2020 (2) TMI 876 - AT - Customs

Tribunal sets aside premature order, directs department to decide on exemption application

The tribunal set aside the impugned order directing the appellant to pay Cost Recovery Charges as premature and beyond the show-cause notice scope. The ... Demand of pending dues of Cost Recovery Charges alongwith the interest - Customs Cargo Service Provider (CCSP) - period from 01/01/2016 till 31/03/2018 - cancellation of CHA license on failure of payment of dues alongwith imposition of penalties - mechanism for recovery of dues not present - scope of SCN - HELD THAT:- The appellant is an approved Customs Cargo Service Provider under the HCCAR, 2009. Further, the appellants for the last two years have paid the Cost Recovery Charges of ₹ 42,11,029/- [01/01/2014 to 31/12/2014] and ₹ 58,23,776/- [01/01/2015 to 31/12/2015] and the appellants were eligible for exemption from payment of Cost Recovery Charges from 04/12/2015 in terms of Boards Instructions dated 12/09/2005. Further, the appellants vide letter dated 11/01/2016 to the Commissioner of Customs sought exemption/waiver from payment of Cost Recovery and the Commissioner of Customs vide its letter dated 16/02/2016 to Additional Director General and Under Secretary to the Ministry of Finance, Department of Revenue informed that the appellants have achieved the bench mark in the year 2014-15 and 2015-16 and that the appellants have also remitted the Cost Recovery Charges up to 31/12/2015. In the show-cause notice the allegations against the appellant was that they have violated the Regulations 5(1)(iii) relating to Insurance Policy and Regulations 5(2) relating to non-payment of cost recovery charges and Regulation 5(3) relating to Bank Guarantee. Out of these three charges, the Commissioner has held that the appellant has complied with the Regulation 5(1)(iii) and 5(3) and has confirmed the demand under Regulation 5(2) - Further, the impugned order directing the appellant to pay Cost Recovery Charges of ₹ 2,18, 47,100/- is beyond the show-cause notice because in the show-cause notice the only allegation is that the appellant has not fulfilled the conditions as laid down in Regulations 5 (1) (iii), 5(2) and 5(3). Therefore, the payment of recovery in the impugned order is beyond the show-cause notice and is not sustainable. In HCCAR, 2009, no recovery mechanism for recovery of Cost Recovery Charges has been provided and this has been considered by the Tribunal in the case of CONTAINER CORPORATION OF INDIA LTD. VERSUS CC, JODHPUR [2019 (2) TMI 507 - CESTAT NEW DELHI] and it has been held by the Tribunal that if the Regulation has no provisions for recovery of unpaid Cost Recovery Charges then the recovery cannot be effected in law. The impugned order directing the appellant to pay the pending dues of Cost Recovery Charges for the period from 01/01/2016 till 31/03/2018 along with interest is premature and cannot be given effect to unless the application of the appellant dated 11/01/2016 to the Commissioner of Customs seeking exemption/waiver from payment of Cost Recovery Charges is decided by the respondent - appeal disposed off. Issues Involved:1. Payment of Cost Recovery Charges.2. Eligibility for exemption/waiver from Cost Recovery Charges.3. Validity of the impugned order vis-à-vis the show-cause notice.4. Recovery mechanism under HCCAR, 2009.Issue-wise Detailed Analysis:1. Payment of Cost Recovery Charges:The appeal was directed against an order requiring the appellant to pay pending Cost Recovery Charges for the period from 01/01/2016 to 31/03/2018 along with applicable interest. The appellant argued that they had paid all dues up to December 2015 and were eligible for exemption from 04/12/2015 onwards. The Commissioner of Customs had acknowledged the appellant's fulfillment of conditions under Regulation 5(1)(iii) and 5(3) but held them in violation of Regulation 5(2) for non-payment of Cost Recovery Charges.2. Eligibility for Exemption/Waiver from Cost Recovery Charges:The appellant claimed eligibility for exemption from Cost Recovery Charges from January 2016 onwards, having met the performance benchmarks for 2014-15 and 2015-16. The Commissioner of Customs had recommended their case for exemption multiple times, but no formal decision was made by the concerned authority. The appellant cited the Board’s Instructions dated 12/09/2005 and argued that the delay in granting exemption should not be held against them. They also referenced the Adani Ports case, where the court held that exemption should be effective from the date of application.3. Validity of the Impugned Order vis-à-vis the Show-Cause Notice:The appellant contended that the impugned order was beyond the show-cause notice, which only alleged non-fulfillment of conditions under Regulations 5(1)(iii), 5(2), and 5(3). The impugned order directed payment of Cost Recovery Charges, which was not proposed in the show-cause notice. The appellant relied on several judicial precedents emphasizing that the Department cannot traverse beyond the allegations in the show-cause notice.4. Recovery Mechanism under HCCAR, 2009:The appellant argued that HCCAR, 2009 does not provide a mechanism for the recovery of unpaid Cost Recovery Charges. They cited the Container Corporation of India Ltd. case, where it was held that the regulation does not allow for the realization of cost recovery charges, only for suspension or revocation of approval. The tribunal agreed, stating that recovery cannot be effected in law if the regulation lacks provisions for it.Conclusion:The tribunal found that the impugned order directing the appellant to pay Cost Recovery Charges was premature and beyond the scope of the show-cause notice. The tribunal set aside the impugned order and directed the Department to decide on the appellant’s pending application for exemption from payment of Cost Recovery Charges. The appeal was disposed of with instructions for the Department to take appropriate action in accordance with the law after deciding on the exemption claim.