TaxTMI 
TaxTMI 
2014 (10) TMI 508
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....andling of Cargo in Customs Areas, 2009 is inapplicable to the Petitioner. (b) That this Court be pleased to issue a writ of Mandamus or an appropriate writ, order or direction under Article 226 of the Constitution of India declaring that the Regulation 5(2) of the Handling of Cargo in Customs Areas, 2009 is ultravires section 157 and 158 or any other provision of the Customs Act, 1962. (c) That this Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India declaring that the Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 is ultravires Article 14 and Article 19(1)(g) of the Constitution of India. (d) That this Court be pleased to issue a writ or Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner's case and after going into the validity and legality thereof to quash the demand notices dated 8th June, 2011, 18th July, 2011, 29th March, 2012, 16th April, 2012 and 13th June, 2012. 3] Th....
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....o.1. Similarly, in respect of import/export of goods through the Air Cargo Complexes, the custody of such cargo till the time it is cleared for export or home consumption lies with the custodian appointed under Section 45 of the Act. Further to the OMDA and the SSA and for uninterrupted handling of cargo operations at CSIA, the Ministry of Civil Aviation vide letter dated 28th April, 2006 requested the Respondent No.2 to issue a necessary notification under the Customs Act, 1962 to declare/appoint the Petitioner as custodian. 7] The Petitioners further submit that accordingly, Respondent No.3 vide Public Notice No,1/2006 ACC dated 3rd May, 2006 appointed the Petitioner as custodian of the Air Cargo Complex under section 45 of the Customs Act. At this point, it is submitted that vide the above Public Notice, the custodianship of the Air Cargo Complex was transferred to the Petitioner from the Airports Authority of India and Air India who were joint custodians vide Public Notice No.1/2002 ACC dated 19th October, 2002. 8] After legislative history of duties, functions and obligations of custodian appointed under section 45 of the Customs Act, 1962, the Petitioners state that a Circu....
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....s to bear the cost of Customs staff posted there. 11] Circular No.13/2009Cus dated 23th March, 2009 was issued by Respondent No.2, wherein the scope and operations of the Regulations was clarified. At para 5.3 of the circular, it was specifically stated that Custodians who were exempt under Circular No.27/2004Cus dated 6th April, 2004 would continue to be exempt even under the Regulations. Subsequently vide Notification No.96/2010Cus (N.T.) dated 12th November, 2010, the said Clause (5) was substituted. 12] In furtherance of the amendment vide Notification No.96/2010Cus (N.T.) dated 12th November, 2010, the Respondent No.2 issued Circular No.4/2011Cus dated 10th January, 2011 2 whereby it was stated at para 8 that existing custodians even if appointed before the Regulations came into force, were liable to comply with Regulations (5) and (6) of the Regulations. In lieu of the same, vide Public Notice No.02/2011 dated 5th May, 2011, the Respondent No.3 at clause (24) of the Public Notice held that the Petitioner is liable to bear the cost of customs staff posted at the Air Cargo Complex. 13] The Petitioner vide letter dated 9th May, 2011, requested Respondent No.3 for some time si....
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....ut prejudice to the above, the Petitioner is not liable to comply with the mandate of Regulation 5(2) of the Regulation vide Para 5.3 of Circular No.13/2009Cus dated 23rd March, 2009, as reaffirmed by para 3 of Circular No.29/2011Cus dated 18th July, 2011. Prior to coming in force of the subject regulations, the custodians appointed under the Act were liable to follow with the guidelines mentioned in Circular No.34/2002Cus dated 26th June, 2002, the annexure whereof gave an identical condition for provision of cost recovery charges. Subsequently, it was clarified that certain categories of custodians were made exempt from the operation of the guidelines, as mentioned above, vide Circular No.27/2004 Cus. The categories are reproduced below for ready reference. "I am directed to invite your attention to Board's Circular No.34/2002Cus, dated 2662002 [2002 (143) E.L.T. T49] vide which a set of guidelines was prescribed for appointment of custodians of Air Cargo Complex and Seaports. Doubts have been raised by the field formations whether these guidelines will apply only to custodianship of new ports and new air cargo complexes or they will also apply to the following cases ....
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....the Regulation 5(2) which casts the burden of the costs of the Customs officers posted at the custom area, on cost recovery basis, on parties like the Petitioner, does not fall within the purview of the above provisions. Mr. Sridharan has invited our attention to the grounds in the Writ Petitions while elaborating this challenge. 20] For all these reasons, it is submitted that the Writ Petitions be allowed. 21] Mr. Sridharan, placed reliance on the following judgments in support of his above contentions:1) Board of Trustees of the Port of Bombay V/s. Union of India reported in 2009 (241) ELT 513 (Bom); 2) International Airports Authority V/s. Grand Slam International of India reported in 1995 (77) ELT 753 (S.C.); 3) Lohara Steel Industries Ltd. & Anr. V/s. The State of Andhra Pradesh & Anr. reported in (1997) 2 Supreme Court Cases 37; 4) Calcutta Municipal Corporation & Others V/s. Shrey Mercantile (P)Ltd. & Others Reported in 2005 (4) SSC 245; and 5) Order passed in Writ Petition No.27840 of 2010 in the case of GMR Hyderabad International Airport Ltd. V/s. Central Board of Excise & Customs & Ors. 22] On the other hand, Mr. Jetly, learned counsel, appearing on behalf of the ....
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.... to those custodians appointed under the Airport Authority of India Act, 1994 and not the Customs Act, 1962, is not tenable in law. Therefore, their challenge to the Regulation 5(2) is also devoid of merits. 26] Mr. Jetly submits that in exercise of the powers conferred by section 141(2) read with section 157 of the Act, the Regulations which have been referred above, have been framed and later on notified. Mr. Jetly further submits that all Customs Cargo Service Providers, who were already approved, on or before the date of coming into force of these regulations, are required to comply with the conditions contained in these regulations as specified in the Regulations. Regulation 5 sets out the conditions to be fulfilled by Customs Cargo Service Providers. 27] Mr. Jetly further submits that reliance by the Petitioners is placed on the fact that they are the Custodians appointed not by the Commissioner of Customs but are created under respective statutes such as Airport Authority of India Act. Section 45 of the said Act provides that no custodian other than approved by Commissioner of Customs or notified under any other statute should act as Custodians. This read with 'Handlin....
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....eloped, operated and maintained the airports, the Petitioners are a private entity with commercial concerns. 30] Mr. Jetly further points out that the Government sanctions additional manpower resources at the request of the Custodian to be posted at these ports/terminals over and above the regular strength to service the facility run by their custodians for their own commercial gains. The cost recovery charges at a specified rate are levied for the postings of customs officials additionally sanctioned over and above regular posts. Therefore, if such charges are not recovered, that could amount to profiting at the expense of tax payers. The charges are required to be paid to the Government for the costs incurred by the exchequer towards its staff posted at these ports and not directly as salaries and allowances to the government employees. Hence, the demand cannot be said to be illegal and invalid. Mr. Jetly has relied upon the Notifications whereby there is a bifurcation of areas of Custodians of Airport Authority of India and Air India. Copies of the same have also been annexed to the affidavit in reply. It is urged that the area on which new Perishable Cargo Terminal is construc....
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....ain custodians are out of the purview of the resolutions and they cannot be applied to them. It is in this background that they deny all the contentions in the affidavit in reply. It is claimed that the present case is not one where the sovereign appoints customs officers at every Air Cargo Complex. It is submitted that certain places are notified as ports of import/export etc. under section 7 and 8 of the Customs Act, 1962. At these notified places, in order to conduct business more efficiently, the sovereign appoints private players to aid in discharge of their functions. Therefore, this is not an unfair or unjust enrichment at the expense of the Respondents or the tax payers. It is in these circumstances that it is submitted that the sovereign function has not been discharged and there is no need for any payment rather it is the Respondents who should suitably compensate the Petitioners. For all these reasons, it is submitted that the Writ Petition be allowed. 33] For properly appreciating the rival contentions, the basic facts need to be referred. The basic facts are that Ministry of Civil Aviation addressed a letter to the Central Board of Excise and Customs, New Delhi, on 28....
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....l they are cleared for home consumption or for warehousing or for transshipment in accordance with the provisions of Chapter VII and Chapter VIII of the Customs Act, 1962, as the case may be. Similarly, the Petitioner will also be the custodian of the export goods brought into the Customs Area earmarked for the purpose as detailed in the schedule below the Notification. The Notification itself states that as custodian of the imported goods, the Petitioner would be required to comply with the provisions of section 45(2) and 48 of the Customs Act, 1962 as well as the Rules and Regulations and instructions issued from time to time in this regard. Even with regard to export Cargo the Petitioner will ensure the movement of the Cargo to respective Airlines storage areas, immediately after the "Let Export" order is given by the customs authorities. The Notification No.1/2002 dated 19th October, 2002 as amended on 28th October, 2003 was further amended to this extent. 35] A bare perusal of section 45(1) would reveal that all imported goods unloaded in a customs area shall remain in the custody of such persons as may be approved by the Commissioner of Customs until they are cleared for hom....
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....art or whole of the same premises transferred (on lease or otherwise) to new custodian on or after 26th June, 2002 so also in case of custodian notified prior to 26th June, 2002 but premises extended after 26th June, 2002 under the same custodianship, the matter was examined by the Board and it is clarified that the new guidelines issued on 26th June, 2002 by Board Circular No.34/2002 will not apply to the categories of cases referred to in this circular. However, the conditions and obligations already being discharged by the earlier custodians of such existing Air Cargo Complexes (including courier terminals) or ports should be retained and applied to the new custodians also. 39] Thus, in these circumstances that one must see the application of the Regulations at AnnexureF entitled "The handling of Cargo in Customs Area Regulations, 2009." The Regulations in clause (2) contain the definitions. The term Customs Cargo Services Provider is defined under clause 2(1)(b) and reads as under: " Customs Cargo Services Provider" means any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referre....
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....3] Then, the amendment to the Regulation is notified in the Government of India Gazette dated 12th November, 2010 (Notification No.96/2010Cus) (N.T.). These Notifications proceed to amend the 2009 Regulations and clause (2) thereof is to be found at page 58. 44] Then, Circular No.4/2011Cus, Annexure I dated 10th January, 2011 clarifies that as far as Regulation 5 is concerned, this Regulation need not be subjected to exemption by any authority as they concern over all safety and security of the premises. Clause (7) and (8) of this Circular are to be found at page 60 and they read as under: " 7. Vide Notification No.96/2010Customs dated 12.11.2010, Regulation 5 has been amended to the effect that in addition to other obligations, all CCSPs for custody of imported or export goods and for handling of such goods in the Customs area shall provide free of cost or rent, fully furnished office accommodation, EDI service center along with basic amenities and facilities. Further, amendments have also been made to make it mandatory to all such CCSP to provide residential accommodation and transport facilities to the Customs staff. 8. In this regard, it is clarified that no exemption is ava....
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....ayment be accepted without prejudice and under protest but what we find is that the authorities never granted any exemption. There was no clarification from the Aviation Ministry as well and which the Petitioner was trying to seek through that Ministry's intervention. Therefore, the Petitioner were called upon to comply with the prior Circulars, the Regulations and further Regulation dated 18th July, 2011. What the Petitioner is relying upon is the clarification given by this last Circular No.29/2011 which exempts the custodians already exempted by the Circular dated 6th April, 2004 and by para 5.3 of Board Circular dated 23th March, 2009. The department of customs continue to demand the payment and what the Petitioners pointed out was that the payments are made under protest and without prejudice to the rights and remedies available to resolve the issue for which the Petitioner will be separately approaching the customs. The Petitioner made an application to the Chairman, Central Board of Excise and Customs Department of Revenue and prayed for exemption of payment for cost recovery charges for custom staff posted at this Terminal. They referred to the agreements with the autho....
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....of imported goods. That it is well within the ambit and scope of a comprehensive legislation like Customs Act to provide for such restrictions is beyond doubt. There is nothing illegal about such a stipulation. If the Customs Act, 1962 seeks to regulate the imports into India so as to ensure levy, assessment and recovery of the duty prescribed thereon, then such a provision can be very well incorporated. Therefore, sub section (1) of section 45 could be read as making a exception only if there is anything otherwise contained in any law. All imported goods unloaded in a customs area have to remain in the custody of such person as may be approved by the Commissioner of Customs. There is no dispute that the person has to seek approval of the Commissioner of Customs to take custody of the imported goods and to retain the same. Unless such approval is granted, a person cannot be called a custodian. Once he is a custodian and is obliged to act in terms of sub section (2) of section 45 and all other provisions enabling clearance of imported and exported goods, then, it is not possible to agree with Mr. Sridharan. There is at best and what could be called as an appointment of a custodian. ....
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....ion, the Petitioners would not have furnished a bond as required by the authorities. It is in these circumstances that we are unable to agree with the Petitioners as they do not have any absolute exemption as claimed by them. The Petitioners have understood the law and its applicability to mean stepping into the shoes of a Authority like AAI does not mean automatic exemption. All custodians on which the status is claimed have to be complied with unless exempted. The staff of the Customs Department is deployed to enable the movement of goods from the notified Customs Area. That movement is possible only after the proper officer permits it. That proper officer is from the Department and if he is posted with a specific subject and purpose, then, charges of such posting will have to be borne by the Petitioners. 54] There is justification for the argument of the Respondents that even if there was a certain exemption in favour of their predecessor in title or the Airport Authority of India that is specific and qua the premises. That could be qua part or whole of the premises transferred. The Respondents have clarified that custodianship for part of the Air Cargo Complex was transferred ....
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....he charges and expenses in relation thereto, have to be, therefore, paid and that is how the Circulars, guidelines and Regulations must be read and interpreted. So read, interpreted and considered, there is no scope for the argument that the Petitioners are not duty bound to pay the cost recovery charges or that any stipulation in that behalf is ultravires the Customs Act over the mandate of Article 14 and 19(1)(g) of the Constitution of India. Mr. Jetly has rightly traced the entire history of the Regulations and to our mind he has, in that regard, justifiably placed reliance on the detailed affidavit in reply filed in these Writ Petitions. 56] Once the Petitioners have taken the responsibility and have agreed to abide by all the terms and conditions imposed on them, then, there is no substance in the contentions of Mr. Sridharan. 57] We find that reliance by Mr. Jetly on Exhibit 7 to the affidavit in reply is, thus, well placed. There the Perishable Cargo Terminal permission refers to the Handling of Cargo in Customs Area Regulations, 2009. As per para 4 (XXIII) thereof, the Petitioners have to bear the charges of the Customs staff posted at the Perishable Cargo Terminal by the....
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....because of their typical and peculiar position as emerging from the Customs Act and the Major Port Trust Act, 1963. The position as the custodian of the goods in terms of the Major Port Trust Act, therefore, enabled this Court to Rule in favour of the Port Trust. This judgment, therefore, is of no assistance to the Petitioners. The reliance placed, then, on the judgment of Lohara Steel Industries Ltd. (supra) is entirely misplaced. That is not a judgment which would assist us in deciding the present controversy. Insofar as the judgment in the case of Calcutta Municipal Corporation V/s. Shrey Mercantile (P) Ltd. reported in 2005(4) SCC 245, that is also not of any assistance because of the fact that it dealt with the controversy as to what is fee and if a fee is in fact a tax without sanction of law, then, that is bad unless it is specifically permitted and approved or sanctioned. It is in the context that the expression "regulatory fee" though not defined was held to be in effect and substance a tax. It is in that regard that the principles have been referred to. 61] We do not decide any larger controversy. As far as the judgment of the Andhra Pradesh High Court is concerned, we f....