenged the respondents' refusal to release export promotional copies due to the pending 2016 SCN

1. Whether the show cause notice regarding the classification of exported "scaffolding items" under Chapter Headings 7318, 8205, and 3926 is sustainable in light of prior judicial finality on the same issue

2. Whether the DRI had the authority to initiate the proceedings and whether the SCN was barred by the principle of reasonable limitation

The court applied Rule 16 of the Drawback Rules, which provides for the recovery of erroneous or excess drawback payments

It relied on the "reasonable period of limitation" doctrine (established in Pratibha Syntex Ltd. v. Union of India), holding that in the absence of a statutory limit in Rule 16, a three-year period is the reasonable limit for issuing an SCN

it followed the jurisdictional principle from M/s. Canon India Private Limited v. Commissioner of Customs, which restricts the power of DRI officers to issue such notices

The court also upheld the principle of judicial consistency, noting that once a classification attains finality for an item, the revenue cannot continue to litigate the same against other traders

The court noted that the classification of "scaffolding items" under Headings 7318 and 8205 had already been settled by a Division Bench in Special Civil Application No. 3825 of 2023, a decision upheld by the Supreme Court

The court observed that the revenue failed to challenge the findings of the "proper officer" who originally cleared the goods, and thus the assessment had attained finality

Regarding the 7-year delay in adjudication (with the SCN being kept in a "call book" without informing the petitioner), the court determined this was an inordinate delay that invalidated the proceedings

Finally, because the department had already accepted the legal position in identical matters like M/s. JBS Exports, the court found no grounds for the respondents to maintain the impugned SCN

The court held that the classification issue was no longer res integra and the proceedings were further vitiated by delay

The respondents were directed to: (i) release any withheld duty drawback amounts within 12 weeks, and (ii) release the export promotional copies in SCA 3130/2019 within 12 weeks