Gateway Terminals India Pvt Ltd vs Commissioner Of Customs (NS-II)

C J Mathew, Member (T)

This appeal lies against order [order-in-original no. 01/2015-16 dated 06th April 2015] of Commissioner of Customs (NS-II), Nhava Sheva, which has fasten the appellant, M/s Gateway Terminals India Pvt Ltd (GTIPL}, with duty liability of Rs. 78,81,61,176, Rs. 3,59,418 and Rs. 1,28,025/- under section 28 of Customs Act, 1962 along with applicable interest under section 28AB of the Customs Act, 1962, while at the same time affirming the eligibility of five licences issued in 2005 under the ‘export promotion capital goods (EPCG)’ scheme in the Foreign Trade Police (FTP) and further permitting the debit of Rs. 67,91,49,875 against the said licences as well as payment of further duty liability of Rs. 10,94,98,774.

The background to this culmination of the impugned proceedings was the application moved before the empowered board of approval (BOA) constituted under Appendix XIV, Vol. (d) of Handbook of Procedures, Volume I, 2004-2009 for the appellant herein to set up ‘export oriented units (EOU)’ that obtained approval of the approval of the jurisdictional Development Commissioner on 29th June 2006. Subsequently, it had been taken note of that services offered by the appellant herein were not eligible to operate under the scheme, the letter of permission (LOP), the registration as well as private bonded warehouse licence were all cancelled, following which three show cause notices came to be issued to the appellant for recovery of the said amount pertaining to 33 consignments imported by them in the interregnum.

The appellant approached the empowered committee under the Foreign Trade Policy (FTP) to obtain EPCG licence which came to be issued between March 2005 and December 2005 and in consequence of the said show cause notice, it was decided that all the goods so imported would be treated as imported against the said EPCG licence, its validity was deemed to have been extended as tested in September 2014. Thereafter the impugned order came to be issued.

The adjudicating authority held that ab initio cancellation of letter of permission, the status as ‘export oriented unit (EOU)’ and as bonded warehouse ceased to exist and the goods were deemed to be have been cleared for home consumption on the date of debonding with all consequent liabilities arising as though the goods themselves had been cleared without payment of duty.

We have heard Learned Counsel for the appellant and Learned Authorised Representative at length.

This is a peculiar case in which the bonded warehouse licence came to cancelled, though vide the impugned order, with effect from the date of licence itself. Thus, the goods imported then and warehoused were also deemed to have been removed from the warehouse on that date even while cancellation of the warehousing licence was effected only on the date of the impugned order. On a perusal of the scheme of Customs Act, 1962, we find that there is no provision whatsoever for the consequences of cancellation of a warehousing licence other than through section 58 of Customs Act, 1962 by giving one month notice in writing and opportunity to be heard. Therefore, notwithstanding the issue of letter of permission which was also the genesis of the private warehousing licence, provisions of Customs Act, 1962 do not envisage such deftailing of a scheme in Foreign Trade Policy with the self content and apprehensive provision for a warehousing in chapter IX of Customs Act, 1962 with the procedures formulated for implementation of such a scheme did prescribe the licencing of a private bonded warehouse for enabling operation as export oriented unit (EOU). Such a procedure cannot correct the existence and sanctity of a warehouse licenced under the provisions of chapter IX of Customs Act, 1962. Any termination of the said warehousing licence and its consequence, was necessarily follow the provisions embodied in the said chapter and cannot be said to be linked to a permission accorded under the Foreign Trade Policy (FTP). It may also be noted that the said appendix in the Handbook of Procedures cited in the impugned order had been put in a place solely for the purpose other than the effect of the exemptions in Income Tax Act, 1961. There is no statutory reference whatsoever but Customs Act, 1962 and therefore the procedure prescribed for a scheme under a policy cannot render an institution established and controlled under a statute to be subservient them too.

It would, therefore, appear that the impugned order, fastening the consequences of payment of duty on goods that continued to be warehoused till 6th of April 2015 is not only contrary to the provisions of Customs Act, 1962 but also in breach of the principles of natural justice which prescribes consequences of termination of warehousing licence only after completion of the due process. For this reason, we set aside the impugned order and, as the show cause notice had not been decided after due consideration of the legal provisions, the matter is remanded to the original authority for a fresh decision on the termination of warehousing licence and consequences thereof, if any, strictly in accordance with law.