Oswal Minerals Ltd Vs Commissioner of Customs (CESTAT Hyderabad) – Detailed Case Note

Overview

The decision in Oswal Minerals Ltd Vs Commissioner of Customs (CESTAT Hyderabad) deals with diversion of warehoused imported goods to an unauthorised private yard instead of the notified public bonded warehouse. The Tribunal upheld confiscation under Section 111(j) of the Customs Act, 1962, imposition of redemption fine under Section 125, and penalty under Section 112(a), reiterating that the warehousing scheme under Chapter IX of the Customs Act is to be followed with strict compliance and does not admit any concept of “substantial compliance”.

The appeal filed by M/s Oswal Minerals Ltd. was dismissed, and the findings of both the Adjudicating Authority and Commissioner (Appeals) were affirmed in full.

Factual Matrix and Procedural History

Import and Warehousing Permission

  • M/s Oswal Minerals Ltd. imported manganese ore of Gabon origin through Visakhapatnam Port.
  • A Warehouse Bill of Entry No. 9065422 dated 04.12.2023 was filed for warehousing of 5500 MT (and in the Order-in-Original, 5550 MT) of manganese ore.
  • The assessee executed the mandatory warehouse bond under Section 59 of the Customs Act, 1962.
  • Based on this, the proper Officer granted permission under Section 60 to remove the goods from Customs area WQ‑6 for the exclusive purpose of depositing them in Public Bonded Warehouse (PBWH) No. 05/2023 (Code – VTZ1U093).

The permission under Section 60 was expressly limited to removal to this specified PBWH and did not extend to any other premises.

Discovery of Diversion

  • Acting on specific intelligence, the Special Intelligence and Investigation Branch (SIIB) undertook an investigation into the actual movement of the cargo.
  • It was found that, instead of being transported and deposited in PBWH No. 05/2023, the entire quantity of manganese ore was moved directly to “Dolphin Yard”, an open private yard belonging to M/s Green Energy Resources, Visakhapatnam.
  • Dolphin Yard was admittedly not an approved bonded warehouse, nor was it the premises mentioned in the Warehouse Bill of Entry or the Section 60 permission.

Investigation and Evidence Collection

  • Statements of multiple persons were recorded under Section 108 of the Customs Act, including:
    • Officials and workers of M/s Green Energy Resources
    • Staff connected with the public bonded warehouse
    • Functionaries and employees associated with the assessee
    • Transporters and logistics personnel
  • Documentary and circumstantial evidence was collected, including:
    • Transport challans and lorry receipts
    • Gate entry and exit registers
    • Warehouse records
    • Correspondence and internal communications
    • WhatsApp chats and other electronic communications

The investigation concluded that the goods never entered the designated bonded warehouse and were instead stacked in Dolphin Yard immediately after removal from the Customs area.

Show Cause Notice and Adjudication

  • A Show Cause Notice was issued alleging violation of:
    • Section 46(4A)
    • Section 59
    • Section 60
      of the Customs Act, 1962 read with the Warehoused Goods (Removal) Regulations, 2016.
  • It was proposed that:
    • The goods be held liable to confiscation under Section 111(j).
    • Penalty be imposed under Section 112(a) on the assessee.

After considering the written reply and oral arguments, the Adjudicating Authority concluded:

  • The diversion to Dolphin Yard stood proved through documentary and oral evidence.
  • Acts of M/s Green Energy Resources were attributable to the assessee under Section 147.
  • Confiscation under Section 111(j) was warranted.
  • Given provisional release, redemption fine of Rs. 80,00,000 under Section 125 and penalty of Rs. 9,00,000 under Section 112(a) were imposed.

Appeal Before Commissioner (Appeals)

  • The assessee appealed to the Commissioner (Appeals), Customs, Visakhapatnam.
  • Order-in-Appeal No. VIZ-CUSTM-001-APP-33-2025-26 dated 12.12.2025 sustained:
    • The finding that the manganese ore was not warehoused in PBWH No. 05/2023.
    • The conclusion that diversion to a private yard contravened warehousing provisions.
    • Confiscation, redemption fine and penalty in full.

The assessee then approached CESTAT Hyderabad challenging this appellate order.

Assessee’s Contentions Before CESTAT

No Intention to Evade Duty or Clear Goods Illegally

The assessee argued:

  • There was no conscious intention to evade customs duty.
  • The imported manganese ore was neither sold in the domestic market nor put to commercial use.
  • The cargo allegedly remained under the overall control of the same warehouse operator, and therefore, the core warehousing requirement was, in substance, complied with.

Blame Shifted to Warehouse Operator

  • M/s Green Energy Resources was engaged as:
    • Warehouse operator
    • Logistics and handling service provider
  • If that entity temporarily placed cargo at Dolphin Yard:
    • It was claimed to be an independent action of the operator.
    • The assessee asserted it had no knowledge or consent regarding diversion.
    • Hence, it was argued that the assessee could not be fastened with penal consequences merely due to its agent’s conduct.