2024 (4) TMI 1043 - AT - Customs

100% EOU - Validity of EPCG Licenses - Cancellation of bonded warehouse licence, letter of permission (LOP) and registration - Duty liability u/s 28 - interest - export promotion capital goods (EPCG) scheme in the Foreign Trade Police (FTP) - breach of the principles of natural justice - HELD THAT - On a perusal of the scheme of Customs Act, 1962, we find that there is no provision whatsoever for the consequences of cancellation of a warehousing licence other than through section 58 of Customs Act, 1962 by giving one month notice in writing and opportunity to be heard. Therefore, notwithstanding the issue of letter of permission which was also the genesis of the private warehousing licence, provisions of Customs Act, 1962 do not envisage such deftailing of a scheme in Foreign Trade Policy with the self content and apprehensive provision for a warehousing in chapter IX of Customs Act, 1962 with the procedures formulated for implementation of such a scheme did prescribe the licencing of a private bonded warehouse for enabling operation as export oriented unit (EOU). Such a procedure cannot correct the existence and sanctity of a warehouse licenced under the provisions of chapter IX of Customs Act, 1962. Any termination of the said warehousing licence and its consequence, was necessarily follow the provisions embodied in the said chapter and cannot be said to be linked to a permission accorded under the Foreign Trade Policy (FTP). It may also be noted that the said appendix in the Handbook of Procedures cited in the impugned order had been put in a place solely for the purpose other than the effect of the exemptions in Income Tax Act, 1961. There is no statutory reference whatsoever but Customs Act, 1962 and therefore the procedure prescribed for a scheme under a policy cannot render an institution established and controlled under a statute to be subservient them too. It would, therefore, appear that the impugned order, fastening the consequences of payment of duty on goods that continued to be warehoused till 6th of April 2015 is not only contrary to the provisions of Customs Act, 1962 but also in breach of the principles of natural justice which prescribes consequences of termination of warehousing licence only after completion of the due process. Thus, we set aside the impugned order and, as the show cause notice had not been decided after due consideration of the legal provisions, the matter is remanded to the original authority for a fresh decision on the termination of warehousing licence and consequences thereof, if any, strictly in accordance with law.

Summary

Issues involved:
The appeal against the order of Commissioner of Customs fastening the appellant with duty liability under section 28 of Customs Act, 1962 while affirming the eligibility of licenses issued under the EPCG scheme in the Foreign Trade Policy.

Background and Proceedings:
The appellant applied to set up 'export oriented units (EOU)' which got approved by the Development Commissioner. Subsequently, due to ineligibility to operate under the scheme, the licenses were cancelled, leading to show cause notices for duty recovery on imported consignments. The appellant obtained EPCG licenses between March 2005 and December 2005, treating imported goods against these licenses.

Adjudication and Decision:
The adjudicating authority held that upon cancellation of EOU status and bonded warehouse license, goods were deemed cleared for home consumption with duty liabilities. The Tribunal observed the absence of provisions in the Customs Act for consequences of warehouse license cancellation, emphasizing adherence to due process and natural justice principles.

Tribunal's Findings and Decision:
The Tribunal noted the cancellation of the warehouse license, deeming goods removed from the warehouse, contrary to Customs Act provisions. Emphasizing the need for proper procedure and statutory compliance, the Tribunal set aside the impugned order and remanded the matter for a fresh decision in accordance with the law.

Conclusion:
The Tribunal found the impugned order not compliant with Customs Act provisions and natural justice principles, remanding the matter for a fresh decision on the termination of the warehouse license and its consequences.

*(Order pronounced in the open court on 25/04/2024)*