TaxTMI 
TaxTMI 
2018 (8) TMI 1610
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....r respectively, as wholly illegal, unlawful, null and void. The petitioners seek direction that the respondents should refund all the charges collected from them since inception. Another prayer made is for quashing of the demands issued for recovery of cost of custom staff at the rate of 1.85 times the salary of the custom staff posted at the respective ICDs/CFSs/ACCs/EPZs. It is also prayed that the Union of India should frame a policy to appoint and post custom officers at the ICDs/CFSs/ACCs/EPZs of the petitioners on non-cost recovery basis. Additionally prayer in W.P.(C) No. 13770/2009, W.P.(C) No. 3912/2010 and W.P.(C) No. 6543 of 2010 is for the quashing of Guideline No.10 of Circular No.128/95-Cus, dated 14th December, 1995 (hereinafter the "impugned Guideline") as being ultra vires to the provisions of Article 14 and Article 265 of the Constitution of India. Petitioner in W.P.(C) No.6392/2012, has sought quashing of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations 2009 (hereinafter the "impugned Regulation") and demand letter dated 29th June, 2012 as being ultra vires to the provisions of Article 14 and Article 265 of the Constitution of India. In W.P....
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....of the custom staff posted in the ICDs/CFCs/ACCs/EPZs. 3.3 Customs personnel posted at the ICDs/CFSs/ACCs/EPZs were responsible for customs clearance for exports and imports of goods through the ICDs/CFSs/ACCs/EPZs. The scheme envisaged that the petitioners as operators and custodians would pay for Customs personnel posted at ICDs/CFSs/ACCs/EPZs on cost recovery basis. 4. Circular No. 128/95-Cus dated 14th December, 1995, which is impugned, stipulates as under:- "(10) Custodian shall bear the cost of the Customs staff, posted for the ICD/CFS/EPZ. The Commissioner of Customs shall decide the number of staff which is required to be posted in the facility considering the workload in the station." Impugned Regulation 5(2) of Handling of Cargo in Customs Areas Regulations, 2009 reads:- "5. Conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area.- XXX (2) The applicant shall undertake to bear the cost of the Customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government o....
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....oposition for profit and gain. Central Government has sanctioned additional manpower to man and operate these ICDs/CFSs/ACCs/EPZs. Additional manpower was dedicated and posted at the ICDs/CFSs/ACCs/EPZs throughout the year. Collection of cost recovery charges has a quid pro quo and was not ultra vires Article 14 and Article 265 of the Constitution of India. 9. Respondents submit that the norms fixed by the Central Board of Excise and Customs for Cost Recovery Charges are in accordance with the Ministry of Finance's letter F. No.A/11018/9/91-AD IV dated 1st April, 1991. The petitioners being custodians of ICDs/CFSs/ACCs were required to pay charges at the rate of 1.85 times the salary of the officers posted at ICDs/CFSs/ACCs. The salary would include D.A., C.C.A., H.R.A. etc. Said costs were to be recovered in advance from the custodians. The Integrated Finance Unit ('IFU') wing of the Ministry of Finance had given concurrence to this method of charging cost recovery charges vide their Dy. No.2/FA(F)/91 dated 01st January, 1991 with effect from 01st April, 1991. The cost recovery charges had been worked out by the Department of Revenue on the basis of general principles....
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....to say, the authority levying the fee must render some service for the fee levied however remote the service may be; (ii) that the fee realised must be spent for the purposes of the imposition and should not form part of the general revenues of the State. 4. .......... Two elements are thus essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes. The same view was reiterated in Ratilal Panachand Gandhi v. The State of Bombay and Ors. [1954] S.C.R.P. 1055." 13. Earlier in the matter of the Commissioner Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt., AIR 1954 SC 282, the Supreme Court had the opportunity to examine distinction between "tax" and "fee" and it was held as follows: "44. The learned Attorney-General has argued in ....
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....alia in Matthews v. Chicory Marketing Board (60 C.L.R. 263, 276.). "A tax", according to the learned Chief Justice, "is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered" not payment for services rendered. This definition brings out, in our opinion, the essential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the taxpayer's consent and the payment is enforced by law (Vide Lower Mainland Dairy v. Orystal Dairy Ltd. 1933 AC 168). The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected form part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer....
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....sion on them to pay taxes at all. Compulsion lies in the fact that payment is enforceable by law against a man in spite of his unwillingness or want of consent; and this element is present in taxes as well as in fees. Of course, in some cases whether a man would come within the category of a service receiver may be a matter of his choice, but that by itself would not constitute a major test which can be taken as the criterion of this species of imposition. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. Fees confer a special capacity, although the special advantage, as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest (Vide Findlay Shirras on "Science of Public Finance" Vol. I, p. 202.). Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. As Seligman says, it is the special benefit accruing to the individual which is the reason for payment in the case of fees; in the case....
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....ach one of the three lists as regards fees which could be levied in respect of any of the matters that is included in it. The implication seems to be that fees have special reference to governmental action undertaken in respect to any of these matters." The aforesaid decision holds that it was not clear whether the word "tax" used in Article 265 has been or has not been used in the wider sense to include cesses and fees, but by implication of clause (28) of Article 366, taxation includes imposition of any tax or impost, whether general, local or special. Levy of fees is a form of exercise of taxing power of the State, albeit our Constitution has placed fees under a separate category for purposes of legislation and at the end of each one of the three legislative lists empowering the particular legislature to legislate on imposition of fees in respect of the one of the items dealt with in the list itself. Fee is something voluntary which a person has to pay if he wants certain services or special benefit which the individual receives from the government. Conversely, there is no obligation if a person does not want the services and thereby he can avoid the obligation to pay fee. Neve....
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....or a fee but the recovery is supported assuming to be a fee by co-relating it with these services provided. There is, therefore, quid pro quo. There is no element of tax therein." 15. The ICDs/CFSs/ACCs/EPZs located in the hinterland are operated by the custodians for their private commercial gains and profits. Government facilitates the operation of the ICDs/CFSs/ACCs/EPZs by providing the required services by posting customs officials at these stations. The affidavit in reply to the present writ petitions sets out and states additional costs have been incurred by the government for the services of the staff and posted them at the ICDs/CFSs/ACCs/EPZs, to show co-relation between the services provided and cost recovery charges, to establish quid pro quo. Figures and increase in customs officers and staff has been explained with data and details in the counter affidavit. This cannot be controverted and denied. 16. The petitioners-companies charge certain amount per container from the exporter/importer. In this manner cost recovery charge paid to the government was recouped and passed on to the importer/exporter. It was added to the expense or cost. It was treated as element and pa....
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....iated with services provided by the Union of India to a private organization like the petitioners. Costs incurred are to be recovered from the custodians. Pertinently, as noticed below the petitioners had undertaken to bear the costs of customs officers posted at the ICDs/CFSs/ACCs/EPZs as a pre-condition for appointment as a custodian under Section 45(1) of the Act. 18. Cost recovery charges are also payable in terms of Regulation 5 (2) of Handling of Cargo in Customs Area Regulations, 2009. The said regulations have been made in terms of Section 157 and 158 of the Act. Relevant portions of Regulation 5 are as under. "5. Conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area. - Any person who intends to be approved as a Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods, in a customs area, hereinafter referred to as the applicant, shall fulfill the following conditions, namely:- (1) The applicant shall provide the following to the satisfaction of the Commissioner of Customs, namely: xxxx (j) adequate air-conditioned space and power back up, hardware, networkin....
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....in terms of Section 45 of the Act and Regulation 5 (2) of Handling of Cargo in Customs Area Regulations, 2009, that the circular dated 14th December, 1995 and the impugned letter of the Ministry of Finance dated 1st April, 1991 have been issued. 21. Petitioners as a pre-condition for becoming custodians of the respective ICDs/CFSs/ACCs/EPZs had willingly undertaken to bear the costs of the Customs staff posted at the ICDs/CFSs/ACCs/EPZs. Thus, the payment of cost recovery charges has sanction and authority of law to back the levy and imposition. Further, the cost recovery charges so levied are against expenses incurred by the government for rendering the services at the ICDs/CFSs/ACCs/EPZs. Therefore, in view of the case law above discussed, provisions of the Act and the documents on record, it is established that cost recovery charges are in the nature of "fee" for services rendered by the customs officers at the concerned ICDs/CFSs/ACCs/EPZs. 22. On the issue and question of quantum and whether the government can levy the cost recovery charges at the rate of 1.85 times the salary of the customs officers, we would observe, the actual cost cannot be restricted and confined to sal....
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....for various duties at ICD/CFS/EPZ. Further by a notification No.26/2009, the Government by the exercise of its power under Section 141(2) of the Customs Act had issued new regulations known as Handling of Cargo in Customs Areas Regulations, 2009. Regulation 3 has made its regulations to come into effect with retrospective operations. Under Regulation 5, it is clearly stipulated that the Custodian shall bear the cost of Customs staff posted in the station. The Commissioner of Customs shall decide the number of staff required to be posted in the facility. It is also provided under condition No.(o) that the Customs Cargo provider shall bear the cost of customs officers posted at the Commissioner of Customs on cost recovery basis and in the manner specified by the Government of India, Ministry of Finance unless specifically exempted by an order of the Ministry. .................. 12. ....In normal circumstances, the officers of the Customs department perform their duty only in the Customs House located in the Gateway Port and they discharge different functions. When ICD and CFS are running by Custodians for their own commercial gains and located in the hinterland, the cost recovery c....
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....od 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 to Air India by the Airport Authority of India. That is why the exemption enjoyed by these two entities and claimed by the Petitioners is restricted to the area. The Perishable Cargo Complex is a facility which has been developed and with the participatio....
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....n custody of such person" are the relevant words and to understand the concept. The permission to set up a Perishable Cargo Terminal for exports was sought by the Petitioners. That the facility was constructed by the Cargo Service Centre India (P) Ltd. on a Build, Operate and Transfer basis is clear from Exhibit '7' to the affidavit in reply. That entity is also designated as "Customs Cargo Service Provider" is further clear. The function of Cargo is outsourced but the Petitioners appointment as custodian under the Customs Act is not disturbed and remains untouched. Therefore, conditional approval contained in Exhibit '7' binds the Petitioners or else the approval would fall. Once the permissions have been sought and from the various authorities under the Customs Act, then, it is not proper to urge that the conditions imposed by such authorities will not be binding. .............. 59. For these reasons, we do not find any substance in this Writ Petition. Rule is discharged in both of them. .............. 61. We do not decide any larger controversy. As far as the judgment of the Andhra Pradesh High Court is concerned, we find that there as well, the learned Single Judge has with....
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....nents had undergone a change and as a result, the cost of the staff as worked out and was payable. Similar would be the position on implementation of the 7th pay Commission report. 26. In view of the Rules 112 and 113 of the General Financial Rules, recoveries of expenditure of the services rendered to both the government and non-government parties are to be classified as receipts and the entire cost shall be recovered from the public or private body so that the net cost to the government is nil. If the revision in cost due to implementation of the 6th Pay Commission was not carried out, then the government would had suffered a net loss and would have tantamounted and resulted in profiting of the private sector at the expense of the government. Cost recovery @ 185% of the total salary of staff actually posted at ICDs/CFSs/ACCs/EPZs of the petitioners was being done as per the Board's instructions issued under F. No.434/12/92/-CUS dated 05.06.1992, Circular Nos.128/95-CUS dated 14.12.1995, 133/95-CUS dated 22.12.1995, 52/97 dated 17.10.1997 and 80/98-CUS dated 20.10.1998. 27. Customs officers may perform statutory or sovereign functions, however, the sovereign is not liable to....