Redemption fine and penalty was set aside when there was no breach of licence conditions for bonded warehousing

The Hon’ble Supreme Court in COMMISSIONER OF CUSTOMS, NHAVA SHEVA I Versus GANESH BENZOPLAST LIMITED - 2025 (8) TMI 1015 - SC Order held that there was no reason to interfere with the judgment of the Hon’ble Bombay High Court dismissing the Customs Appeal under Section 130 of the Customs Act, 1962.

Facts:

Ganesh Benzoplast Limited (“the Respondent”) is a licence-holder operating a public bonded warehouse comprising 82 tanks (79 public bonded tanks and 3 private bonded tanks) in a duly fenced and notified area. The Respondent handled discharge and storage of edible oils through high-pressure pipelines.

Commissioner of Customs, Nhava Sheva-I (“the Appellant”) passed an Order-in-Original dated January 8, 2024, whereby the suspension of warehousing operations was revoked, but redemption fine and penalty were imposed under Sections 117 and 112(b)(ii) of the Customs Act, 1962 for alleged breaches, including storage of non-bonded goods, non-reporting of time-expired bonds, and lack of audit trail facilities.

The Respondent challenged the said order before the CESTAT, which by order dated April 22, 2024 set aside the redemption fine and penalty, holding that no breach of licence conditions was established since all permissions had been duly obtained from Customs authorities for unloading/storage and activities were conducted under supervision.

Aggrieved, the Appellant filed Customs Appeal before the Hon’ble Bombay High Court under Section 130 of the Customs Act, raising substantial questions of law concerning

1. Whether CESTAT was correct in law in setting aside the Commissioner’s order solely on the basis of Customs permission?
2. Whether CESTAT overlooked mandatory procedures under JNCH Public Notice No. 155/2016 and CBIC Circular No. 08/2021?
3. Whether penalties could be set aside despite alleged violations of non-reporting of time-expired bonds, storage of non-bonded goods in bonded tanks, and lack of audit trail facilities?

The Bombay High Court dismissed the Customs Appeal, holding that no substantial question of law arose.

The Appellant filed SLP (Civil) Diary No. 17367/2025 before the Hon’ble Supreme Court. The Supreme Court, however, dismissed the SLP, affirming the High Court’s reasoning.

Issue:

Whether the setting aside of redemption fine and penalty imposed on the Respondent, on the ground that permissions were granted by Customs authorities, and no breach of licence conditions for bonded warehousing was made out is valid?

Held:

The Hon’ble Supreme Court in COMMISSIONER OF CUSTOMS, NHAVA SHEVA I Versus GANESH BENZOPLAST LIMITED - 2025 (8) TMI 1015 - SC Order held as under:

• Observed that, the Bombay High Court rightly confined itself to examining whether a substantial question of law arose under Section 130 of the Customs Act.
• Noted that, the CESTAT had recorded detailed findings of fact based on contemporaneous permissions issued by Customs authorities and the manner of discharge/storage of goods through high-pressure pipelines.
• Held that, no perversity was shown in the CESTAT’s factual findings, and therefore no interference was warranted.
• Consequently, the SLP was dismissed, and the Bombay High Court judgment upholding the CESTAT order stood affirmed.

Our Comments:

In the case of  M/s. BISCO LIMITED Versus COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE - 2024 (3) TMI 1001 - Supreme Courtwhere the Supreme Court held that storage pursuant to explicit Customs permission and under official supervision cannot constitute breach of licence conditions. The Bombay High Court held that the principle applied equally, and permissions granted by Customs are binding and cannot later be used as grounds for penalty.

Relevant Provisions:

Section 130 of the Customs Act, 1962

“130. Appeal to High Court-

(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.

(2) The Principal Commissioner of Customs or Commissioner of Customs or the other party aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be—

(a) filed within one hundred and eighty days from the date on which the order appealed against is received by the Principal Commissioner of Customs or Commissioner of Customs or the other party;

(b) accompanied by a fee of two hundred rupees where such appeal is filed by the other party;

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.”

 (Author can be reached at [email protected])