Special Bonded Warehouse License cancellation set aside as penalty under section 117 distinguished from offence penalisation

CESTAT NEW DELHI allowed the appeal and set aside the Commissioner's order dated 17.08.2023 cancelling the Special Bonded Warehouse License under section 58B of the Customs Act 1962. The tribunal held that the Additional Commissioner's order dated 24.01.2022 imposing penalty under section 117 for contravention of section 46 did not constitute penalisation for an offence under the Customs Act, distinguishing between penalty for contravention and penalty for offence. The appellant's undertaking that he had not been penalised for an offence was therefore correct, making the license cancellation unsustainable.

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Issues Involved:
1. Cancellation of the Special Bonded Warehouse License under section 58B of the Customs Act, 1962.
2. Imposition of penalty under section 117 of the Customs Act, 1962.
3. Interpretation of the terms 'offence' and 'contravention' under the Customs Act, 1962.
4. Validity of the appellant's declaration and undertaking in the license application.

Detailed Analysis:

1. Cancellation of the Special Bonded Warehouse License under section 58B of the Customs Act, 1962:
The Commissioner of Customs cancelled the Special Bonded Warehouse License of the appellant, M/s. Kundan Care Products Limited, citing that the appellant had been penalized under section 112 of the Customs Act for contravention of section 46 of the Customs Act. The appellant argued that the penalty was for a 'contravention' and not an 'offence,' and thus, the license should not have been cancelled. The Tribunal noted that the Customs Act differentiates between 'offence' and 'contravention,' and since the penalty was for a contravention, the cancellation of the license was not justified.

2. Imposition of penalty under section 117 of the Customs Act, 1962:
The Commissioner also imposed a penalty of Rs. 4 lakhs under section 117 of the Customs Act. The Tribunal examined whether the appellant's actions warranted such a penalty. The appellant contended that there was no mis-declaration or suppression of facts since the penalty imposed earlier was not for an 'offence.' The Tribunal concluded that since the penalty was for a contravention and not an offence, the imposition of the penalty under section 117 was not warranted.

3. Interpretation of the terms 'offence' and 'contravention' under the Customs Act, 1962:
The Tribunal delved into the distinction between 'offence' and 'contravention' as per the Customs Act. It noted that various sections of the Act treat these terms differently. The Tribunal referenced multiple judgments, including those from the Supreme Court and High Courts, which supported the view that 'offence' and 'contravention' have distinct meanings. The Tribunal emphasized that penalties for contraventions are generally monetary, whereas offences often involve criminal prosecution and imprisonment.

4. Validity of the appellant's declaration and undertaking in the license application:
The appellant had submitted an undertaking and declaration stating that they had not been penalized for any offence under the Customs Act. The Tribunal found that this declaration was accurate since the penalty imposed on the appellant was for a contravention, not an offence. The Tribunal concluded that the appellant did not suppress any vital information or make a false statement in their application for the license.

Conclusion:
The Tribunal set aside the order dated 17.08.2023, which cancelled the Special Bonded Warehouse License and imposed a penalty on the appellant. The Tribunal held that the appellant had not been penalized for an offence under the Customs Act, and thus, the cancellation of the license and the imposition of the penalty were not justified. The appeal was allowed, and the impugned order was set aside.

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