M/s. BISCO Ltd. vs. Commissioner of Customs and Central Excise [March 20, 2024]
Citation: 2024 INSC 231; [2024] 3 S.C.R. 890
Background and Facts
M/s. BISCO Ltd. (Bhanu Iron and Steel Company Limited) imported second-hand steel mill machinery and parts under the Project Import Facility. Their factory premises in Pithampur, Madhya Pradesh, included a notified public bonded warehouse for storing these imports without immediate payment of customs duty. In 1992, customs officials conducted an inspection and found significant discrepancies: out of 595 imported cases, only 304 were inside the warehouse, 264 were outside but within the factory premises, and 27 were missing entirely.
The customs authorities issued a show cause notice, alleging unauthorized removal of goods from the bonded warehouse, leading to confiscation orders, imposition of penalties, and demands for customs duty and interest. BISCO argued that the goods outside the warehouse were temporarily stored there due to heavy rain and with customs officials’ permission. They also cited administrative lapses by customs authorities.
Legal Issues
Whether goods found outside the notified warehouse but within the factory premises constituted unauthorized removal under the Customs Act, 1962.
Whether the confiscation, penalty, and duty demands imposed by customs authorities were justified under Sections 71, 111(j), and 112 of the Customs Act.
Supreme Court’s Analysis and Ruling
The Supreme Court, per Justices Ujjal Bhuyan and B.V. Nagarathna, clarified that Section 15(1)(b) of the Customs Act applies only if goods are cleared from a warehouse within the permitted period. If goods are removed after the expiry of the permitted period, they are deemed improperly removed under Section 72(1)(b), and the applicable duty is determined as of the date of expiry of the warehousing period.
The Court found that the demand for customs duty and interest on the 264 cases found outside the warehouse but within the factory premises could not be sustained, as BISCO had provided a plausible explanation (heavy rain and temporary storage with permission). However, the demand for duty and interest on the 27 missing cases was upheld, as these were neither in the warehouse nor within the factory premises, amounting to unauthorized removal.
The Court upheld the penalty of ₹1 lakh under Section 112 for the unauthorized removal of the 27 missing cases but set aside penalties and confiscation for the 264 cases found within the factory premises. The judgment emphasized the importance of compliance with customs warehousing regulations but also recognized the need for a reasonable and fact-based approach to enforcement.
Significance
This judgment provides clarity on the interpretation of warehousing provisions under the Customs Act, especially regarding the distinction between goods found outside a notified warehouse but within the factory and those completely missing. It underscores that penalties and confiscation should be imposed only where clear violations occur and not where explanations are plausible and supported by evidence. The decision reinforces the principle of proportionality in customs enforcement and the need for fair adjudication in cases of alleged misuse of warehousing facilities.
Citation
2024 INSC 231; [2024] 3 S.C.R. 890.
RELATED Blog
0 comments