Customs area notification requirements govern import operations, with delayed departmental response relevant only to penalty mitigation.

Use of an area for loading, unloading and storage of import-related goods without notification as a customs port under Section 7 or as a customs area under Section 8 did not create any legal entitlement to operate there. A delayed departmental reply to the appellant's permission request could be considered only on the question of penalty quantum, not as a defence to the statutory breach. The appellant's status as a Central Government undertaking was also relevant to mitigation. Penalty was therefore considered imposable, but the amount was reduced in light of these circumstances.

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Issues: Whether penalty under the customs law was justified for using an area for loading, unloading and storage without the area being notified as a customs port or customs area, and whether the penalty deserved reduction on account of the department's delayed response and the appellant's conduct.

Analysis: The area used for the import-related operations had not been notified as a customs port under Section 7 or as a customs area under Section 8. The appellant's request for permission and the department's tardy reply did not confer a legal right to use the area without compliance with the statutory requirement. Those circumstances could, however, be taken into account in considering the extent of penalty, including the fact that the appellant was a Central Government undertaking.

Conclusion: Penalty was held to be imposable, but it was reduced from Rs. 15 lakhs to Rs. 7.5 lakhs.

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