Court upholds cargo handling regulation, rejects waiver request for Cost Recovery Charges

The Court dismissed the petition challenging Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, citing a previous decision upholding the provision. Regarding the impugned demand for Cost Recovery Charges (CRC), the Court held that the Petitioner did not meet the performance benchmarks of handling TEUs and processing BoE/SB simultaneously as required by the Exemption Circular. Consequently, the Petitioner's request for waiver from CRC payment was rejected, and the interim order in their favor was vacated.

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Issues Involved:
1. Challenge to Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009.
2. Impugned demand for Cost Recovery Charges (CRC) towards the cost of Customs staff.

Issue-wise Detailed Analysis:

1. Challenge to Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009:
The Petitioner, a private Container Freight Station (CFS) at Haldia, West Bengal, originally challenged Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009. However, this challenge does not survive due to the authoritative decision in Allied ICD Services Ltd. Vs. Union of India and Ors., 2018 SCC OnLine Del 10816, where the impugned provision was upheld. The said judgment is pending challenge by way of a Special Leave Petition before the Supreme Court, without any stay against it.

2. Impugned Demand for Cost Recovery Charges (CRC):
The Petitioner also impugned the demand raised by the respondents for the recovery of CRC of customs employees posted at the Petitioner’s station.

Factual Background:
- The appointment of custodians of ICDs/CFSs/ACCs/EPZs was opened to the private sector as per Circular No.128/95-Cus dated 14.12.1995, which required custodians to bear the cost of the Customs staff posted at their premises.
- Circular No.52/97-Cus dated 17.10.1997 provided that Customs staff for all new ICDs/CFSs was sanctioned on a cost recovery basis.
- On 12.09.2005, Circular No.F.No.434/17/2004-Cus. IV (Exemption Circular) was issued, allowing regularization of cost recovery posts at ICDs/CFSs that had completed two years of operation and achieved the performance benchmark.
- Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, mandated applicants to bear the cost of Customs officers posted at such customs areas on a cost recovery basis unless exempted by an order of the Government of India.

Petitioner’s Contention:
- The Petitioner argued that they were entitled to a waiver from the payment of CRC, having achieved the performance benchmark of handling 1200 TEUs per annum as required in Clause 1(ii) of the Exemption Circular.
- They contended that the requirement to simultaneously satisfy both the benchmarks of handling TEUs and processing BoE/SB was misconceived and contrary to the object of the Exemption Circular.
- The Petitioner relied on workload data to argue that the requirement of processing 1200 BoE/SB would render the requirement of 1200 TEUs meaningless, as one BoE/SB usually pertains to more than one TEU.

Respondents’ Contention:
- The Respondents argued that the Petitioner’s request for waiver was rightly rejected as the Petitioner did not meet the performance benchmark of processing 1200 BoE/SB per annum as stipulated in Clause 1(iii) of the Exemption Circular.
- They contended that both the conditions of handling TEUs and processing BoE/SB had to be satisfied concurrently to be eligible for the waiver.
- The Respondents referred to file notings of the Ministry of Finance, which suggested that the conditions regarding the number of containers and documents processed had to be satisfied simultaneously.

Court’s Analysis:
- The Court noted that the cost recovery charges are in the nature of fees incurred by the government for services rendered by Customs staff to the custodian of the ICDs/CFSs.
- The Court held that the Exemption Circular clearly required the satisfaction of both criteria (handling of TEUs and processing of BoE/SB) simultaneously to be eligible for the waiver.
- The Court rejected the Petitioner’s argument that the criteria should be read disjunctively, noting that both criteria envisage different parameters of performance and must be met independently.
- The Court emphasized that the plain reading of the Exemption Circular indicated that the performance benchmarks were to be fulfilled simultaneously, and there was no ambiguity requiring interpretation.

Conclusion:
The Court dismissed the petition, holding that the Petitioner had failed to satisfy all the conditions for becoming eligible for the exemption from CRC. The interim order dated 3rd June 2016, as confirmed vide order dated 21st January 2019, was vacated.

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