Legal principle

Breach of conditions appended to a warehouse licence may warrant cancellation of the licence but not penalty under section 117, because imposition of penalty is in the realm of statutory enactment only and regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 reaches contravention of the Regulations themselves, not licence conditions.

Court decision

The Tribunal allowed both appeals and set aside both impugned orders in favour of the licensee. It held section 111(h) inapplicable because that clause operates only where goods are unloaded or attempted to be unloaded in contravention of sections 33 and 34, and the Commissioner had not even ascertained whether the bonded tanks fell within the customs area under section 8; accordingly confiscation, section 125 fines and section 112 penalties in relation to the five bills of entry and bill of entry no. 9146408/16.06.2022 were set aside. It held there is no bar on storage of goods of any person, even the private-warehouse licensee itself, in a public warehouse, sections 60 and 71 drawing no distinction between the two categories. It held the Commissioner exceeded his authority in imposing section 117 penalties for licence-condition breaches not contained in the Regulations, that the digital-signature obligation under regulation 3 falls on the 'warehouse keeper' and not the licensee, and that the assessable-value finding was factually baseless without a section 2(41) determination.

Facts

Frigorifico Allana Pvt Ltd held licences under section 58 (private warehouse, eight tanks, dated 11.08.2021) and section 57 (public warehouse, two bonded tanks, December 2021) of the Customs Act, 1962 for handling liquid bulk cargo (edible oil, chemicals, petroleum products) at Nhava Sheva. Following inspection of the facilities, the Commissioner of Customs (NS-I) passed two Orders-in-Original (26.03.2024 and 16.04.2024) confiscating goods under sections 111(j) and 111(h), imposing fine of ₹2.10 crore/₹2 crore (with ₹2.70 crore in lieu) under section 125 and penalties of ₹40/42/53 lakh under section 112, besides penalties of ₹8 lakh and ₹10 lakh under section 117 via regulation 12 of the Warehouse (Custody and Handling of Goods) Regulations, 2016 for six alleged breaches (records software with audit trail, digital signature, solvency certificate, insurance, CCTV, and exceeding maximum permissible assessable value for stored goods). The licences were also suspended, with continuation made contingent on payment of the fines and penalties. The licensee appealed both orders to CESTAT Mumbai.

Key provisions

• Section 111(h), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Regulation 12, Warehouse (Custody and Handling of Goods) Regulations, 2016 — Penalty
• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 58, Customs Act, 1962 — Licensing of private warehouses
• Section 33, Customs Act, 1962 — Unloading and loading of goods at approved places only
• Section 58B(2), Customs Act, 1962 — Cancellation of licence
• Section 60, Customs Act, 1962 — Permission for removal of goods for deposit in warehouse
• Section 73A, Customs Act, 1962 — Custody and removal of warehoused goods
• Section 71, Customs Act, 1962 — Goods not to be taken out of warehouse except as provided by this Act