2024 (3) TMI 1001 - SC - Customs

Duty demand - Bonded Warehouse - seizure of 264 cases found outside the warehouse - Unauthorisedly clearance of 27 cases from the notified public bonded warehouse - clearance in a clandestine manner - Confiscation - Interest - - Import of second hand steel mill machinery and parts - warehousing period expired - HELD THAT - Since the imported goods covered by the 264 cases were never warehoused inside the notified public bonded warehouse but were unloaded outside the notified area but within the factory premises of the appellant and kept under a shed on permission granted by the Superintendent which permission was neither cancelled nor revoked, question of warehousing the goods covered by the 264 cases within the notified public bonded warehouse did not arise. As a corollary, the further question of improperly or unauthorisedly removing the 264 cases from the notified warehouse to outside the said area but within the factory premises of the appellant attracting Section 71 and the consequences following the same did not arise. Inference drawn by the respondent that the permission granted by the Superintendent was only temporary and therefore, the rigor of Section 71 would be attracted, in our view, would not be a correct understanding of the situation and the law. We find that there is no explanation on the part of the appellant qua the missing 27 cases. Therefore, the view taken by the respondent and affirmed by the CESTAT that those 27 cases were improperly or unauthorisedly removed from the notified public bonded warehouse is correct and requires no interference. Evidently, the circular dated 12.7.1989 would not be applicable to the facts of the present case in as much as it is not the case of the respondent that either the warehousing period had expired or that the warehousing period was extended . As we have seen, the warehousing in the notified public bonded warehouse continued as the Corporation had deposited with the respondent a sum of Rs. 56,10,294.00 in respect of the notified warehouse as custom establishment charges for the period from 1992-1993 to 2007-2008. That apart, we can refer to the fact that respondent had not levied any customs duty on the 304 cases found within the notified area which would mean that the notified warehousing continued. Therefore, this is not a case where Section 15(1)(b) could have been invoked. Thus, having regard to the discussions, we are of the view that the demand raised by the respondent against the appellant and affirmed by the CESTAT qua the 264 cases including levy of customs duty and interest cannot be sustained. Those are accordingly set aside and quashed. Demand of customs duty and interest on the 27 cases is concerned , the same is hereby sustained. The decision imposing penalty on the appellant u/s 112 of the Customs Act is also not disturbed in view of the conduct of the appellant in unauthorisedly removing the 27 cases of imported goods not only from the notified public bonded warehouse but also from the industrial/factory premises of the appellant. Impugned order of CESTAT would stand modified accordingly - Appeal is allowed in part in the above terms.

Summary

Issues Involved:
1. Legality of the removal of 264 cases of imported goods from a notified public bonded warehouse.
2. Justification for the customs duty and interest levied on the 27 missing cases.
3. Applicability of Section 15(1)(b) vs. Section 15(1)(c) for determining the rate of duty.
4. Validity of the penalty imposed under Section 112 of the Customs Act.

Summary:

Issue 1: Legality of the removal of 264 cases of imported goods from a notified public bonded warehouse.

Appellant had imported second-hand steel mill machinery and parts under Project Import Facility. A warehouse within the industrial premises of the appellant was notified as a public bonded warehouse. On 07.08.1992, officials found 264 cases outside the warehouse but within the factory premises, and 27 cases were missing. The appellant argued that the goods were kept outside due to heavy rain and space issues, with permission from the Superintendent. The Court held that the permission granted by the Superintendent was not revoked, and thus, the 264 cases were not improperly removed. Therefore, Sections 71 and 72 were not applicable, and the decision to levy interest under Section 28AB was not justified.

Issue 2: Justification for the customs duty and interest levied on the 27 missing cases.

The Court found no explanation for the missing 27 cases. Therefore, the view that these cases were improperly removed from the warehouse was correct. The demand for duty of Rs.3,99,255.00 plus interest was sustained.

Issue 3: Applicability of Section 15(1)(b) vs. Section 15(1)(c) for determining the rate of duty.

The Court noted that Section 15(1)(b) would not apply as the warehousing period had not expired. Instead, Section 15(1)(c) was applicable. The Board's circular dated 12.07.1989, which clarified that Section 15(1)(c) would apply to goods removed after the expiry of the warehousing period, was not relevant here as the warehousing period continued.

Issue 4: Validity of the penalty imposed under Section 112 of the Customs Act.

The penalty of Rs.1,00,000.00 under Section 112 was upheld due to the unauthorized removal of the 27 cases from the warehouse and factory premises.

Conclusion:

The demand and interest on the 264 cases were set aside, directing parties to work out remedies under Section 15(1)(c) within eight weeks. The customs duty and interest on the 27 missing cases were sustained, and the penalty under Section 112 was not disturbed. The appeal was allowed in part, modifying the impugned order of CESTAT accordingly.