TaxTMI 
TaxTMI 
2026 (9) TMI 1607
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....anufacturing facilities in Surat, Gujarat and maintains its marketing and sales office in Mumbai. The appellant being one of the leading exporters of cut and polished diamonds, with a global customer base spanning over 50 countries and annual turnover exceeding Rs.4000 crores, have duly registered as a member of Gem and Jewellery Export Promotion Council and recognized as a 5 star Export house by the Director General of Foreign Trade (DGFT). The appellant had applied for obtaining a license under Section 58 of the Customs Act, 1962 for establishment of a private bonded warehouse at its Mumbai sales office. The proposed private bonded warehouse was intended to function as the appellant's global marketing and sales hub for polished diamonds imported from its affiliated entities located outside India. 2.3 The appellant had submitted an application before the Proper officer of customs, i.e., the Deputy Commissioner of Customs, for grant of license for setting up of private bonded warehouse for gems and jewellery, vide letter dated 27.05.2022 along with requisite application form and supporting documents. In dealing with the application, the learned Commissioner of Customs had found ....
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...., licence a private warehouse wherein dutiable goods imported by or on behalf of the licensee may be deposited. Section 58A. Licensing of special warehouses. (1) The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, license a special warehouse wherein dutiable goods may be deposited and such warehouse shall be caused to be locked by the proper officer and no person shall enter the warehouse or remove any goods therefrom without the permission of the proper officer. (2) The Board may, by notification in the Official Gazette, specify the class of goods which shall be deposited in the special warehouse licensed under subsection (1)." Private Warehouse Licensing Regulations, 2016 "Licensing of private warehouse. (3) (1) Upon an application being made to license a private warehouse, the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may issue a licence to the applicant who, - (a) is a citizen of India or is an entity incorporated or registered under any law for the time being in force; (b) submits an undertaking to comply w....
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....ections, of course, are changed to chapter XVI sections (132 to 140) by also adding sometime 120B of IPC. 11. I find that offenses committed by the applicant are NOT merely technical and NOT beyond human control and, well covered under Regulation 3(2)(c) and hence merits disqualification for a license u/s 58." 9.1 On perusal of the case records, we note that the appellant had submitted the application form for grant of private bonded warehouse license for gems and jewellery, in order to undertake certain activities in respect of cut and polished diamonds. In submitting such form, the appellant had followed the prescribed forms by duly filling the details to make it complete, and also submitted documents that are required to be enclosed, bond to be executed etc., as prescribed vide CBIC Circular No.26/2016-Customs dated 09.06.2016. Further, at paragraph 7.1 in the impugned order it is stated that the legal consultant of the appellant had presented the list of four cases against them in which Order-in-Originals have been issued confirming differential duty, imposing redemption fine and penalties on them; further, in all such cases it is also indicted that they had also fi....
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....ribed the Form (annexed) to be used by an applicant seeking a licence for a bonded warehouse. 2. This application form has been prescribed for use by applicants for new warehouses to be licensed and is not required to be filed by existing licensees covered under the transitional provisions provided in the Regulations for licensing of warehouses or the Warehouse (Custody & Handling) Regulations, 2016. 3. The form has been designed in a manner so as to also serve as a check list for obtaining information relevant for evaluation of the applicant at one go and ascertaining the facilities for security of goods available at the proposed site (serial no. 7 & 8 of Part II of the form refers). This information is expected to enable a comprehensive assessment of the applicant and of the premises by the licensing authority. However, it may be borne in mind that warehouses vary widely in characteristics and type of goods stored. Absence of certain features (for example, absence of CCTVs or burglar alarms in case of certain types of sites) shall be acceptable in some situations. It is, therefore, expected that the Licensing authorities shall exercise their good judgement viz. ....
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....the warehouse, the applicant shall provide the documents and complete the process under Regulation 4(a) to (d). Thereafter, the Principal Commissioner / Commissioner shall grant the license for the warehouse. 6. The License granted under the regulations shall remain valid till its surrender / cancellation. Henceforth, there shall be no requirement for renewal of warehousing license on annual basis. 7. In case of licenses issued earlier to the notification of Licensing Regulations on 14thMay 2016, the requirement of annual renewal is dispensed. All warehouses appointed under the erstwhile section 57 or licensed under erstwhile section 58 shall be deemed to remain valid till their surrender /cancellation, once the conditions under the new regulations have been complied. 8. Since the licensee is required to renew the insurance policy annually and continue to comply with solvency conditions (as applicable), the same shall be required to be submitted annually. 9. Difficulties, if any, in implementation of this procedure may be brought to the notice of the Board." 9.3 Further, we also find that attention of CBEC was brought about cases of such antec....
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....appellant could be cancelled if the appellant had been penalized for an offence under the Customs Act, the Central Excise, 1944 or Chapter V of the Finance Act 1994 [the Finance Act], but as 'offence' and 'contravention/violation of the provisions' are different and the appellant had not been penalized for an offence either under the Customs Act or the Central Excise or Chapter V of the Finance Act, the License cannot be cancelled. The appellant also pointed out the order dated 24.01.2022, only imposes a penalty of Rs. 1.5 lacs on the appellant under section 112 of the Customs Act for contravention of the provisions of section 46 of the Customs Act read with rule 11 of the 1993 Foreign Trade Rules. 10. The reply submitted by the appellant did not find favour of the Commissioner, who by order dated 17.08.2023 cancelled the License issued to the appellant...... xxx xxx xxx xxx 18. Regulation 3(2)(c) of the 2016 Regulations provides that the Principal Commissioner of Customs or the Commissioner of Customs shall not issue a License to an applicant if he has been penalised for an offence under the Customs Act, the Central Excise Act or Chapter V of the Finance Act. ....
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.... deals with 'offences' and 'prosecutions'. Section 132 provides that a person who makes a false declaration or files a false document shall be punishable with imprisonment for a term which may extend to two years or with fine or with both. Section 133 also provides that any person intentionally obstructs any officer of customs in exercise of any powers conferred under Customs Act shall be punishable with imprisonment for a term which may extend to two years or with fine, or with both. Likewise, other sections like section 134 and 135 also deal with punishment of imprisonment or with fine or both. Section 104 of the Customs Act deals with power to arrest. It provides that if an officer of customs has reason to believe that any person has committed an offence punishable under section 132 or section 133 or section 135 or section 135A or section 136, he may arrest such person and every person arrested shall without unnecessary delay, be taken to a magistrate. On the other hand, provisions for 'contravention' of the provisions of the Customs Act generally impose a penalty in terms of money. It cannot, therefore, generally be said that any 'contravention' would amount to an 'offence' und....
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....ch was approved by the Principal Commissioner, which was communicated to the apparent by the Assistant Commissioner of Customs through a letter dated 08.07.2024. In the said communication, the appellant was apparently informed that its application for a Special Bonded Warehouse License stood rejected, and the original application documents were returned. It is against this rejection of its license application that the present appeal has been filed before us, under Section 129A of the Customs Act. xxx xxx xxx xxx 27. Coming to the substantive merits of the Appeal, the short question is whether the Principal Commissioner was justified in refusing the Appellant a special warehouse license solely on the ground that the Appellant had been penalized under Section 112(a) of the Customs Act in the past. Considering the facts and the law, it is the case of the appellant that the impugned order cannot be sustained. The denial of the license in the present circumstances is legally untenable and improper. 28. Section 58A of the Customs Act provides for licensing of special warehouses wherein certain classes of imported goods (as notified by the Board) may be deposited with....
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....of the word "offence" in Chapter XVI strongly indicates a context of crime and prosecution. Indeed, Section 135 is the principal penal provision creating offences that are cognizable and nonbailable. 32. When Regulation 3(2)(c) disqualifies an applicant who "has been penalized for an offence under the Customs Act," a reasonable construction is that it targets those applicants who have been found guilty of offenses of a kind that denote serious wrongdoing - essentially those entailing mens rea and prosecuted as crimes or subject to Compounding in lieu of prosecution. If, on the other hand, every customs infraction leading to a penalty was meant to be included, the legislation could have simply said "penalized under the Act" (omitting "for an offence"). The added words "for an offence" must be given meaning. We interpret them as referring to offences in the sense of Chapter XVI offences or similarly grave violations. 33. This interpretation is buttressed by the decision in Kundan Care Products Ltd. (supra), which is directly on point. In that case, this Tribunal (Principal Bench, New Delhi) was confronted with the identical Regulation 3(2)(c) when a license was canc....
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....hall not issue a license if..." in Regulation 3(2) may seem mandatory, but in context it should guide the discretion of the Commissioner, not eliminate it. If every penalty, however trivial the underlying contravention could lead to automatic rejection, the result would be draconian. If one were to label this penalty as an "offence", it would mean that thousands of importers who routinely face minor penalties (for classification disputes, short payments, procedural lapses, etc.) are all "offenders" under the Customs Act, a proposition that the Customs law itself does not subscribe to. 36. In this instant case, the Principal Commissioner failed to consider the nature and gravity of the Appellant's past violation. The Appellant's transgression was essentially an over-claim of an exemption for samples, which was not outright smuggling or fraud, but an interpretational issue (as evidenced by the fact that the goods were allowed conversion to warehousing in the very OIO and no Section 114A penalty for fraud was imposed). 37. Admittedly, beyond the bear fact of penalty, the Principal Commissioner in the order has not pointed out to any other factor which would i....