M/s Nuance Group (India) Private Limited vs KOLKATA-ADMN AIRPORT
- Court
- Customs, Excise and Service Tax Appellate Tribunal
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH – COURT NO. 2
Customs Appeal No. 75967 of 2026
(Arising out of Order under ARPT/WH/MISC/271/2026-Admn (AP)-O/o Pr Commr-
Cus-AP/ACC-Kolkata bearing No. I/4782512/2026 dated 14.10.2026 passed by the
Commissioner of Customs (Airport & Air Cargo Commissionerate), N.S.C.B.I. Airport,
Dumdum, Kolkata – 700 052, West Bengal)
M/s. Nuance Group (India) Private Limited
08-136, WeWork Manyata Redwood, Block D3,
Manyata Tech Park Road, Thanissandra, B Nagavara,
Bengaluru, Karnataka – 560 045
: Appellant
VERSUS
Commissioner of Customs (Airport & A.C.C.)
O/o. Principal Commissioner of Customs (Airport & A.C.C.),
N.S.C.B.I. Airport, Dumdum,
Kolkata, West Bengal – 700 052
: Respondent
APPEARANCE:
Shri Soumendra Nath Mookherjee, Senior Advocate,
Shri Naman Choudhury, Advocate,
Shri Navin Agrawal, Advocate,
Shri Debayan Sen, Advocate,
Shri Giridhar Dhelia, Advocate,
Shri Niket Ojha, Advocate,
For the Appellant
Shri Shambhoo Nath, Special Counsel,
Shri Subrata Debnath, Authorized Representative,
For the Respondent
CORAM:
HON’BLE SHRI R. MURALIDHAR, MEMBER (JUDICIAL)
HON’BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 76590 / 2026
DATE OF HEARING: 12.11.2026
DATE OF DECISION: 13.11.2026
ORDER: [PER SHRI R. MURALIDHAR]
Considering the urgency of the matter, vide our
Order dated 02.11.2026, we had allowed the Early
hearing request made by the appellant and the matter
was posted for hearing on 04.11.2026, with the
consent of both the sides.
Page 2 of 43
Appeal No.: C/75967/2026-DB
1.1. On 04.11.2026, the Revenue made a
submission indicating that they were in the process of
appointing a Special Counsel in this case. Accordingly,
the matter had been adjourned to 12.11.2026, so that
the Revenue could be granted the opportunity of being
represented by a Special Counsel.
1.2. Today, on behalf of the Revenue, the Ld. Special
Counsel Shri Shambhoo Nath has appeared. The
appellant is represented by the Ld. Senior Counsel
Shri Soumendra Nath Mookherjee and other
ld. advocates.
2. At the outset, the Ld. Special Counsel for the
Revenue has mentioned that they have received a
letter on 10.11.2026 intimating that one Public
Interest Litigation Writ Petition “ is being filed ” before
the Hon’ble High Court at Calcutta by some third
party. He submits that this fact may may be taken on
record.
2.1. We have gone through the letter dated
10.11.2026 submitted by the Ld. Special Counsel,
which has been written by one Mr. Prabir Adhya,
Advocate, Calcutta High Court, wherein the said
individual has addressed letters to various
institutions, including the C.B.I.C., stating that a
Public Interest Litigation is “ intended to be filed before
the Hon’ble High Court at Calcutta on the reopening
th
i.e. 12 November, 2026” . Therewith, a copy of the
synopsis has been attached, without any signature.
2.2. On going through the above letter written by the
said person, a few questions arise, which are being
discussed hereunder:
2.3. The person writing the letter about the “ intended
PIL ” is neither the appellant nor respondent in the
Page 3 of 43
Appeal No.: C/75967/2026-DB
present case. Therefore, as per us, he has no locus
standi in the present proceedings, before this
Tribunal.
2.4. It is observed from the unsigned synopsis that
this person is citing the entire details of the present
case including the issue involved therein. Since the
Revenue’s Adjudication proceedings are not public
documents, we do not know as to how this person
could be privy to such minute details.
2.5. Such a letter being written to the Ministry and to
others, specifically ensuring that it reaches the
Revenue officials, for onward transmission to their
Special Counsel to mention the same before the
Bench, makes us take the view that the same is being
done with an intent to put indirect pressure / influence
on the Tribunal at the time of Hearing, which is not
appreciated by the Bench.
2.6. If, as claimed by the person, he is intending to
pursue the matter before the Hon’ble High Court, as a
citizen he has his rights to do so. But to send
information about this to the Revenue and other
authorities on the eve of Hearing, smacks of
something sinister about the entire transaction.
2.7. We are writing separately to the concerned
Revenue officials with our specific notings from our
observation of the unsigned synopsis, for taking
appropriate action including before the Hon’ble High
Court as and when the “ intended PIL ” reaches there.
2.8. Both the sides i.e., the appellant / applicant of
the Licence, duly represented by the Ld. Senior
Counsel and others, and the Revenue, duly
represented by the Ld. Special Counsel and their
Authorized Representative, have agreed that they are
Page 4 of 43
Appeal No.: C/75967/2026-DB
ready to argue the case before us, without any further
reference to the “ intended PIL ”. Therefore, with the
consent of both the sides, we have taken up the
Appeal for disposal.
3. The facts of the case are that the appellant had
filed an application seeking Special Warehouse
Licence under Section 58A of the Customs Act, 1962
for its duty-free operations at Netaji Subhas Chandra
Bose International (NSCBI) Airport, Kolkata. The said
application was filed on 21.08.2026.
4. On 29.09.2026, that is after about 38 days, a
Notice came to be issued by the Principal
Commissioner of Customs (Airport & A.C.C.), Kolkata
wherein the appellant was asked to Show Cause:
1. As to why the application for the grant of Special
Warehouse Licence under Section 58A of the Customs
Act, 1962 should not be rejected in terms of Regulation
3(2)(c) of the Special Warehouse Licensing
Regulations, 2016, owing to the penalties sustained
under Sections 112 and 114 of the Customs Act, 1962;
2. As to why the application should not be rejected on
grounds of misdeclaration in Part-II, Point No. 5 of the
statutory application.
4.1. The appellant filed their detailed reply vide
letter dated 05.10.2026 clarifying that the Penalty
under Section 112 and 114 was imposed in respect of
the issue that arose in June 2009 which were decided
by the Tribunal in 2017. The appellant also attended
the Personal Hearing granted to them on 07.10.2026.
The appellant submitted that imposing of penalty is
towards contravention and not towards as ‘ offence ’
committed by them. They cited the legal provisions
and case laws in their defence. They also clarified that
Page 5 of 43
Appeal No.: C/75967/2026-DB
the Management team had undergone complete
change from 2017 and submitted the details of the
new Management personnel. The details of such
License granted at Kempegowda International Airport,
Bengaluru, along with AEO granted at T2 of the same
Airport, was submitted to show the present
unblemished credentials of the appellant.
4.2. However, the adjudicating authority has passed
the impugned Order on 14.10.2026 rejecting their
request for issue of Special Warehouse Licence.
5. Being aggrieved, the appellant has filed their
Appeal before this Tribunal.
6. The Ld. Senior Advocate appearing on behalf of
the appellant takes us through Sl. No. (5) of the
Declaration filed with the application submitted before
the Customs authorities, which reads as under: -
“DECLARATION
.
.
.
5. I/We have neither been penalized or convicted
nor are being prosecuted for an offence under the
Customs Act, 1962 or Central Excise Act, 1944 or
Finance Act, 1994”
6.1. He submits that their request for grant of
Licence has been rejected on the ground that
(i) vide CESTAT Final Order No. 31055/2017 dated
10.07.2017 (Appeal No. C/20207/2014), the Hon’ble
Tribunal had upheld the penalties of Rs.50,000/-
imposed under Section 112 and Rs.50,000/- imposed
under Section 114 of the Customs Act, 1962 and
(ii) vide CESTAT Final Order No. A/31966/2017 dated
08.11.2017, the Hon’ble Tribunal had upheld the
Page 6 of 43
Appeal No.: C/75967/2026-DB
penalty of Rs. 3,00,000/- under Section 112 of the
Customs Act, 1962, which as per the adjudicating
authority amounted to the appellant having been
penalized for an ‘ offence ’ and that therefore the
appellant does not meet the requirement of Sl. No. (5)
of their Declaration; that the lower authority has
recorded that though the appellant was imposed with
these penalties, they had given in the declaration that
they had not been penalized or convicted or
prosecuted for an offence under the Customs Act,
1962 or Central Excise Act, 1944 or Finance Act, 1994.
It is submitted that on these points/grounds, their
request for Licence came to be rejected.
6.2. The Ld. Senior Advocate points out that
penalties imposed under Sections 112 and 114 of the
Customs Act, 1962 cannot be treated to be a
penalization on account of an ‘offence’ being
committed by the appellant. He takes us through the
relevant Customs Act 1962 - Chapter XIV containing
Sections 111 to 127 as well as Chapter XVI containing
Sections 132 to 140A. It is his submission that the Act
maintains a clear distinction between these two
Chapters. It is argued in this regard that the Sections
falling under Chapter XIV speak of only penalties ,
whereas those under Chapter XVI pertain to offences
and prosecutions ; that since Section 112 and 114 of
the Act fall within the ambit of Chapter XIV, the
penalties imposed thereunder cannot be said to be in
the nature of offences at all. It is his stand that only if
any penalization is under any of the Sections under
Chapter XVI only, the same can be termed as an
‘ offence ’, which is not the case here.
Page 7 of 43
Appeal No.: C/75967/2026-DB
6.3. On this issue, he relies on the case-law of
M/s. Kundan Care Products Ltd. v. Commissioner of
Customs, New Delhi [2024 (8) TMI 271 – CESTAT,
New Delhi] to submit that the issue in that case was
identical to the present issue, wherein the Principal
Bench of the Tribunal has clearly held that penalties
imposed under Section 112 of the Customs Act, 1962
cannot be termed as an ‘offence’ , so as to deny the
License.
6.4. He also relies on the case-law of M/s. Hari
Krishna Exports Pvt. Ltd. v. Commissioner of
Customs, Airport Special Cargo Commissionerate
[Final Order No. A/86175/2026 dated 22.09.2026 in
Customs Appeal No. 86290 of 2025 – CESTAT,
Mumbai] wherein, on an identical issue, the Mumbai
Bench of the Tribunal, relying upon the cited case law
of Kundan Care Products Ltd. (supra) as well as
another decision, of the Chennai Bench in
M/s. Mumbai Travel Retail Pvt. Ltd. v. Commissioner
of Customs, Chennai [2025 (5) TMI 778 – CESTAT,
Chennai], has held that imposition of penalties under
Section 112 / 114 of the Act would not amount to any
offence .
6.5. Without prejudice to the above submissions,
additionally, the Ld. Senior Advocate submits it would
also be relevant to go through the present credentials
the appellant. It is stated that in respect of the same
appellant, Licence No. 01/2023 was issued by the
Principal Commissioner of Customs, Kempegowda
International Airport, Bengaluru, to operate the
Customs Warehouse. He produces a copy of the same.
6.6. He further drew attention to the fact that the
appellant has been awarded Authorized Economic
Operator Certificate (Importer & Exporter) (known as
Page 8 of 43
Appeal No.: C/75967/2026-DB
‘AEO’) vide Certificate dated 29.05.2023 under T2, by
the AEO Programme Manager in respect of Bengaluru
International Airport. He also produces a copy of the
same.
6.7. He therefore submits that these documentary
evidence prove that the appellant has been found to
be eligible for such Licence and has been granted the
same under the same provisions of Customs Act 1962.
They have also been granted the status of AEO, which
is granted only for those having highest standards in
their operating efficiency.
6.8. He further refers to Page 126 of their
Compilation [reply to the Notice dated 05.10.2026],
and submits that they have clarified that the issue
which was before the Tribunal in the Orders dated
10.07.2017 and 08.11.2017, pertained to proceedings
initiated in June, 2009, which had culminated in the
said Final Orders passed on 10.07.2017 and
08.11.2017; that the appellant had already clarified
vide their letter dated 05.10.2026 addressed to the
adjudicating authority, that at the time of the June,
2009 events, the appellant was a 50:50 joint venture
between (a) Shoppers Stop Limited and (b) The
Nuance Group AG, during which period the operational
management responsible for the business, pertaining
to Hyderabad operations, was different. Now the
venture has undergone change of partners with effect
from October 2017. It is submitted that following the
change in ownership and management, the appellant
has implemented a materially stronger operating and
control environment.
6.9. In view of these submissions, the Ld. Senior
Counsel canvasses that the penalties had been
imposed under Sections 112 and 114 of the Customs
Page 9 of 43
Appeal No.: C/75967/2026-DB
Act, 1962 in respect of contraventions noticed in 2009
i.e., almost more than about 17 years back, whereas
subsequently, in 2017, the entire composition of the
company has changed, with internationally reputed
persons taking part in the management; that their
credentials are further established in view of the
Licence being granted by the Principal Commissioner
of Customs, Kempegowda International Airport as
also the AEO status accorded to them.
7. Therefore, the Ld. Senior Advocate for the
appellant submits that the arguments advanced on
account of merits as stated as well as the factual
details narrated, along with the strong unblemished
present credentials, may be taken note of by the
Hon’ble Bench.
8. Accordingly, it is prayed by the Ld. Senior
Advocate that the appeal be allowed, giving a specific
direction to the Revenue authorities to issue the
Special Warehouse Licence within the next few days
so that the appellant would be in a position to fulfil the
condition of starting the operations by 18.11.2026; he
submits that in case the issuance of the Licence is
delayed and not obtained within six months of the
Letter of Intent dated 18.05.2026 i.e., by about
18.11.2026, as per Article 3.1.2 of the Concession
Agreement, the award shall be cancelled, the Security
Deposit of Rs.59,61,15,675.33/- shall stand forfeited
and the appellant shall be debarred from AAI tenders
for three years.
Page 10 of 43
Appeal No.: C/75967/2026-DB
9. On the other hand, the Ld. Special Counsel
appearing on behalf of the Revenue relies on the case-
law of M/s. Bhagwati Products Ltd. v. Commissioner
of Customs (Pre.), Noida [Final Order Nos. 70859-
70860/2025 dated 12.12.2025 in Customs Appeal No.
70604 of 2025 & anr. – CESTAT, Allahabad] and
submits that in the said case, the Tribunal had relied
on the Hon’ble Supreme Court’s five Judge
Constitutional Bench decision in Maqbool Hussain
[1983 (13) E.L.T. 1284 (S.C.)] to hold that penalties
are in the nature of an ‘offence’ . Accordingly, he
argues that once the appellant has been imposed with
penalties under Sections 112 and 114 of the Act, the
appellant has contravened Regulation 3(2)(c) and
thus the appellant mis-declared at Sl. No. (5) of the
Declaration given by them; that the appellant,
knowing fully well that they had been imposed with
these penalties, still declared that they have not been
penalized. He therefore submits that the adjudicating
authority was correct in coming to the conclusion that
the appellant is not meeting the required criteria for
issuance of the Licence. Accordingly, he prays that the
appeal may be dismissed.
10. Heard both the sides, perused the appeal papers
and the documentary evidence placed before us.
11. The relevant portion of Special Warehouse
Licensing Regulations (SWLR), 2016, is extracted
below:
“3. Licensing of special warehouse.—(1) Upon an
application being made to license a special
warehouse, the Principal Commissioner of Customs
or Commissioner of Customs, as the case may be,
may issue a licence to an applicant who,—
………………………
Page 11 of 43
Appeal No.: C/75967/2026-DB
(2) The principal Commissioner of Customs or the
Commissioner of Customs, as the case may be, shall
not issue a licence to an applicant if,—
(a) he has been declared an insolvent or
bankrupt by a Court or Tribunal;
(b) he has been convicted for an offence
under any law for the time being in force;
(c) he has been penalised for an offence under
this Act, the Central Excise Act, 1944 (l of
1944) or Chapter V of the Finance Act, 1994
(32 of 1994);
(d) he is of unsound mind and stands so
declared by a competent Court; Or
(e) the Principal Commissioner of Customs or
the Commissioner of Customs, as the case
may be, is satisfied that
(i) the site or building of the proposed
special warehouse is not suitable for
secured storage of dutiable goods;
(ii) the site or building of the proposed
special warehouse is not suitable for
general supervision by officers of
customs;
(iii) bankruptcy proceedings are
pending against the applicant; or
(iv) criminal proceedings are pending
against the applicant and the offences
involved are of such nature that he is
not a fit person for grant of licence.”
11.1. The License can be denied on account of any of
the clauses under (a) to (d) or on account of (i) to (iv)
of clause (e) of the Regulation 3(2). In the present
Page 12 of 43
Appeal No.: C/75967/2026-DB
case, the Notice has been given applying Regulation
3(2)(c). Admittedly, the Revenue has not taken any
other ground while taking up the proceedings towards
the Licence application made by the applicant /
appellant.
12. We find that the issue boils down to coming to a
conclusion on as to whether the imposition of
penalties under Sections 112 and 114 of the Customs
Act, 1962 could be treated as “being penalized for an
offence”, as is being canvassed by the Revenue, or,
imposing of penalty under the said Act “would not
amount to an offence” , as is being canvassed by the
appellant.
13. The second point raised by the Adjudicating
authority about the appellant mis-declaring at Sl. No.5
of their Declaration in the Application, would entirely
depend on the outcome of our conclusion on the first
point given above.
14. We have gone through the Table differentiating
between the scope of Chapter XIV and Chapter XVI of
the Customs Act, as given by the Ld. Senior Advocate
for the appellant, which is reproduced below: -
Chapter XIV
Chapter XVI
(Sections 111-127)
(Sections 132-140A)
Heading Confiscation of goods and
Offences and prosecutions
conveyances and imposition
of penalties
Nature Civil/administrative liability Criminal liability
Operative
" shall be liable to a penalty "
" shall be punishable with
words
(Sections 112, 114, 114A,
imprisonment or with fine,
117 etc.)
or with both " (Sections
132, 133, 135 etc.)
Page 13 of 43
Appeal No.: C/75967/2026-DB
Forum Adjudicating officer under
Criminal court
Section 122, after show
(Magistrate), on complaint
cause notice under Section
with prior sanction under
124
Section 137
Standard Departmental adjudication;
Criminal trial; Code of
appeal under Sections
Criminal Procedure/BNSS
128/129A
Termination Order-in-original/appellate
Conviction / acquittal;
order
compounding of
"offences" under Section
137(3)
14.1. From the above table, it can be seen that
specifically, Chapter XVI deals with " OFFENCES AND
PROSECUTIONS " whereas, in respect of Chapter XIV,
there is no mention whatsoever about offences.
14.2. We find that the word ‘offence’ has not been
defined under the Customs Act, 1962. For this, we
have to refer to the definition provided under the
General Clauses Act, 1897. The relevant portion of the
same is reproduced below: -
“3. Definitions.—In this Act, and in all Central Acts
and Regulations made after the commencement of
this Act, unless there is anything repugnant in the
subject or context,—
.
.
.
(38) “offence” shall mean any act or omission made
punishable by any law for the time being in force;”
Page 14 of 43
Appeal No.: C/75967/2026-DB
14.3. We find that this issue has been dealt with in
detail by the Principal Bench of the Tribunal in the case
of M/s. Kundan Care Products Ltd. v.
Commissioner of Customs, New Delhi [2024 (8)
TMI 271 – CESTAT, New Delhi], wherein, after
considering the arguments put forth by both the sides,
it was held as follows: -
“24. Chapter XIV of the Customs Act deals with
'confiscation of goods and conveyances and
imposition of penalties', while Chapter XVI deals with
'offences and prosecutions'.
25. It would be pertinent to note that sections
42(2)(f), 59(1)(c), 72(1)(a), 73A(3), 109A, 111,
113, 117, 143(2), 156(1)(g) and 158(2)(il) relate to
'contravention' of the provisions of the Customs
Act or 'contravention' of any law .
26. On the other hand, sections 23(2), 26A(1) (d)
(iii), 68(c), 104(1), 109A, 127B(1)(b), 127H(1)(3),
127L(1)(ii), 135(1)(d)(i), 135A, 1358, 136(2)(b),
137(1),(2)(a)(b), (3)(a)(b) & (d), 138, 138A, 140
and 140A deal with committing an 'offence' or
prosecution of an offence under the Customs
Act.
27. This apart, section 1(2) of the Customs Act that
extends the Customs Act to the whole of India and,
save as otherwise provided in the Customs Act, it
applies also to an 'offence' or 'contravention'
thereunder committed outside India by any person.
The same sub-section (1) uses both the words
'offence' and 'contravention'. It is, therefore, clear
that the meaning assigned to these two words in the
Customs Act is different.
.....
Page 15 of 43
Appeal No.: C/75967/2026-DB
33. Section 112 of the Customs Act, under which the
penalty of Rs.1.5 lacs was imposed upon the
appellant by order dated 24.01.2022, is contained in
Chapter XIV of the Customs Act. The order dated
24.01.2021 records a finding that the appellant had
violated/contravened the provisions of section 46 of
the Customs Act.
34. There is a marked difference between a penalty
imposed for 'contravention' of the provisions of the
Customs Act and punishment imposed for committing
an 'offence'. Chapter XVI of the Customs Act deals
with 'offences' and 'prosecutions'. Section 132
provides that a person who makes a false declaration
or files a false document shall be punishable with
imprisonment for a term which may extend to two
years or with fine or with both. Section 133 also
provides that any person intentionally obstructs any
officer of customs in exercise of any powers conferred
under Customs Act shall be punishable with
imprisonment for a term which may extend to two
years or with fine, or with both. Likewise, other
sections like section 134 and 135 also deal with
punishment of imprisonment or with fine or both.
Section 104 of the Customs Act deals with power to
arrest. It provides that if an officer of customs has
reason to believe that any person has committed an
offence punishable under section 132 or section 133
or section 135 or section 135A or section 136, he may
arrest such person and every person arrested shall
without unnecessary delay, be taken to a magistrate.
On the other hand, provisions for 'contravention' of
the provisions of the Customs Act generally impose a
penalty in terms of money. It cannot, therefore,
generally be said that any 'contravention' would
amount to an 'offence' under the Customs Act.
35. Regulation 3(2)(c) of the 2016 Regulations
provides that the Principal Commissioner of Customs
Page 16 of 43
Appeal No.: C/75967/2026-DB
shall not issue a licence to an applicant if he has been
penalised for an offence under the Customs Act. The
declaration that was given by the appellant with the
application for seeking a licence stated that the
appellant has not been penalised for an offence under
the Customs Act. Regulation 3(2)(c) does not state
that the license shall not be issued if penalty has been
imposed for 'contravention' of the provisions of the
Customs Act.
36. The appellant had not been penalised for an
'offence' under the Customs Act. It cannot, therefore,
be urged that by not making reference to the order
dated 24.01.2022 passed by the Additional
Commissioner of Customs imposing a penalty upon
the appellant under section 112(a) of the Customs
Act for contravention of the provisions of section 46
of the Customs Act, the appellant had withheld vital
information from the department or had made a false
statement.
...
44. In view of the aforesaid, it can safely be
concluded that the order dated 24.01.2022 passed by
the Additional Commissioner, that alone has been
made the basis for cancelling the License issued to
the appellant, does not penalise the appellant for an
'offence' under the provisions of the Customs Act.
Only a penalty has been imposed upon the appellant
for 'contravention' of the provisions of section 46 of
the Customs Act. The order dated 17.08.2023 passed
by the Commissioner, therefore, cannot be
sustained.
45. The impugned order dated 17.08.2023 passed by
the Commissioner is, therefore, set aside and the
appeal is allowed.”
[Emphasis supplied]
Page 17 of 43
Appeal No.: C/75967/2026-DB
14.4. We find that the Bench has clearly distinguished
the ‘ contravention ’ and ‘ offence ’. It has also observed
that since the appellant had been imposed with
penalty, their Declaration stating that they have not
been penalized of any offence, is not a case of mis-
declaration. We hold that the cited case law is
squarely applicable to the present case.
14.5. The same view has also been expressed by the
Chennai Bench in the case of M/s. Mumbai Travel
Retail Pvt. Ltd. v. Commissioner of Customs,
Chennai [2025 (5) TMI 778 – CESTAT, Chennai]
wherein , while dealing with a similar issue, it has been
observed as under: -
“27. Coming to the substantive merits of the Appeal,
the short question is whether the Principal
Commissioner was justified in refusing the Appellant
a special warehouse license solely on the ground that
the Appellant had been penalized under Section
112(a) of the Customs Act in the past. Considering
the facts and the law, it is the case of the appellant
that the impugned order cannot be sustained. The
denial of the license in the present circumstances is
legally untenable and improper.
28. Section 58A of the Customs Act provides for
licensing of special warehouses wherein certain
classes of imported goods (as notified by the Board)
may be deposited without payment of duty. The
power to grant the license is vested in the Principal
Commissioner of Customs. The section itself lays
down no specific criteria or disqualifications except
that the grant is "subject to such conditions as may
be prescribed." The conditions and procedural
requirements are prescribed in the Special
Warehousing Licensing Regulations, 2016 (issued
under the authority of Section 157 read with Section
58A of the Customs Act). Regulation 3 of the 2016
Page 18 of 43
Appeal No.: C/75967/2026-DB
Regulations deals with eligibility. Regulation 3(2)
enumerates certain conditions under which the
license shall not be issued to an applicant. Among
"the these, (c) reads: the Principal Commissioner or
Commissioner shall not issue a license if the applicant
has been penalized for an offence under the Customs
Act, 1962, the Central Excise Act, 1944 or Chapter V
of the Finance Act, 1994".
29. This clause is central to the dispute the Principal
Commissioner invoked it, taking the view that the
Appellant, having been penalized under Section
112(a) of the Customs Act, fell foul of this condition.
On a plain reading, Regulation 3(2)(c) indeed
appears to bar grant of license to anyone who has
been penalized for an offence under the Act.
However, the crux of the matter lies in the
interpretation of the phrase "penalized for an
offence under the Customs Act."
30. The above phrase cannot be read in isolation or
given an unduly literal meaning divorced from the
context of the scheme of the parent Act, i.e. Customs
Act. A holistic reading of the Customs Act
reveals a clear distinction between
contraventions that attract civil penalties and
offences that attract criminal prosecution. This
distinction has both textual and jurisprudential
support.
31. The Act itself segregates the topics: Chapter XIV
(Sections 111-127) is titled "Confiscation of goods
and conveyances and imposition of penalties"-
violations dealt with here (like improper importation,
misdeclaration, etc.) result in confiscation of goods
and monetary penalties on persons (e.g. Section 112,
114). In contrast, Chapter XVI (Sections 132-140A)
is titled "Offences and prosecutions" which covers
criminal offences like false declarations (Section
132), fraudulent evasion of duty (Section 135),
Page 19 of 43
Appeal No.: C/75967/2026-DB
obstruction of officers (Section 136), etc., which can
result in prosecution and possible imprisonment. The
use of the word "offence" in Chapter XVI strongly
indicates a context of crime and prosecution. Indeed,
Section 135 is the principal penal provision creating
offences that are cognizable and non-bailable.
32. When Regulation 3(2) (c) disqualifies an
applicant who "has been penalized for an offence
under the Customs Act," a reasonable construction is
that it targets those applicants who have been found
guilty of offenses of a kind that denote serious
wrongdoing essentially those entailing mens rea and
prosecuted as crimes or subject to Compounding in
lieu of prosecution. If, on the other hand, every
customs infraction leading to a penalty was meant to
be included, the legislation could have simply said
"penalized under the Act" (omitting "for an offence").
The added words "for an offence" must be given
meaning. We interpret them as referring to offences
in the sense of Chapter XVI offences or similarly
grave violations.
33. This interpretation is buttressed by the decision
in Kundan Care Products Ltd. (supra), which is
directly on point. In that case, this Tribunal (Principal
Bench, New Delhi) was confronted with the identical
Regulation 3(2)(c) when a license was cancelled on
the premise that a prior Section 112(a) penalty
constituted an "offence" that the licensee had failed
to disclose. The Tribunal disagreed with the
Revenue's broad brush approach, and made an
important delineation: it held that a penalty under
Section 112, which arises from a contravention of the
Customs Act, is not the same as being "penalized for
an offence" under the Customs Act. The Tribunal
noted that the appellant in that case had not been
prosecuted or convicted for any offence under the
Act, and therefore the declaration it made that it had
Page 20 of 43
Appeal No.: C/75967/2026-DB
not been penalized for an offence was essentially true
in the intended legal sense. Consequently, the
cancellation of the license was set aside. The salient
point from Kundan Care (supra) is that the mere fact
of a monetary penalty under Section 112 does not
automatically trigger the disqualification in
Regulation 3(2)(c), because that regulation's scope
is confined to penalties for "'offences", which was
understood to mean something other than every
contravention. We find ourselves in full agreement
with the rationale and are in fact bound to follow this
decision. It aligns with the scheme of the Customs
Act and avoids an overbroad result that Would treat
minor/transgressions and serious crimes identically.
34. Applying that reasoning here, the Appellant's
case is if anything more compelling than Kundan Care
(supra). There is no allegation that the Appellant
misled the authorities or suppressed information in
its application. It simply became ineligible in the eyes
of the Principal Commissioner because of Regulation
3(2) (c). Now, if we interpret Regulation 3(2)(c) in
the restrictive sense as discussed above, the
Appellant was not, in truth, penalized for an "offence"
under the Customs Act: the penalty under Section
112(a) was for a wrong claim of exemption (a civil
contravention) and not for an offence under Chapter
XVI. No court convicted the Appellant of any offense;
no compounding of an offense (under Section 137)
was involved either. Therefore, disqualifying the
Appellant on this ground was based on a
misapplication/misinterpretation of the law.
35. Even if one were to accept the Department's view
that any penalty under the Customs Act counts as an
"offence" for Regulation 3(2)(C), the license rejection
is to be held to arbitrary and unsustainable. The
language "shall not issue a license if..." in Regulation
3(2) may seem mandatory, but in context it should
Page 21 of 43
Appeal No.: C/75967/2026-DB
guide the discretion of the Commissioner, not
eliminate it. If every penalty, however trivial the
underlying contravention could lead to automatic
rejection, the result would be draconian. If one were
to label this penalty as an "offence", it would mean
that thousands of importers who routinely face minor
penalties (for classification disputes, short payments,
procedural lapses, etc.) are all "offenders" under the
Customs Act, a proposition that the Customs law
itself does not subscribe to.
36. In this instant case, the Principal Commissioner
failed to consider the nature and gravity of the
Appellant's past violation. The Appellant's
transgression was essentially an over-claim of an
exemption for samples, which was not outright
smuggling or fraud, but an interpretational issue (as
evidenced by the fact that the goods were allowed
conversion to warehousing in the very OIO and no
Section 114A penalty for fraud was imposed).
37. Admittedly, beyond the bear fact of penalty, the
Principal Commissioner in the order has not pointed
out to any other factor which would impugn the
appellant's ability/suitability to operate a Special
Bonded Warehouse. There is also no whisper or doubt
about insolvency or any pending criminal
investigation; nor is there any finding with regard to
technical shortcomings in the proposed facility. In
fact, the appellant's prior conduct insofar as
complaint is concerned, was limited to a one-of
incident, for which it was penalized. That incident, as
discussed, was certainly not in the nature that would
point to dishonesty, rather it was relating to a
disputed exemption on imported goods. Hence,
denying the license on this single criteria is not
justified.
38. In view of the above discussions, the impugned
order, in our view, is not sustainable, since it is based
Page 22 of 43
Appeal No.: C/75967/2026-DB
on an erroneous interpretation of Regulation 3(2) (c)
and Section 58A of the Customs Act. Accordingly, the
impugned order deserves to be set aside, which we
hereby do and since there are no other grounds
forthcoming from the impugned order pointing out
towards the disqualification of the appellant for the
license, the appellant is entitled for the consequential
benefit.
39. In the result, appeal is allowed.”
[Emphasis supplied]
14.6. In the above cited case, while dealing with an
identical issue, the Bench came to an independent
conclusion, including holding “ If, on the other hand,
every customs infraction leading to a penalty was
meant to be included, the legislation could have
simply said "penalized under the Act" (omitting "for
an offence"). The added words "for an offence" must
be given meaning. We interpret them as referring to
offences in the sense of Chapter XVI offences or
similarly grave violations.”. We find that the
observations in this case, as well as the conclusion
arrived therein, would be squarely applicable to the
facts of the present case.
14.7. Again, in M/s. Hari Krishna Exports Pvt. Ltd.
v. Commissioner of Customs, Airport Special
Cargo Commissionerate [Final Order No.
A/86175/2026 dated 22.09.2026 in Customs
Appeal No. 86290 of 2025 – CESTAT, Mumbai],
the Tribunal has held as under: -
“2.3 The appellant had submitted an application
before the Proper officer of customs, i.e., the Deputy
Commissioner of Customs, for grant of license for
setting up of private bonded warehouse for gems and
jewellery, vide letter dated 27.05.2022 along with
Page 23 of 43
Appeal No.: C/75967/2026-DB
requisite application form and supporting documents.
In dealing with the application, the learned
Commissioner of Customs had found that the
appellant had committed certain offences under the
Customs Act, 1962, dealing with undervaluation of
imported machinery, non-establishment of identity in
re-import of diamonds, valuation dispute in export of
rough diamonds, short supply in re-import under
Notification No. 45/2017-Customs. Accordingly, he
has rejected the application filed by the appellant for
grant of private bonded warehouse license under
Section 58 ibid on the above grounds in the
impugned order. Feeling aggrieved with the
impugned order, the appellant has preferred this
appeal before the Tribunal.
.
.
.
In view of the settled legal position as held in the
above referred cases of Mumbai Travel Retail Private
Limited (supra) and Kundan Care Products Limited
(supra), we find that the issue arising out of the
present dispute is no more res integra. Accordingly,
we do not find any merits in the impugned order
passed by the learned Commissioner, in not granting
the private bonded warehouse license by rejecting
the application filed by the appellant and
consequently set aside the same.
10. In the result, the impugned order 31.01.2015
passed by the learned Commissioner is set aside and
the appeal filed by the appellant is allowed in their
favour.”
[Emphasis supplied]
Page 24 of 43
Appeal No.: C/75967/2026-DB
15. We find that in all the above case-laws, it has
been consistently held that the imposition of penalties
under Section 112 or 114 of the Customs Act, 1962,
while would be in the nature of ‘ contravention ’, would
not amount to committing any ‘ offence ’. The case laws
have specifically dealt with relevant provisions like
Section 1(2), Chapter XIV and Chapter XVI to
individually and jointly come to a conclusion that grant
of License cannot be refused on account of any
penalty imposed on the applicant. We have no
hesitation to apply these case laws to the present
appeal. Accordingly, we set aside the impugned Order
and allow the appeal.
16. We have given due consideration to the case-
law of M/s. Bhagwati Products Ltd. v.
Commissioner of Customs (Pre.), Noida [Final
Order Nos. 70859-70860/2025 dated
12.12.2025 in Customs Appeal No. 70604 of
2025 & anr. – CESTAT, Allahabad] cited by the Ld.
Special Counsel for the Revenue. The relevant portion
of this Order is reproduced below:
“4.4 Appellant have submitted by relying on the
provisions of General Clauses Act, 1897 (Act X of
1897) to argue that the word offence used in clause
3 (2) (c) refers to offences which are punishable as
per the provisions of Section 132, 133, 134 & 135 of
Customs Act, 1962, and would not be in respect of
the other contraventions for which the penalties have
imposed under other provision of the Customs Act,
1962. We are not impressed by the said argument of
the appellant. A constitutional bench (five
judges) of Hon'ble Supreme Court has in case
of Maqbool Hussain [AIR 1953 SUPREME COURT
325-1983 (13) Ε.L.Τ. 1284 (S.C.)] observed as
follows:
Page 25 of 43
Appeal No.: C/75967/2026-DB
"The question that arises for our determination in this
appeal is whether by reason of the proceedings taken
by the sea Customs Authorities the appellant could
be said to have been prosecuted and punished for the
same offence with which he was charged in the Court
of the Chief Presidency Magistrate, Bombay. There is
no doubt that the act which constitutes art offence
under the Sea Customs Act as also an offence
under the Foreign Exchange Regulation Act was
one and the same, viz., importing the gold in con-
travention of the notification of the Government of
India dated the 25th August, 1948. The appellant
could be proceeded against under section
167(8) of the Sea Customs Act as also under
section 23 of the Foreign Exchange Regulation
Act in respect of the said act . Proceedings were in
fact taken under section 167(8) of the Sea Customs
Act which resulted in the confiscation of the gold.
Further proceedings were taken under section 23 of
the Foreign Exchange Regulation Act by way of filing
the complaint aforesaid in the Court of the Chief
Presidency Magistrate' Bombay, and the plea which
was taken by the accused in bar of the prosecution in
the Court of the Chief Presidency Magistrate, was
that he had already been prosecuted and punished
for the same offence and by virtue of the provisions
of article 20(2) of the Constitution he could not be
prosecuted and punished, again.
The word offence has not been defined in the
Constitution. But article 367 provides that the
General Clauses Act, 1897 (Act X of 1897), shall
apply for, the interpretation of the Constitution.
Section 3(37) of the General Clauses Act defines an
offence to mean any act or omission made punishable
by any law for the time being in force and there is no
doubt that both under the provisions of section 167
(8) of the Sea Customs Act and section 23 of the
Foreign Exchange Regulation Act the act of the
Page 26 of 43
Appeal No.: C/75967/2026-DB
appellant was made punishable and constituted
an offence. In order however to attract the
operation of article 20(2) the appellant must have
been prosecuted and punished for the same offence
when proceedings were taken by the Sea Customs
Authorities. The High Court did not go into the
question as to whether the appellant was prosecuted
when proceedings were taken before the Sea
Customs Authorities. It considered the question of
punishment in the first instance and thought it
necessary to arrive at a' finding as to the ownership
of the confiscated gold before it could consider the
application of the appellant. In the opinion of the High
Court the appellant could be said to have been
punished only if it were established that he was the
owner of the confiscated gold. If he was the owner,
the confiscation was a punishment, which would not
be so if he was not the owner of the gold. This
question of the ownership of the gold was not in our
opinion material. The gold was found in the
possession of the appellant when he landed at the
Santa Cruz airport. The appellant was detained and
searched by the Customs Authorities and the gold
was seized from his person. Proceedings under
section 167(8) were taken by the Customs
Authorities and after examining witnesses an order
was passed on the 19th December, 1949,
confiscating the gold and giving an option to the
owner to pay a fine of Rs. 12,000 in lieu of such
confiscation under section 183 of the Sea Customs
Act. Copy of this order was forwarded to the appellant
and for all practical purposes the appellant was
treated as the owner of the confiscated gold......
The question whether the Sea Customs Authorities
when they entertained proceedings for confiscation
of the gold in question acted as a judicial tribunal has
got to be determined in accordance with the above
tests. The Sea Customs Act, 1878, 'was enacted
Page 27 of 43
Appeal No.: C/75967/2026-DB
to consolidate and amend the law relating to
the levy of sea customs duties . The hierarchy of
the officials are the Customs Collector, who is the
officer of Customs for the time being in separate
charge of a custom house, the Chief Customs Officer
who is the Chief Executive Officer of the Sea Customs
for a port and the Chief Customs Authority which is
the Central Board of Revenue. Sections 18 and 19
enact prohibitions. and restrictions on importation
and exportation of goods and section 19(a) provides
for detention and confiscation of goods whose
importation is prohibited. After making various
provisions for the levy of sea customs duties, Chapter
XVI enacts offences and penalties and several
offences mentioned in the first column of the
schedule to section 167 are made punishable with
penalties mentioned in the third column thereof. Item
8 relates to the offence committed by the importation
of goods contrary to the prohibition or restriction
imposed in that behalf under sections 18 and 19 of
the Act and penalty prescribed for such an offence
is:-
"Such goods shall be liable to confiscation; any
person concerned in any such offence shall be liable
to a penalty not exceeding three. times the value of
the goods, or not exceeding one thousand rupees."
Chapter XVII prescribes the procedure relating to
offences, appeals, etc. Powers of search are given to
the officers of customs but provision is made that a
person about to be searched can, require the officer
to take him previous to search before the nearest
Magistrate or Customs Collector.
Search warrant can only be issued by the Magistrate
and can be executed in the same way and has the
same effect as a search warrant issued under a law
relating to criminal procedure. Powers are also given
to the officers of Customs to arrest persons
Page 28 of 43
Appeal No.: C/75967/2026-DB
reasonably suspected of having committed an
offence under the Act but the person arrested is to
be forthwith taken before the nearest Magistrate or
Customs Collector. The Magistrate is entitled either
to commit such person to jail or order him to be kept
in custody of the police for such time as is necessary
to enable the Magistrate to communicate with the
proper officers of Customs. No such power is given to
the Customs Collector. Section 181(A) also provides
for the detention of packages containing certain
publications imported into the States. Section 182
provides that except in the case of certain offences
therein mentioned which involve proceedings before
a Magistrate confiscation, increased rate of duty or
penalty can be adjudged by the Customs Authorities
therein mentioned and section 183 provides for
option to be given to the owner of the goods
confiscated to pay in lieu of confiscation such fine as
the officer thinks fit, Section 186 provides that the
award of any confiscation, penalty or increased rate
of duty under the Act by an officer of Customs is not
to prevent the infliction of any punishment to which
the person affected thereby is liable under any other
law. An appeal is provided under section 188 from a
decision or order of the officer of Customs to the Chief
Customs Authority who is thereupon to make such
further enquiry and pass such order as he thinks fit
confirming, altering or annulling the decision or order
appealed against. Section 191 provides for a revision
by the Central Government on the application of a
person aggrieved by any decision or order passed by
an officer of Customs or the Chief Customs Authority
from which no appeal lies. Section 193 provides for
the enforcement of the payment of penalty or
increased rate of duty as adjudged against any
person by an officer of Customs. If such officer is not
able to realise the unpaid amount from other goods
in charge he can notify in writing to any Magistrate
within the local limits of whose jurisdiction such
Page 29 of 43
Appeal No.: C/75967/2026-DB
person may be, his name and residence and the
amount of penalty or increased rate of duty
unrecovered and such Magistrate is thereupon to
proceed to enforce payment of the said amount in
like manner as if such penalty or increased rate had
been a fine inflicted by himself.
It is clear on a perusal of the above provisions that
the powers of search, arrest and detention are given
to the Customs Authorities for the levy of sea
customs duties and provision is made at the same
time for a reference to the Magistrate in all cases
where search warrants are needed and detention of
the arrested person is required. Certain offences of a
serious nature are to be tried only by Magistrates who
are the only authorities who can inflict punishments
by way of imprisonment. Even though the customs
officers are invested with the power of adjudging
confiscation, increased rates of duty or penalty the
highest penalty which can be inflicted is Rs. 1,000.
Confiscation is no about one of the penalties which
the Customs Authorities can impose but that is more
in the nature of proceedings in rem than proceedings
in personam, the object being to confiscate the
offending goods which have been dealt with contrary
to the provisions of the law and in respect of the
confiscation also an option is given to the owner of
the goods to pay in lieu of confiscation such fine as
the officer thinks fit. All this is for the enforcement of
the levy of and safeguarding the recovery of the
customs duties. There is no procedure prescribed to
be followed by the Customs Officer in the matter of
such adjudication and the proceedings before the
Customs Officers are not assimilated in any manner
whatever to proceedings in courts of law according to
the provisions of the Civil or the Criminal procedure
Code. The Customs Officers are not required to act
judicially on legal evidence tendered on oath and they
are not authorised to administer oath to any witness.
Page 30 of 43
Appeal No.: C/75967/2026-DB
The appeals, if any, lie before the Chief Customs
Authority which is the Central Board of Revenue and
the power of revision is given to the Central
Government which certainly is not a judicial
authority. In the matter of the enforcement of the
payment of penalty or increased rate of duty also the
Customs Officer can only proceed against other
goods of the party in the possession of the Customs
Authorities. But if such penalty or increased rate of
duty cannot be realized therefrom the only thing
which he, can do is to notify the matter to the
appropriate Magistrate who is the only person
empowered to enforce payment as if such penalty or
increased rate of duty had been a fine inflicted by
himself. The process of recovery can be issued only
by the Magistrate and not by the Customs Authority.
All these provisions go to show that far from being
authorities bound by any rules of evidence or
procedure established by law and invested with
power to enforce their own judgments or orders the
Sea Customs Authorities are merely constituted
administrative machinery for the purpose of
adjudging confiscation, increased rates of duty and
penalty prescribed in the Act. The same view of the
functions and powers of Sea Customs Officers was
expressed in& decision of the Bombay High Court to
which our attention was called. (See Mahadev
Ganesh Jamsandekar v. The Secretary of State for
India in Council ((1922) L.L.R. 46 Bom. 732.]).
4.5 In the case of Additional Coll. Of Cus.,
Calcutta Vs Sitaram Aggarwala [1999 (110)
E.L.Τ. 185 (S.C.)] a constitutional bench (five
judges) of Hon'ble Supreme Court has held as
follows:
4. Section 167(8) of the Act is a penal section the
object of which is not only to prevent the evasion of
the payment of duties but also to prevent smuggling
Page 31 of 43
Appeal No.: C/75967/2026-DB
of goods resulting in the depletion of foreign
exchange and jeopardising the economic stability of
the country. For that purpose it has to be given an
interpretation to cover all those who aid and abet in
these nefarious activities whether they are principals
or accessories who assist the smugglers or
supplement their efforts. The use of the words
"concerned in" in Section 167(8) shows that a person
may be concerned in the importation of smuggled
gold, without being a smuggler himself
countravening any of the provisions of the Foreign
Exchange Act. Therefore the High Court was right
when it observed that if any one is interested or
consciously takes any step whatever to promote the
object illegally bringing bullion into the country, then
even if no physical connection is established between
him and the thing brought he will be guilty."
4.6 In the case of Sachidananda Banerjee, A.C.C.,
Calcutta Vs Sitaram Agarwala [1999 (110)
E.L.T. 292 (S.C.)] another constitutional bench (five
judges) of Hon'ble Supreme Court has held as
follows:
"11. We may briefly indicate the scheme of the
Act in order to appreciate the purpose behind
Section 167(81). The object of the Act is to provide
machinery for the collection inter alia of import duties
and for the prevention of smuggling. With that object
customs frontiers are defined, (Ch. I); customs
officers are appointed with certain powers, (Ch. II);
ports, wharves, customhouses, warehouses and
boarding and landing-stations are provided for, (Ch.
III); prohibitions and restrictions of imports and
exports are envisaged, (Ch. IV); levy of and
exemption from custom duties and the manner in
which it has to be done is provided, (Ch. V);
drawbacks i.e. refunds are provided in certain
circumstances, (Ch. VI); arrival and departure of
Page 32 of 43
Appeal No.: C/75967/2026-DB
vessels is controlled, (Ch. VII and Ch. VIII); provision
is made for the discharge of cargo, (Ch. IX), and
clearance of goods for home consumption (Ch. X);
provision is also made for warehousing and
transhipment., (Chapters XI, XII); provisions are also
made for exportation or shipment and re-landing (Ch.
XIII); special provisions have been made relating to
spirit (Ch. XIV) and coasting trade (Ch. XV). Then
comes Ch. XVI dealing with offences and penalties.
Offences enumerated in Ch. XVI are of two kinds;
first there are contraventions of the Act and rules
thereunder which are dealt with by customs officers
and the penalty for which is imposed by them. These
may be compendiously called customs offences.
Besides these there are criminal offences which are
dealt with by Magistrates and which result in
conviction and sentence of imprisonment and/or fine.
These two kinds of offences have been created to
ensure that no fraud is committed in the matter of
payment of duty and also to ensure that there is no
smuggling of goods, without payment of duty or in
defiance of any prohibition or restriction imposed
under Ch. IV of the Act.
12. It is necessary for our purpose to set out two
provisions of Section 167 which is in Ch. XVI. These
are Section 167(8) and 167(81). Section 167(8) is in
these terms:-
"167. The offences mentioned in the first column of
the following schedule shall be punishable to the
extent mentioned in the third column of the same
with reference to such offences respectively :-
…..
It will be seen that Section 167(8) deals with what
we have called customs offences while Section
167(81) deals with criminal offences. It is well-
settled by the decisions of this Court that goods
Page 33 of 43
Appeal No.: C/75967/2026-DB
which have been imported against the prohibition or
restriction imposed under Ch. IV of the Act are liable
to confiscation at any time after import and this
liability extends even in the hands of third persons
who may not have had anything to do with the actual
import. So long as it is proved that the goods had
been imported against the restrictions imposed under
Chapter IV, the goods remain liable to confiscation
whenever found even if this is long after the import
is over and even if they are in possession of persons
who had nothing to do with the actual import. It is
also well-settled by the decisions of this Court that
the second part of the penalty relating to any person
applies only to a person concerned in the importation
or exportation of the goods and does not apply to a
person found in possession of the smuggled goods
who had nothing to do with the importation or
exportation thereof (see Shivanarayna Mahato v.
Collector of Central Excise and Land Customs) C.A.
288 of 1964, decided on August 14, 1965."
[Emphasis supplied]
16.1. We find that in the above cited case-law, the
Bench has extensively cited the Supreme Court
judgements. It can be observed that in all the cases
referred to by the Bench, the issue pertained to the
offence in terms of Section 167(8) of the Sea Customs
Act, 1878 and Section 23 of the Foreign Exchange
Regulation Act, 1973, both of which are not the
statutes forming part of the subject matter of the
present litigation. With due respect, we find that the
Bench, without actually going into the relevance of the
present provisions Section 1(2), Chapter XIV and
Chapter XVI and Sections thereof, has
overwhelmingly laid emphasis on the Supreme Court
judgement, which was rendered in respect of that
earlier Sea Customs Act. In their order portion itself
Page 34 of 43
Appeal No.: C/75967/2026-DB
[as reproduced by the Bench] the Hon’ble Supreme
Court has held “ section 167 (8) of the Sea
Customs Act and section 23 of the Foreign
Exchange Regulation Act the act of the appellant
was made punishable and constituted an
offence.” On the other hand under the present
Customs Act 1962, ‘contravention’ and ‘offence’
have different treatment for penalizing.
17. While the other cited cases, on identical issue,
have confined themselves the Customs Act, 1962
provisions to come to a correct conclusion, the Bench
in the case of Bhagwati Products Ltd. has waded into
unchartered territory and has imposed the ratio
pertaining to the Sea Customs Act and FERA to the
provisions of the Customs Act, 1962, which with due
respect, we find to be erroneous. The detailed
discussions of case law of Kundan Care Products
Ltd. , though cited during the arguments therein, had
not been given due consideration by the Bench.
Therefore, we find that the case law of Bhagwati
Products Ltd. cited by the Ld. Special Counsel is
clearly distinguishable and hence, cannot be applied
to the facts of the present case.
18. We find that the case-laws of Kundan Care
Products Ltd. (supra), Mumbai Travel Retail Pvt. Ltd.
(supra) and Hari Krishna Exports Pvt. Ltd. (supra) are
all directly on the issue before us, clearly dealing with
the provisions of the Customs Act, 1962. Hence, we
take a considered view that these case-laws are
squarely applicable to the facts of the present case.
19. Since the appellant has also made elaborate
submissions on their credentials, we are also bound to
have a look at them. The relevant documents in this
regard are extracted hereinbelow: -
Page 35 of 43
Appeal No.: C/75967/2026-DB
▪ Reply to Notice submitted by the appellant, as on
record:
Page 36 of 43
Appeal No.: C/75967/2026-DB
Page 37 of 43
Appeal No.: C/75967/2026-DB
Page 38 of 43
Appeal No.: C/75967/2026-DB
19.1. We find that the appellant in their reply to the
Commissioner, had clarified about the entire
management structure change carried out with effect
from 2017. They had also enclosed the relevant
documentary evidence. When the ‘ contravention ’ /
‘ offence ’ has taken place in 2009 and the Management
team undergoes considerable change with new
partners coming in from October 2017, due weightage
should have been given to this by the Commissioner.
In the interest of justice and fairplay, the past
contravention of the outgoing partner, cannot be
weaponized to deny the License to the present
appellant with excellent credentials.
▪ Licence No. 01/2023 granted by Principal
Commissioner of Customs (Airport & ACC),
Bengaluru:
Page 39 of 43
Appeal No.: C/75967/2026-DB
Page 40 of 43
Appeal No.: C/75967/2026-DB
20. The above document shows that the present
appellant has been granted the License to operate at
KIA, Bengaluru in 2023.
Page 41 of 43
Appeal No.: C/75967/2026-DB
▪ T2 Authorized Economic Operator (AEO)
Certificate dated 29.05.2023 issued to the
appellant:
21. This Document shows that the appellant has been
accorded the Authorized Economic Operator’s [AEO]
Certificate, which requires several strict regulatory
compliance requirements.
Page 42 of 43
Appeal No.: C/75967/2026-DB
22. Admittedly, it is observed the appellant has been
granted the Licence and AEO in 2023, without any
issue being raised about the penalties imposed on
them in 2017 for the SCN issued in 2009.
23. When the above documents are read together, it
gets clarified that the appellant’s past contravention,
cannot / should not come in the way of their getting
the License.
24. We hold that the penalties imposed under
Section 112 or 114 of the Customs Act, 1962 are in
the nature of penalty towards ‘ contravention ’ and not
towards any ‘ offence ’. Therefore, the same would not
amount to any contravention of the conditions
prescribed under Regulation 3(2)(c) of the Special
Warehouse Licensing Regulations (SWLR), 2016.
Since the appellant carried a Bonafide belief that the
penalties imposed were not any ‘ offence ’ by nature,
their non declaration about the past penalties cannot
be treated as mis-declaration. Thus, we hold that the
appellant has correctly declared the factual detail at
Sl. No. (5) of their Declaration.
25. In view of the foregoing, we set aside the
impugned order and allow the appeal holding that the
appellant would be eligible for the Special Warehouse
License applied for by them.
26. Taking into consideration the fact that if they do
th
not start the operation by 18 November, 2026, the
appellant would be put to financial loss and also is
likely to lose the contract to operate the Warehouse
itself, we direct the concerned Licensing Authorities to
th
issue the Licence latest by 15 November, 2026.
Page 43 of 43
Appeal No.: C/75967/2026-DB
27. The Registry is directed to issue the Certified copy
of this Order to the appellant and the respondent-
Revenue [to the Office of the Authorized
Representative (A.R.) of the Revenue - CESTAT]
‘by hand’ ( dasti ). The Office of the A.R. – CESTAT, is
directed to send the copy of this order ‘by hand’
( dasti ) to the License issuing authority so as to avoid
any unnecessary delay.
28. The Office of the A.R. to report of the compliance
th
of this order by 16 November, 2026.
(Order pronounced in the open court on 13.11.2026 )
(R. MURALIDHAR)
MEMBER (JUDICIAL)
(K. ANPAZHAKAN)
MEMBER (TECHNICAL)
Sd/-
Sd/-
Sdd