2024 (12) TMI 299 - AT - Customs

Cancellation of public bonded warehouse licence issued to the Appellant, under Section 58B(1) of the Customs Act, 1962, for alleged contravention of the provisions of the Act - theft in the warehouse - contravention of provisions of Regulation 4(c) and 11 of the said Regulations read with paragraphs 2 and 7 of Circular No. 25/2016-Cus. dated 08th June, 2016 - HELD THAT - The main ground on which the warehousing licence issued to the Appellant was revoked is that the feature of audit trail was not incorporated in the computerized system operated by the Appellant in the warehouse. The Ld. Principal Commissioner of Customs has cited the Circular No. 25/2016-Cus. dated 08th June, 2016 and alleged contravention of the provisions of the said Regulations on account of non-provision of audit trail in the computerized system - the Circular was issued mainly for administrative and procedural purposes. We agree with the observations of the Ld. Principal Commissioner that it is the duty of the License holder to provide all the infrastructure required in the warehouse. However, there are merit in the submission of the appellant that the delay in installing the audit trial was caused mainly due to COVID pandemic and the circumstances which were beyond their control. There is no finding contrary to this in the impugned order. Accordingly, the delay in inclusion of an audit trail in the computerized system does not amount to violation of the provisions of the Regulations warranting cancellation of the licence. It is observed that the revocation of the Licence without giving any opportunity to the Appellant to install the audit trail in the system, is legally not tenable. In these circumstances, the revocation of licence on account of this alleged violation is not proper. Theft in the warehouse - HELD THAT - It is observed that an FIR had been filed and the Appellant has already paid the duty involved in respect of the stolen goods. The finding of the Ld. Principal Commissioner agreed upon that adequate security measures are essential for operation of the warehouse. However, it is observed that one isolated incident of theft cannot be a reason to come to the conclusion that the security measures in the warehouse were not adequate. The Department can advise the License-holder to increase the security and to provide adequate staff for security and maintenance of the warehouse - there are merit in the submission of the appellant that they were operating with minimum staff during COVID pandemic and the operations in the warehouse were very few; the officers have no occasion to assess the experience of the warehouse keeper appointed by them. The reasons submitted by the appellant for the delay in installation of the audit trail in the computerized system are very valid and reasonable. Further, the Appellant informed that they have installed the audit trail facility now and the same is functioning properly. This requires verification by the Officers, to ensure that the Appellant have complied with the requirement of Audit Trail at present. In respect of the other allegation made in the impugned order regarding not providing proper security and other staff for administration of the warehouse, it is observed from the submission of the Appellant that they have provided all the facilities now and the same is required to be verified by the Officers. The impugned order is set aside - matter remanded to the adjudicating authority for examination of the issue afresh and for verification of the infrastructure available in the warehouse as required under the said Regulations and to take appropriate action, as deemed fit, as per law.

Summary

Issues:
1. Cancellation of public bonded warehouse license under Section 58B(1) of the Customs Act, 1962.
2. Alleged contravention of provisions of the Act and Regulations.
3. Imposition of penalty under Section 117 of the Act read with Regulation 12 of the Regulations.
4. Delay in installing audit trail in the computerized system.
5. Allegation of not keeping adequate security measures for the warehoused goods.
6. Violation of Regulation 3(1) of the said Regulations regarding the experience of the warehouse keeper.
7. Applicability of Circular No. 25/2016-Cus. dated 08th June, 2016.

Analysis:
The Appellant, a logistics company, appealed against the cancellation of its public bonded warehouse license due to alleged contravention of Customs Act provisions and Regulations. The Appellant argued that the delay in installing the audit trail in the computerized system was due to the COVID-19 pandemic, which affected their operations. The Tribunal noted that the Circular cited was for administrative purposes and found merit in the Appellant's explanation for the delay. The Tribunal held that the revocation without allowing the Appellant to rectify the issue was improper, and the delay did not warrant cancellation. The matter was remanded for verification of compliance (Para 9).

Regarding the theft incident in the warehouse, the Tribunal agreed that security measures are essential but noted that one isolated theft incident does not necessarily indicate inadequate security. The Appellant's argument that the warehouse keeper's experience was not properly assessed due to minimal operations during the pandemic was accepted, as no evidence was presented to support the violation finding. The Tribunal deemed this finding untenable (Para 9.2-9.3).

The Appellant's submission of having now installed the audit trail and provided necessary facilities required verification. The Tribunal remanded the matter for a fresh examination to ensure compliance with regulations and to take appropriate action (Para 10-11).