2019 (2) TMI 507 - AT - Customs

Tribunal sets aside demand for cost recovery charges, grants exemption based on Ministry letters.

The Tribunal allowed the appeal, setting aside the adjudicating authority's order confirming a demand for cost recovery charges against the appellant. It ... Confirmation of cost recovery charge - legal provisions not clearly invoked - Invocation of provisions of Regulation 5(2) and 6(1)(o) of HCCAR - Held that:- The ld. Adjudicating authority has confirmed the demand under the provision raised by the show cause notice dated 29.3.2016. The show cause notice at para 16(ii) has invoked the provisions of Regulation 5(2) and 6(1)(o) of HCCAR. However, the Commissioner has confirmed the demand without invoking any of those regulation. A perusal of the regulation reveals that the same is intended for levying of cost recovery charge and payment thereof. Similarly, the condition at 5(2) only states that custodian or CCSP will have to undertake to bear expenses of the custom officers posted in the custom area on cost recovery charge basis as per the manner prescribed unless and until the same is exempted by the Ministry of Finance. Therefore, Regulation 6(1)(o) of the Regulation (6) is not meant for recovery of default payment but only it says that the CCSP will have to bear the cost of officer deployed at their premises. Similarly, Regulation (12) of the CCAR does not prescribe for the recovery of defaulted cost recovery charge. But only states that the same is procedure for suspension or revocation of approval and imposition of penalty. The ld. Adjudicating authority has not appreciated the legal provision as contained in HCR, which do not indicate the machinery for realisation of cost recovery charge on account of being defaulted. In fact, the show cause notice has invoked the provisions of Regulation 12 of HCCAR which does not provide for the realisation of the cost recovery charge but only revocation of the licence granted to CCSP on account of various breaches as contained therein. This regulation has no provisions for recovery of unpaid cost recovery charge on account of non-fulfilment of criteria as laid down in the CBEC circular - the order passed by the ld. Adjudicating authority is beyond the scope of the provisions of HCCAR, 2009. The provisions of Regulation 5(2) of HCCAR is clear and unambiguous that the cost recovery charge is not required to be paid when the same is specifically exempted by the order of Government of India and Ministry of Finance. It is on record that in the case of appellant Ministry has exempted cost recovery charge vide letter dated 23.5.2006 and 18.2.2009. We thus hold that the appellant is duly entitled for the benefit of cost recovery charge for the subsequent years in terms of the new regulation also under provisions of the HCCAR, 2009 - appeal allowed - decided in favor of appellant. Issues Involved:1. Confirmation of demand for cost recovery charges.2. Applicability of Handling of Cargo in Customs Areas Regulations (HCCAR), 2009.3. Exemption from cost recovery charges.4. Legal provisions for recovery of unpaid cost recovery charges.5. Interpretation of previous judgments and legal principles.Detailed Analysis:1. Confirmation of Demand for Cost Recovery Charges:The appeal arises from the Order-in-Original No. 02/2018, which confirmed a demand of Rs. 4,35,27,946/- against the appellant along with a penalty of Rs. 5,000/- under Regulation 12(8) of HCCAR, 2009. The appellant was appointed as custodian of ICD, Jodhpur, subject to conditions including payment of cost recovery charges for Custom officers posted at ICD. The appellant did not meet the benchmark performance for the year 2009-2010, leading to the demand for cost recovery charges, which was confirmed by the adjudicating authority.2. Applicability of Handling of Cargo in Customs Areas Regulations (HCCAR), 2009:The appellant contended that the cost recovery charges should not be applicable post-2009 due to the regularization and encadrement of posts by CBEC. The appellant argued that the HCCAR, 2009, does not provide for recovery of unpaid cost recovery charges, only for revocation or suspension of custodianship.3. Exemption from Cost Recovery Charges:The appellant claimed exemption based on letters dated 23.5.2006 and 18.2.2009, which indicated regularization of posts and exemption from cost recovery charges. The appellant argued that once the posts were encadred, there was no requirement to pay cost recovery charges. The adjudicating authority, however, did not consider these exemptions and confirmed the demand.4. Legal Provisions for Recovery of Unpaid Cost Recovery Charges:The Tribunal examined Regulations 5(2), 6(1)(o), and 12 of HCCAR, 2009. Regulation 5(2) and 6(1)(o) mandate the custodian to bear the cost of Customs officers unless exempted by the Ministry of Finance. Regulation 12 outlines the procedure for suspension or revocation of approval but does not provide for the recovery of unpaid charges. The Tribunal found that the adjudicating authority erred in confirming the demand without proper legal basis under HCCAR, 2009.5. Interpretation of Previous Judgments and Legal Principles:The appellant cited various case laws to argue that the previous CESTAT order was per incurium and sub silento, as it did not consider the legal provisions and exemptions. The Tribunal agreed, noting that the previous order did not examine the depth of relevant legal provisions and communications regarding exemptions. The Tribunal also referred to the Gujarat High Court's decision in Adani Ports, which supported the appellant's claim for exemption from the date of application.Conclusion:The Tribunal concluded that the appellant is entitled to exemption from cost recovery charges based on the Ministry's letters and the encadrement of posts. The adjudicating authority's order was set aside, and the appeal was allowed. The Tribunal emphasized that the legal provisions of HCCAR, 2009, do not support the recovery of unpaid cost recovery charges in the manner pursued by the adjudicating authority. The decision was pronounced in court on 1.2.2019.