2024 (1) TMI 591 - CESTAT BANGALORE

The appellant operated a Private Bonded Warehouse and duty-free shop at Bangalore International Airport. Under Trade Facility No. 50/2005, all sales from the duty-free shop were to be covered by a voucher with specific details. The company launched a promotional liquor offer ("buy 3 for 2" on Johnnie Walker and Smirnoff) without informing the Customs Authorities, violating Section 72 of the Customs Act 1962 and the Trade Facility. The appellant paid Rs. 1,42,1751/- after admitting the lapse and faced a demand notice for duty, interest, and a penalty of Rs. 50,000/-, which was upheld by the Commissioner (Appeals).

Appellant's Arguments

1. Promotional Offer Nature: The offer was a 33% discount on three bottles, and the duty on excess liquor should be collected from passengers under Section 28, not from the appellant under Section 72.
2. Baggage Allowance: Goods purchased from duty-free shops are treated as baggage under Section 77, with a 2-litre free allowance. Excess should be declared and duty paid by passengers.
3. No Mens Rea for Penalty: The appellant argued there was no intention to evade duty, and no specific provision was invoked for penalty imposition.

Court's Observations and Decision

1. Violation of Conditions: The tribunal observed that the appellant violated the conditions of the Customs Bonded Warehouse License and the Trade Facility No. 50/2005.
2. Applicability of Section 72: The appellant is liable for duty payment under Section 72 if the provisions and procedures are violated. The responsibility to pay duty lies with the licensee of the Duty-Free Shop, not the passengers.
3. Penalty Set Aside: Although the duty and interest demand was upheld, the penalty was set aside as there was no intention to evade duty and the customs officers were aware of the sales transactions.

Conclusion

The court upheld the duty and interest demand but set aside the penalty imposed on M/s. Nuance Group (India) Pvt. Ltd. in the case against The Commissioner of Customs, Bangalore.

 

---

Full Text:

2024 (1) TMI 591 - CESTAT BANGALORE

Liability under Section 72: duty rests with duty-free shop licence-holder when trade facility conditions are breached. Duty arises where a duty-free shop licence-holder breaches voucher and recordkeeping conditions under the trade facility; the licence-holder bears responsibility for payment of duty and interest when procedural requirements are violated, while penalty depends on culpability and may be disallowed where no intent to evade duty is established and customs were aware of the transactions.