By TIOL News Service

MUMBAI, MAY 17, 2018: THE Appellant are running duty free shops at the Goa International Airport and have been granted Warehouse license u/s 58 of the Customs Act. The goods brought into the shop are insured against theft, burglary, pilferage and natural causes and the beneficiary of the same is Customs department.

In May 2008, a theft/burglary occurred at the shop in respect of goods worth Rs.62,97,331/- for which FIR was filed. Subsequently, some CISF and police personnel behind the theft were caught.

The Appellants were issued SCN alleging that, on verification, the goods valued at Rs.62,97,331/- involving custom duty of Rs. 96,66,209/- were found short and not accounted for by the 'Licence Holder' being a 'Licensed Ware housekeeper' and having violated the conditions of the License, therefore, customs duty is payable by them.

The Assistant Commissioner confirmed the demand and in appeal, the Commissioner (Appeals) directed the appellant to make a pre-deposit of Rs.30 lakhs. During pendency of their appeal against this stay order, the appeal was dismissed by the Commissioner(A) on the ground of non-compliance of stay Order.

Finally, the matter was remanded by the Tribunal and pursuant to which the impugned order came to be passed on 31.08.2017 rejecting the appeal filed by the duty free shop.

In the present appeal, it is submitted that the goods in question were stolen and the circumstances were completely beyond their control; that one of the keys was with the department and being joint custodian the revenue cannot disown their responsibility; the case being of theft cannot be termed as one where the goods were not accounted for and consequentially no demand could have been raised under Section 72(1)(d) of CA, 1962; applying the legal maxim lex non cogit ad impossibilia the demand is not sustainable.

The Bench considered the submissions made by both sides and after adverting to the condition no. 13 of the Private bonded warehouse Licence no. 3/2016 dated 21.10.2016 issued by the Assistant Commissioner,observed -

+ Following the compliance with the terms and conditions of the Licence the Appellant got the goods insured against theft, pilferage, fire, accident and other natural calamities, risk against rioting at least for value equal to the customs duty by a comprehensive insurance policy.

+ The duty has been adequately safeguarded by insurance policy drawn in favour of the Commissioner. This policy was instructed to be issued by the revenue only for the reason that in case of any mishap, the revenue would claim the duty from the insurance company. Apart from this, getting the insurance policy issued in the name of Commissioner would not serve any purpose.

+ One of the keys of the licenced premises was with the department. The area is located in high security of the Airport, round the clock security of CISF and local police personnel and, therefore, it cannot be said that the Appellant has not taken adequate precaution to safeguard the goods.

Distinguishing the case laws cited by the AR, the CESTAT further observed -

++ We find that the facts are different as the goods were in joint custody of the Appellant as well as the department since one key of the warehouse was with the department thus making them joint custodian of the goods. No goods would be allowed to be removed from such warehouse without following the customs rules, procedures and payment of duty and there is no dispute that the Appellant scrupulously followed the said conditions.

++ In such case when the bonded warehouse is under the control of the Customs authorities and the theft has occurred that too by the CISF and Police personnel, the appellant cannot be found faulted with.

++ On the one hand the revenue has sought to recover any loss of duty from the insurance company by making the Appellant pay for the insurance premium and on the other hand it was alleged that the goods has been improperly removed from the warehouse. The theft incident has not occurred due to any improper removal of the goods by the Appellant and hence no duty can be recovered from them.

Thereafter, the Bench referred to the provisions of section 23 [Remission of duty on lost, destroyed or abandoned goods] and section 58 [Licensing of private warehouse] and observed -

+ In the present case, it is an admitted position that the appellant insured the warehoused goods for that part of the value representing Customs duty on the imported goods. Thus it is clear abidance of the terms and conditions of the warehousing licence issued under Section 58 of the Customs Act and the warehousing bond executed.

+ Having followed the terms and conditions of the licence, the appellant is thus entitled to claim the benefit under Section 23 of the Customs Act by remission of duty.

+ Therefore, demand of Customs duty on the warehoused goods which has been stolen cannot be demanded from the Appellant.

In fine, it was held that there was no ground to demand duty from the Appellant.

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-1549-CESTAT-MUM)