Nuance Group (India) Pvt. Ltd. Vs Commissioner of Customs (CESTAT Bangalore)
Introduction: The case of Nuance Group (India) Pvt. Ltd. vs. Commissioner of Customs before CESTAT Bangalore delved into the liability of duty-free shop licensees for customs duty violations. This article provides an in-depth analysis of the case and its implications.
Detailed Analysis: Nuance Group (India) Pvt. Ltd., operating a duty-free shop at Bangalore International Airport, faced charges of violating Customs Act provisions by launching promotional offers without informing Customs Authorities. The appellant admitted to the lapse and paid the demanded amount but contested the imposition of penalty and duty.
The appellant argued that customs duty should have been levied on passengers, not the duty-free shop licensee, citing relevant sections of the Customs Act, baggage rules, and previous judicial precedents. However, the Commissioner (Appeals) upheld the duty demand, leading to the appeal before CESTAT Bangalore.
CESTAT Bangalore analyzed the relevant sections of the Customs Act, emphasizing the licensee’s obligation to comply with prescribed procedures and conditions. The tribunal noted the appellant’s violation of license conditions, as revealed by statements and document scrutiny.
The tribunal upheld the duty demand against the licensee, emphasizing that duty-free shop licensees are liable for customs duty when violating prescribed conditions. It cited previous rulings affirming the applicability of Section 72 of the Customs Act to duty-free shop operators.
However, CESTAT Bangalore set aside the penalty, considering the lack of intent to evade duty and the role of customs officers in verifying sales transactions.
Conclusion: CESTAT Bangalore’s ruling clarifies the liability of duty-free shop licensees for customs duty violations. It underscores the licensee’s responsibility to adhere to prescribed conditions and procedures laid out in the Customs Act. While duty-free shops offer tax exemptions, licensees must ensure strict compliance with regulatory requirements to avoid penalties and duty liabilities.
FULL TEXT OF THE CESTAT BANGALORE ORDER
The appellant M/s. Nuance Group (India) Private Limited was operating 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, it was noticed that between 17.9.2008 to 17.11.2008 the appellant had launched a promotional offer for 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 penalty of Rs. 50,000/-. On an appeal, the Commissioner (Appeals) upheld the order of the original authority. Aggrieved by this order, the appellant is in appeal against this impugned order.
2. The learned counsel on behalf of the appellant submits that the promotional offer, in essence, give 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 in excess of 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. In terms of Chapter XI of the Customs Act, import of goods as baggage from outside India including the goods purchased from duty-free shops located beyond the customs frontier is a recognised procedure. 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 free allowance and if anything, in excess, needs to be declared and pay the duty. Therefore, the duty should have been demanded from the passenger under Section 28 and not from the appellant under Section 72. To substantiate his claim, he has relied upon the decision in the case of Aarish Altaf Tinwala Vs. Commissioner of Customs (Airport) Mumbai in Order No. 634/2018- CUS(WZ)/ASRA/Mumbai dated 31.08.2008. Also relied on the following decisions:
