Container Corporation custodianship revoked for operating from unnotified area violating Sections 7, 8, 45 penalties reduced

CESTAT Bangalore upheld revocation of custodianship and rejection of renewal application for Container Corporation under Section 45 and HCCAR 2009. The custodian operated from unnotified area violating Sections 7, 8, and 45 of Customs Act 1962, and failed to meet conditions under Regulation 5 of HCCAR 2009. CESTAT reduced penalty under Regulation 12(8) from Rs. 50,000 to Rs. 10,000 and penalty under Section 117 from Rs. 4,00,000 to Rs. 25,000. Appeal disposed.

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Issues Involved:

1. Renewal of custodianship under Section 45 of the Customs Act, 1962.
2. Compliance with Handling of Cargo in Customs Area Regulations, 2009 (HCCAR).
3. Imposition of penalties under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Renewal of Custodianship under Section 45 of the Customs Act, 1962:

The appellant, M/s. Container Corporation of India Ltd., was appointed as custodian of the Inland Container Depot (ICD) at Whitefield, Bangalore, under Section 45 of the Customs Act, 1962, in conjunction with HCCAR, 2009. The custodianship was due for renewal on 31.03.2020, but due to the Covid-19 pandemic, the due date was deferred to 31.12.2020. An inspection conducted in December 2020 revealed several deficiencies. Consequently, a show-cause notice was issued questioning why the renewal of custodianship should not be rejected and why the custodianship should not be revoked under Regulation 11 read with Regulation 12 of HCCAR, 2009.

2. Compliance with Handling of Cargo in Customs Area Regulations, 2009 (HCCAR):

The audit report identified several deficiencies in the appellant's operations, including lack of security boundaries, inadequate monitoring of entry and exit, incomplete insurance documentation, improper layout of the notified area, insufficient infrastructure, unregulated parking, tardy disposal of Section 48 Cargo, and pending clearance of seized goods. The Commissioner of Customs adjudicated that the appellant had not adhered to certain provisions of HCCAR, 2009, but instead of revoking custodianship, extended it for six months and imposed penalties.

3. Imposition of Penalties under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962:

The Commissioner imposed a penalty of Rs. 50,000/- under Regulation 12(8) of HCCAR, 2009, and Rs. 4,00,000/- under Section 117 of the Customs Act, 1962. The appellant contended that the breaches were not serious and remedial actions were taken. They argued that the penalties were imposed without considering their submissions and that the violations were venial in nature, not warranting such penalties. They also referenced previous Tribunal decisions where penalties under Section 117 were reduced or deemed not imposable.

The Authorized Representative for Revenue argued that the violations were grave and detrimental to Revenue's interest, citing relevant case laws to support the imposition of penalties.

Judgment Analysis:

The Tribunal found that the appellant, as a Customs Cargo Service Provider (CCSP), had discrepancies in fulfilling conditions under Regulation 5 of HCCAR, 2009. The Tribunal acknowledged the appellant's argument that the discrepancies were due to the Covid-19 pandemic and that some issues were attended to, while others would be addressed in due course. However, it was noted that operating from an unnotified area violated Sections 7, 8, and 45 of the Customs Act, 1962, justifying the penalty under Section 117.

The Tribunal concluded that while the penalties were tenable, the quantum was disproportionate to the discrepancies. Therefore, the penalty under Regulation 12(8) of HCCAR, 2009, was reduced from Rs. 50,000/- to Rs. 10,000/-, and the penalty under Section 117 of the Customs Act, 1962, was reduced from Rs. 4,00,000/- to Rs. 25,000/-.

Conclusion:

The appeal was disposed of with a reduction in penalties, acknowledging the appellant's partial compliance and the impact of the Covid-19 pandemic on their operations. The Tribunal maintained the penalties' legitimacy but adjusted their amounts to better reflect the nature of the violations.

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