* Author
[2024] 3 S.C.R. 890 : 2024 INSC 231
M/s. Bisco Limited
v.
Commissioner of Customs and Central Excise
(Civil Appeal No. 4663 of 2009)
20 March 2024
[B. V. Nagarathna and Ujjal Bhuyan,* JJ.]
Issue for Consideration
The appellant had imported second hand steel mill machinery
and parts covered by three transit bonds totalling 595 cases.
The officials of the Preventive Branch of the Commissionerate
searched the industrial premises of the appellant, including
the notified public bonded warehouse and found that only
304 cases were stocked inside the warehouse, whereas
264 cases were found outside the warehouse but within the
industrial/factory premises of the appellant. Remaining 27
cases were neither found inside the warehouse nor outside the
warehouse. The Commissioner of Customs and Central Excise,
inter-alia, confiscated 264 cases of imported goods valued at
Rs.48,79,776.00 seized from within the factory premises of the
appellant but outside the approved warehouse u/s. 111 of the
Customs Act. However, the confiscated goods were permitted
to be redeemed on payment of fine of Rs.2 lakhs. Further,
the Commissioner had confirmed customs duty amounting to
Rs.39,03,821.00 in terms of s.71 r/w. the proviso to s.28A of the
Customs Act. That apart, appellant was directed to pay interest
of Rs.18,88,425.00 on the aforesaid quantum of customs duty
in respect of the 264 cases from the date of warehousing till the
date of detection of the shortage in the warehouse. In appeal,
CESTAT by the impugned order affirmed the aforesaid decision
of the Commissioner.
Headnotes
Customs Act, 1962 – s.71 r/w. the proviso to s.28A, s.111 – The
allegation of the respondent is that 264 cases were improperly
or unauthorisedly removed from the notified warehouse as
those were found lying outside the notified area but within the
industrial/factory premises of the appellant – That apart, 27
cases were neither found inside the notified warehouse nor
[2024] 3 S.C.R. 891
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
outside the said warehouse but within the factory premises
of the appellant – In such circumstances, the respondent
has justified the order dated 28.04.2005 (passed by the
Commissioner),which was affirmed by the CESTAT vide order
dated 30.04.2009 – Propriety:
Held: The appellant had submitted that soil outside the notified
area that become very sluggish due to heavy rains – As a
result, the trailers carrying the consignment could not enter the
notified warehouse and appellant had requested the concerned
Superintendent of Customs and Central Excise to shift the
machineries to under a shed within the factory premises –
The permission was granted – The permission granted by the
Superintendent to the appellant to unload a portion of the cargo
outside the open space which was notified as public bonded
warehouse but within the factory premises of the appellant was
neither cancelled nor revoked by the Superintendent or even by
the Commissioner – Infact, a view can reasonably be taken that
the appellant as the owner of the goods had exercised its right
u/s. 64(d) which was endorsed by the Superintendent – Therefore,
it would not be correct to say that the 264 cases found outside
the notified warehouse but within the factory premises of the
appellant were improperly or unauthorisedly removed from the
notified public bonded warehouse – Also, the period of warehousing
had not expired and continued to remain operational in terms
of the proviso to s.61 of the Customs Act – The decision of the
respondent to invoke s.71 and thereafter levy interest on the
goods covered by the 264 cases u/s. 28AB of the Customs Act
was not justified – 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 – However, 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. [Paras 13, 50, 51, 53, 54]
892 [2024] 3 S.C.R.
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Case Law Cited
Kesoram Rayon v. Collector of Customs, Calcutta
[1996] Suppl. 5 SCR 77 : (1996) 5 SCC 576 – held
inapplicable.
Simplex Castings Ltd. v. Commissioner of Customs,
Vishakhapatnam (2003) 5 SCC 528; Paper Products
Ltd. v. Commissioner of Central Excise (1999) 7 SCC
84; SBEC Sugar Ltd v. Union of India [2011] 2 SCR
585 : (2011) 4 SCC 668 – referred to.
List of Acts
Customs Act, 1962; Customs Tariff Act, 1975; Right to Information
Act, 2005.
List of Keywords
Customs; Custom duty; Notified public bonded warehouse;
Industrial/factory premises; Confiscation of imported goods;
Improper or unauthorised removal of goods from the notified
warehouse; Period of warehousing.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4663 of 2009
From the Judgment and Order No.C/155/09 dated 30.04.2009 in
Appeal No.C/441/2005-CU (DB) of the Customs, Excise and Service
Tax Appellate Tribunal, New Delhi
Appearances for Parties
Aarohi Bhalla, Sanchar Anand, Devendra Singh, Aman Kumar Thakur,
Arjun Rana, Ms. Sumbul Ausaf, Advs. for the Appellant.
Rupesh Kumar, Mukesh Kumar Maroria, V.C. Bharathi, H.R. Rao,
Suyash Pandey, Hemant Kumar, Advs. for the Respondent.
Judgment / Order of the Supreme Court
Judgment
Ujjal Bhuyan, J.
Heard learned counsel for the parties.
2. This is a statutory appeal under Section 130E of the Customs Act,
1962 (briefly the ‘Customs Act’ hereinafter) against the final order
[2024] 3 S.C.R. 893
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
dated 30.04.2009 passed by the Customs, Excise and Service Tax
Appellate Tribunal, New Delhi (for short ‘CESTAT’ hereinafter) in
Customs Appeal No.441 of 2005 dismissing the appeal filed by
the appellant against the order dated 28.04.2005 passed by the
Commissioner of Customs and Central Excise, Indore (for short ‘the
Commissioner’ hereinafter).
2.1. By the aforesaid order dated 28.04.2005, the Commissioner
had confirmed the duty demand of Rs.3,99,255.00 in respect
of 27 cases not found in the warehouse and imposed penalty
of Rs.1 lakh on the appellant under Section 112 of the
Customs Act. That apart, the appellant was directed to pay
interest on the duty confirmed in terms of Section 28AB of the
Customs Act from the date of enforcement of the said section
till the date of actual payment of duty. The Commissioner
had also confiscated 264 cases of imported goods valued at
Rs.48,79,776.00 seized from within the factory premises of the
appellant but outside the approved warehouse under Section
111 of the Customs Act. However, the confiscated goods were
permitted to be redeemed on payment of fine of Rs. 2 lakhs.
Thirty days’ time was granted to the appellant to exercise the
option for redeeming the goods. Further, the Commissioner
had confirmed customs duty amounting to Rs.39,03,821.00
in terms of Section 71 read with the proviso to Section 28A
of the Customs Act. The appellant was also required to pay
interest amounting to Rs.18,88,425.00 on the customs duty
confirmed on the 264 packages from the date of warehousing
till the date of detection of the shortage in the warehouse; in
addition, appellant was also required to pay interest on the
duty confirmed in terms of Section 28AB of the Customs Act
from the date of enforcement of the said section till the date
of actual payment of duty confirmed on the 264 cases.
3. Appellant before us is M/s Bhanu Iron and Steel Company Limited,
Plot No. 801, Sector III, Industrial Estate, Pithampur, District Dhar
in the State of Madhya Pradesh (‘BISCO’ for short).
4. This appeal has a chequered history. Before finally landing in this
Court, the appellant had gone through several rounds of appeal and
remand. For a proper perspective, it would be apposite to briefly
narrate the factual trajectory of the case.
894 [2024] 3 S.C.R.
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5. Appellant had imported second hand steel mill machinery and parts
thereof under Project Import Facility covered by Chapter Heading
No.98.01 of the Schedule to the Customs Tariff Act, 1975.
6. A warehouse within the precincts of the industrial/factory premises
of the appellant was notified as a public bonded warehouse on
management basis with M/s Central Warehousing Corporation as
warehouse keeper by the then Collector of Customs and Central
Excise, Indore vide the notification dated 03.05.1989 for storage of
the imported second hand steel mill machinery and parts thereof
without payment of customs duty. According to the respondent, the
appellant had imported in all 595 cases of machinery parts which were
required to be warehoused in the notified public bonded warehouse.
The breakup of the 595 cases of the machinery parts as provided
by the respondent is as under:
Sl.
No.
Transit Bond No. & Date No. of cases actually
received in the customs
bonded warehouse.
1. T-1592 dated 31.05.89 172
2. T-7012 dated 04.12.89 146
3. T-2014 dated 30.05.90 277
Total 595
7. Acting on the basis of information received that the appellant had
misused the warehousing facility, officials of the respondent had
searched the industrial premises of the appellant including the
notified public bonded warehouse on 07.08.1992. In the course of the
search, the stock lying within the notified public bonded warehouse
were verified. On such verification, only 304 cases were found lying
inside the warehouse; 264 cases were found outside the warehouse
but within the industrial/factory premises of the appellant; remaining
27 cases were not found either inside the warehouse or outside the
warehouse within the industrial/factory premises.
8. As no documents showing clearance of the goods contained in the
264 cases from within the warehouse but lying outside the warehouse
on payment of duty and interest as required under Section 71 of
the Customs Act could be produced, the said goods were seized in
terms of Section 110 of the Customs Act. The value of the goods
seized was estimated at Rs.48,79,776.00.
[2024] 3 S.C.R. 895
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
9. In his statement recorded under Section 108 of the Customs Act on
07.08.1992, Sh. Yashwant Singh Bisht, Project Officer (Commercial) of
the appellant stated that the 264 cases of imported goods were kept
outside the bond under a shed as the trailers transporting the goods
could not enter the notified warehouse in view of the soil becoming
very sluggish on account of heavy rains and also because of paucity of
space. The Collector, therefore, opined that the appellant had removed
the 264 cases of warehoused goods valued at Rs.48,79,776.00
attracting duty of Rs.39,03,821.00 and interest of Rs.18,88,425.00 in
violation of Section 71 read with Section 111(j) of the Customs Act.
The seized goods were thus held liable for confiscation.
10. It was further alleged that appellant had unauthorisedly cleared 27
cases of the imported goods valued at Rs.4,99,068.00 attracting duty
of Rs.3,99,255.00 with interest of Rs.2,41,326.00 which were liable
to be recovered under Section 71 read with the proviso to Section
28(1) of the Customs Act.
11. That apart, it was alleged that M/s. Central Warehousing Corporation,
Pithampur had abetted the appellant in clearing the warehoused
goods without payment of duty and interest.
12. In the above circumstances, a show cause notice dated 22.01.1993
was issued to the appellant as well as to the warehouse keeper by
the Collector (now the Commissioner) to explain and show cause
as to why:
(i) the seized quantity of 264 cases of goods valued at
Rs.48,79,776.00 and attracting duty of Rs.39,03,821.00
plus Rs.18,88,425.00 due to interest should not be
confiscated in terms of Section 71 read with Section
111(j) of the Customs Act.
(ii) the amount of duty of Rs.3,99,255.00 plus interest
of Rs.2,41,326.00 payable on 27 cases of goods
valued at Rs.4,99,068.00 cleared and utilized by the
appellant, should not be demanded from the appellant
in terms of Section 71 read with the proviso to Section
28 (1) of the Customs Act.
(iii) a penalty under Section 112 of the Customs Act
should not be imposed for violation of Section 71
and Section 111(j) of the Customs Act.
896 [2024] 3 S.C.R.
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13. Appellant submitted reply dated 02.04.1994. In its reply, appellant
stated that there was heavy rain in the month of August 1989 and
the soil outside the notified warehouse had become very sluggish.
As a result, the trailers carrying the consignment could not enter the
notified warehouse. The goods were downloaded in the open outside
the notified warehouse but within the factory premises. To prevent the
goods from getting damaged, appellant had requested the concerned
Superintendent of Customs and Central Excise to shift the machineries
to under a shed within the factory premises under Section 64 of the
Customs Act. Permission was granted by the Superintendent. In terms
of such permission of the Superintendent, who was the proper officer,
appellant had shifted the goods to under the shed to prevent further
damage of the goods. It was contended that the goods were still under
the bonded warehouse and could not be said to have been cleared.
In this connection, reference to and reliance was placed on Section
15 of the Customs Act. This position was clarified by Sh. Yashwant
Singh Bisht in his statement recorded on 07.08.1992. The appellant,
therefore, requested the authority to drop the proceedings.
14. It may be mentioned that the Central Warehousing Corporation (for
short ‘the Corporation’ hereinafter) had also submitted its reply dated
19.12.1993. In the reply it was stated that an open area of 2,000 sq.
meters in the premises of the appellant having fencing and a gate
with locking arrangement was approved by the customs and central
excise authorities as a public bonded warehouse. Appellant vide
letter dated 30.08.1989 sought permission from the Superintendent,
Customs and Central Excise, Range-III, Pithampur for unloading
the cargo covered by Bond No.T-1592 dated 31.05.1989 outside
the said warehouse on account of heavy rains, etc. It was pointed
out that the trailers carrying the consignment could not enter the
said warehouse because those got stuck in the soil outside the said
warehouse as the soil had got sluggish due to heavy rains. The
Superintendent gave permission for unloading the cargo outside the
warehouse but within the factory premises on the body of the letter
itself. The machinery parts had to be shifted to a shed outside the
bonded warehouse but within the factory premises to protect those
parts from further rusting and corrosion.
15. Commissioner by his adjudication order dated 28.08.1996 did not
accept the reply of the appellant and confirmed the demand and
interest. It was ordered as under:
[2024] 3 S.C.R. 897
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
(i) demand for duty of Rs.3,99,255.00 plus Rs.2,41,326.00
leviable on 27 cases cleared in a clandestine manner
was confirmed for recovery from the appellant in
terms of Section 71 read with the proviso to Section
28(1) of the Customs Act.
(ii) 264 cases of imported goods valued at Rs.48,79,776.00
seized from the premises other than the approved
warehouse were confiscated under Section 111
of the Customs Act but permitted to be redeemed
on payment of fine of Rs.12,00,000.00 (Rs. twelve
lakhs only). Appellant would also suffer duty of
Rs.39,03,821.00 plus interest at the time of their
ultimate clearance.
(iii) penalty of Rs.5,00,000.00 (Rs. five lakhs only) was
imposed on the appellant under Section 112 of the
Customs Act.
(iv) penalty of Rs.25,000.00 (Rs. twenty five thousand
only) was imposed on the Central Warehousing
Corporation under Section 112 of the Customs Act.
16. Aggrieved by the aforesaid order of the Commissioner, appellant
preferred an appeal before the then Central Excise and Gold Appellate
Tribunal (CEGAT). By order dated 18.02.1999, CEGAT disposed
of the appeal by setting aside the order of the Commissioner and
remanding the matter back to the Commissioner for fresh adjudication.
The Commissioner was directed to look into the new facts and
documents brought on record by the appellant and thereafter decide
the case de novo in accordance with the principles of natural justice.
17. Following the remand, a fresh adjudication order was passed by
the Commissioner on 31.12.2002. In this order, the Commissioner
recorded that the warehoused goods were removed to a place outside
the approved warehouse without following the procedure set out
under Sections 67, 68 and 69 of the Customs Act. The Commissioner,
thereafter, reiterated the first adjudication order dated 28.08.1996.
18. Assailing the aforesaid order of the Commissioner dated 31.12.2002,
appellant preferred appeal before the CESTAT. In its order dated
08.10.2003, CESTAT observed that the Commissioner had not
looked into the additional documents which were part of the record.
898 [2024] 3 S.C.R.
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CESTAT, therefore, opined that the matter should be remanded
back to the adjudicating authority for fresh adjudication after taking
into consideration the documents produced by the appellant,
including those produced before the CESTAT. Thus, by the order
dated 08.10.2003, CESTAT allowed the appeal of the appellant by
remanding the matter back to the Commissioner for re-adjudication
after affording an opportunity of hearing to the appellant.
19. The matter was taken up by the Commissioner afresh on remand.
By a detailed order dated 28.04.2005, the Commissioner directed
as under:
(i) demand of Rs.3,99,255.00 leviable on the 27 cases
found not warehoused was confirmed for recovery
from the appellant in terms of the conditions of transit
bond.
(ii) appellant should pay interest on the duty confirmed
in terms of Section 28AB of the Customs Act from
the date of enforcement of the said section till the
date of actual payment of duty. The interest amount
was directed to be worked out and communicated to
the appellant by the Assistant Commissioner, Central
Excise Division, Pithampur.
(iii) 264 cases of imported goods valued at Rs.48,79,776.00
seized from the premises of the appellant outside the
approved warehouse were confiscated under Section
111 of the Customs Act. As the goods were within the
factory premises but outside the bonded warehouse,
a lenient view was taken; the goods were permitted
to be redeemed on payment of fine of Rs.2,00,000.00
(Rupees two lakhs only). The option for redeeming
the goods was to be exercised by the appellant within
30 days from the date of receipt of the order.
(iv) customs duty amounting to Rs.39,03,821.00 for
recovery from the appellant in terms of Section 71
read with the proviso to Section 28A of the Customs
Act was confirmed.
(v) appellant was required to pay interest amounting to
Rs.18,88,425.00 on the customs duty confirmed on
[2024] 3 S.C.R. 899
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
the 264 packages from the date of warehousing till the
date of detection of the shortage in the warehouse,
i.e. from 04.02.1989 to 07.08.1992, in terms of Section
71 of the Customs Act.
(vi) appellant was also required to pay interest on the
duty confirmed in terms of Section 28AB of the
Customs Act from the date of enforcement of the
said section to till the date of actual payment of duty
confirmed on the 264 packages. The interest amount
was directed to be worked out and communicated to
the appellant by the Assistant Commissioner, Central
Excise Division, Pithampur.
(vii) penalty of Rs.1,00,000.00 (Rupees one lakh only)
was imposed on the appellant under Section 112 of
the Customs Act.
20. It was against this order that the related appeal was filed by
the appellant before the CESTAT. By the impugned order dated
30.04.2009, CESTAT dismissed the appeal.
21. Hence the present appeal. This Court by order dated 21.08.2009
had issued notice.
22. Respondent has filed counter affidavit. It is stated that during the
visit of the officials of the Preventive Branch of the Commissionerate
on 07.08.1992, the impugned goods were found outside the notified
warehouse. That apart, there was no explanation for the imported
goods contained in the 27 cases which were neither found within
the bonded warehouse nor outside the bonded warehouse within the
factory premises. In such circumstances, the respondent has justified
the order dated 28.04.2005 which was affirmed by the CESTAT vide
order dated 30.04.2009.
23. It may be mentioned that appellant has brought on record two
additional documents. Appellant had sought for information from
the Central Warehousing Corporation under the Right to Information
Act, 2005 vide letter dated 22.09.2009 regarding payment of custom
establishment charges by the Corporation. Appellant was informed
by the Central Warehousing Corporation vide letter dated 18.12.2009
that the Corporation had deposited a sum of Rs.56,10.294.00 under
the head of ‘Pithampur Warehousing (Bhanu Iron and Steel Company
900 [2024] 3 S.C.R.
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Limited along with wind up Warehouse) custom establishment
charges’ for the financial year 1992-1993 to 2007-2008.
24. Learned counsel for the appellant submits that CESTAT had failed
to consider the fact that it was on the basis of specific permission
granted to the appellant by the proper officer that the impugned goods
were found outside the warehouse but within the industrial/factory
premises of the appellant. Therefore, in terms Section 64(d) of the
Customs Act respondent could not have treated the said goods as
having been removed from the warehouse. He submits that since the
appellant had not cleared the warehoused goods, Section 64 of the
Customs Act would come into play. Therefore, CESTAT was clearly
in error in upholding the order of the respondent applying Section
15(1)(b) of the Customs Act for determining the rate of duty in respect
of those goods. According to him, in the facts of the present case
the only provision that would be applicable is the residuary provision
i.e., Section 15 (1) (c) of the Customs Act.
24.1 Learned counsel has also placed reliance on the circular
dated 12.07.1989 of the Central Board of Excise and Customs
which was fully applicable to the case of the appellant. Though
this circular was subsequently superseded by circular dated
14.08.1997, it would be the former circular which would be
applicable to the facts of the present case.
24.2 Learned counsel further submits that CESTAT was not justified
for upholding the order of the respondent applying Section 71 of
the Customs Act read with Section 28AB of the said Act while
imposing interest on the confiscated goods. Confiscation itself
was not justified.
24.3 Finally, it is contended that both the respondent as well as
CESTAT had overlooked the fact that the goods in question
were denied to the appellant for a long time. Therefore, a lenient
view ought to have been taken.
25. Learned counsel for the respondent, on the other hand, submits
that on the basis of reliable information received about suspected
misuse of the warehousing facility by the appellant, officers of the
Preventive Branch of the Collectorate of Central Excise and Customs,
Indore had searched the premises of the appellant on 07.08.1992
and physically verified the stock. On verification, it was found that
[2024] 3 S.C.R. 901
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
304 cases were stocked inside the warehouse while 264 cases
were found outside the warehouse but within the factory premises.
Remaining 27 cases were found neither inside the warehouse nor
within the factory premises. It was thereafter that action was taken
under the relevant provisions of the Customs Act following which
show cause notice was issued to the appellant.
25.1 Learned counsel has justified the ultimate adjudication order
as well as the impugned order of the CESTAT confirming the
said adjudication order.
25.2 In such circumstances, he submits that there is no merit in the
appeal and, therefore, the same should be dismissed.
26. Submissions made have been duly considered.
27. We may now refer to some of the relevant provisions of the Customs
Act. Section 2(43) defines a ‘warehouse’ to mean a public warehouse
licensed under Section 57 or a private warehouse licensed under
Section 58 or a special warehouse licensed under Section 58A of the
Customs Act. ‘Warehoused goods’ has been defined under Section
2(44) to mean goods deposited in a warehouse.
28. Section 12 of the Customs Act deals with dutiable goods. SubSection(1) thereof says that duties of customs shall be levied at
such rates as may be specified under the Customs Tariff Act, 1975
on goods imported into or exported from India.
29. Date for determination of rate of duty and tariff valuation of imported
goods is dealt with in Section 15. Sub-Section(1) of Section 15 says
that the rate of duty and tariff valuation, if any, applicable to any
imported goods shall be the rate and valuation in force-
(a) in the case of goods entered for home consumption
under Section 46, on the date on which a bill of
entry in respect of such goods is presented under
that section;
(b) in the case of goods cleared from a warehouse
under Section 68, on the date on which the goods
are actually removed from the warehouse;
(c) in the case of any other goods, on the date of
payment of duty.
902 [2024] 3 S.C.R.
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30. While Section 28 provides for recovery of duties not levied or short
levied, Section 28AA deals with interest on delayed payment of duty.
On the other hand, Section 28AB provided for interest on delayed
payment of duty in special cases. Substance of Section 28AB (since
deleted) was that where any duty was not levied or paid or short
levied etc., the person who was liable to pay the duty would also be
liable to pay interest in addition to duty at such rate not below 10%
and not exceeding 36% per annum as may be fixed by the central
government by notification in the official gazette.
31. Chapter IX of the Customs Act comprising of Sections 57 to 73A
deal with warehousing. Section 57 provides for licensing of public
warehouses where dutiable goods may be warehoused. As per
Section 58, as it stood at the relevant time, the proper officer may
license a private warehouse where dutiable goods imported by or
on behalf of the licensee or any other imported goods in respect of
which facilities for deposit in a public warehouse are not available,
may be deposited. Sub-Section(2) provides for cancellation of
license so granted by giving a month’s written notice in advance if
the licensee had contravened any of the provisions of the Customs
Act or committed breach of any of the conditions of the license.
However, before such cancellation, the licensee was required to be
given a reasonable opportunity of being heard.
32. ‘Warehousing bond’ is provided for in Section 59. As per subSection(1), the importer of any goods specified in Section 61(1)
which had been entered for warehousing and assessed to duty
under Sections 17 or 18 shall execute a bond binding himself in a
sum equal to thrice the amount of the duty assessed on such goods.
33. As per Section 60, as it stood at the relevant point of time, when the
provisions of Section 59 have been complied with in respect of any
goods, the proper officer may make an order permitting the deposit
of goods in a warehouse.
34. Section 61 mentions the period for which the goods may remain
warehoused. Sub-Section (1) says that any warehoused goods
may be left in the warehouse in which they are deposited or in any
warehouse to which they may be removed-
(a) in the case of capital goods intended for use in any
hundred percent export-oriented undertaking, till the
expiry of five years;
[2024] 3 S.C.R. 903
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
(aa) in the case of goods other than capital goods intended
for use in any hundred percent export-oriented
undertaking, till the expiry of three years; and
(b) in the case of any other goods, till the expiry of one
year;
after the date on which the proper officer has made an order under
Section 60 permitting the deposit of the goods in a warehouse.
However, proviso (i) (B) says that in the case of any goods which
are not likely to deteriorate and which are not intended for use in any
hundred percent export oriented undertaking, the period specified
in clauses (a), (aa) or (b) may, on sufficient cause being shown,
be extended by the Principal Commissioner or Commissioner of
Customs for a period not exceeding six months and by the Principal
Chief Commissioner or Chief Commissioner of Customs for further
period as he may deem fit.
35. Section 64 deals with owner’s right to deal with warehoused
goods. Section 64, as it stood at the relevant point of time, read
as under:
64. Owner’s right to deal with warehoused goods.- With
the sanction of the proper officer and on payment of the
prescribed fees, the owner of any goods may either before
or after warehousing the same-
(a) inspect the goods;
(b) separate damaged or deteriorated goods from the
rest;
(c) sort the goods or change their containers for the
purpose of preservation, sale, export or disposal of
the goods;
(d) deal with the goods and their containers in such
manner as may be necessary to prevent loss or
deterioration or damage to the goods;
(e) show the goods for sale; or
(f) take samples of goods without entry for home
consumption, and if the proper officer so permits,
without payment of duty on such samples.
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35.1. Thus, this section provided that the owner of any goods
with the sanction of the proper officer and on payment of
the prescribed fees may either before or after warehousing
the same, deal with the goods and their containers in such
manner as may be necessary to prevent loss or deterioration
or damage to the goods.
36. Section 67 deals with removal of goods from one warehouse to
another. It says that the owner of any warehoused goods may with
the permission of the proper officer, remove them from one warehouse
to another subject to such conditions as may be prescribed for the
due arrival of the warehoused goods at the warehouse to which
removal is permitted.
37. Heading of Section 68 is ‘Clearance of warehoused goods for home
consumption’. This section, as it stood at the relevant point of time,
provided that the importer of any warehoused goods may clear those
goods from the warehouse for home consumption if –
(a) a bill of entry for home consumption in respect of such
goods has been presented in the prescribed form;
(b) the import duty leviable on such goods and all
penalties rent, interest and other charges payable in
respect of such goods have been paid; and
(c) an order for clearance of such goods for home
consumption has been made by the proper officer.
38. There is an embargo provided in Section 71 from taking out goods
from a warehouse. As per Section 71, no warehoused goods shall be
taken out of a warehouse except on clearance for home consumption
or re-exportation or for removal to another warehouse or as otherwise
provided by the Customs Act.
39. Section 71 is followed by Section 72 which deals with goods improperly
removed from warehouse, etc. As per sub-Section(1)(b) where any
warehoused goods have not been removed from a warehouse at
the expiration of the period during which such goods are permitted
under Section 61 to remain in a warehouse, the proper officer may
demand and the owner of such goods shall forthwith pay, the full
amount of duty chargeable on account of such goods together with
all penalties, rent, interest and other charges payable in respect of
such goods.
[2024] 3 S.C.R. 905
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
40. Once the goods covered by any bond executed under Section 59
have been cleared for home consumption or exported or transferred
or are otherwise duly accounted for, and when all amounts due on
account of such goods have been paid, the proper officer shall cancel
the bond as discharged in full and deliver the same after cancellation
to the person who has executed or is entitled to receive it.
41. Section 110(1) of the Customs Act empowers the proper officer to
seize any goods if he has reason to believe that such goods are
liable to confiscation under the Customs Act.
42. As per Section 111(j), any dutiable or prohibited goods removed
or attempted to be removed from a customs area or a warehouse
without the permission of the proper officer or contrary to the terms
of such permission, shall be liable for confiscation.
43. In the event of such an act, the concerned person shall be liable to
pay penalty under Section 112.
44. Central Board of Excise and Customs had issued Circular No.98/95-
Cus. dated 12.07.1989. Subject matter of this circular was what would
be the relevant date for calculation of customs duty in cases where
warehoused goods were cleared after expiry of the warehousing
period. Reference was made to the instructions of the Board dated
17.03.1987 where it was clarified that in cases where warehoused
goods were cleared from a warehouse after expiry of the bond period,
the rate of duty would be the one which was prevalent on the date
of expiry of the bond. The issue was reconsidered in the tripartite
meeting held between the Ministry of Law, Department of Revenue
and the Comptroller and Auditor General. It was observed in the
meeting that on expiry of the warehousing period, the goods kept in
a warehouse ceased to be warehoused goods and, therefore, their
removal from the warehouse could not be regarded as covered by
the provisions of Section 15(1)(b) of the Customs Act. After noting
that there was no specific legal provision to determine the rate of
duty in such cases of warehoused goods where the bond period
had expired, it was concluded that the residual clause of Section
15(1)(c) of the Customs Act could apply to cases where the goods
were removed from the warehouse after expiry of the warehousing
period and that the rate of duty in such cases would be the rate
prevalent on the date of payment of duty. It was further clarified that
provisions of Section 15(1)(b) of the Customs Act would continue to
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apply in cases where goods were cleared from the warehouse after
extension of the warehousing period but before expiry of the extended
period for which applications from the importers for extension of
the warehousing period should be received before expiry of the
permitted period of warehousing. These conclusions reached in the
tripartite meeting were accepted by the Board and by the aforesaid
circular dated 12.07.1989, direction was issued for their immediate
implementation superseding the instructions dated 17.03.1987.
45. The above provision continued to hold the field till the decision of
this Court in Kesoram Rayon versus Collector of Customs, Calcutta,
(1996) 5 SCC 576. The question for consideration in Kesoram was
the rate at which customs duty was to be levied on goods that
remained in a bonded warehouse beyond the permitted period. A
two judge bench of this Court after referring to various provisions
of the Customs Act held that Section 15(1)(b) would apply to the
case of goods cleared under Section 68 from a warehouse upon
presentation of a bill of entry for home consumption; payment of
duty, interest, penalty, rent and other charges; and an order for home
clearance. This Court clarified that provisions of Section 68 and
consequently Section 15(1)(b) would apply only when goods have
been cleared from the warehouse within the permitted period or its
permitted extension and not when by reason of their remaining in the
warehouse beyond the permitted period or its permitted extension,
the goods would be deemed to have been improperly removed from
the warehouse under Section 72. In the facts of that case, it was
found that there was nothing on record to suggest that clearance of
the goods in question under Section 68 was ordered and, therefore,
Section 15(1)(b) had no application. Finally, this Court held that the
consequence of non-removal of the warehoused goods within the
permitted period or the permitted extension by virtue of Section 72
is certain. The date on which it comes to an end is the date relevant
for determining the rate of duty; when the duty is in fact demanded
is not relevant.
46. Following the decision of this Court in Kesoram, the Central Board of
Excise and Customs issued Circular No.31/97-Cus. dated 14.08.1997.
The Board held that in view of this Court’s judgment, the date of
payment of duty in the case of warehoused goods removed after
expiry of the permissible or extended period would be the date of
expiry of the warehousing period or such other extended period,
[2024] 3 S.C.R. 907
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
as the case may be, and not the date of payment of duty. Goods
not removed from a warehouse within the permissible period or the
extended period are to be treated as goods improperly removed
from the warehouse.
47. In Simplex Castings Ltd. versus Commissioner of Customs,
Vishakhapatnam, (2003) 5 SCC 528, the appellant had questioned
filing of appeal by the Commissioner before the CEGAT in view of the
circular dated 12.07.1989 issued by the Central Board of Excise and
Customs. It was argued that it was not open to the Commissioner to
take the stand that non-removal of the goods from the warehouse
after the period of warehousing was over would be deemed removal
from the warehouse and that the rate of duty would be leviable from
the date the period of warehousing was over. The Commissioner had
appealed against the decision of the Collector of Customs (Appeals)
in which the circular dated 12.07.1989 was followed. The appeal
filed by the Commissioner was allowed by the CEGAT by relying
upon the decision of this Court in Kesoram. This Court referred to
its earlier decision in Paper Products Ltd. versus Commissioner of
Central Excise, (1999) 7 SCC 84, and held that the circular dated
12.07.1989 was binding on the Department and, therefore, it was
not open to the Department to prefer appeal before CEGAT contrary
to what was laid down in the circular dated 12.07.1989 in which it
was specifically provided that the residual Section 15(1)(c) of the
Customs Act would apply to cases where the goods were removed
from a warehouse after expiry of the warehousing period and that
the rate of duty in such cases would be the rate prevalent on the
date of payment of duty. This Court noted that the aforesaid circular
dated 12.07.1989 was withdrawn by the subsequent circular dated
14.08.1997. But, at the relevant point of time, the circular dated
12.07.1989 was holding the field. Thus, the appellate order passed by
the Collector of Customs (Appeal) could not be said to be in anyway
illegal or erroneous and, therefore, it was not open to the Department
to challenge the said order before the CEGAT in contravention of
the circular dated 12.07.1989.
48. The decision in Kesoram was approved and applied by a coordinate
bench of this Court in SBEC Sugar Ltd versus Union of India, (2011)
4 SCC 668. This Court held that Section 15(1)(b) would be applicable
only when the goods are cleared from the warehouse under Section
68 of the Customs Act i.e. within the initially permitted period or during
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the permitted extended period. When the goods are cleared from
the warehouse after expiry of the permitted period or its permitted
extension, the goods are deemed to have been improperly removed
under Section 72(1)(b) of the Customs Act with the consequence that
the rate of duty has to be computed according to the rate applicable
on the date of expiry of the permitted period under Section 61.
49. Let us now briefly recap the facts. Appellant had imported second
hand steel mill machinery and parts covered by three transit bonds
totalling 595 cases. The customs authority had notified an open
area of 2000 square meters within the industrial/factory premises of
the appellant as a public bonded warehouse. This open area was
fenced and had gate with locking arrangement. The imported goods
covered by the 595 cases were required to be warehoused in the
said notified public bonded warehouse without payment of customs
duty. Appellant had written a letter dated 30.08.1989 to the concerned
Superintendent seeking permission to unload a portion of the cargo
outside the warehouse but within the factory premises. It was pointed
out that the trailers carrying the consignment could not enter the
said warehouse as because those trailers had got stuck in the soil
outside the warehouse but within the factory premises as the soil
had become very sluggish due to heavy rain and also because of
paucity of space within the notified open area. The Superintendent
gave permission on the body of the letter itself for unloading the
cargo outside the warehouse but within the factory premises. The
machinery parts which were thus unloaded were shifted to a shed
outside the bonded warehouse but within the factory premises of
the appellant so that those machinery parts did not get damaged,
lying in the open and getting exposed to the elements.
49.1. Officials of the Preventive Branch of the Commissionerate
searched the industrial premises of the appellant, including the
notified public bonded warehouse, on 07.08.1992 and physically
verified the stock in the notified public bonded warehouse as
well as outside but within the industrial/factory premises of the
appellant. On such verification, it was found that only 304 cases
were stocked inside the warehouse, whereas 264 cases were
found outside the warehouse but within the industrial/factory
premises of the appellant. Remaining 27 cases were neither
found inside the warehouse nor outside the warehouse but
within the industrial/factory premises of the appellant.
[2024] 3 S.C.R. 909
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
49.2. After issuance of show cause notice and hearing, respondent
passed adjudication order dated 28.08.1996 which suffered
several rounds of appeals and remand. Ultimately, the
Commissioner passed the final adjudication order dated
28.04.2005 whereby demand of Rs.3,99,255.00 leviable on
the 27 cases found not warehoused was confirmed. Appellant
was also directed to pay interest on the said duty in terms of
Section 28AB of the Customs Act. The 264 cases of imported
goods found outside the notified warehouse were confiscated
but option of redemption was given to the appellant on
payment of fine of Rs.2,00,000.00. For the goods covered by
the 264 cases, customs duty amounting to Rs.39,03,821.00
was directed to be recovered from the appellant in terms of
Section 71 read with the proviso to Section 28A of the Customs
Act. That apart, appellant was directed to pay interest of
Rs.18,88,425.00 on the aforesaid quantum of customs duty in
respect of the 264 cases from the date of warehousing till the
date of detection of the shortage in the warehouse. Further,
appellant was directed to pay interest under Section 28AB
in respect of the 264 cases from the date of enforcement of
the said section to till the date of actual payment of the duty.
Penalty of Rs.1,00,000.00 was also imposed on the appellant
under Section 112 of the Customs Act.
49.3. In appeal, CESTAT by the impugned order affirmed the
aforesaid decision of the Commissioner.
50. We may mention that the permission granted by the Superintendent to
the appellant on 30.08.1989 to unload a portion of the cargo outside
the open space which was notified as public bonded warehouse but
within the factory premises of the appellant was neither cancelled nor
revoked by the Superintendent or even by the Commissioner. Infact,
a view can reasonably be taken that the appellant as the owner of
the goods had exercised its right under Section 64(d) which was
endorsed by the Superintendent. Therefore, it would not be correct
to say that the 264 cases found outside the notified warehouse
but within the factory premises of the appellant were improperly or
unauthorisedly removed from the notified public bonded warehouse.
51. It has also come on record that Central Warehousing Corporation
had deposited a sum of Rs.56,10,294.00 with the respondent as
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custom establishment charges in respect of the aforesaid notified
public bonded warehouse for the period 1992-1993 to 2007-2008.
This would mean that the warehousing in the aforesaid notified
public bonded warehouse continued during the said period. Thus,
the period of warehousing had not expired and continued to remain
operational in terms of the proviso to Section 61 of the Customs Act.
52. This would further be borne out from the fact that it is not the case
of the respondent that the 304 cases found inside the notified
warehouse were kept there beyond the warehousing period. In fact,
the allegation of the respondent is that 264 cases were improperly or
unauthorisedly removed from the notified warehouse as those were
found lying outside the notified area but within the industrial/factory
premises of the appellant. That apart, 27 cases were neither found
inside the notified warehouse nor outside the said warehouse but
within the factory premises of the appellant.
53. In such a scenario, the provisions of Sections 71 and 72 would not
be applicable. Therefore, the decision of the respondent to invoke
Section 71 and thereafter levy interest on the goods covered by the
264 cases under Section 28AB of the Customs Act was not justified.
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.
54. Having said that, 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
[2024] 3 S.C.R. 911
M/s. Bisco Limited v. Commissioner of Customs and Central Excise
bonded warehouse is correct and requires no interference.
55. Reverting back to the 264 cases, we are of the view that in a case
of this nature, Section 15(1)(b) would have no application. Rather,
Section 15(1)(c) would be attracted.
56. In so far the Board’s circular dated 12.07.1989 is concerned, the
subject matter of the said circular was what would be the relevant
date for calculation of customs duty in cases where warehoused
goods were cleared after expiry of the warehousing period. In that
context, it was clarified that provisions of Section 15(1)(b) of the
Customs Act would apply to cases where the goods were cleared
from the warehouse after extension of the warehousing period
but before expiry of such extended period. On the other hand, in
respect of cases where the goods were removed after expiry of the
warehousing period, the residual clause of Section 15(1)(c) of the
Customs Act would apply. Evidently, this 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.
57. As regards, the decision of this Court in Kesoram is concerned, the
question for consideration in that case was the rate at which customs
duty could be levied on goods that remained in a bonded warehouse
beyond the permitted period. It was in that context that this Court held
that Section 68 would not be applicable since Section 68 operates in
a different context. On the contrary, Section 72 would apply. Thus,
this Court clarified that the date on which the warehousing period
comes to an end, would be the date relevant for determining the
rate of duty and when the duty is actually demanded would not be
relevant. It was further clarified that Section 15(1)(b) would apply to
goods cleared under Section 68. Goods which remain in the bonded
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warehouse beyond the permitted period would be deemed to have
been improperly removed from the warehouse under Section 72.
It is quite evident that this decision would not be applicable to the
facts of the present case.
58. Thus, having regard to the discussions made above, 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. Parties are directed to work out
their remedies in respect of the 264 cases of goods under Section
15(1)(c) of the Customs Act within a period of eight weeks from
the date of receipt of a copy of this order. In so far the demand of
customs duty and interest on the 27 cases is concerned, the same
is hereby sustained. The decision imposing penalty of rupees one
lakh on the appellant under Section 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.
59. Impugned order of CESTAT would stand modified accordingly.
60. Appeal is allowed in part in the above terms. No costs.
Headnotes prepared by: Ankit Gyan Result of the case:
Appeal partly allowed.
