Custom, Excise & Service Tax Tribunal
Tm International Logistics Limited vs -Patna(Prev) on 5 December, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 75783 of 2022
(Arising out of Order-in-Original No. 01-Cus/Commr/Tech/2022-23 dated 23.08.2022
passed by the Principal Commissioner of Customs (Preventive), 5 th Floor, Central
Revenue Building, Birchand Patel Path, Patna - 800 001)
M/s. T.M. International Logistics Limited : Appellant
7th Floor, Infinity IT Lagoon,
Plot-E2-2/1, Block-EP & GP,
Sector-V, Salt Lake, Kolkata - 700 091
VERSUS
Principal Commissioner of Customs (Preventive) : Respondent
5th Floor, Central Revenue Building, Birchand Patel Path,
Patna - 800 001
APPEARANCE:
Dr. Samir Chakraborty, Senior Advocate
Assisted by Shri Abhijit Biswas, Advocate
For the Appellant
Shri Faiz Ahmed, Authorized Representative
For the Respondent
CORAM:
HON'BLE SHRI R. MURALIDHAR, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77734 / 2024
DATE OF HEARING: 04.11.2024
DATE OF DECISION: 05.12.2024
ORDER:[PER SHRI K. ANPAZHAKAN] The instant appeal has been filed by M/s. T.M. International Logistics Limited 7th Floor, Infinity IT Lagoon, Plot-E2-2/1, Block-EP & GP, Sector-V, Salt Lake, Kolkata - 700 091[hereinafter referred to as "the Appellant"] against the Order-in- Original No. 01-Cus/Commr/Tech/2022-23 dated 23.08. 2022 passed by the Principal Commissioner of Page 2 of 10 Appeal No.: C/75783/2022-DB Customs (Preventive), Patna wherein the Ld. Principal Commissioner has confirmed the allegations contained in the Show Cause Notice and cancelled the public bonded warehouse licence issued to the Appellant, under Section 58B(1) of the Customs Act, 1962, for alleged contravention of the provisions of the Act and the said Regulations as specified and imposed a penalty of Rs. 1,00,000/- upon the appellant under Section 117 of the Act read with Regulation 12 of the said Regulations. Aggrieved against the cancellation of the Warehousing License issued to them, the appellant has filed this appeal praying for setting aside the impugned order.
2. Brief facts of the case are that the Appellant was issued a Warehousing License under Section 57 of the Customs Act, 1962, by the Commissioner of Customs (Preventive), Patna, which was communicated to the appellant by letter dated June 10, 2019. The said License was issued allowing the appellant to operate a public bonded warehouse for storage of refractory items, casting powers, machinery spares, ferro alloys and metals, rolls, etc. of Tata Group companies only at Jamshedpur, in accordance with "The Warehouse (Custody and Handling of Goods) Regulations, 2016"
(hereinafter referred to as "the said Regulations").
3. After granting of the licence in June, 2019, the appellant started operation of the said warehouse from June, 2020. This was the peak period of the COVID Pandemic in the year 2020. Hence the Appellant could operate only with a skeleton workforce. This situation continued even in the year 2021 when the second wave of the pandemic, which was more severe than the first one. This adversely affected the proper functioning of the warehouse and Page 3 of 10 Appeal No.: C/75783/2022-DB the appellant could not provide all the infrastructure required for the warehouse.
4. The appellant submits that a theft took place in the warehouse on 16.06.2021 and an FIR was lodged by the Appellant with the jurisdictional Police Station. Subsequently, statements were recorded from the warehouse keeper under Section 108 of the Customs Act, 1962 on 18.06.2021 and 01.12.2021. The Appellant paid the duty involved in the stolen goods amounting to Rs.1,60,996/-.
5. On 2nd June, 2022, a Show Cause Notice was issued to the Appellant by the Principal Commissioner of Customs proposing to cancel the warehouse licence under Section 58B(1) of the Customs Act, 1962 for the alleged contravention of the provisions of Section 57 and 73A of the Act read with Regulations 3,4, 5(2), 7(h) and 11 of the said Regulations. Penalty was also proposed to be imposed under the said Act and Regulations.
5.1. The said Notice was adjudicated and the warehouse licence issued to the Appellant was cancelled vide the impugned order dated 23.08.2022.
5.2. The Appellant has filed the present appeal against the cancellation of their warehouse licence and imposition of penalty in the impugned order.
6. The Appellant submits that they have not contravened the provisions of Regulation 4(c) and 11 of the said Regulations read with paragraphs 2 and 7 of Circular No. 25/2016-Cus. dated 08th June, 2016 as alleged in the impugned order; the above allegation levelled in the impugned order is based on incorrect appreciation and interpretation of the provisions of the Page 4 of 10 Appeal No.: C/75783/2022-DB Act, the said Regulations and the conditions laid down in the Warehouse Licence issued to the appellant; as per Regulation 4(c) of the said Regulations, a Licensee is required to provide at the warehouse a computerized system for accounting of receipt, storage, operations and removal of goods. The Appellant contends that the materials available on record shows that the computerized system was available at the warehouse wherein all records relating to receipt, storage and removal are available; the said Regulations nowhere provide for an audit trail to be inserted mandatorily in such computer system. The Appellant submits that all records in relation to the warehouse licence were maintained in terms of Regulation 11 ibid.
6.1. The Appellant further points out that none of the conditions of the licence, Regulation 4 or Regulation 11 of the said Regulations requires the computer system to incorporate the feature of an audit trail; non-inclusion of an audit trail in the computerized system does not amount to violation or contravention of any of the said Regulations as well as the condition of issue of the licence.
6.2. The Appellant contends that the Public Warehouse Licensing Regulations, 2016 does not empower the Board to issue any Circular to regularize the functioning of the warehouses; the said Circular No. 25/2016-Cus. dated 08th June, 2016 was issued mainly for administrative and procedural purposes. The impugned order has cited the said Circular to allege contravention of the provisions of the said Regulations on account of non-provision of audit trail in the computerized system. Accordingly, the Appellant contends that the Show Cause Notice has Page 5 of 10 Appeal No.: C/75783/2022-DB traversed beyond the statutory provisions under which the License was issued.
6.3. The appellant further submits that despite not being statutorily required to provide the facility of audit trail, they have proceeded to install such a facility in the computerized system in their warehouse and the audit trail is functional w.e.f. September, 2023; the software is running properly and the application is ready to be used immediately. The appellant submits that the delay in installing the audit trail was mainly due to COVID pandemic and the circumstances which were beyond their control. The COVID Pandemic in the year 2020-21 prevented them from developing, installing and carrying out proper trial and thereby starting operation of the required software related activities providing the audit trail feature in the computerized system installed in the warehouse. The appellant submits that in spite of the audit trail being unavailable in the warehouse computer system, there was no discrepancy in the maintenance of records and the accounts were duly maintained as per Regulations 4 and 11 of the said Regulations for two years; there is no finding contrary to this in the impugned order. Accordingly, the appellant prayed for setting aside the impugned order and restoring their license.
6.4. Regarding the allegation of not keeping adequate security measures for the warehoused goods and violation of Regulation 4 of the said Regulation and Section 57 of the Act, the appellant submits that one isolated incident of theft cannot be a reason to come to the conclusion that the security measures in the ware house are not adequate. The Appellant also submits that there is no truth in the finding in the Page 6 of 10 Appeal No.: C/75783/2022-DB impugned order that the warehouse keeper appointed by them did not have any prior experience in warehousing operation and accordingly there was violation of Regulation 3(1) of the said Regulations. As they were operating with minimum staff during COVID pandemic and the operations in the warehouse were very few, the appellant contends that the officers have no occasion to assess the experience of the warehouse keeper appointed by them. Accordingly, the appellant submits that the finding in the impugned order on this count is erroneous and untenable.
6.5 In this regard, the Appellant placed their reliance on the decision of the Tribunal in the case of Shiv Probuild Pvt. Ltd. vs Commissioner of Customs [2024 (8) TMI 481-CESTAT-New Delhi] wherein it has been held that every infraction cannot lead to revocation of licence; such a severe exercise of revocation of licence will lead to serious consequences not only for the Appellant, but also for the employees who have been engaged in the warehouse and their families.
6.6. In view of the above, the Appellant prays for setting aside the impugned order cancelling their license.
7. On the other hand, the Ld. Authorized Representative of the Revenue reiterates the findings in the impugned order. He contends that the Appellant has not installed the audit trail in the computerized system as required under the Public Warehouse Licensing Regulations, 2016; it is mandatory on the part of the License holder to provide all basic infrastructure for running the warehouse; since the Appellant failed to provide the basic infrastructure, the Page 7 of 10 Appeal No.: C/75783/2022-DB ld. adjudicating authority has rightly revoked their licence in the instant case. Accordingly, he prays for upholding the impugned order.
8. Heard both sides and perused the appeal records.
9. We find that the Appellant has been issued a warehousing licence under Section 57 of the Customs Act, 1962 vide letter dated 10th June, 2019. The Appellant started operation of the said warehouse from June, 2020, which was the peak period of the COVID pandemic in the year 2020.The Appellant submitted that in view of the COVID situation in the country, they could operate the warehouse only with a skeleton workforce and this had adversely affected the functioning of their warehouse.
9.1. We observe that the main ground on which the warehousing licence issued to the Appellant was revoked is that the feature of audit trail was not incorporated in the computerized system operated by the Appellant in the warehouse. The Ld. Principal Commissioner of Customs has cited the Circular No. 25/2016-Cus. dated 08th June, 2016 and alleged contravention of the provisions of the said Regulations on account of non-provision of audit trail in the computerized system. We observe that the Circular was issued mainly for administrative and procedural purposes. We agree with the observations of the Ld. Principal Commissioner that it is the duty of the License holder to provide all the infrastructure required in the warehouse. However, we find merit in the submission of the appellant that the delay in installing the audit trial was caused mainly due to COVID pandemic and the circumstances which were Page 8 of 10 Appeal No.: C/75783/2022-DB beyond their control. We observe that the COVID Pandemic in the year 2020-21 prevented them from developing, installing and carrying out proper trial and thereby starting operation of the required software related activities providing the audit trail feature in the computerized system installed in the warehouse. We also observe that in spite of the audit trail being unavailable in the warehouse computer system, there was no discrepancy in the maintenance of records and the accounts were duly maintained as per Regulations 4 and 11 of the said Regulations for two years. We also find that there is no finding contrary to this in the impugned order. Accordingly, we hold that delay in inclusion of an audit trail in the computerized system does not amount to violation of the provisions of the Regulations warranting cancellation of the licence. We observe that the revocation of the Licence without giving any opportunity to the Appellant to install the audit trail in the system, is legally not tenable. In these circumstances, we hold that the revocation of licence on account of this alleged violation is not proper.
9.2. With regard to the issue of theft in the warehouse, we observe that an FIR had been filed and the Appellant has already paid the duty involved in respect of the stolen goods. We agree with the finding of the Ld. Principal Commissioner that adequate security measures are essential for operation of the warehouse. However, we observe that one isolated incident of theft cannot be a reason to come to the conclusion that the security measures in the warehouse were not adequate. The Department can advise the License-holder to increase the security and Page 9 of 10 Appeal No.: C/75783/2022-DB to provide adequate staff for security and maintenance of the warehouse.
9.3. We also find that the Ld. Principal Commissioner has given a finding that the warehouse keeper appointed by them did not have any prior experience in warehousing operations and accordingly there was violation of Regulation 3(1) of the said Regulations. In this regard, we find merit in the submission of the appellant that they were operating with minimum staff during COVID pandemic and the operations in the warehouse were very few; the officers have no occasion to assess the experience of the warehouse keeper appointed by them. We observe that the ld. adjudicating authority has not brought in any evidence in the impugned order to substantiate this allegation. Accordingly, we hold that the finding in the impugned order on this count is not tenable.
10. We observe that the reasons submitted by the appellant for the delay in installation of the audit trail in the computerized system are very valid and reasonable. Further, the Appellant informed that they have installed the audit trail facility now and the same is functioning properly. This requires verification by the Officers, to ensure that the Appellant have complied with the requirement of Audit Trail at present. In respect of the other allegation made in the impugned order regarding not providing proper security and other staff for administration of the warehouse, we observe from the submission of the Appellant that they have provided all the facilities now and the same is required to be verified by the Officers. In view of the above, we are of the view that the matter is required to be remanded back to the adjudicating authority for the purpose of verification Page 10 of 10 Appeal No.: C/75783/2022-DB of fulfilment of all the requirements for running the warehouse in terms of the said Regulations.
11. Accordingly, we set aside the impugned order and remand the matter to the adjudicating authority for examination of the issue afresh and for verification of the infrastructure available in the warehouse as required under the said Regulations and to take appropriate action, as deemed fit, as per law.
(Order pronounced in the open court on 05.12.2024) Sd/-
(R. MURALIDHAR) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd