Section 15(1)(b) Customs Act Applicable Only If Goods Are Cleared From Warehouse Within 'Permitted Period': SC

The Supreme Court has reiterated that Section 15(1)(b) of the Customs Act applies when goods are cleared from the warehouse within the permitted period. 

In that context, the Bench of Justice BV Nagarathna and Justice Ujjal Bhuyan observed 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 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."

Counsel Devendra Singh appeared for the petitioner, while Counsel Mukhesh Kumar Maroria appeared for the respondents.

M/s Bhanu Iron and Steel Company Limited (BISCO) imported second-hand steel mill machinery and parts under Project Import Facility. A warehouse within their factory premises was notified as a public bonded warehouse for storing these imports without paying customs duty.

In 1992, customs officials conducted a search and found discrepancies: only 304 out of 595 cases were inside the warehouse, 264 were outside but within the factory premises, and 27 were missing. The Commissioner confirmed duty demands on the 27 missing cases and imposed penalties. Additionally, 264 cases found outside the warehouse were confiscated but could be redeemed on payment of a fine. Interest was imposed on duty confirmed for these cases.

BISCO contested, stating the goods outside the warehouse were due to heavy rain and permission was granted by customs officials to store them temporarily. They argued against the duty demands and penalties.

The case went through multiple appeals and remands. Despite BISCO's explanations, the Commissioner upheld the duty demands, penalties, and confiscation of goods. BISCO appealed to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which dismissed their appeal in 2009.

In the subsequent legal proceedings, BISCO argued that they had permission to store goods outside the warehouse temporarily due to heavy rain. They also pointed out administrative lapses by customs authorities. However, the respondent contended that their actions were based on reliable information about the misuse of the warehousing facility.

The Apex Court took 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, could not be sustained. The demand of the customs duty and interest on the 27 cases was sustained. 

It was also said that, "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."

Cause Title: M/s Bisco Limited vs Commissioner of Customs & Central Excise

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