Cost recovery charges unsustainable where no separate customs officer posted; Rules 5(2) and 6(o) limit liability; Rule 4 not retrospective

CESTAT AHMEDABAD - AT allowed the appeal and set aside the demand for cost recovery charges. The tribunal held the appellant lawfully paid MOT charges because no separate Customs officer was posted at its private jetty; Rules 5(2) and 6(o) of HCCAR 2009 apply only where a separate officer is posted. The retrospective provision in Rule 4 cannot be relied on to create a retrospective liability for cost recovery when no posting occurred. In these facts the demand for cost recovery charges was unsustainable.

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Issues Involved:
1. Applicability of Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009) to the appellant.
2. Requirement to pay Cost Recovery Charges (CRC) versus Merchant Over Time (MOT) charges.
3. Retrospective application of HCCAR, 2009.
4. Time-barred demand for CRC.
5. Legal validity of Regulation 5(2) of HCCAR, 2009.

Issue-wise Detailed Analysis:

1. Applicability of Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009) to the appellant:
The appellant, M/s. Goodearth Maritime Limited, was appointed as a Custodian under Section 45(1) of the Customs Act, 1962, by Notification No. 09/2002/CC dated 23.04.2002. The Adjudicating Authority concluded that after the introduction of HCCAR, 2009, the appellant fell under its ambit and was required to pay CRC. The appellant argued that HCCAR, 2009, applies only when dedicated staff is posted at the jetty, which was not the case here.

2. Requirement to pay Cost Recovery Charges (CRC) versus Merchant Over Time (MOT) charges:
The appellant was allowed to operate the jetty on payment of MOT charges as per the Customs (Fee for Rendering Services of Customs officers) Regulations, 1998, until separate posting of Customs staff on a cost recovery basis. The appellant paid MOT charges regularly, which was not disputed. The appellant contended that CRC is applicable only when additional Customs officials are posted, which did not happen in their case. The department's acceptance of MOT charges indicated no separate posting of Customs staff at the appellant’s jetty.

3. Retrospective application of HCCAR, 2009:
The Adjudicating Authority argued that HCCAR, 2009, had retrospective effect, requiring the appellant to pay CRC from 17.03.2009. However, the Tribunal found that Regulation 4 of HCCAR, 2009, which gives retrospective effect, is only to regularize the appointment of Customs Cargo Service Providers (CCSP) and not for CRC. Therefore, CRC cannot be applied retrospectively, especially when no separate officer was posted.

4. Time-barred demand for CRC:
The appellant argued that the demand for CRC from 17.03.2009 to 31.03.2015, raised by a show cause notice on 23.03.2018, was time-barred. The Customs Act, 1962, provides a two-year time limit for raising demands. The Tribunal agreed, noting that the department was aware of the appellant paying MOT charges, making the demand beyond the normal period of two years unsustainable.

5. Legal validity of Regulation 5(2) of HCCAR, 2009:
The Tribunal referred to several judgments, including the Andhra Pradesh High Court's decision in GMR Hyderabad International Airport Limited, which held that Regulation 5(2) of HCCAR, 2009, is illegal. The High Court ruled that CRC cannot be imposed without providing special services and that such a levy lacks legal substratum. The Tribunal concluded that CRC is not applicable to the appellant as no separate Customs officer was posted at their jetty.

Conclusion:
The Tribunal set aside the demand for CRC, holding that the appellant was not liable to pay CRC in the absence of dedicated Customs staff and that the demand was time-barred. The appeal was allowed with consequential relief.

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