No Confiscation If Prior Permission Taken From Customs Dept. For Storage Of Non-Bonded Goods In Bonded Warehouse: CESTAT

The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the provisions of Sections 111(j) and 111(h) of the Customs Act cannot be invoked when prior permission is given by the customs authorities for the storage of non-bonded goods in a bonded warehouse after payment of due duty.

The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that all the imported bulk liquid cargo brought into the vessels was unloaded, stored, and handled in bonded or non-bonded tanks with the requisite and due permission of the department, and that too on payment of duty thereon, wherever required. There is nothing on record in the form of any evidence to show that proper accounting for receipt, transfer, or removal of the goods in the warehouse was not maintained by the appellants in terms of existing regulations dealing with the warehousing of goods. Furthermore, all the activities were under the direct supervision and control of the customs officers posted in the warehouse.

The appellants/assessee were issued a public-bonded warehousing license by the jurisdictional customs authorities at Jawaharlal Nehru Custom House (JNCH), Nhava Sheva. In total, there were 79 public-bonded storage tanks located on the premises of the warehouse. The license was issued to the appellants in terms of Section 57 of the Customs Act, 1962. The license has provided various conditions to be fulfilled or observed by the license holder, the appellants.

A team of officers from the Import Bond section of JNCH visited the warehouse of the appellants. Upon verification of the warehouse and various records, they observed that non-bonded goods had been stored in the bonded tanks, whereas bonded tanks are meant for the storage of only customs-bonded goods.

To carry out a detailed investigation and to stop any further violations of the licensing conditions, the license of the public bonded warehouse issued to the appellants was suspended on December 7, 2023, by the department as per the provisions of Section 58B(2).

The Principal Commissioner of Customs passed the order for confiscation of goods and imposed a penalty. It was held that the requirements of the provisions of the Customs Act, 1962; the Public Warehousing Regulations, 2016; and the Warehouse (Custody and Handling of Goods) Regulations, 2016 and the licensing conditions have not been fulfilled by the appellants.

The assessee contended that the disputed goods could not be confiscated when subsequent permission for the bonding of tanks was given by the department. Due to operational reasons, the goods were stored in the non-bonded tanks, and the importer had also paid the entire duty on the goods stored in the non-bonded tanks.

As per Section 33, movement of goods within the bonded warehouse is permissible, subject to the condition that such activities should be within the knowledge of the department and that necessary approval for such activities should be obtained by the warehouse licensee.

The tribunal noted that the appellants have complied with statutory provisions in carrying out the activities within the warehousing station(s). Therefore, it cannot be said that the goods dealt with by the appellants are liable for confiscation, and accordingly, the appellants cannot be exposed to the penal consequences provided under the statute.

The tribunal held that the bulk liquid cargo dealt with by the appellants is not prohibited for importation and that the appellants had obtained due permission from the customs department for carrying out the activities within the warehousing premises, which is evident from the above tables, mentioning the date of permissions issued by the department and the specific tank numbers for which such permissions were being issued by them. Therefore, the provisions of Section 111(j) are not applicable to the confiscation of goods.

Counsel For Appellant: Anurag Mishra

Counsel For Respondent: Adeeb Pathan

Case Title: M/s. Ganesh Benzoplast Limited Versus Commissioner of Customs, Nhava Sheva-I

Case No.: Customs Appeal No. 85350 of 2024

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