2016 (11) TMI 464 - HC - Customs

Court upholds Cargo Regulations under Customs Act, dismisses challenge by DIAL. Seek guidance from Central Govt.

The court upheld Regulation 6(1)(l) of the Cargo Regulations, finding it within the scope of the Customs Act and not in violation of constitutional ... Constitutional validity of Regulation 6(1)(1) of the Handling of Cargo in Customs Areas Regulations, 2009 - ultra-vires the provisions of Customs Act, 1962 - waiver of demurrage charges - Held that: - the power to frame regulations is located in Section 42 (1) and (2) of the Airports Authority of India Act, 1994. This court has, in its preceding discussion, held that the above power cannot be questioned, as wide and that as long as Parliamentary intent is discernable, subordinate legislation, which broadly conforms to its objectives, cannot be impeached. In exercise of its powers, Regulation 6 (1) was framed; it specifically obliges service providers not to charge demurrage in certain cases if directed not to do so (“subject to any other law for the time being in force, shall not charge any rent or demurrage on the goods seized or detained or confiscated by the Superintendent of Customs or Appraiser or Inspector of Customs or Preventive officer or examining officer, as the case may be.'). Interestingly, the duty not to charge – when imposed by any customs official authorized to do so, is specifically subordinated to other laws (“subject to any other law for the time being in force”). Thus the powers under the Airports Authority Act, 1994. Identical power vests with the Central Government under the AAI Act to issue directions (Section 40). In the event DIAL is of the view that customs authorities’ directions to it to not charge demurrage are unwarranted, it can seek guidance and directions in that regard, from the Central Government. In these circumstances, the grievance that Regulation 6 can potentially render DIAL’s functioning unviable and result in losses to it, has to fail. Petition dismissed - decided against petitioner. Issues Involved:1. Challenge to Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009.2. Allegation of regulation being ultra-vires the Customs Act, 1962.3. Allegation of arbitrariness and unconstitutionality (violation of Articles 14 and 19(1)(g) of the Constitution of India).4. Authority to waive demurrage charges under the AAI Act and Customs Act.5. Commercial viability and economic impact on DIAL.Issue-wise Detailed Analysis:1. Challenge to Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009:The petitioner (DIAL) challenged Regulation 6(1)(l) of the Cargo Regulations, arguing it was ultra-vires the Customs Act, 1962, and unconstitutional. The regulation prohibits charging rent or demurrage on goods seized, detained, or confiscated by customs authorities.2. Allegation of Regulation being Ultra-Vires the Customs Act, 1962:DIAL argued that the Customs Act does not authorize the CBEC to frame regulations that waive demurrage charges. The court noted that Section 141(2) and Section 157 of the Customs Act empower the CBEC to prescribe responsibilities for handling goods in customs areas, including the impugned regulation. The court concluded that the regulation is within the scope of the Customs Act.3. Allegation of Arbitrariness and Unconstitutionality (Violation of Articles 14 and 19(1)(g) of the Constitution of India):DIAL contended that the regulation violated Article 14 (equality before the law) and Article 19(1)(g) (right to practice any profession or carry on any occupation, trade, or business). The court found that the regulation has a reasonable nexus with the object sought to be achieved by the Customs Act, which is to prescribe responsibilities for handling goods in customs areas. The court also held that the restriction on charging demurrage is a reasonable restriction in the interest of the general public under Article 19(6).4. Authority to Waive Demurrage Charges under the AAI Act and Customs Act:DIAL argued that the demurrage charges are governed by the AAI Act and cannot be waived under the Customs Act. The court noted that while DIAL's functions are governed by the AAI Act, the responsibilities of the Customs Cargo Service Provider (including DIAL's subcontractor) are governed by the Cargo Regulations. The court referred to previous Supreme Court decisions, which held that customs authorities cannot direct the waiver of demurrage charges. However, these decisions were made before the introduction of Section 141(2) and the Cargo Regulations.5. Commercial Viability and Economic Impact on DIAL:DIAL argued that the regulation would undermine its commercial viability by allowing customs authorities to unilaterally waive demurrage charges, leading to potential losses. The court acknowledged this concern but noted that DIAL could seek guidance and directions from the Central Government if it believed customs authorities' directions were unwarranted. The court concluded that the regulation does not render DIAL's functioning unviable.Conclusion:The court dismissed the writ petition, upholding Regulation 6(1)(l) of the Cargo Regulations. The regulation was found to be within the scope of the Customs Act, consistent with its objectives, and not in violation of constitutional provisions. The court emphasized that DIAL could seek guidance from the Central Government regarding any unwarranted directions from customs authorities. Consequently, the challenge to the impugned regulation failed, and the petition was dismissed with no costs.