Legal principle

Even where two sets of regulations contain pari materia provisions, penalty proceedings founded on regulations inapplicable to the licence actually held — here, the Warehouse Regulations, 2016 instead of the Special Warehouse Regulations, 2016 applicable to a section 58A licensee — are illegal and must be quashed, particularly where the relied-upon audit report was never supplied and proceedings were launched years after the licence was surrendered.

Court decision

The writ petition succeeded: the High Court quashed and set aside the order dated 30.12.2025 imposing the Rs.30,000/- penalty, made the rule absolute, passed no order as to costs, and rejected the department's request for remand.

Facts

The petitioner, a importer and processor of precious metals, held a Special Warehouse (Bonded Warehouse) licence under section 58A of the Customs Act, 1962 from 10.06.2016, which it surrendered and which stood cancelled from 08.03.2019. Almost five years later, on 01.02.2024, the department issued a show-cause notice based on an audit report dated 16.12.2022, alleging violations of Regulation 11 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 — failure to maintain records in digital form, non-obtaining of digital signature by the warehouse keeper, and failure to annually renew the solvency certificate and risk insurance policy. The petitioner's request for a copy of the audit report was not acceded to, and by order dated 30.12.2025 a penalty of Rs.30,000/- (Rs.10,000/- each for Regulations 11(1)(a), 4(c) and 3(2) read with Clause 8 of Circular No.26/2016) was imposed.

Key provisions

• Section 58A, Customs Act, 1962 — Licensing of special warehouses