M/S. BISCO LIMITEDversusCOMMISSIONER OF CUSTOMS AND CENTRAL EXCISE

                 [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

* Author
[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]
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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.
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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.    Transit Bond No. & Date             No. of cases actually
       No.                                      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

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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.
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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

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           (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.
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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

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                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
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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
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     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. Sub-
    Section(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.
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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 sub-
    Section(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;
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           (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

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     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

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     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

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     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.