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 goods in tank no. 103 before obtaining formal inclusion permission, though permission was granted shortly after. The tribunal found that confiscation under section 111(h) was not warranted as goods remained within customs area and supervisory control. The Commissioner exceeded authority in imposing penalties under sections 112 and 117, failing to properly assess whether tanks were within designated customs area and incorrectly determining maximum permissible assessable value without proper valuation exercise under section 2(41).

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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, 1962
The 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, 1962
Consequent 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, 1962
Penalties 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 Revocation
The 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)

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