2023 (6) TMI 1092 - AT - Customs

Violation of principles of natural justice - Handling of Cargo in Customs Areas- Setting up of ICD - Implication of having DTA unit and Customs Area both within the same premises - Revocation of approvals granted u/s 8, Section 45 of Customs Act,1962 read with Regulation 10 of (HCCAR, 2009) - verification report relied upon by the Commissioner post survey dt. 08/02/2023 was not made available to the appellant - procedure prescribed under Regulation 12 of HCCAR, 2009 not followed before such revocation - HELD THAT - After prolonged verification and inspection of the proposed ICD premises commencing from the year 2016 by the Customs Department and taking note of necessary rectifications carried out by the appellant from time to time on the objections raised during the course of inspection, Notification No.01/2022(NT) dt. 24/01/2022 was issued, specifying the Customs area of ICD for the purpose of loading of export goods and unloading of imported goods; also permission was granted under Section 45 of the Customs Act, 1962 read with Regulation 10 of HCCAR, 2009 for a period of two years w.e.f. 24/01/2022 - The ICD could not come into operation immediately after issuance of the said Notification due to non-allotment of location code by the competent authority. Correspondences have been exchanged between the appellant and the Department from time to time in this regard but no positive result has emerged. The appellant was, however, intimated through order dt. 16/02/2023 about the revocation of the permission granted earlier on 24/01/2022 pursuant to a survey conducted on 08.2.2023. It is the contention of the Revenue that subsequent to the examination of the permission granted while issuing location code, difficulties that would be encountered once the said area becomes operational, came to the knowledge of the Department pursuant to the survey conducted on 08.2.2023 and accordingly, the permission was withdrawn with a liberty to the Appellant to re-apply after compliance with the observation mentioned in the said Order. We do not find emergence of any new facts after the Notification was issued on 24.01.2022 that has spelt out in the revocation order; the existence of the manufacturing unit in the basement of the Customs notified area has been raised in the inspection reports. Consequent to the observation in the letter dated 21.3.2021 it was sterilised and artificially separated from the proposed customs notified area to enable the department to declare it the premises as Customs Notified area. Now, the argument of the Revenue is that there would be some GST implications if both the DTA unit as well as Customs notified area are situated in the same premises. It is also seen from the records that such apprehensions have not been spelt out in the order. It is indicated by the Revenue that there could be some misuse and complications in the implementation of GST laws if both the manufacturing unit as well as customs operations under the Customs notified area are allowed simultaneously. However, it is found from the records that the said apprehension and other objections have not been communicated to the appellant by way of issuance of a show-cause notice and response from the appellant in this regard in complete disregard and blatant violation of Regulation 12 of HCCAR, 2009 - the appellant be given a reasonable opportunity, by way of issuance of a show-cause notice and reply thereof, to explain the apprehensions now raised by the Department on the basis of a survey report dated 08.2.2023(not issued to the Appellant), even after modifications/alternation carried out by the Appellant from time to time. To meet the ends of justice, and taking note of the fact that the Appellant has made huge investment in this regard, and the ICD could not be made operational even though the necessary infrastructure is in place since 2017, the Department are directed to issue a notice to the appellant within a week s time from the date of receipt of this order raising all issues clearly stating the grounds for proposed action. Also, copy of the survey report dated 08.2.2023 be issued to the Appellant, if not delivered. The learned advocate for the appellant undertakes to file their reply within one week from the date of receipt of notice even though the time limit for filing reply prescribed under the said Regulation 12 of HCCAR, 2009 is thirty days. On receipt of the reply to the Notice and after affording an opportunity of hearing to the appellant, the learned Commissioner should decide the issue maximum within a fortnight thereafter - appeal allowed by way of remand.

Summary

Issues Involved:

1. Legality of the revocation of approvals granted under Section 8, Section 45 of the Customs Act, 1962, and Regulation 10 of HCCAR, 2009.
2. Compliance with principles of natural justice in the revocation process.
3. Validity of the concerns raised by the Customs Department regarding the existence of a manufacturing unit in the customs area.

Summary:

Issue 1: Legality of the Revocation of Approvals
The appellant argued that the revocation of approvals granted under Section 8 and Section 45 of the Customs Act, 1962, read with Regulation 10 of HCCAR, 2009, was without legal basis. The premises had been inspected multiple times, and objections raised were complied with, leading to the issuance of Notification No.01/2022(NT) on 24/01/2022. The appellant contended that the revocation was abrupt and lacked any allegation of misuse or violation of conditions.

Issue 2: Compliance with Principles of Natural Justice
The appellant claimed that the revocation order violated principles of natural justice as no show-cause notice was issued, and the verification report post-survey dated 08/02/2023 was not provided to them. Regulation 12 of HCCAR, 2009, which prescribes the procedure for suspension or revocation of approvals, was not followed. The appellant emphasized that they were not given an opportunity to present their case or respond to the survey report, resulting in a gross violation of natural justice.

Issue 3: Validity of Concerns Raised by Customs Department
The Customs Department argued that the existence of a manufacturing unit in the customs area could lead to complications, including GST implications. They contended that Regulation 6(2) of HCCAR, 2009, does not allow leasing premises to private third parties, and the appellant violated this condition. The department maintained that the revocation was based on a thorough inspection and analysis, and the appellant could re-apply after complying with the observations in the survey report.

Judgment:
The Tribunal found that the revocation order dated 16/02/2023 was not in accordance with the law. The Customs Department had knowledge of the manufacturing unit's existence and had approved the premises after multiple inspections and compliance with objections. The Tribunal noted that the department had not communicated any new facts or issued a show-cause notice, violating Regulation 12 of HCCAR, 2009.

The Tribunal directed the department to issue a show-cause notice within a week, clearly stating the grounds for the proposed action and providing a copy of the survey report dated 08/02/2023 to the appellant. The appellant was to file a reply within one week, and the Commissioner was to decide the issue within a fortnight thereafter. The impugned order dated 16/02/2023 was set aside, and the appeal was allowed by way of remand.