Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 14.11.2026
CESTAT Kolkata Sets Aside Rejection of Special Warehouse Licence Over Past Customs Penalties
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, has set aside the rejection of Nuance Group (India) Private Limitedβs application for a Special Warehouse Licence at Netaji Subhas Chandra Bose International Airport, holding that past monetary penalties for customs contraventions do not automatically amount to penalties for an βoffence.β
Tribunal directs licence issuance by 15 November 2026
In its final order dated 13 November 2026, the Tribunal allowed Nuance Group Indiaβs appeal against the Commissioner of Customs (Airport & Air Cargo Commissionerate), Kolkata. The Bench directed the licensing authority to issue the Special Warehouse Licence by 15 November 2026.
The deadline was significant because Nuance Group had to commence operations by 18 November 2026 under its concession arrangement. A failure to do so could have led to cancellation of the award, forfeiture of a security deposit of approximately Rs. 59.61 crore, and a three-year debarment from Airports Authority of India tenders.
Why the application had been rejected
Nuance Group applied on 21 August 2026 for a licence under Section 58A of the Customs Act, 1962, for duty-free operations at Kolkata Airport. The customs authority issued a show-cause notice on 29 September 2026 and rejected the application on 14 October 2026.
The rejection was based on two connected grounds:
- Earlier penalties imposed under Sections 112 and 114 of the Customs Act had been upheld in 2017.
- The companyβs declaration that it had not been penalised, convicted, or prosecuted for an βoffenceβ was treated as a misdeclaration.
The earlier proceedings arose from events connected with the companyβs Hyderabad duty-free business in 2009.
Key legal issue: contravention versus offence
The central issue before CESTAT was whether a penalty under Sections 112 or 114 of the Customs Act constitutes being βpenalised for an offenceβ under Regulation 3(2)(c) of the Special Warehouse Licensing Regulations, 2016.
The Tribunal drew a clear distinction within the Customs Act:
- Chapter XIV (Sections 111β127) addresses confiscation and monetary penalties for customs contraventions, including Sections 112 and 114.
- Chapter XVI (Sections 132β140A) deals with criminal offences and prosecutions, which may result in imprisonment, fines, or both.
CESTAT held that a monetary penalty imposed under Sections 112 or 114 is a consequence of a contravention, not an offence in the criminal sense contemplated by the licensing regulation. As a result, Regulation 3(2)(c) did not disqualify Nuance Group from receiving the licence.
Earlier declaration was not a misdeclaration
Since the Tribunal found that the prior penalties were not penalties for an βoffence,β it also rejected the allegation that Nuance Group had made a false declaration in its licence application.
The companyβs statement that it had not been penalised, convicted, or prosecuted for an offence was held to be legally correct. The Tribunal noted that the declaration had to be read in line with the statutory distinction between a customs contravention and a criminal customs offence.
Reliance on consistent CESTAT decisions
The Kolkata Bench followed earlier decisions that had interpreted the same licensing provision in a similar manner, including:
- Kundan Care Products Ltd., where a Section 112 penalty was held not to be a penalty for an offence under Regulation 3(2)(c).
- Mumbai Travel Retail Pvt. Ltd., which found that the phrase βpenalised for an offenceβ could not be extended to every customs infraction attracting a monetary penalty.
- Hari Krishna Exports Pvt. Ltd., which applied the same approach while setting aside the refusal of a private bonded warehouse licence.
The Revenue relied on the Allahabad Bench ruling in Bhagwati Products Ltd., which had taken a broader view of the word βoffence.β However, the Kolkata Bench distinguished that decision because it substantially relied on provisions of the earlier Sea Customs Act and the Foreign Exchange Regulation Act, rather than the distinct structure of the Customs Act, 1962.
Current compliance credentials also supported Nuance Group
The Tribunal also considered Nuance Groupβs current operational and compliance profile. It noted that the events underlying the earlier proceedings dated back to 2009 and that the companyβs ownership, board, and management underwent substantial changes from 2017 onward.
Among the documents considered were:
- A Special Warehouse Licence issued to the company at Kempegowda International Airport, Bengaluru, in 2023.
- An Authorized Economic Operator (AEO) T2 certificate granted in May 2023.
- Evidence of enhanced governance and inventory-control measures, including SAP-based receipt records, physical verification, customs-supervised handling, documented movement controls, and periodic inventory checks using RF scanners.
The Tribunal observed that the company had received both the Bengaluru licence and AEO recognition without the historical penalties being treated as a bar. It concluded that the old contraventions should not be used to deny a licence to an applicant with demonstrated current compliance credentials.
Outcome and broader significance
CESTAT set aside the customs authorityβs order and held Nuance Group eligible for the Special Warehouse Licence. The Tribunal required the authorities to issue the licence by 15 November 2026 and called for compliance reporting by 16 November 2026.
The ruling reinforces an important principle for warehouse licensing under customs law: not every monetary customs penalty creates a permanent licensing disqualification. Where a past penalty concerns a civil or administrative contravention under Chapter XIV, rather than a criminal offence under Chapter XVI, it cannot by itself trigger the bar in Regulation 3(2)(c) of the Special Warehouse Licensing Regulations, 2016.
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Source: CESTAT Kolkata
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Ravi Shekhar Jha – Advocate, Bar Council of Delhi