Customs supervision charges held unsustainable where the circular conflicted with regulations; refund with interest followed.

Differential cost recovery charges for customs officers' supervision at a 100% EOU were held unsustainable where the governing Board circular could not override the applicable regulations and the levy did not qualify as merchant overtime charges for supervision during normal working hours within the jurisdictional area. The disputed amount had been paid under protest, and refund was therefore available together with interest. The prior finding that the assessee had not raised the issue earlier was treated as factually incorrect, and relief was granted against the impugned demand to the extent it upheld the charge.

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Issues: Whether the demand and retention of differential cost recovery charges for customs officers' supervision was sustainable in law, and whether the amount paid under protest was refundable with interest.

Analysis: The dispute concerned charges levied for supervision of export-related operations by customs and central excise officers in the factory premises of a 100% EOU. The challenged demand was examined in the light of the binding view that the Board circular governing such charges could not override the applicable regulations, and that charges for officer supervision during normal working hours within the jurisdictional area were not exigible as merchant overtime charges. Reliance was also placed on the prior judicial view that the demand of cost recovery charges in such circumstances was contrary to law. The finding that the assessee had never raised the issue earlier was held to be factually incorrect, and the amount had already been deposited under protest before the refund claim was pursued.

Conclusion: The levy of differential cost recovery charges was not sustainable, and the assessee was entitled to refund of the amount along with interest.

Final Conclusion: The impugned order was set aside to the extent it upheld the demand, and relief was granted in respect of the disputed cost recovery charges.

Ratio Decidendi: A charge for customs supervision cannot be sustained where the governing circular is ultra vires the applicable regulations and the claimed levy is contrary to the legal regime governing the services actually rendered.

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