Legal principle

A penalty imposed under section 112 of the Customs Act for 'contravention' of statutory provisions is not a penalization for an 'offence', since offences and penalties are distinct categories; therefore, a licensee who declares it has never been penalized for an offence makes no false or suppressive declaration when only a section 112 penalty exists, and a warehouse licence cannot be cancelled under section 58B on that basis.

Court decision

The Tribunal allowed the appeal and set aside the Commissioner's order dated 17.08.2023. It held that the order dated 24.01.2022, the sole basis for cancellation, did not penalize the appellant for an 'offence' under the Customs Act but imposed only a penalty for 'contravention' of section 46; hence the declaration/undertaking was not false and the licence cancellation could not be sustained. Reliance on Padma Kant Malviya was held misplaced, as that case concerned contempt of court under section 5(2) of the Criminal Procedure Code, not this question.

Facts

M/s. Kundan Care Products Ltd. applied on 17.12.2022 for a Special Bonded Warehouse Licence under section 58A of the Customs Act, 1962, filing a self-declaration and undertaking (per the CBIC Circular dated 09.06.2016) that it had not been penalized for any offence under the Customs Act, the Central Excise Act, 1944, or Chapter V of the Finance Act, 1994; the licence was granted on 11.01.2023. After a DRI antecedent-verification letter dated 08.02.2023 disclosed two pending show cause notices (DRI Chennai and Bangalore) and two closure reports (Delhi Air Cargo Import), the department issued a show cause notice dated 17.04.2023 alleging suppression, since an order dated 24.01.2022 had imposed a penalty of Rs. 1.5 lakhs on the appellant under section 112 for contravention of section 46 read with rule 11 of the Foreign Trade (Regulation) Rules, 1993, relating to goods imported vide four bills of entry dated 18.10.2017 and 26.10.2017. The Commissioner of Customs, Air Cargo Complex (Export), New Delhi, by order dated 17.08.2023, cancelled the licence under section 58B and imposed a penalty of Rs. 4 lakhs under section 117 (penalty under section 114AA for wilful misstatement was also proposed in the SCN). The appeal before the CESTAT, New Delhi challenged that order.

Key provisions

• Section 46, Customs Act, 1962 — Entry of goods on importation
• Section 58A, Customs Act, 1962 — Licensing of special warehouses
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Section 58B, Customs Act, 1962 — Cancellation of licence
• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 58, Customs Act, 1962 — Licensing of private warehouses
• Section 109A, Customs Act, 1962 — Power to undertake controlled delivery
• Section 1, Customs Act, 1962 — Short title extent and commencement
• Section 111, Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 132, Customs Act, 1962 —  False declaration, false documents,etc
• Section 133, Customs Act, 1962 — Obstruction of officer of customs