The Bangalore bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) held that no penalty under the Customs Act, 1962 is imposable on the licensee of a duty-free shop in the absence of suppression of fact to evade tax.
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 adjudicating authority observed that ’the appellant had not done it intentionally to evade customs duty,’ therefore, imposition of penalty does not arise as there is no mens-rea and no specific provision has been invoked in the present case for imposition of penalty.
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.
A two-member bench comprising Mr P A Augustian, Member ( Judicial ) and Mrs R Bhagya Devi, Member ( Technical ) observed that since there is no intention to evade payment of duty and the fact that the officers are also to verify the vouchers and countersign the sale vouchers, the fact of awareness by the officers cannot be ignored. The CESTAT set aside the penalty.
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