Temporary Storage Outside Bonded Area is Not Unauthorized Removal: CESTAT Quashes Customs Confiscation and Penalty [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the temporary placement of goods outside a licensed bonded warehouse does not amount to unauthorized removal under the Customs Act.

Akshay Logistics, the appellant, is a licensed public bonded warehouse operator under Section 57 of the Customs Act, 1962. During a departmental inspection conducted between August 28 and September 5, 2023, customs officers found that nine consignments of imported goods were placed outside the designated bonded area.

The department treated this as a violation and passed an order confiscating the goods under Section 111(j), offering redemption under Section 125, and imposing a penalty of Rs. 5 lakh under Section 117. The appellant’s warehouse license was also suspended under Section 58B(2).

Aggrieved by the order, the appellant approached the CESTAT. The counsel for Akshay Logistics argued that the goods had not been removed without permission. In some cases, the goods were still present within the premises; in others, they had been cleared upon duty payment or transferred to another warehouse with prior approval.

They further argued that the goods were placed temporarily outside the bonded area due to space constraints and bulky packaging, with customs officers being fully aware of the situation. The counsel submitted that there was no intention to evade duty or commit any breach of the law.

The departmental counsel argued that goods found outside the bonded area amounted to improper removal in violation of the licensing conditions. The counsel argued that this was sufficient to justify confiscation and penalty under the provisions of the Customs Act.

The two member bench comprising C.J. Mathew (Technical Member) and Ajay Sharma (Judicial Member) observed that there was no evidence showing that the goods were removed in violation of Section 71. The tribunal found that the goods were either present within the premises, cleared with duty, or moved with proper permission. The tribunal further observed that procedural lapses such as stacking issues or camera coverage could not be treated as serious violations when no revenue loss had occurred.

The tribunal ruled that the customs authorities acted in an overly rigid manner and failed to exercise responsible adjudication. Holding that the confiscation and penalty were unjustified, the tribunal allowed the appeal and set aside the order.

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