2011 (2) TMI 538 - HC - Indian Laws

Court upholds legality of Customs Officers' cost recovery charges under Customs Act, dismisses writ petitions

The court dismissed all three writ petitions, upholding the legality of demand notices for cost recovery charges related to establishment charges of ... Demand - It is claimed that for every Rs. 100/- spent by the Government, the petitioners are paying Rs. 185/- towards charges for the Customs personnel deputed to CFS/ICD - In the counter affidavit filed on behalf of the respondents, it was stated that due to liberalization of Indian economy, considerable growth was found in volume of exports and imports - The proposal for setting up CFS either by way of private sector or public sector will be cleared by the Inter Ministerial Committee on the recommendations of the Jurisdictional Commissioner and on the basis of prescribed guidelines - It was also further stated in the same regulation that the customs service providers already approved on or before the date of coming into force its regulations shall comply with the conditions of requirement within a period of three months or such period not exceeding the period of one year as the Commissioner of Customs may allow - It is only when a pay revision was made by the Central Government for its employees with retrospective effect, the petitioners have come forward to challenge the demand - Therefore, recovery charges will have to be made by them When ICD and CFS are running by Custodians for their own commercial gains and located in the hinterland, the cost recovery charges will have to be paid for the posting of customs officials who are additionally sanctioned for these ICDs and CFS over and above the regular posts - while calculating the cost recovery charges, apart from the cost of the staff includes the component of pay and allowances, contribution of pension will have to be recovered from their salaries. therefore, there was no exorbitant claim in demanding 1.85 times - writ petitions will stand dismissed Issues Involved:1. Legality of demand notices for establishment charges.2. Applicability of cost recovery charges under the Customs Act.3. Validity of retrospective application of pay revisions.4. Nature of cost recovery charges as a fee.5. Relevance of the Kerala High Court judgment.6. Compliance with Customs regulations and guidelines.Issue-wise Detailed Analysis:1. Legality of Demand Notices for Establishment Charges:The petitioners challenged demand notices requiring payment of arrears for establishment charges of Customs Officers at Container Freight Stations (CFS) and Inland Container Depots (ICD). The notices were issued due to the implementation of the 6th Pay Commission scales of pay, which increased the cost recovery charges retrospectively from January 2006.2. Applicability of Cost Recovery Charges under the Customs Act:The petitioners argued that the Customs Officers perform sovereign functions under the Customs Act, and no fee should be levied for such duties. They contended that cost recovery is void ab initio and violates Articles 14 and 265 of the Constitution of India. The respondents countered that the establishment of CFS/ICD was to facilitate import/export, and the cost recovery charges were justified to cover the expenses of additional Customs personnel posted at these facilities.3. Validity of Retrospective Application of Pay Revisions:The petitioners asserted that any retrospective pay revisions by the Central Government should not be passed on to them. They cited a Kerala High Court judgment, which held that there was no obligation for the petitioner to meet additional burdens due to pay revisions. The respondents argued that the cost recovery charges included components such as pay, allowances, and pension contributions, and were calculated based on principles laid down under General Financial Rules.4. Nature of Cost Recovery Charges as a Fee:The respondents maintained that cost recovery charges were in the nature of fees for services rendered by Customs personnel at CFS/ICD. They stated that the charges were directly related to the additional creation of posts and were necessary to cover the entire cost incurred by the government. The Supreme Court's judgment in Government of Maharashtra v. Deokar's Distillery was cited, which upheld similar charges for supervisory staff in distilleries.5. Relevance of the Kerala High Court Judgment:The petitioners relied on a Kerala High Court judgment, which ruled that the petitioner was not obliged to pay additional amounts due to pay revisions. The respondents argued that this judgment did not address the issue of cost recovery charges comprehensively and was not applicable to the present case.6. Compliance with Customs Regulations and Guidelines:The respondents highlighted that the petitioners were bound by the Customs Act and related regulations, which required them to bear the cost of Customs staff posted at CFS/ICD. They referred to guidelines issued by the Central Board of Excise and Customs (CBEC) and notifications under Section 141(2) of the Customs Act, which mandated cost recovery charges at 185% of the total salary of Customs officers.Conclusion:The court dismissed all three writ petitions, concluding that the demand notices for cost recovery charges were justified and legally valid. The objections raised by the petitioners did not withstand legal scrutiny, and the cost recovery charges were deemed necessary to cover the expenses of additional Customs personnel. The court found no reason to interfere with the impugned demand notices, and the petitions for stay and injunction were also dismissed.