The Tribunal confirms that penalties under Section 114A of the Customs Act disqualify the company from obtaining a private warehouse license.
In a significant ruling, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) Allahabad Regional Bench upheld the rejection of private warehouse licensing applications by M/s Bhagwati Products Ltd. The company’s applications for a license under Section 58 of the Customs Act, 1962, were denied due to penalties imposed under Section 114A of the same Act, signifying contraventions with the intent to evade duty.
The case revolved around the interpretation of Regulation 3(2)(c) of the Private Warehouse Licensing Regulations, 2016 (PWLR), which prohibits the issuance of licenses to applicants penalized for offences under the Customs Act. Bhagwati Products Ltd. argued that the penalties were for contraventions and did not constitute criminal offences under Chapter XVI of the Act. However, the Tribunal, led by Mr. S.K. Mohanty, Member (Judicial), and Mr. Sanjiv Srivastava, Member (Technical), rejected this argument.
The Tribunal emphasized that the term "penalized for an offence" under Regulation 3(2)(c) extends to penalties for contraventions of Customs Act provisions. The decision highlighted that the interpretation of "offence" should not be restricted to criminal offences alone but should include fiscal penalties for contraventions, thus ensuring that Regulation 3(2)(c) is not rendered redundant.
The ruling also noted that the penalties under Section 114A are imposed for contraventions involving intent to evade duty, which constitutes an offence under the Act. Consequently, M/s Bhagwati Products Ltd. was found ineligible for the warehouse license due to the upheld penalties, even though the company’s appeal against the penalties is pending before the Supreme Court.
The Tribunal's decision underscores the necessity of a harmonious construction of regulations to prevent any provision from becoming otiose. This interpretation aligns with the regulatory intent to maintain stringent control over customs operations and uphold the integrity of the licensing process.
Bottom Line:
Customs Act - Interpretation of Regulation 3(2)(c) of the Private Warehouse Licensing Regulations, 2016 (PWLR) - "Penalized for an offence" includes penalties for contraventions under the Customs Act, not limited to criminal offences under Chapter XVI.
Statutory provision(s): Customs Act, 1962 Section 58, Regulation 3(2)(c) of PWLR 2016, Section 114A of the Customs Act, 1962.
