Custom, Excise & Service Tax Tribunal
Frigorifico Allana P Ltd vs Commissioner Of Customs-Nhava Sheva-I on 28 June, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
CUSTOMS APPEAL NO: 85733 OF 2024
[Arising out of Order-in-Original No: 291/2024-25/COMMR/NS-I/Bond/JNCH
dated 26th March 2024 passed by the Commissioner of Customs (NS-I), Nhava
Sheva.]
Frigorifico Allana Private Ltd
Plot No. 6, Tank Farm Road, JNPT, Nhava Sheva
Tal: Uran, Dist: Raigad - 400 707 ... Appellant
versus
Commissioner of Customs (NS-I)
Jawaharlal Nehru Customs House, Uran, Nhava Sheva,
Dist: Raigad- 400 707 ...Respondent
WITH CUSTOMS APPEAL NO: 85795 OF 2024 [Arising out of Order-in-Original No: 16/2024-25/COMMR/NS-I/Bond/JNCH dated 16th April 2024 passed by the Commissioner of Customs (NS-I), Nhava Sheva.] Frigorifico Allana P Ltd Plot No. 6, Tank Farm Road, JNPT, Nhava Sheva Tal: Uran, Dist: Raigad - 400 707 ... Appellant versus Commissioner of Customs (NS-I) Jawaharlal Nehru Customs House, Uran, Nhava Sheva, Dist: Raigad- 400 707 ...Respondent APPEARANCE:
Shri Anurag Mishra, Advocate and Shri Shamesher Garud, Advocate for the appellant Shri Krishna M Azad, Assistant Commissioner (AR) for the respondent C/85733 & 85795/2024 2 CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: 85654-85655/2024 DATE OF HEARING: 17/05/2024 DATE OF DECISION: 28/06/2024 PER: C J MATHEW In this dispute, cavil is not about duty liability on goods allegedly not levied, not paid, short-levied or short-paid by the appellant. The cavil is also, for the most part, not about alleged smuggling of goods by the appellant; we have qualified it only because, though without saying so, the impugned order has held some goods to have been for imposing penalty in consequence. For the most part, simultaneous penalty has been imposed under a residual empowerment vested in adjudicatory authority by Customs Act, 1962 and for having breached obligations as licensee of warehouse under Customs Act, 1962. Two appeals are before us with the first impugning order1 of Commissioner of Customs (NS-I), JNCH, Nhava Sheva concerning licence dated 11th August 2021under section 58 of Customs Act, 1962 to operate a private warehouse comprising eight tanks. The other impugned order2 of Commissioner of Customs (NS-I), JNCH, Nhava Sheva concerning 1 [order-in-original no. 291/2024-25/COMMR/NS-I/Bond/JNCH dated 26th March 2024] 2 [order-in-original no. 16/2024-25/COMMR/NS-I/Bond/JNCH dated 16th April 2024] C/85733 & 85795/2024 3 licence of December 2021 issued under section 57 of Customs Act, 1962 for operation of public warehouse with two bonded tanks. Operators of such licences were required to be in compliance with Warehouse (Custody and Handling of Goods) Regulations, 2016 issued under authority conferred by section 157 of Customs Act, 1962, read with section 57, section 58 and section 73A of Customs Act, 1962, on Central Board of Excise and Customs (CBEC). As the range of issues relating to handling of specific consignments and to breach of conditions specified in the respective licences are, by and large, similar, both the appeals were sought to be taken up together for disposal and the issues considered in the respective categories. The sum and substance of the cavil of the appellant in both the appeals is the confiscation of the goods under section 111 of the Customs Act, 1962 with consequent imposition of fine under section 125 of Customs Act, 1962; imposition of penalties under section 117 of Customs Act, 1962 on alleged violations of the conditions of licence by recourse to regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016, besides suspension of the said licence being entitled for revocation only upon payment of penalties and fines imposed in the respective orders.
2. Warehousing, from tax perspective, is best described as the mechanics for deferment of levy of duty and emplaces the physical premises under control of customs regulations as guarantee that 'imported C/85733 & 85795/2024 4 goods' and 'export goods' would be available for assessment and further processing. Hence, warehousing has found a special place in the scheme of customs law with such facilitation enacted in Sea Customs Act, 1878 being carried into Customs Act, 1962 in chapter IX thereof. From the very beginning, public warehouses were appointed, and private warehouses licenced, by the competent authority in 'warehousing ports', and, later, in warehousing stations, with public warehouses unrestricted insofar as customer choice was concerned while private warehouses were importer- specific. The evolution of modern logistics has impacted the extent of operational control over such customs warehouses and, today, the two categories are much the same in matters of regulation. M/s Frigorifico Allana P Ltd were licenced to operate both public and private warehouses in their specialised area of 'liquid bulk cargo' - edible oil, chemicals and petroleum products - for all of which two tanks and eight tanks respectively were in their possession. Storage of liquid bulk is handicapped by being 'product sensitive' but offers convenience of being 'owner neutral' both combining for singularity of 'accounting' disposal of cargo to suffice. We draw attention to this aspect as some part of the dispute turns on this peculiarity.
3. The scheme of regulation over warehouses, licenced by Commissioner of Customs under the empowerment of the two provisions in chapter IX of Customs Act, 1962, prescribes the method of handling goods in different circumstances and obligation devolving C/85733 & 85795/2024 5 thereon. Not unnaturally, consequences of non-observance and breach thereof are also statutorily provided thus '117. Penalties for contravention, etc., not expressly mentioned Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it is his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to penalty not exceeding one lakh rupees.' which the impugned order has liberally applied to each breach so found and held as offending. Of particular relevance, in the context of the impugned proceedings, is the Warehouse (Custody and Handling of Goods) Regulations, 2016 stipulating obligations, procedures and observances and, more importantly, providing access to the penal empowerment supra with '12. Penalty. - If a licensee contravenes any of the provisions of these regulations, or abets such contravention or fails to comply with any of the provision of these regulations, he shall be liable to a penalty in accordance with the provisions of the Act.' therein with which the adjudicating Commissioner has strewn penalties upto the maximum limit several times over.
4. The two appeals are taken up for disposal together as the regulatory oversight over the two categories of warehouses is identical even if the facts may differ on some aspect of the breach. This is not particularly surprising as the circumstances leading to the impugned C/85733 & 85795/2024 6 proceedings stemmed from inspection of the public and private warehouses and, in fact, one aspect of the proceedings is the mutual recourse to space on occasion with resort to storage of their own cargo on one occasion in a eleventh tank that brought the ire of the licencing authority to bear on the goods to which we have alluded earlier and for those to be held as liable to confiscation under section 111 (j) of Customs Act, 1962 and section 111(h) of Customs Act, 1962 as well as under section 111(h) of Customs Act, 1962 and, upon such finding, fine of ₹ 2,10,00,000 and ₹ 2,00,00,000 and of ₹ 2,70,00,000 in lieu thereof under section 125 of Customs Act, 1962 on the goods relating to private warehouse and on goods relating to public warehouse respectively ordered besides fastening penalty of ₹ 40,00,000 and ₹ 42,00,000 and of ₹ 53,00,000 under section 112 of Customs Act, 1962. Beyond that, the alleged breaches warranting recourse to section 117 of Customs Act, 1962, numbering six, with one of them tripled and quintupled in the two categories, had the outcome of penalty of ₹ 8,00,000 and ₹ 10,00,000 respectively; of these, two pertain to facility for maintenance of records and obtaining of digital signature that are stipulated in the said Regulations while the others emanate from conditions subject to which the licencing authority issued licences to the appellant herein which was also appears to have been deemed into the Regulations in the impugned order.
5. We are, therefore, required to examine the scope of recourse to C/85733 & 85795/2024 7 section 117 of Customs Act, 1962 for penalising alleged breach of licencing condition and breach, if any, of stipulations in the Regulation. But first and foremost is, so to speak, the icing on the cake - the continuation of suspension till the penalties and fines in the impugned order had been met by the appellant. It has been contended by the Learned Counsel for appellant that the suspensions, as also contingent retention in the impugned order; are in violation of the empowerment afforded under section 58B of Customs Act, 1962. Learned Authorized Representative submitted that breach of the regulatory environment in which a licensee was required to carry out its responsibility elicited during inspection of the facility had led to proceedings prescribed under chapter IX of Customs Act, 1962 and, therefore, suspension was in accordance with law.
6. Section 58B of Customs Act, 1962 empowers Principal Commissioner of Customs / Commissioner of Customs to cancel the license granted to public warehouse under section 57 of Customs Act, 1962, to private warehouse under section 58 of Customs Act, 1962 and to special warehouses section 58A of Customs Act, 1962 subject to licensee being afforded opportunity to be heard before such cancellation. The same provision enables suspension of warehouse licence by Principal Commissioner of Customs/Commissioner of Customs during the pendency of enquiry. Such vesting of power to suspend is not out of the ordinary and it has been held judicially that C/85733 & 85795/2024 8 suspension, in all sorts of circumstances, is not a penalty; not unnaturally, suspension may, in circumstances, be warranted where immediate disbarment pending final decision in proceedings is necessary. We find that the expression 'enquiry', deployed in connection with the empowerment to suspend a licence, is neither referred to in sub-section (1) nor prescribed as formal procedure in relation to disposition of licence or other penal detriment to licencee and it may, therefore, be reasonably inferred as reference to the opportunity to be given to a licensee before cancellation of the license. A harmonious reading of the provisions leads to the conclusion that suspension, empowered under section 58B(2) of Customs Act, 1962, may continue till the licence is cancelled on conclusion of proceedings. This is evident from the varying implications of cancellation and of suspension, as set out in section 58B(3) and section 58B(4) of Customs Act, 1962, whereby goods shall not be deposited in warehouse during the period of suspension and warehoused goods to be removed within the stipulated time after cancellation of the licence even while rendering the prescriptions of chapter IX of Customs Act, 1962 to the extent that goods remain warehoused; no additional goods are to be taken on deposit by warehouse licensee under suspension and all the goods to be removed after cancellation. The intent is to dilute privileges incrementally without impacting customers and goods immediately.
7. In the present proceedings, the enquiry has not concluded with C/85733 & 85795/2024 9 cancellation of licence under section 58B(1) of Customs Act, 1962 and, hence, conclusion of enquiry without that consequence does not legally justify retention of suspension. We need look no further than the authority conferred under section 58B(2) of Customs Act, 1962 for taking any other action against the licensee and the goods without any bearing on continuation of the licence as indication of statutory intent to set apart cancellation of licence and penalties. Validation of this act of the licencing authority is to participate in the illegality of continuation of suspension even without the legally intended finale. It would also be appellate sanction for stretching a legally circumscribed provision beyond statutory intent as means of compelling compliance which is anathema to rule of law. It would also be contrary to the judicially determined principle that suspension is not an instrument of penalty. Carryover of the suspension of licence beyond the stage of enquiry is not in concord with the power vested in Principal Commissioner of Customs/Commissioner of Customs. The act of Commissioner of Customs in bundling suspension with other action that has been taken against the licensee and goods is beyond the scope of law and, consequently, continuation of suspension beyond the date of impugned order merits setting aside.
8. In the two proceedings, separate episodes of unauthorized storage have been elaborated upon as cause for confiscation of goods with consequent redemption fine in lieu thereof as well as imposition of penalty under section 112 of Customs Act, 1962. Insofar as the C/85733 & 85795/2024 10 private warehouse is concerned, storage of goods imported vide bill of entry no. 7434419/10.02.2022 in non-bonded tank and of imports effected by M/s Tata International, M/s DIL Exim, M/s Madhuri Refinery Oil, M/s Golden Agri Resources and M/s Athena Trade, vide bill of entry no. 4909035/04.03.2023, bill of entry no. 3757125/15.12.2022, bill of entry no. 6791640/22.12.2021, bill of entry no. 9380221/23.12.2023 and bill of entry no. 4095753/09.01.2023, in tanks of the private warehouse were set out as ground for the goods to be held liable for confiscation under section 111(j) of Customs Act, 1962 in relation to the former and under section 111(h) of Customs Act, 1962 in relation to the latter.
9. According to Learned Counsel for the appellant, constraints of storage capacity and urgent requirements had compelled use of these tanks temporarily and that, despite reasons having been elaborated in the course of proceedings, Commissioner of Customs had failed to give due consideration thereof. He submitted that these should, at best, be considered as technical irregularities not warranting confiscation of goods with consequence of redemption fine as well as penalty. Furthermore, he submitted that the goods that were not available for confiscation could not have been subject to redemption fine thereof under section 125 of Customs Act, 1962 for which reliance was placed on the decision of Hon'ble High Court of Bombay in Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc [2009 (248) ELT C/85733 & 85795/2024 11 122 (Bom.)]. He further submitted that reliance placed on the decision of the Hon'ble High Court of Madras in Visteon Automotive Systems India Limited v. CESTAT, Chennai [2018 (9) GSTL 142 (Mad)] is not tenable in view of the judgment of the jurisdictional High Court. Learned Counsel also relied upon the order3 of the Tribunal, in Ganesh Benzoplast Ltd v. Commissioner of Customs, Nhava Sheva-I, disposing off appeal4 against order5 of Commissioner of Customs (NS-I), Nhava Sheva. Learned Authorised Representative submitted that the goods being dutiable could not have been stored in unauthorized places and, consequently, confiscation and penalties were natural outcomes.
10. It was ascertained during the enquiry proceedings that the appellant had sought inclusion of tank no. 103 to the private warehouse licence in December 2021 and that permission was accorded on 18th February 2022. It is also on record that the goods imported vide bill of entry 7434419/10.02.2022 had been pumped in the said tank on 15th February 2022. There is no doubt that the procedure does not contemplate retrospective applicability of such inclusion but in matters of storage, and especially of liquid bulk, which, for want of discharge on arrival, would imply retention of the vessel with mounting of related charges, required the breach to be viewed in proper perspective as malafide has not been set out in the impugned order. It also bemuses 3 [final order no. A/85423/2024 dated 22 nd April 2024] 4 [C/85350/2024] 5 [order-in-original no. 201/2023-24/COMMR/NS-I/Bond/JNCH dated 08th January 2024] C/85733 & 85795/2024 12 that a Commissioner of Customs, while ready and willing to consider storage for three days in a non-bonded tank as demonstration of all that is wrong in this world, has failed to ascertain cause for delay in approval on the part of the competent authority in disposing off the application for inclusion in the licence; the severity of premature deployment of tank for storage of dutiable goods in circumstances of denial of inclusion is nowhere near one of delay in discharge of responsibility of public office. In the light of any lack of evidence of intention to breach the law, the exigency of liquid cargo awaiting discharge from vessel and no prejudice to interest of the exchequer having been established, recourse to confiscation of the goods is unwarrantedly harsh and disproportionate. The impugned order has resorted to section 111(j) for confiscation of the goods. We have doubts about the applicability of this provision inasmuch as goods not having been deposited in a warehouse could not be alleged to have been removed contrary to permission and, further, it is not as if the goods were moved out of customs area and supervisory control of the customs authorities pending clearance for home consumption. As confiscation was not warranted, the imposition of penalty under section 112 in relation to the impugned goods is patently not correct in law.
11. Insofar as storage of five consignments of three parties in the private bonded tanks of the appellant is concerned, the circumstances in which these had been stored on different occasions including the non-
C/85733 & 85795/2024 13 evacuation of the existing cargo and compulsion of accommodating a long certain customer, as well as practical difficulties in segregating co- mingled cargo, had been brought to the notice of Commissioner of Customs who failed to appreciate the circumstances. We find that the confiscation had been ordered under section 111(h) of Customs Act, 1962 which is liable to be invoked only when goods are unloaded or attempted to be unloaded in contravention of provisions under section 33 and section 34 of Customs Act, 1962. It would appear that Commissioner of Customs has failed to take cognizance of chapter VI of Customs Act, 1962 which placed responsibility for unloading of the cargo on the master of vessel as set out in section 31 of Customs Act, 1962 and, thereafter, for discharge only in places specified under section 8(a) of Customs Act, 1962. The powers entrusted on Principal Commissioner of Customs/ Commissioner of Customs under section 8 of Customs Act, 1962 is intended to earmark places for loading and unloading and to set limits of designated customs area which has been defined as 'a customs station' and 'an area in which imported goods or exported goods are ordinarily kept before clearance by the customs authorities'; from the impugned order we are unable to discover if the Commissioner of Customs had ascertained if the said bonded tanks were within such customs area. In any which way, section 111(h) of Customs Act, 1962 would not be applicable and consequently confiscation thereof, as well as imposition of fine and the determination C/85733 & 85795/2024 14 of penalty, is not in accordance with law. For these reasons, detriment in relation to the five bills of entry would need to be set aside.
12. In the impugned order pertaining to the public warehouse, the goods belonging to the appellant, and covered by bill of entry no. 9146408/16.06.2022, were held as liable to confiscation under section 111(h) of Customs Act, 1962 for having been stored in the public warehouse which, according to the Commissioner of Customs, is in violation of section 33, section 60 and section 71 of Customs Act, 1962. In connection with the five bills of entry for consignments alleged to have been incorrectly stored in the private warehouse, we have found that the provisions of section 33 of Customs Act, 1962 would not apply. As far as section 60 and section 71 of Customs Act, 1962, for deposit of goods, permitted to be removed from customs station, in a warehouse is concerned, no distinction is drawn between public warehouse and private warehouse. While the storage of third party goods in a private warehouse may be irregular, there is certainly no bar on the storage of goods belonging to any person, even to licensee of private warehouse licence, in a public warehouse. The Commissioner of Customs appears to have ignored this fundamental premise in considering the said storage to be irregular. There is no justification whatsoever for invoking section 111(h) as well as imposition of penalty thereof under section 112 of Customs Act, 1962. Accordingly, detrimentation of fine and penalties are set aside.
C/85733 & 85795/2024 15
13. In both the impugned orders, penalties of ₹ 1,00,000/- each has been imposed under section 117 of Customs Act, 1962, including three concurrently in the former and five concurrently in the latter, for alleged violation of assessable value limit for storage of goods pending clearance. The other causes for imposition of penalty are non- maintenance of records in software with audit trial facility, non- production of solvency certificate, non-production of insurance policy, non-installation of CCTV monitoring system and for not obtaining digital signature. All of these have taken recourse to regulation 12 of Warehouse (Custody and Handling of Goods) Regulations, 2016. It cannot but be noticed that it is for contravention of any of the provisions of the Regulations, abetting such contravention or for failure to comply with the provisions of Regulations that imposition of penalty in accordance with the provisions of Customs Act, 1962 is empowered. The said Regulations require that the 'warehouse keeper' appointed thereby is obliged to obtain 'digital signature' from the appropriate authorities in terms of regulation 3 which was allegedly not done. As far as digital signature is concerned, the responsibility vests with the 'warehouse keeper' and the Commissioner of Customs appears to have imposed penalty on the licencee. There is no allegation that prescription in regulation 4 for the licencee to provide for computerized system for accounting of receipt, storage or operations and removal of goods had been breached. Despite scrutiny of the Regulations, we find none C/85733 & 85795/2024 16 prescribing insurance, installation of closed circuit television, solvency certificate, audit trial facility for software or the permissible limit for storage at any given point in time. These breaches are said to arise from the violation of the licensing conditions and, admittedly so, with the impugned order making reference to Annexure for the purpose. Regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 does not envisage importation of such licensing conditions as a part and parcel of the said Regulations; neither is authority vested with the Principal Commissioner of Customs / Commissioner of Customs, empowered to specify conditions appended to licence, to deem these as incorporated within Regulations notified under section 157 of Customs Act, 1962 and section 73A of Customs Act, 1962. It was always open to the Commissioner of Customs, as the licensing authority, to cancel the licence for such breach but imposition of penalty is in the realm of statutory enactment only. It is to be invoked in consequence of breach of Customs Act, 1962 and, by delegated authority, extended through regulation 12 therein to breach of provisions of Warehouse (Custody and Handling of Goods) Regulations, 2016. The latter has no reference to license conditions and Customs Act, 1962 authorizes prescribing of conditions with no allowance for fiscal penalties for breach thereof. Therefore, Commissioner of Customs has exceeded his authority in imposing penalty under section 117 for the several breaches noticed during the C/85733 & 85795/2024 17 course of inspection. Furthermore, insofar as the maximum permissible assessable value alleged to have been breached, it should not have escaped notices of Commissioner of Customs that the said condition does not define 'value' and, if at all required, should have been estimated in accordance with section 2(41) of Customs Act, 1962. In the absence of such exercise, the validity of the finding of having exceeded the maximum permissible assessable value is without factual basis and, therefore, incorrect.
14. In the light of our finding supra, we find that the impugned order was passed in excess of authority and the imposition of penalty lacks authority of law for which reason the impugned orders are set aside to allow the appeals.
(Order pronounced in the open court on 28/06/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as