Customs Settlement Limitation Excludes Period When Interim Board Could Not Function: Delhi High Court

The Delhi High Court on 4 August held that the period during which the Interim Board for Settlement remained unable to function due to lack of quorum must be excluded while calculating the statutory limitation period for deciding customs settlement applications.

A Division Bench of Justices Anil Kshetarpal and Shail Jain set aside the communications issued by the Interim Board treating the Petitioner's settlement proceedings as having abated under Section 127C(12) of the Customs Act, 1962, holding that a litigant cannot be deprived of the statutory remedy of settlement due to the adjudicatory authority's institutional incapacity. The judges held:

“It is difficult to attribute to the legislature an intention that a litigant, who has diligently pursued the statutory remedy available under the Act and has fulfilled every obligation cast upon him, should nevertheless lose that very remedy solely because the statutory authority entrusted with deciding the proceedings ceased to possess the legal competence to function.”

Section 127C of the Customs Act provides the procedure for disposal of settlement applications by the Settlement Commission, now the Interim Board for Settlement.

The dispute before the Court concerned Section 127C(12), which permits the Interim Board to extend the statutory period for deciding pending settlement applications. The issue was whether settlement proceedings could be treated as having abated when the Interim Board itself had become incapable of functioning due to the absence of the statutory quorum.

The Petitioner submitted that after the matter was finally heard and reserved for orders, one member of the Interim Board retired on 30 September 2025, leaving the Board without the required quorum from 1 October 2025. Consequently, the Board became incapable of pronouncing its decision. Despite this, the Board later held that the proceedings had abated since no final order had been passed within the statutory period. The Revenue contended that abatement followed automatically once the statutory period expired.

The High Court rejected this interpretation and held that Section 127C could not be applied mechanically without considering the statutory scheme. It observed:

“In the considered opinion of this Court, the period prescribed under Section 127C(8A), as extended in terms of Section 127C(12), necessarily contemplates a period during which the Interim Board is legally capable of exercising the jurisdiction vested in it under the Act. The expression “no order is passed within the prescribed period” cannot be understood to include a situation where the Interim Board itself had ceased to exist as an effective adjudicatory forum on account of the absence of the statutory quorum.”

Further, the Bench held that accepting the Revenue's interpretation would mean that the limitation period would continue to run against an applicant even when there was no legally constituted Interim Board capable of deciding the settlement application. It noted:

“In other words, although the applicant would possess no means whatsoever to secure disposal of the settlement proceedings, and although the statutory authority itself would remain incapable of performing the duties cast upon it by law, the applicant would nevertheless suffer the drastic consequence of abatement solely because the prescribed period expired during such institutional incapacity. Such an interpretation would render the statutory remedy of settlement dependent not upon the diligence of the applicant or the discharge of statutory functions by the adjudicatory authority, but upon administrative contingencies entirely beyond the control of either.”

It also held that the phrase “no order is passed within the prescribed period” under Section 127C(8A) cannot include a period when the Interim Board lacked the legal competence to exercise jurisdiction due to absence of quorum.

Accordingly, the High Court declared that the entire period from 1 October 2025, when the Interim Board became non-functional due to lack of quorum, until the date of the judgment shall be excluded while computing limitation under Section 127C(8A) read with Section 127C(12) of the Customs Act, 1962.

For Petitioner: Mr. Ankur Jain, Mr. Pranav Ojha and Mr. Samay Jain

For Respondent: Mr. Varun Mishra SPC with Mr. Ashar Hussain Advs. for R4 & 6. Mr. Anurag Ojha, SSC Mr. Dipak Raj, Mr. Aryaman Singh Chouhan, and Mr. Aditya Chaudhary, Advs.