TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1703
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....aid 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 ICDs/CFSs/ACCs/EPZ is payable by the custodians in terms of Regulation 5(2) of ....
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....ervice 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 Customs Cargo Service provider where an enquiry against such Customs Cargo Service provider is pending or contemplated." From the conjoin read....
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.... 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- The Customs Cargo Service Provider for custody of imported goods of export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (2) Un....
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....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 export meant goods. It is therefore clear that, not all ports or airports in India are customs ports or airports. It is only at the notified customs ports, customs clearance is undertaken by the officers of the Customs. Once the ....
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.... 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 imported or export meant goods in a customs area (In a given case, the customs airport operator need not necessarily be the custodian appointed under Section 45 of the Act). Hence, this provision does not lay down any policy guide....
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.... 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 imposition of such levies, there is no role for the consent of the targeted group or the consent of the beneficiary. It is, hence, implicit that no levy can be imposed except through clear and unambiguous words. No one can be taxe....
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....ical 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 not a tax but a fee, it would be imperative to notice that a fee is a charge for special services rendered to individuals or organizations by some governmental agency or the other and such a charge has an element of quid pro quo i....
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....vered 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 service intended to be rendered. Cases may arise where under the guise of levying a fee Legislature may attempt to impose a tax: and in the case of such a colourable exercise of legislative power courts would have to scrutinize the sch....
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....es 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 no mistaking the respondents; they clearly hinted in their counter affidavit that what is demanded from the petitioner is a fee, by making the following statement : "(2) In reply to Para 2, it is submitted that the Constitutional Bench of the Hon'ble Supreme Co....
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....rsement 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 proposals annually towards the head of their salaries and pensions. 19. Therefore, I am of the opinion that, Regulation 5(2) of Regulations, 2009 has no legal substratum to survive and accordingly the consequential levy made on the petitioner by the respondents towards cost recover....
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....ly 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 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. 12(1....
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....resentation 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 approval of the Custodianship in terms of the provisions contained in Regulation 11(1) of the 2009 Regulations and also forfeiture of security and imposition of penalty under Regulation 12(8) of the 2009 Regulations. The Commissioner under the impugned order did not either revoke the approval of the Custodianship or was the security forfeited. The Commissioner ordered that the outstanding cost recovery charges should be covered from the Appellant....
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....ice 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 Regulation 2009. It is not appreciable that when he has held that there is no provision for imposition of interest under the Rule for the default made by the CCSP then how his attention escaped to notice that there is also no similar provision for recovery of default payment either under Regulations 5(2), 6(1)(o) of the Regulation. We also find that the Regulation 5(2) states 'undertaken to bear the cost of Custom Officer posted, at such Customs area, on cost recover....
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....tently 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 recover cost recovery charges. The relevant portion of the said Hon'ble Telangana High Court judgment is reproduced below:- "12. We have considered the submissions made on rival sides and have perused the record. The singular issue which arises for consideration in this intra Court Appeal is whether the impugned 2009 Regulations are ultra vires the Customs Act, 1962. 13. The principles of interpretation with regard to taxing statutes are well settled. A Constitution Bench of the Supreme Court in CST vs. Modi Sugar Mil....
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....n 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 of implied intent or the concept of incidental and ancillary power in the matter of exercise of fiscal power. The facts and circumstances in the case of District Council of Jowai are entirely different. The exercise of powers by the Autonomous Jaintia Hills Districts are controlled by the constitutional provisions and in the special facts of the case, this Court has indicated that the realisation of just fee for a specific purpose by the autonomous District was justified and such power was implied. The said decision cannot be made applicable in the facts of this case o....
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....us 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 customs area subject to control of officers of customs:- (1) All conveyances and goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs. (2) The imported or export goods may be received, stored, delivered, despatched 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." 18. It is evident that all the conveyances and goods in a customs area shall, for the purposes of enforcing the provisions ....
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....ehouse 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) the documents to be furnished in relation to imported goods; (j) the conditions, restrictions and the manner of making deposits in electronic cash ledger, the utilisation and refund therefrom and the manner of maintaining such ledger; (ja) the manner of maintaining electronic duty credit ledger, making payment from such ledger, transfer of duty credit from ledger of one person to the ledger of another and the conditions, restrictions and time limit relating thereto; (k) the manner of conducting audit; (ka) the manner of authentication and the time limit for such authentication, the document or information to be furnished and the manner of submitting such document or information and the time limit for such submiss....
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....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 statutory provision. Therefore, the same is also violative of Article 265 of the Constitution of India. Even assuming that the said levy to be a fee, the same cannot be recovered from the respondent as no services are provided to it by deployment of additional staff at the Airport between the years 2008 and 2013. 23. We may take note of decision of Bombay High Court in Mumbai International Airport Private Limited (supra). In the aforesaid decision, the validity of Regulation 5(2) of the 2009 Regulations was challenged on the ground that the same is ultra vires Sections 157 and 158 of the Customs Act as well as violative of Articles 14 and 19(1)(g) of the Constitution of India. The aforesaid ground of challenge was dealt by the Division Bench in paragraph 53, which reads as under: "53. Mr. Je....