2014 (10) TMI 508 - HC - Customs

Court upholds constitutionality of cargo handling regulation, dismisses writ petitions on cost recovery charges.

The court dismissed the Writ Petitions, holding that Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, is applicable to the ... Duties, functions and obligations of custodian appointed under section 45 of the Customs Act, 1962, - cost recovery charges for custom staff posted at the new Perishable Cargo - Regulation 5(2) of Handling of Cargo in Customs Areas Regulations, 2009 - Regulation ultra vires to section 157 and 158 of the Customs Act, 1962 - Held that:- A bare perusal of section 45(1) would reveal that all imported goods unloaded in a customs area shall remain in the custody of such persons as may be approved by the Commissioner of Customs until they are cleared for home consumption or warehoused or for transshipment in accordance with the provisions of Chapter VII. It is this sub section of section 45 which is part and parcel of the Notification dated 3rd May, 2006. Then, by sub section(2) of section 45, the duties and obligations of the persons having custody of any imported goods in a Customs Area have been set out. Then, by sub section (3) the liability to pay duty on the goods which are pilfered shall be of the person having custody of the iported goods. In other words, if the imported goods are pilfered after unloading thereof in a customs area while in the custody of the person within the meaning of sub section (1) of Section 45, then, it is his responsibility and he will be liable to make good the loss caused by such pilferage. By clause (5) the conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area are set out. That clarifies that any person who intends to be approved as a Customs Cargo Service Provider for custody of importer goods or export goods and for handling of such goods in a customs area labeled as an applicant, has to fulfill the conditions specified in clause 5(1)(i) and 5(2) which states that that this applicant shall undertake to bear the cost of the customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. There the Perishable Cargo Terminal permission refers to the Handling of Cargo in Customs Area Regulations, 2009. As per para 4 (XXIII) thereof, the Petitioners have to bear the charges of the Customs staff posted at the Perishable Cargo Terminal by the Commissioner of Customs, Air Cargo Complex, Mumbai on cost recovery basis. The Petitioners would not have been permitted to outsource the function of handling of Cargo within this terminal premises unless the Regulation 6(2) of these Regulations had permitted them to do so. Further, they could not have been appointed as custodian and within the meaning of the said term and as contemplated section 45 of the Customs Act, 1962, unless, they subjected themselves to these provisions. That they did so voluntarily does not mean that they can pick and choose favourable or beneficial terms and conditions and leave our or omit the so called onerous one's. Therefore, “shall remain in custody of such person” are the relevant words and to understand the concept. The permission to set up a Perishable Cargo Terminal for exports was sought by the Petitioners. That the facility was constructed by the Cargo Service Centre India (P)Ltd. on a Build, Operate and Transfer basis is clear from Exhibit '7' to the affidavit in reply. That entity is also designated as “Customs Cargo Service Provider” is further clear. The function of Cargo is outsourced but the Petitioners appointment as custodian under the Customs Act is not disturbed and remains untouched. Therefore, conditional approval contained in Exhibit '7' binds the Petitioners or else the approval would fall. Once the permissions have been sought and from the various authorities under the Customs Act, then, it is not proper to urge that the conditions imposed by such authorities will not be binding. Cost recovery charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before a importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner. These are officers posted on additional sanctioned posts than the regular strength. The details have been provided in the affidavit in reply. In that regard, we find that Mr. Jetly has rightly relied upon paras 32 to 37 of the affidavit in reply, wherein it has been pointed out as to how additional cost has to be incurred for providing the services of the staff and posting them at the disposal of the station. It is in these circumstances that though it is denied that this is in the nature of a tax or a fee but the recovery is supported assuming to be a fee by corelating it with these services provided. There is, therefore, quid pro quo. There is no element of tax therein - Decided against the appellant. Issues Involved:1. Applicability of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 to the Petitioner.2. Constitutionality of Regulation 5(2) under Sections 157 and 158 of the Customs Act, 1962.3. Constitutionality of Regulation 5(2) under Articles 14 and 19(1)(g) of the Constitution of India.4. Validity of demand notices issued to the Petitioner for cost recovery charges.Issue-wise Detailed Analysis:1. Applicability of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 to the Petitioner:The Petitioners, private limited companies managing Chhatrapati Shivaji International Airport (CSIA) and the Air Cargo Complex, argued that Regulation 5(2) is inapplicable to them. They contended that they were exempt from bearing the cost of Customs staff as per Circular No. 27/2004-CUS and Circular No. 13/2009-CUS. However, the Respondents argued that the Petitioner, being a custodian under Section 45 of the Customs Act, 1962, is required to comply with Regulation 5(2), which mandates bearing the cost of Customs officers. The court held that the Petitioner, having been appointed as a custodian, must comply with Regulation 5(2) and bear the cost recovery charges as stipulated.2. Constitutionality of Regulation 5(2) under Sections 157 and 158 of the Customs Act, 1962:The Petitioners challenged the validity of Regulation 5(2), arguing it was ultra vires Sections 157 and 158 of the Customs Act, 1962. They contended that the regulation, which imposes the cost of Customs officers on the custodian, does not fall within the purview of these sections. The court, however, found that Section 141(2) and Section 157 provide sufficient legal backing for such regulations. The court concluded that Regulation 5(2) is within the legislative competence and is not ultra vires the Customs Act.3. Constitutionality of Regulation 5(2) under Articles 14 and 19(1)(g) of the Constitution of India:The Petitioners argued that Regulation 5(2) violates Articles 14 and 19(1)(g) of the Constitution, claiming it imposes an unreasonable burden on them. The court rejected this argument, stating that the regulation applies uniformly to all custodians and is necessary for the proper functioning and control of Customs areas. The court emphasized that the regulation ensures the efficient deployment of Customs officers, which is essential for maintaining the integrity of the customs process.4. Validity of demand notices issued to the Petitioner for cost recovery charges:The Petitioners sought to quash the demand notices for cost recovery charges issued by the Respondents. They argued that they were not liable to pay these charges as they were exempt under previous circulars. The court found that the Petitioners had been aware of their obligations under the regulations and had even paid some charges under protest. The court held that the demand notices were valid and enforceable, as the Petitioners were required to bear the cost of Customs officers under Regulation 5(2).Conclusion:The court dismissed the Writ Petitions, holding that Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, is applicable to the Petitioners, is constitutionally valid under both the Customs Act and the Constitution of India, and that the demand notices for cost recovery charges were valid. The court emphasized the necessity of the regulation for the efficient functioning of Customs areas and the uniform application of the law to all custodians.