The Bangalore bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) held that the Licensee of a duty-free shop is liable to pay customs duty when it violates a provision of the Customs Act, 1962.
The appellant M/s. Nuance Group ( India ) Private Limited was operating a Private Bonded Warehouse and duty-free shop at Bangalore International Airport under Section 58 of the Customs Act, 1962 and they had to comply with the procedures specified in Trade Facility No.50/2005 dated 5.4.2005. As per this Trade Facility Procedure, the appellant for every sale made from the duty-free shop should be covered by a voucher which shows the name of the passenger to whom the sale was affected, passport number, flight number of the aircraft of arrival and departure.
These sale vouchers are to be countersigned by the customs officer. However, the officers investigated noticed that between 17.9.2008 to 17.11.2008, the appellant had launched a promotional offer for the sale of Johnnie Walker and Smirnoff brand liquor in terms of “buy JW centurion 3 for 2, buy JW Black 3 for 2 and buy Smirnoff 3 for 2”. The said promotional offer was not informed to Customs Authorities. Therefore, the appellant had violated the provisions of Section 72 of the Customs Act, 1962 and Trade Facility No.50/2005; admittedly, accepting their lapse, the appellant paid an amount of Rs.14,21,751/-. Accordingly, the Original Authority confirmed the demand along with interest and imposed a penalty of Rs. 50,000/-. On an appeal, the Commissioner ( Appeals ) upheld the order of the original authority.
The counsel on behalf of the appellant submitted that the promotional offer, in essence, gave the customer’s discount of 33% on the total value of three bottles of liquor purchased by them. The liquor cleared by the international passengers over the baggage allowance should have been subjected to duty in their hands under Section 28 of the Customs Act 1962 and not demanded from the appellant under Section 72. He further submits that in terms of Section 71 of the Customs Act, 1962 warehoused goods could be taken out of the warehouse for home consumption or as otherwise provided in the Customs Act, 1962.
Under Section 77, the owner has to file a declaration of the contents of the baggage and as per the Baggage Rules, the passenger could carry 2 Litres of liquor as a free allowance and if anything, in excess, needs to be declared and paid the duty. Therefore, the duty should have been demanded from the passenger under Section 28 and not from the appellant under Section 72.
The Authorised Representative has reiterated the findings of the Commissioner ( Appeals ) and submitted that the demand for customs duty in respect of such goods cleared in violation of the conditions has been raised in terms of Section 72(1)(a) of the Act which provides for payment of customs duty chargeable on such goods removed in contravention of the conditions of the warehousing bond, along with interest and penalties.
The fact that the warehoused goods are obliged to be removed by provisions of Section 71 of the Customs Act, 1962 and goods improperly removed from the warehouse are liable to be dealt with in terms of Section 72 of the Customs Act, 1962 and they are statutorily obliged to duly account for the goods which are bonded, to the satisfaction of the proper officer, is also not disputed.
The appellants were issued with Customs Bonded Warehouse License and permitted to operate the duty-free shop (DFS) at Bangalore on the investigation into the facts in terms of the bond executed by them as well as the conditions for grant of permission to run the DFS, which has been made with the strict condition that import of goods such as liquor was allowed duty-free only to sell the same to international passengers.
They were also required to maintain detailed documentation by which the Customs Authorities could verify and ascertain whether the strict conditions prescribed had been complied with. The statements from the various persons in charge of the duty-free shop and the scrutiny of the documents relating to DFS have revealed that the appellant has completely violated the conditions under which licenses were granted to them.
A two-member bench comprising Mr P A Augustian, Member ( Judicial ) and Mrs R Bhagya Devi, Member ( Technical ) held that the licensee of the Duty-Free Shop is liable to pay duty if the provisions of Sections and the Procedures laid down therein are violated and therefore, the question of passengers paying duty does not arise. The Tribunal upheld the duty along with interest.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
