Legal principle

Goods kept outside a bonded warehouse but within the premises under a proper officer's permission under Section 64(d), which is never cancelled or revoked, are not 'improperly or unauthorisedly removed' under Sections 71 and 72 where the warehousing period has not expired, and duty on such goods falls under the residual clause of Section 15(1)(c) rather than Section 15(1)(b).

Court decision

Partly allowing Bisco's appeal, the Supreme Court set aside and quashed the demand on the 264 cases, including the customs duty and interest levied under Section 28AB, holding the goods were kept outside the notified warehouse on the Superintendent's permission under Section 64(d), which was never cancelled or revoked, and directing parties to work out remedies for the 264 cases under Section 15(1)(c) within eight weeks. The demand of duty and interest on the 27 missing cases was sustained, and the Rs.1 lakh penalty on the appellant under Section 112 was left undisturbed in view of its conduct in unauthorisedly removing those cases; the CESTAT order was modified accordingly, with the appeal allowed in part and no costs.

Facts

M/s Bisco Limited (Bhanu Iron and Steel Company Ltd, Pithampur, MP), which imported second-hand steel mill machinery and parts under Project Import Facility (Chapter Heading 98.01 of the Customs Tariff Act, 1975), stored them in a public bonded warehouse notified within its factory premises with Central Warehousing Corporation as warehouse keeper. Acting on information of misuse of the warehousing facility, departmental officers searched the premises on 07.08.1992 and found 304 cases inside the warehouse, 264 cases outside it but within the factory premises, and 27 cases missing. The 264 cases were seized under Section 110, and a show cause notice dated 22.01.1993 alleged violation of Section 71 read with Section 111(j), sought duty on the 27 cleared cases under Section 71 read with the proviso to Section 28(1), and proposed penalty under Section 112. The Commissioner confirmed duty of Rs.3,99,255 on the 27 cases, confiscated the 264 cases on payment of redemption fine, imposed penalties, and levied duty of Rs.39,03,821 plus interest under Section 71 read with the proviso to Section 28A and Section 28AB; CESTAT affirmed, and Bisco appealed to the Supreme Court under Section 130E.

Key provisions

• Section 71, Customs Act, 1962 — Goods not to be taken out of warehouse except as provided by this Act
• Section 15(1)(b), Customs Act, 1962 — Date for determination of rate of duty and tariff valuation of imported goods
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 68, Customs Act, 1962 — Clearance of warehoused goods for home consumption
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 64, Customs Act, 1962 — Owner’s right to deal with warehoused goods
• Section 111(j), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 61, Customs Act, 1962 — Period for which goods may remain warehoused
• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 28A, Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Section 58, Customs Act, 1962 — Licensing of private warehouses