TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 741
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....C) appointed Kannur International Airport under Section 7 of the Customs Act, 1962 for unloading of imported goods and loading of goods for export or any class of such goods. As per Notification No.01/2018 dated 29.11.2018, the Commissioner of Customs (Preventive), Cochin specified the area of "Kannur International Airport" under Section 8 of the Customs Act, 1962. As per CRB Post Creation Order No.22/2018 dated 14.11.2018 issued by the Directorate General of Human Resources & Development (DGHRD), 97 posts of officers of Customs were created on cost recovery basis with a condition to renew every year and consequently, Chief Commissioner vide letter dated 22.11.2018 intimated the posting of requisite officers on cost recovery basis. Alleging that as per Regulation No.5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR 2009, for short) airport operator has to bear the cost of the Customs officers posted, at such customs area on cost recovery basis, and shall make payments at such rates and in the manner prescribed, unless exempted by the Ministry of Finance, Government of India, the appellant failed to pay an amount of Rs.5,85,60,018/- pertaining to the period fro....
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.... Clause 15(e) of the National Civil Aviation Policy, 2016, no cost will be levied on the airport operator for arranging the service of the customs, except for: items to be billed to Passenger Service Fees (PSF); or those covered under Handling of Cargo in Customs Area Regulation 2009. • Passenger Service Fee is an amount that is collected from each embarking passenger at the airport by the airlines. Cost of deployment of customs officials at the airport is not charged to the embarking passengers and therefore it is not covered under the heading of PSF. • The SCN alleges that as per Regulation No. 5(2) of Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009) (as amended), Airport Operator has 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 of India in the Ministry of Finance. There is no statutory basis for cost recovery charges where the airport is only handling passenger transport. The HCCAR, 2009 provides for the manner in which the imported goods/expo....
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....e. It envisages that if the Commissioner of Customs is satisfied that in relation to the custody and handling of imported or export goods in a customs area, the Customs Cargo Service provider, for reasons beyond his control, is unable to comply with any of the conditions of regulation 5, he may for reasons to be recorded in writing, exempt such Customs Cargo Service provider from any of the conditions of regulation 5. It is submitted that in present case, the activity of Airport was suspended during the period from 25.03.2020 to 11.05.2020, on account of national lockdown due to the pandemic Covid-19, therefore, the Appellant has failed to fulfil the obligations cast upon them, as envisaged in the Customs Act, 1962 and defaulted the payment of cost recovery charges, the reason of said default is beyond the control of the Appellants. It is submitted that Ld. Commissioner in the impugned orders has not disputed and held that the said submissions made by the Appellant merits consideration. However, he confirmed the demand of recovery charges, holding that the issue has to be decided within the ambit of the Customs Act, 1962. Therefore, appellant is entitled for exemption from cost rec....
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.... • The Appellant vide its letter dated 16.03.2020 requested the Commissioner of Customs, for waiver of the Cost Recovery Charges and vide letter dated 17.03.2020 requested the Ministry of Civil Aviation for exemption from the payment of cost recovery charges. Subsequently, the Appellant vide letters dated 21.04.2021, 30.04.2021 and 01.06.2021 requested the CBIC, to waive / grant exemption from the pending cost recovery charges and considering the request and recommendation of the Commissioner of Customs, the Directorate General of Human Resource Development, CBIC vide its letter dated 18.08.2021 has granted exemption from Cost recovery in terms of conditions mentioned in Board's Circular No. 02/2021-Customs dated 19.01.2021. In view of the above, the Appellant is entitled for exemption from cost recovery charges for the entire period as the assessee cannot be penalized for the inaction on part of the department. Reliance in this regard is placed on the case of Commissioner of Customs (Imports), Mumbai vs. Tullow India [2005 (189) ELT 401 (SC)]. • It is pertinent to note that cargo operations commenced from October 2021 and the Appellant has been diligently discha....
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....pace and operational area, will be arranged for by the government on payment basis, except for items to be billed to Passenger Service Fees (PSF) or those covered under Handling of Cargo in Customs Area Regulation 2009 and CISF Act. No cost will be levied on the airport operator. Norms for such facilities will be finalized in consultation with the stakeholders." [Emphasis supplied] • The appellant has claimed that cost recovery charges under Handling of Cargo in Customs Area Regulation, 2009 (HCCAR, 2009) is applicable only to cargo handling and not passenger handling. The appellant is covered by Handling of Cargo in Customs Area Regulation 2009 (HCCAR, 2009) as explained below: • As per Notification No. 56/2017-Customs (NT) dated 23.06.2017, CBIC had appointed Kannur International Airport under Section 7 of the Customs Act, 1962 for the unloading of imported goods and loading of goods for export or any class of such goods. As per Notification No. 01/2018 dated 29.11.2018, the Commissioner of Customs (Preventive), Cochin specified the area of Kannur International Airport under Section 8 of the Customs Act, 1962. • As per HCCAR, 2009, 'Customs ....
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....overy charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before an importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deploy....
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.... Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1954 AIR 282, 1954 SCR 1005, Hon'ble Madras High Court in the case of P. P. Kutti Keya v. The State of Madras (1) [1954] S.C.R. 1046. (2) [1954] S.C.R. 1055. (3) A.I.R. 1954 Mad. 621. State of West Bengal v. Kesoram Industries Ltd. [2004 (1) TMI 71 Supreme Court. • The appellant provided an undertaking at the time of its application for custodianship under Section 45 of the Customs Act, 1962, explicitly agreeing to abide by the 2009 Regulations. Subsequent requests for waiver of certain conditions do not nullify or override the initial binding nature of the undertaking. The principle of estoppel applies, and the appellant cannot selectively challenge the validity of the 2009 Regulations after having derived benefits under them. Customs officers deployed at the appellant's premises perform critical statutory duties, including: Oversight and monitoring of cargo clearance; Prevention of smuggling and illegal activities; ensuring statutory compliance with Customs regulations. The presence of customs officers at the premises of the custodian directly enables the custodian to fulfill their obligations under Section 45 of th....
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.... the Custodianship under Section 45 of the Act, the regulations framed are in no way inconsistent with the Act and, therefore, these can't be said to be ultra vires of the Act. • The High Court failed to consider that prior to the framing of these regulations, the Government has laid down a standard set of guidelines for appointment of Custodians, including the various facilities and conditions to be fulfilled, as laid down in Circular No 34/2002- Cus dated 26.06.2002 as amended by Circular No. 27/2004-cus dated 06.04.2004. • The High Court failed to appreciate that the transitional provisions have been provided under Regulation 4 so that the existing appointments of custodians under section 45 of the Customs Act, 1962 shall continue and there may not be any disruption in their operations. However, the existing custodians would be required to provide facilities and fulfill the conditions mentioned in Regulation 5 & 6, as applicable, within the specified time period. • Hon'ble High Court had not taken cognizance of Circular No. 13/2009-Customs dated 23.3.2009 provided that the cost of providing services shall be borne by the Airport Company....
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.... 26.06.02 as amended by Circular No. 27/04-Cus dated 06.04.2004. • Hon'ble High court had not taken cognizance of Section 158 of the Customs Act, 1962 which empowers the Board to make rules and regulations to levy fees for rendering of any services by the officers of Customs. • Hon'ble High court has not appreciated that the charges being collected are cost recovery charges and are being uniformly charged to all the custodians without any arbitrariness. The officers are posted at the custodian's premises, wherein the custodian to further his business interest has requested to notify him as custodian. Hence, there is quid pro quo wherein an amount can be charged by the Government in the name and nature of cost recovery charges, which is nothing but for recovery of additional expenditure the Government will incur for posting officers exclusively at the premises of the custodian. • The 2009 Regulations are validly framed under Sections 141 and 157 of the Customs Act, 1962 and are essential for enforcing statutory obligations in customs areas. Cost recovery charges are in the nature of regulatory fees, not taxes, and are essential for maintaining ....
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....e Airport. Pursuant to the said order and on commencement of operations, the appellant had paid the applicable Cost Recovery Charges, as fixed and for the period 01.12.2018 to 30.11.2019 amounting to Rs.8,25,37,957/- and from 01.12.2019 to 31.03.2020 amounting to Rs.2,92,80,010/-. Since they have not paid the CRC fully, a letter was issued on 19.12.2019 directing the appellant to pay Rs.8,78,40,029/- and thereafter correspondences were exchanged from time to time between the Department and the appellant for payment of the said CRC. The first show-cause notice was issued to the appellant on 15.01.2021 for recovery of the outstanding CRC for the period from April 2020 to November 2020 amounting to Rs.5,85,60,018/- along with interest under Section 28AA of the Customs Act, 1962. Replying to the said notice, the appellant had communicated that due to their financial difficulty post-COVID, they could not pay CRC and requested time till 31.03.2021 to pay it and also requested to waive CRC for the financial years 2020-21 and 2021-22. The Commissioner however confirmed the demand of CRC with interest as proposed in the show-cause notice. Subsequently, periodically three show-cause notices ....
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....fficers 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. SECTION 142. Recovery of sums due to Government. - (1) Where any sum payable by any person] under this Act [including the amount required to be paid to the credit of the Central Government under section 28B is not paid, - (a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or (b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs] or such other officer of customs; or (c) if the amount cannot be recovered from such ....
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....the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom the notice is issued under this section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before the payment is made, notwithstanding any rule, practice or requirement to the contrary; (iii) in case the person to whom a notice under this section has been issued, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Chapter shall follow. (2) Where the terms of any bond or other instrument executed under this Act or an....
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.... 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 submission, the form a....
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....I) Service Centre, with required amenities and facilities and residential accommodation and transportation facilities for customs staff; (c) premises for user agencies with basic amenities and facilities; (d) storage facility, separately for imported, export and transshipment goods; (e) gate complex with separate entry and exit; (f) adequate parking space for vehicles; (g) boundary wall; (h) internal service roads; (i) electronic weigh-bridge and other weighing and measuring devices; (j) computerized system for location and accountal of goods, and processing of documents; (k) adequate air-conditioned space and power back up, hardware, networking and other equipment for secure connectivity with the Customs Automated system; and for exchange of information between Customs Community partners; (l) facilities for auction, including by e-auction, for disposal of uncleared, unclaimed or abandoned cargo; (m) facilities for installation of scanning equipment; (n) security and access control to prohibit unauthorized access into the premises, and (o) such other equipment or fac....
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....lysis and reasoning; hence the said judgments be followed. 12. On going through the judgments cited by both the sides, we find that the very same provisions of the HCCAR, 2009 has been considered by the Bombay high Court, Delhi High Court, Rajasthan High Court and Telangana High Court. In the judgments of the Bombay High Court, Delhi High Court and Rajasthan High Court the provisions of the said Regulation has been held to be valid whereas the Telangana High Court has declared the same as ultra vires. SLP filed against the order of the Bombay High Court, has been dismissed by the Hon'ble Supreme Court being withdrawn by the petitioner, keeping the question of law open. Against the division bench judgement of the Telangana High Court, SLP has been filed before the honourable apex court and the SLP is pending as on date. 13. In the case of Mumbai International Airport Private Ltd. (supra), the Division Bench of the Bombay High Court framed the following issues raised in the Writ Petition:- 2. The four essential reliefs that are prayed in this writ petition are as under :- "(a) That this Court be pleased to issue a writ of Mandamus or an appropriate writ, order....
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.... 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 home consumption or warehoused or for transshipment in accordance with the provisions of Chapter VII. It is this sub-section of Section 45 which is part and parcel of the Notification dated 3rd May, 2006. Then, by sub-section (2) of Section 45, the duties and obligations of the persons having custody of any imported goods in a Customs Area have been set out. Then, by sub-section (3) the liability to pay duty on the goods which are pilfered shall be of the person having custody of the imported goods. In other words, if ....
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....ribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. ... ... ... 50. However, so long as a customs area and as defined under the Customs Act, Section 2(11) and other definitions under Section 2 together with Chapter II, III, IV, IVA to IVC, Chapter VI, VII and all sections appearing therein are read together, it is apparent that, none can be said to be beyond the purview of the Customs Act, 1962. Section 45 of the Customs Act, 1962 provides for restrictions on custody and removal 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 a....
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....en to the authorities to make prescription by way of rules or regulations so that responsibilities of person engaged in all the above activities are fixed. Therefore, these regulations are traceable and safely to this legal provision. 52. Similarly, the general power to make the regulations by Section 157 to carry out the provisions of the Act enables the authorities to frame the regulations. We do not find substance in the contentions of Mr. Sridharan that the regulations travel beyond the Act or that they are ultra vires the Act.(emphasis supplied) 53. If that was not be the position, 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 ....
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....ecause the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before a importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner. In such....
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.... what is primarily required to be decided and adjudicated is challenge to the validity of recovery of cost computed at the rate of 1.85 times the salary of the customs officers posted at the concerned ICDs/CFSs/ACCs/EPZs. While examining the said aspect, we would also consider the challenge to the constitutional vires, etc. 16. Their Lordships after analysing the concept of tax and fees referring to the judgment of the Hon'ble Supreme Court in the case of Commissioner, Hindu Religious Endowments Vs. Lakshmindra Thirtha Swamiar of Shri Shirur Mutt [AIR 1954 SC 282], observed as under: 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 ....
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....rendering the services at the ICDs/CFSs/ACCs/ EPZs. Therefore, in view of the case laws 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. 17. Finally, their Lordships justifying the collection of CRC referring to Financial Rules, held as follows:- 25. It is a fact that the cost recovery charges have been worked out and were/are payable by the Department of Revenue on the basis of general principles laid down in the General Financial Rules. As a condition for being appointed as a custodian, the petitioners had undertaken to bear the cost of the customs staff posted at the ICDs/CFSs/ACCs/EPZs. Cost was/is liable to change if the different components of this cost, such as, the salary, D.A., CCA, HRA, pay allowance and pension contribution at the rates in force from time to time, etc. were/are changed. After the implementation of the recommendations of the 6th Pay Commission, these components had undergone a change and as a result, the cost of the staff as worked out and was payable. Similar would be th....
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....0 (Del.)]. 19. The Division Bench of the Telangana High Court, on an appeal filed by the Revenue against the judgment of single Judge in GMR's case, framed the issue as follows:- 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. 20. Referring to the power to impose tax as held by the Hon'ble Supreme Court in the case of Bimal Chandra Banerjee Vs. State of Madhya Pradesh [(1970) 2 SCC 467], Ahmedabad Urban Development Authority Vs. Sharadkumar Jayantikumar Pasawalla [(1992) 3 SCC 285] and in the case of Modi Naturals Limited Vs. Commissioner of Commercial Tax, UP [(2023) 12 Centax 91 (SC)], their Lordships observed as follows:- 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 go....
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.... 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 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 ....
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.... under the Regulations. Similarly, the Division Bench of Delhi High Court in Allied ICD Services Limited (supra) has relied on the decision of the Bombay High Court. Therefore, the aforesaid decisions rendered by Bombay High Court as well as Delhi High Court are distinguishable. 24. So far as the contention that the Company at the time of application seeking appointment as Custodian has furnished an undertaking that it shall abide by the 2009 Regulations is concerned, suffice it to say that the Company subsequently on 6-5-2007 and 22-11-2007 had submitted applications seeking to waive the Condition Nos. 10 to 13 of Circular No. 34/2002, dated 26-6-2002. Therefore, the undertaking furnished by the Company does not bind it in the facts of the case. 25. For the aforementioned reasons, we agree with the conclusion of the Learned Single Judge that the impugned 2009 Regulations are ultra vires the Customs Act.(emphasis supplied). 21. The said judgment of the Telangana High Court has been followed by the Ahmedabad Bench of the CESTAT. It is argued by learned AR for the Revenue that the Department has filed SLP against the Judgment of Telangana High Court in GMR's case....
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....uty. (3) Notwithstanding anything contained in sub-section (1), no interest shall be payable where,- (a) the duty becomes payable consequent to the issue of an order, instruction or direction by the Board under section 151A; and (b) such amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment. Interest under Section 28AA would be attracted only when the amount required to be paid is 'duty' which has not been levied, short-levied or short paid under Section 28 of the Customs Act, 1962, whereas in the present case, the CRC has been held to be not duty; hence, in our opinion, Section 28AA cannot be pressed into service for recovery of interest. So, the Order of the learned Commissioner for recovery of interest under Section 28AA of the Customs Act, 1962 on the outstanding CRC cannot be sustained. 23. On the issue of exemption from payment of CRC, we find that the appellant has referred to a letter dated 18.08.2021 issued by DGHRD, Department of Revenue, Min. of Finance in respo....