Bonded warehouse licence cancellation overturned due to COVID delays and insufficient evidence of security inadequacy under Section 58B(1)

CESTAT Kolkata set aside the cancellation of appellant's public bonded warehouse licence under Section 58B(1) of Customs Act, 1962. The licence was revoked for lack of audit trail in computerized system and alleged inadequate security following theft incident. Tribunal found delay in installing audit trail was due to COVID pandemic circumstances beyond appellant's control, and single theft incident insufficient to conclude inadequate security measures. Matter remanded to adjudicating authority for fresh examination and verification of current infrastructure compliance with regulatory requirements.

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Issues:
1. Cancellation of public bonded warehouse license under Section 58B(1) of the Customs Act, 1962.
2. Alleged contravention of provisions of the Act and Regulations.
3. Imposition of penalty under Section 117 of the Act read with Regulation 12 of the Regulations.
4. Delay in installing audit trail in the computerized system.
5. Allegation of not keeping adequate security measures for the warehoused goods.
6. Violation of Regulation 3(1) of the said Regulations regarding the experience of the warehouse keeper.
7. Applicability of Circular No. 25/2016-Cus. dated 08th June, 2016.

Analysis:
The Appellant, a logistics company, appealed against the cancellation of its public bonded warehouse license due to alleged contravention of Customs Act provisions and Regulations. The Appellant argued that the delay in installing the audit trail in the computerized system was due to the COVID-19 pandemic, which affected their operations. The Tribunal noted that the Circular cited was for administrative purposes and found merit in the Appellant's explanation for the delay. The Tribunal held that the revocation without allowing the Appellant to rectify the issue was improper, and the delay did not warrant cancellation. The matter was remanded for verification of compliance (Para 9).

Regarding the theft incident in the warehouse, the Tribunal agreed that security measures are essential but noted that one isolated theft incident does not necessarily indicate inadequate security. The Appellant's argument that the warehouse keeper's experience was not properly assessed due to minimal operations during the pandemic was accepted, as no evidence was presented to support the violation finding. The Tribunal deemed this finding untenable (Para 9.2-9.3).

The Appellant's submission of having now installed the audit trail and provided necessary facilities required verification. The Tribunal remanded the matter for a fresh examination to ensure compliance with regulations and to take appropriate action (Para 10-11).

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