Customs Act | Penalty U/S 114A Bars Private Warehouse Licence Even Without Criminal Conviction: CESTAT Allahabad

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has dismissed appeals thereby upholding the Customs Department's decision rejecting the company's applications for a private warehousing licence and permission to carry out manufacturing operations under the Customs Act, 1962. A Bench comprising Judicial Member S.K. Mohanty and Technical Member Sanjiv Srivastava was hearing the appeals against orders passed by the Commissioner (Appeals), Customs, Noida, which had denied licences sought under Section 58 (private warehouse) read with the Private Warehousing Licensing Regulations, 2016 (PWLR), along with permission under Section 65 for manufacture and other operations. The Bench held that imposition of penalty under Section 114A of the Customs Act amounts to being “penalised for an offence” under Regulation 3(2)(c) of PWLR, and therefore bars grant of a private warehouse licence under Section 58, even if the matter is pending before the Supreme Court, and there is no criminal prosecution or conviction under Chapter XVI. The assessee, Bhagwati Products Ltd., had applied in December 2024 for private warehouse licences at its facilities in Greater Noida to undertake manufacturing of mobile phones under the MOOWR scheme. During scrutiny, Customs authorities noted that Bhagwati Products had earlier been subjected to a penalty of over ₹4.45 crore under Section 114A of the Customs Act, which had been upheld by the Tribunal in 2018 and was pending challenge before the Supreme Court. Relying on Regulation 3(2)(c) of the PWLR, the Revenue held that a licence cannot be granted to an applicant who has been “penalised for an offence” under the Customs Act. The assessee argued that the penalty imposed on it was only for a civil contravention and not for a criminal offence under Chapter XVI of the Customs Act, and therefore should not bar the grant of a licence. Rejecting this argument of the asseessee, the CESTAT held that the term “offence” in Regulation 3(2) is wide enough to cover both customs offences resulting in civil penalties and criminal offences. The Bench noted that Supreme Court jurisprudence clearly recognizes penalties imposed under the Customs Act as punishment for offences, even where such penalties arise from adjudication proceedings and not criminal prosecution. The Bench further observed that once a penalty imposed under Section 114A has been upheld by the final fact-finding authority, the assessee's antecedents cannot be ignored while considering grant of a warehousing licence, which is based on trust and compliance history. Accordingly, the Bench found no infirmity in the Customs authorities' decision and dismissed both appeals, confirming that Bhagwati Products was not eligible for grant of private warehousing licences in view of Regulation 3(2)(c) of the PWLR . Case Title: M/s Bhagwati Products ltd. Vs. Commissioner of Customs (Pre.), Noida Case No.: Customs Appeal No. 70604 of 2025 Appearance for Appellant: Shri B.L. Narsimhan Appearance for Respondent: Shri A.K. Coudhary Click Here To Read/Download Order

Customs Act | Penalty U/S 114A Bars Private Warehouse Licence Even Without Criminal Conviction: CESTAT Allahabad

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Customs Act | Penalty U/S 114A Bars Private Warehouse Licence Even Without Criminal Conviction: CESTAT Allahabad

Rajnandini Dutta

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