Legal principle

Revocation of a warehousing licence under Section 58B(1) without giving the licensee an opportunity to cure a curable infraction — such as an audit-trail delay caused by circumstances beyond its control — is legally not tenable, since every infraction does not warrant cancellation of the licence.

Court decision

The Tribunal set aside the Order-in-Original cancelling the warehouse licence and remanded the matter to the adjudicating authority for fresh examination and verification of whether the warehouse fulfils all infrastructural requirements under the 2016 Regulations. It held that the COVID-caused delay in installing the audit trail did not amount to a violation warranting cancellation, that revocation without an opportunity to install the audit trail was legally not tenable, that a single theft incident did not prove inadequate security, and that the finding against the warehouse keeper was unsupported by evidence. The appeal was thus allowed by way of remand, not by outright restoration of the licence.

Facts

M/s. T.M. International Logistics Ltd. held a public bonded warehouse licence under Section 57 of the Customs Act, 1962 (communicated 10.06.2019) to store refractory items, casting powders, machinery spares, ferro alloys, metals and rolls of Tata Group companies at Jamshedpur under the Warehouse (Custody and Handling of Goods) Regulations, 2016. Operations began only in June 2020, during the peak of the COVID-19 pandemic, with a skeleton workforce. A theft occurred in the warehouse on 16.06.2021; the appellant lodged an FIR and paid the duty of Rs. 1,60,996 involved in the stolen goods. By Show Cause Notice dated 02.06.2022, the Principal Commissioner of Customs (Preventive), Patna proposed cancellation of the licence under Section 58B(1) for contravention of Sections 57 and 73A read with Regulations 3, 4, 5(2), 7(h) and 11, and by Order-in-Original dated 23.08.2022 cancelled the licence and imposed a penalty of Rs. 1,00,000 under Section 117 read with Regulation 12, principally for non-provision of an audit trail in the computerized system.

Key provisions

• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 58B(1), Customs Act, 1962 — Cancellation of licence
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents