2024 (7) TMI 203 - AT - Customs

Warehouse licensee wins appeal against penalties for storing goods before formal tank inclusion permission

The CESTAT Mumbai allowed the appeal and set aside the impugned order imposing penalties and confiscation. The appellant warehouse licensee had stored ... Levy of simultaneous penalty under a residual empowerment vested in adjudicatory authority by Customs Act, 1962 - breach of obligations as licensee of warehouse under Customs Act, 1962, by recourse to regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 - suspension of warehouse license - confiscation of the goods under section 111 of the Customs Act, 1962 - consequent imposition of fine under section 125 of Customs Act, 1962 - imposition of penalties under section 117 of Customs Act, 1962. HELD THAT:- It was ascertained during the enquiry proceedings that the appellant had sought inclusion of tank no. 103 to the private warehouse licence in December 2021 and that permission was accorded on 18th February 2022. It is also on record that the goods imported vide bill of entry 7434419/10.02.2022 had been pumped in the said tank on 15th February 2022. There is no doubt that the procedure does not contemplate retrospective applicability of such inclusion but in matters of storage, and especially of liquid bulk, which, for want of discharge on arrival, would imply retention of the vessel with mounting of related charges, required the breach to be viewed in proper perspective as malafide has not been set out in the impugned order - there are doubts about the applicability of this provision inasmuch as goods not having been deposited in a warehouse could not be alleged to have been removed contrary to permission and, further, it is not as if the goods were moved out of customs area and supervisory control of the customs authorities pending clearance for home consumption. As confiscation was not warranted, the imposition of penalty under section 112 in relation to the impugned goods is patently not correct in law. The confiscation had been ordered under section 111(h) of Customs Act, 1962 which is liable to be invoked only when goods are unloaded or attempted to be unloaded in contravention of provisions under section 33 and section 34 of Customs Act, 1962. It would appear that Commissioner of Customs has failed to take cognizance of chapter VI of Customs Act, 1962 which placed responsibility for unloading of the cargo on the master of vessel as set out in section 31 of Customs Act, 1962 and, thereafter, for discharge only in places specified under section 8(a) of Customs Act, 1962. The powers entrusted on Principal Commissioner of Customs/ Commissioner of Customs under section 8 of Customs Act, 1962 is intended to earmark places for loading and unloading and to set limits of designated customs area which has been defined as ‘a customs station’ and ‘an area in which imported goods or exported goods are ordinarily kept before clearance by the customs authorities’; from the impugned order we are unable to discover if the Commissioner of Customs had ascertained if the said bonded tanks were within such customs area. While the storage of third party goods in a private warehouse may be irregular, there is certainly no bar on the storage of goods belonging to any person, even to licensee of private warehouse licence, in a public warehouse. The Commissioner of Customs appears to have ignored this fundamental premise in considering the said storage to be irregular. There is no justification whatsoever for invoking section 111(h) as well as imposition of penalty thereof under section 112 of Customs Act, 1962. Accordingly, detrimentation of fine and penalties are set aside. The Commissioner of Customs has exceeded his authority in imposing penalty under section 117 for the several breaches noticed during the course of inspection. Furthermore, insofar as the maximum permissible assessable value alleged to have been breached, it should not have escaped notices of Commissioner of Customs that the said condition does not define ‘value’ and, if at all required, should have been estimated in accordance with section 2(41) of Customs Act, 1962. In the absence of such exercise, the validity of the finding of having exceeded the maximum permissible assessable value is without factual basis and, therefore, incorrect. The impugned order was passed in excess of authority and the imposition of penalty lacks authority of law for which reason the impugned orders are set aside to allow the appeals. - Appeal allowed. Issues Involved:1. Confiscation of goods under Section 111 of the Customs Act, 1962.2. Imposition of fines under Section 125 of the Customs Act, 1962.3. Imposition of penalties under Section 117 of the Customs Act, 1962.4. Suspension of warehouse licenses and conditions for revocation.Detailed Analysis:1. Confiscation of Goods under Section 111 of the Customs Act, 1962The primary issue revolves around the confiscation of goods under Section 111 of the Customs Act, 1962. The appellant's goods were held liable for confiscation under Section 111(j) and Section 111(h) for storing goods in unauthorized tanks. However, the tribunal found that the procedural delays in granting permission for tank inclusion and the necessity of immediate storage due to liquid bulk cargo exigencies were not considered. The tribunal noted that the goods were still under customs supervision and no malafide intent was established. Therefore, the confiscation was deemed harsh and disproportionate.2. Imposition of Fines under Section 125 of the Customs Act, 1962Consequent to the confiscation, fines were imposed under Section 125 of the Customs Act, 1962. The tribunal found that since the confiscation itself was unwarranted, the imposition of fines was also incorrect. The tribunal referenced the decision of the Hon’ble High Court of Bombay in Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc, which supports the stance that fines cannot be imposed if goods are not available for confiscation.3. Imposition of Penalties under Section 117 of the Customs Act, 1962Penalties were imposed under Section 117 for various alleged breaches, including non-maintenance of records, non-production of solvency certificates, and failure to install CCTV systems. The tribunal highlighted that these breaches were based on licensing conditions rather than statutory regulations. Regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 does not incorporate licensing conditions, and thus, penalties under Section 117 were beyond the Commissioner’s authority. The tribunal concluded that the Commissioner exceeded his authority in imposing these penalties.4. Suspension of Warehouse Licenses and Conditions for RevocationThe suspension of licenses was another critical issue. The tribunal observed that the suspension was to continue until penalties and fines were paid, which was not in line with statutory provisions. Section 58B of the Customs Act, 1962 allows for suspension during an enquiry but does not extend beyond the conclusion of the enquiry unless the license is canceled. The tribunal found the continuation of suspension beyond the enquiry stage to be illegal and set aside the suspension.Conclusion:The tribunal set aside the impugned orders, finding that the confiscation of goods, imposition of fines and penalties, and continuation of suspension of licenses were not in accordance with the law. The appeals were allowed, and the penalties and fines imposed were annulled.(Order pronounced in the open court on 28/06/2024)