2010 (11) TMI 680 - Commissioner - Customs

Duty free shops - allegations made in the notice under Section 72 that the appellant has not got the warehousing period extended in receipt of the goods imported by them and goods are required to be maintained as per the terms of the licence in a stock register in the Duty Free Shop commodity-wise - Held that - As per the terms of the license for the duty free shop there is no need to seek extension of the Bond period after the goods are transferred to the Duty free Shop from the Chowgule Warehouse. Further as per the terms of the license there is no need to maintain the stocks in the Duty Free Shop bond wise and in fact the requirement is that the stock is to be maintained commodity wise and terms of the license has been followed by the ITDC Ltd. for all these years, appeal allowed.

Issues Involved:
1. Validity of the notice under Section 72 of the Customs Act.
2. Requirement of extending the warehousing bond period.
3. Applicability of Section 58 and Section 61(b) of the Customs Act to the Duty Free Shop.
4. Compliance with the terms of the license for operating the Duty Free Shop.
5. Interpretation of Section 72(1)(b) of the Customs Act.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 72 of the Customs Act:
The appellant argued that the notice under Section 72 was vague and did not specify whether the goods pertained to the Chowgule Warehouse or the Duty Free Shop, nor the period for which the extension was not sought. This lack of clarity denied the appellant a proper opportunity to defend itself. The judgment noted that the goods in question had already been shifted to the Duty Free Shop within the permissible warehousing period, thus nullifying the basis for the notice under Section 72.

2. Requirement of extending the warehousing bond period:
The appellant contended that the requirement to extend the bond period only applied while the goods were stored in the Chowgule Warehouse and not after their transfer to the Duty Free Shop. The judgment supported this view, stating that once the goods are transferred to the Duty Free Shop, the question of seeking an extension of the warehousing period does not arise. The procedure followed for the last 15 years did not require such an extension, and the terms of the license did not specify this requirement.

3. Applicability of Section 58 and Section 61(b) of the Customs Act to the Duty Free Shop:
The Assistant Commissioner assumed that since the Duty Free Shop was licensed under Section 58, the provisions of Section 61(b) regarding the warehousing period were applicable. However, the judgment clarified that the Duty Free Shop, though licensed under Section 58, did not function as a bonded warehouse in the traditional sense. The special procedures prescribed for the Duty Free Shop did not include the requirement to seek bond extensions for goods stored there. Thus, the assumptions made by the Assistant Commissioner were erroneous.

4. Compliance with the terms of the license for operating the Duty Free Shop:
The appellant maintained that it had always complied with the terms of the license, which required maintaining stock records commodity-wise rather than bond-wise once the goods were transferred to the Duty Free Shop. The judgment confirmed that the terms of the license did not necessitate maintaining bond numbers after the transfer and that the Customs Department's deviation from this long-standing practice was unjustified.

5. Interpretation of Section 72(1)(b) of the Customs Act:
The judgment explained that Section 72(1)(b) pertains to goods that have not been removed from the warehouse before the expiry of the permissible warehousing period. However, in this case, all goods covered by the notice had been removed from the Chowgule Warehouse to the Duty Free Shop within the allowed period. Therefore, the conditions of Sections 68 and 69, which require payment of duties for clearance, were not applicable to the Duty Free Shop. The judgment concluded that there was no violation of Section 72(1)(b) as the goods had been properly removed and transferred within the permissible period.

Conclusion:
The judgment set aside the impugned order, stating that the notice under Section 72 was not valid, the requirement for extending the warehousing bond period did not apply to goods in the Duty Free Shop, and that the assumptions made by the Assistant Commissioner were incorrect. The appeal was allowed, reaffirming the appellant's compliance with the terms of the license and the Customs Act.

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