TaxTMI 
TaxTMI 
2024 (7) TMI 1703
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed. He further submits that following the said decision, this Tribunal also in the case of Diamond and Gem Development vs. Commissioner of Customs, Ahmedabad vide order No. 11277-11278/2024 dated 12.06.2024 held that cost recovery charges cannot be recovered. He placed reliance on the following judgments:- (a) Goodearth Maritime Limited vs. CC, Kandla - (2022) 1 Centax 316 (Tri-Ahmd) (b) GMR Hyderabad International Airport Limited vs. C.B.E.C., New Delhi - 2014 (299) ELT 320 (A.P.) (c) MIV Logistics Pvt. Limited vs. CC, Cochin - 2020 (374) ELT 277 (Tri-Bang.) (d) Adani Ports and Special Economic Zone Limited vs. UOI - 2018 (11) GSTL 150 (Guj.) (e) Diamond and Gem Development vs. Comm. of Customs, Ahmedabad Order No. 11277-11278/2024 Dated 12.06.2024 3. On the other hand Shri Girish Nair, learned Assistant Commissioner (AR) appearing for the Revenue reiterates the findings of the impugned order. He submits that identical issue has been considered by Hon'ble Delhi High Court in the case of Allied ICD Services Limited vs. UOI - 2018 (364) ELT 59 (Del.) wherein it was decided that cost recovery charges of the officers deputed at....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exempted by an order of the Government of India in the Ministry of Finance; 6. Responsibilities of Customs Cargo Service provider: (1) The Customs Cargo Service provider shall - (o) shall bear the cost of the customs officers posted by the Commissioner of Customs on cost recovery basis and shall make payments at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry; 11. Suspension or revocation of approval for appointment of a Customs Cargo Service provider: (1) The Commissioner of Customs may, subject to the provisions of these regulations, suspend or revoke the approval granted to the Customs Cargo Service provider subject to the observance of procedure prescribed under regulation 12 and also order for forfeiture of security, if any, for failure to comply with any of the provisions of the Act and the rules, regulations, notifications and orders made thereunder; (2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the approval granted to a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the appellant is required to pay cost recovery charges in terms of HCCAR 2009 or payment of MOT charges made by the appellant is correct. In the present case, the fact is not in dispute that the appellant was allowed to pay MOT charges as per Customs (Fee for Rendering Services of /Customs officers) Regulations, 1998 till separate posting of customs officials has been made for cost recovery basis by the office of the Assistant Commissioner, Customs Bhuj Division. This clearly shows that there was no posting of separate staff for the appellant's Jetty. This is because of this reason, the department accepting the fact that no separate posting was made, the appellant was allowed to pay MOT charges. It is the claim of the appellant that even subsequent to the letter of Customs Division Bhuj dated 05.05.2003, no separate officer was posted to supervise the work at appellant's Jetty. Even if the Regulation of HCCAR 2009 is applicable, the same could be operative for the appellant only if separate officer is posted. In this regard, we would like to refer to relevant regulation of HCCAR 2009 as under:- Regulation 5- Conditions to be fulfilled by Customs Cargo Service provider- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms of rule 5(2) read with Rule 6(o) unless separate officer is posted. Therefore, under any circumstances, in the facts of the present case, the demand of cost recovery charges is not sustainable. 12. In the case of Shree Pipes Limited (supra), the Hon'ble Rajasthan High Court has held that fees/cost recovery/cast of establishment payable to department only on hourly basis and not for whole year when no whole time staff is posted by the department. In the said judgment, the Hon'ble High Court however, held that no whole time posting by department to supervise the Customs bonded warehouse, charges recovered by the department on hourly basis from some licensee and for full year from others, is violative to Article 14 of Constitution of India. 13. In an identical case, in the case of GMR Hyderabad International Airport Limited (supra), the Hon'ble Andhra Pradesh High Court dealing with Handling of Cargo Customs Areas Regulation, 2009, passed the following order:- 8. Section 7 of the Act conferred power on the Board to appoint and notify such ports and airports which alone shall be customs ports or customs airports for purpose of unloading of imported goods and the loading of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es it explicitly clear that the imported or export goods may be received, stored, delivered, dispatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed. The expression "prescribed" was defined in Section 2(32) as meaning those as prescribed by the regulations made under the Act. Even if Sections 7, 45 and 141 are read together, what emerges is that, all goods imported or meant for export can be brought to the customs airport and thereafter they shall remain in the custody of the custodian until they are cleared for home consumption or are warehoused or are transshipped in accordance with the provisions contained in Chapter VIII of the Act. But however, any such physical custody of the cargo by the custodian is subject to the control of the officers of the customs, till they are properly cleared. Therefore, to my mind, Section 141(2) can only give scope for framing the regulations prescribing the responsibilities of the customs airport operators and more importantly of the persons engaged in storing, delivering, dispatching or otherwise handling the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uring the wellbeing of our countrymen. The very foundations upon which this nation won its freedom would have been quickly weakened, otherwise. 11. Regulation 5(2) of Regulations, 2009 undoubtedly prescribed the custodian to bear the costs of the customs officers posted at such customs area on cost recovery basis. Now the question that is to be resolved is whether this falls within the general power of making regulations or not? Payment of one-time fee for appointment as a customs airport or for recognizing a person as a custodian of goods in a customs area is different from obligating such a person to pay regularly for the costs of the customs officers posted at the customs port or customs airport. Both are not the same. 12. The concept of cost recovery is generally associated with the service rendered by a person or a set of persons or a public organization to another, which service is not otherwise liable to be provided. 13. A modern welfare state is obliged to provide for various services and beneficial measures to its citizens. Hence, a welfare state is entitled to make a levy even against the will of the people who are sought to be benefited in the process. In the matter of i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve policy by delegating the power to frame rules or regulations, as the case may be. This practice of empowering the executive to make supporting Legislation strictly within the prescribed sphere has been evolved due to the practical necessities and pragmatic needs of the modern state as the Legislatures, by the very nature of the limitations upon them to conceive all possible circumstances and contingencies at one go and also because of the extremely limited time factor. The Legislatures can hardly work out all the necessary details by themselves. While the Legislature puts in place the life line, the muscular support is supplied through ancillary legislation known as subordinate/delegated legislation, in the form of Rules or Regulations. However, without there being a clear and unambiguous charging provision, by way of ancillary legislation, no taxes can be imposed. In the instant case, the survey of the provisions of the Act have not contemplated for taxing either the appointee or the custodian. Therefore, by making a Regulation, a tax could not have been levied on such appointees of customs airports or the custodians of the uncleared cargo. 15. Assuming that what is levied is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the Consolidated Fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the Consolidated Fund. It is earmarked and set apart for the purpose of services for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exempted from the payment of the cess. Though there is an element of quid pro quo between the tax-payer and the public authority there is no option to the tax-payer in the matter of receiving the service determined by public authority. In regard to fees there is, and must always be, co-relation between the fee collected and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....identified under Section 8 of the Act is only for ensuring the integrity of such a place so that no revenue loss and duty evasion occurs there. Beyond that, a custodian has no other role. He is a facilitator by providing for foolproof or tamper proof premises so that goods do not leave the premises before they are cleared by the customs and correspondingly the necessary duty/revenue is collected smoothly by the State. It is purely incidental, that the custodian may in turn earn some revenue for himself by charging the importer or exporter for facilities provided by him for smooth and eventual clearance of goods by the customs. That is of least importance in the matter of collection of customs duty by the State. I am therefore clearly of the view that, no services are being specially provided by the customs officials to the custodians at a customs port or customs airport, to enable them to collect any fee, from such a custodian. "Cost Recovery" of the salaries and allowances paid to the customs officials is only a dignified form of collection of a fee. Since, no services are specially or generally provided to the custodian, no such fees is liable to be charged. 17. There is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies/Departments. Such appropriations are placed for consideration and approval of the Parliament/Legislature of the State as the case may be. Once the salaries and allowances and other benefits such as pensions are thus already provided for, the question of seeking their reimbursement separately would not arise. Out of the overall collection of revenue, a certain percentage is thus set apart towards the concomitant expenditure liable to be incurred for raising such revenue. Salaries and allowances, pensions and other terminal benefits payable to the Government servants are integral part of this element of expenditure. When the State directly pays to its employees, the State in turn expects absolute integrity and loyalty from such employees. In the case of employment between the State and its servants, it is appropriate to bear in mind that it is not regulated purely by contractual terms or by general conditions which are otherwise part of any master and servant relationship. There is a status conferred by the State upon its employees. By virtue of this status, it undertakes to protect them from undeserved and undesirable wants. Therefore, a provision is made in the budgetary propos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficers posted, at such custom area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance." 20. Regulation 6 deals with responsibilities of Customs Cargo Service provider. The impugned Orders rely upon Regulation 6(1)(o). It is reproduced below: "6. Responsibilities of Customs Cargo Service provider: (1) The Customs Cargo Service provider shall: (o) shall bear the cost of the customs officers posted by the Commissioner of Customs on cost recovery basis and shall make payment at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry." 21. Regulation 11 deals with suspension or revocation of the approval for appointment of a Customs Cargo Service Provider, while Regulation 12 deals with procedure for suspension or revocation of the approval and imposition of penalty. The impugned orders rely upon Regulation 11(1) and 12(8). They are reproduced below: "11(1) The Commissioner of Custom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xempted by an order of the said Ministry. 23. The contention of the Appellants is that they were entitled to waiver of the cost of the Custom Officers posted by the Commissioner in terms of the Notification dated 12 September 2005 issued by the Board. It is stated that as no decision was taken on the said representation, Thar Port filed a Writ Petition in the Rajasthan High Court which is pending. Gemstone also sent a presentation to the Board in terms of the Circular for waiver of the recovery charges and for payment of merchant overtime charges. This representation is also stated to be pending. 24. The issue that arises for consideration in this appeal is as to whether the recovery of cost recovery charges could have been confirmed by the Commissioner exercising powers under Regulations 5(2) and 6(1)(o) of the 2009 Regulations and whether penalty of Rs. 5000/- could have been invoked. 25. As noticed above, the show cause notices dated 9 January, 2013 and 11 December, 2012 were issued to the Appellants under Regulation 12 of the 2009 Regulations. What was stated was that the Appellant has rendered themselves liable for suspension/ revocation of appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aulted cost recovery charge. But only states that the same is procedure for suspension or revocation of approval and imposition of penalty. 14. In view of above, we find that the learned Adjudicating Authority has not appreciated the legal provision as contained in HCR, referred above which do not indicate the machinery for realisation of cost recovery charge on account of being defaulted as is the case before us. In fact, we find that the show cause notice has invoked the provisions of Regulation 12 of HCCAR which does not provide for the realisation of the cost recovery charge but only revocation of the licence granted to CCSP on account of various breaches as contained therein. This regulation has no provisions for recovery of unpaid cost recovery charge on account of non-fulfilment of criteria as laid down in the CBEC circular. Thus, we find that the order passed by the learned Adjudicating Authority is beyond the scope of the provisions of HCCAR, 2009 more so when he has decided not to cancel the licence of the Appellant and only imposed penalty. Further, the learned Adjudicating Authority has also held that there is no provision of recovery of interest under the Regu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contravention of the Regulations. 31. Thus, for all the reasons stated above the impugned orders dated 26 February 2019 and 29 March, 2019 passed by the Commissioner to the extent that the demand of outstanding cost recovery charges has been confirmed and penalty has also been imposed are liable to be set aside and are set aside. The two Appeals bearing nos. 51122 of 2019 and 51280 of 2019 are allowed." From the above decisions, it can be seen that the similar issue has been considered consistently by two division benches of this Tribunal, in view of the above in the present case also the demand of recovery of cost recovery charges is not sustainable. 4.3 Without prejudice to the above observation, we came across a recent judgment of Hon'ble Telangana High Court under Writ Appeal No. 1321 of 2012 vide order dated 27.03.2024, dealing with the same HCCAR, 2009 regulation wherein it was held the provision of cost recovery charges as ultra virus on the ground that under Section 157 of Customs Act, 1962 there is no power to make such rule for recovery of cost recovery charges. Hence in view of this judgment, there is no scope left for the revenue to reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct within the limits of the power granted to it." 15. Another three-Judge Bench of the Supreme Court in Ahmedabad Urban Development Authority vs. SharadkumarJayantikumar Pasawalla^7 held that no tax can be imposed by any rules or regulations unless the statute under which such subordinate legislation is made specifically authorized imposition of such tax. In the Regulations framed under the statute, levy of any tax or fee must be based on a specific statutory provision and not on any implied, incidental or ancillary authority. In paragraph 7, it has been held as under: "7. After giving our anxious consideration to the contentions raised by Mr. Goswami, it appears to us that in a fiscal matter it will not be proper to hold that even in the absence of express provision, a delegated authority can impose tax or fee. In our view, such power of imposition of tax and/or fee by delegated authority must be very specific and there is no scope of implied authority for imposition of such tax or fee. It appears to us that the delegated authority must act strictly within the parameters of the authority delegated to it under the Act and it will not be proper to bring the theory ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the Legislature's failure to express itself clearly." 17. On the touchstone of the aforesaid well settled legal principles, we may now take note of the relevant statutory provisions of the Customs Act, 1962. The Act has been enacted with the object to sternly and expeditiously deal with smuggled goods and curb the debts on the revenue thus caused. The Act inter alia provides for confiscation of goods and conveyance and imposition of penalties when any goods which are imported contrary to any prohibition imposed by or under the Act or any other law for the time being in force. Chapter-XVII of the Customs Act, 1962 deals with Miscellaneous. Chapter-XVII of the Act contains Section 141 and Section 157. Section 141 of the Act deals with 'conveyances and goods in a customs area subject to control of officers of customs'. Section 141 is extracted below for the facility of the reference. "141. Conveyances and goods in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 27; (ab) the form, the particulars, the manner and the time of delivering the passenger and crew manifest for arrival and departure and passenger name record information and the penalty for delay in delivering such information under sections 30A and 41A; (b) the conditions subject to which the transhipment of all or any goods under subsection (3) of section 54, the transportation of all or any goods under section 56 and the removal of warehoused goods from one warehouse to another under section 67, may be allowed without payment of duty; (c) the conditions subject to which any manufacturing process or other operations may be carried on in a warehouse under section 65 (d) the time and manner of finalisation of provisional assessment; (e) the manner of conducting pre-notice consultation; (f) the circumstances under which, and the manner in which, supplementary notice may be issued; (g) the form and manner in which an application for advance ruling or appeal shall be made, and the procedure for the Authority, under Chapter VB; (h) the manner of clearance or removal of imported or export goods; (i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pra), after taking note of the decision in CCE v. Chhata Sugar Company Limited^9, it was held as under: "27. In CCE v. Chhata Sugar Co. Ltd., *(2004) 3 SCC 466+, one of the issues was whether the State Government's administrative charges to collect a levy could be passed on to the person from whom the tax, fee or levy was collected. This Court categorically held that such an imposition would be a tax and not a fee and must be duly authorised since it is a tax (at para 14), it is held: (SCC p. 483) "Hence, administrative charge under the U.P. Act is a tax and not a fee." 28. It is, thus, clear from the aforesaid decisions that imposition of administrative services (sic charges) is a tax and not a fee. Such imposition without backing of statutes is unreasonable and unfair." 22. Therefore, the officers of the Customs Department, who were employed at the Airport between the years 2008 and 2013, were deployed to perform their statutory duties. The levy of cost recovery charges, which is in fact salaries payable to the customs staff deployed at the Airport is in the nature of administrative charges and is a tax. It cannot be exacted from the respondent without any statu....