AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1450
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....rator of the CFS at Haldia port and having been appointed as a 'custodian' under provision of section 45(1) of the Customs Act, 1962 of the goods imported and meant for export through Haldia/Kolkata port, via the said CFS, is obliged to pay to the respondent the cost recovery charges, in lieu of the manpower deployed by the respondent at the CFS, of which the petitioner No. 1 is the operator, in accordance with the Regulation and Circular existing in this regard. The respondent says that the petitioner company, though initially has duly fulfilled its legal obligation of payment of cost recovery charges but subsequently has failed to comply with the same with effect from January 1, 2015 and has not remitted the charges any further. Hence, demand has been raised by the respondent firstly vide the notice dated April 4, 2016 and also subsequently vide the other two notices dated July 2, 2020 and November 10, 2020 respectively. However, the exercise culminated into futility as the petitioner company has allegedly never paid any attention to those demand notices for payment of the amount demanded on account of outstanding cost recovery charges. (3) Due to non-remittance of the cost re....
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....as absolutely irrelevant and inconsequential due to the fact that the petitioners would not have any liability at all, for payment of cost recovery charges. Hence, no question of seeking any waiver could have arisen at all. The writ petitioners say that as the company would not be liable at all for payment of any cost recovery charges to the respondent for operation of CFS at Haldia, the above stated impugned demand notices may be set aside along with the other letter dated August 12, 2020, as impugned in this case. (5) The relevant facts leading to filing of the instant writ petition is required to be discussed. On June 25, 2012 a Public Notice No. 26/12 was published establishing Container Freight Station [CFS] at Haldia, to be operated by the present petitioner No. 1. On August 13, 2012, the other Public Notice No. 34/12, has been published by the Commissioner of Customs (Port) Kolkata, in exercise of power under Section 45 (1) of the Customs Act, 1962, appointing thereby the petitioner No. 1 as the 'custodian' of the FCL/LCL containers as well as over dimensional and break bulk cargo, imported goods received in containers from Haldia/Kolkata Port and goods meant for export t....
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....o make any payment towards cost recovery charges to the respondent. (8) Permission granted to the petitioners under the Public Notice dated August 13, 2012 which was initially for two years period, was extended for a further period of five years and finally, till August 12, 2019. Since thereafter, operation of CFS under the control of the petitioners has been suspended. (9) Waiver notification dated November 03, 2015 has been issued by the respondent for grant of waiver of cost recovery charges in the manner and extent provided by an earlier Circular dated September 12, 2005. As a one-time measure, waiver of cost recovery charges was granted to the eligible facilities under certain circumstances as specified in the said Circular. The Director General of Human Resource Development was authorized to deal with the request for waiver of cost recovery charges. It also provided that the conditions for grant of waiver shall be same as provided in the Exemption Circular of 2005. The writ petitioner applied for grant of waiver in terms of Circular dated November 03, 2015. Vide an order dated February 18, 2016 the petitioner's request for grant of waiver was rejected on the ground that....
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.... and wherein the number of Customs officers already working on cost recovery basis was found to be in excess of the norms. 3. In regard to the outstanding issues mentioned at Para 2 above, the D/o Expenditure has responded as follows: ** ** ** ** ** ** ii. DoE cannot sanction posts ex post facto. Such posts may be subsumed in the posts created during the cadre restructuring of CBEC. ** ** ** ** ** ** 4. DG(HRD), CBEC has examined the comments of D/o Expenditure and have furnished following comments: ** ** ** ** ** ** ii. Though the posts were not initially sanctioned, exemption from the payment of cost recovery charges may be granted to the facilities that fulfill the specified performance norms. HRD, CBEC has informed that the annual financial implication of such exemption is Rs.149 cr. This cannot be viewed as financial loss as such since it is Government policy to exempt the cost recovery charges when the facility fulfills the performance norms. ** ** ** ** ** ** 5. The Board was informed that further, this matter had been discussed with Member (P&V) and DG(HRD) in the meeting chaired by Chairman (C....
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....is and has to make payment for the same at such rates and manner specified by the Government of India in the Ministry of Finance, unless specifically exempted by an order of the said Ministry. (13) A Circular dated March 23, 2009 is in the nature of clarification of the said Regulations of 2009 mentioned above. Provisions have been made therein for exemption of cost recovery charges. It is necessary that relevant portion from there be quoted:- "5.1. Regulation 5 provides the conditions to be fulfilled by an applicant who wishes to be appointed as a custodian of the imported/ export goods in a customs area (ICD/CFS etc.). An exhaustive list of infrastructure and operational requirements for efficient handling of imported or export goods has been provided. Further, it may be noted that sufficient discretion has also been provided for the Commissioner of Customs to decide on the nature of infrastructure and equipments required to be installed at the premises of CCSP. Hence, it may be ensured that all the facilities provided by the custodians are sufficient for efficient handling of cargo. It is clarified that the facilities required for handling cargo at a particular ICD/ ....
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....ed by the Government and notified by the Ministry of Civil Aviation for setting up of private greenfield airports, it has been specified that in case of an international airport, the applicant for setting up of a greenfield airport will obtain clearance from the Department of Revenue for provision of Custom services. The cost of providing these services will have to be borne by the Airport Company. Hence, such custodians shall also be required to pay cost recovery charges in terms of the extant policy. 5.5. As regards ICDs / CFSs, Government had taken a decision to waive the requirement of cost recovery charges to be paid by ICD / CFS, if they fulfill the laid down norms and are in existence for a consecutive period of two financial years. These norms include parameters such as the total number of import or export containers handled, the customs declarations filed for import or export, etc. Board's instructions vide D.O. letter F.No.A.11018/12/2008-Ad.IV dated 2.7.2008 refer in this regard. Accordingly, the eligible ICDs / CFSs which fulfill the laid down criteria are being considered for exemption from payment of cost recovery charges and specific orders in individual cas....
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....e petitioner No. 1 dated July 02, 2020 on demand of cost recovery charges totalling an amount of Rs. 5,04,51,775/- for the Officers posted at the CFS. (16) The impugned letter dated August 12, 2020 was issued thereafter by the authority thereby restricting and/or suspending movement of incoming container/cargo to the petitioner's CFS from Haldia/Kolkata Port with effect from August 13, 2020. The relevant portion of that letter have been quoted above. (17) Finally, the third and last demand notice has been sent by the authority to the petitioner company dated November 10, 2020 demanding the amount of cost recovery charges, stated to have remained due and outstanding for the period from January 01, 2015 to August 12, 2020, totalling a sum of Rs. 6,75,15,678/-, less the amount already realized by the respondent by invocation of the bank guarantee earlier submitted by the petitioner to the tune of Rs. 52,10,000/-. (18) Hence, in this writ petition, the three demand notices as mentioned above and the letter of imposition of restriction/suspension of movement at the CFS of the petitioner No. 1 dated August 12, 2020 have been challenged with the prayer to set aside all of those. ....
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....ed at the end of the service provider. According to the writ petitioners in their case, none of these necessary preconditions have been fulfilled by the respondent authority. Hence, they say that any claim of cost recovery charges or of imposition of restriction due to the alleged non fulfilment of the same, to which the petitioner No. 1 has been subjected to, tantamount to gross arbitrariness and illegality, on part of the respondent authorities. (23) It is further submitted that as per the circular dated September 23, 2009, the charges in respect of the customs officers deployed at the customs clearance facility are generally required to be paid by the custodian, unless the same have been exempted. This has been relied on to further buttress the petitioners' contention that actual physical deployment of customs officer is the mandatory prerequisite for recovery of any charges on cost recovery basis from the CFS of the writ petitioner No. 1 in this case. (24) According to Mr. Mukherjee, Learned Senior Counsel, remittance of charges for cost recovery by the writ petitioner for the period from November 14, 2012 to December 31, 2014, to the tune of Rs. 1,83,82,420/- or its pray....
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.... is no question of any future liability of the writ petitioner towards payment in respect of the manpower, who got subsumed and regularised in the existing cadre. That, it is only when fresh posts on cost recovery basis for the petitioner's CFS are sanctioned in the manner prescribed, its liability towards making payments on cost recovery basis can accrue. According to the petitioner it is only for the sake of record and documentation that deployment figure is shown by the respondent in fraction which itself proves that there was no actual physical deployment of any person or even any sanction therefor. Also, that no record is available there pertaining to the purported posting of any Officer there. (28) The following judgments have been relied on by Mr. Mukherjee, Learned Senior Counsel in support of the arguments advanced by him: (a) Allied ICD Services Limited versus Union of India & Others at 2018 SCC Online Del 10816; [cost recovery charges are in the nature of "fee" for services rendered by the customs officers at the concerned CFS; cost recovery charges are to be levied and imposed at a particular rate on the basis of total salary of the officers posted at the CF....
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.... long period of time without raising any dispute as regards its own liability for the same. That, all on a sudden it has stopped and discontinued remitting the cost recovery charges and challenged as to imposition of the cost recovery charges and also the vires of the regulations before the Delhi High Court. The respondent contends and the petitioner has not denied, that the Delhi High Court has dismissed such challenge by the petitioner, vide an order dated September 24, 2020. According to the respondent the Court has left open the only issue of quantification of cost recovery charges which stands due and payable by the petitioner. Therefore, Mr. Banerjee has submitted that the petitioner has no scope to reopen the issue of applicability of cost recovery charges against the same before this Court, as the issue has already been decided and settled finally by the above order passed by the Delhi High Court. (31) So far as the question of quantification of the cost recovery charges to be remitted by the petitioner is concerned, according to the said respondent the same involves various disputed questions of fact which need to be tested on evidence before an appropriate forum. For t....
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.... 1965 SC 1740] has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [(2004) 3 SCC 553] The legal position becomes clear when the decision in Suganmal [AIR 1965 SC 1740] is read with the other decisions of this Court on the issue, referred to below:- (i) Normally, a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But an order for payment of money may be made in a writ proceeding, in enforcement of statutory functions of the State or its officers. (Vide Burmah Construction Co. v. State of Orissa [AIR 1962 SC 1320 : 1962 Supp (1) SCR 242].) (ii) If a right has been infringed "whether a fundamental right or a statutory right" and the aggrieved party comes to the Court for enforcement of the right, it will not be giving complete relief if the Court merely declares the exis....
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....rol Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549]). (vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. (Vide Sanjana M. Wig v. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242]). We are therefore of the view that reliance upon Suganmal [AIR 1965 SC 1740] was misplaced, to hold that the writ petition filed by the appellant was not maintainable." (36) Admittedly, the petitioner No. 1 was appointed as a "custodian" under Section 45(1) of the Customs Act, 1962 by Public Notice dated August 13, 2012 and was permitted to operate the Container Freight Station at Haldia subject to the express terms and conditions incorporated therein. One of the categorical conditions governing such appointment was that the petitioner "shall bear the cost of the Customs Officers posted at the Container Freight Station by the Commissioner of Customs on cost recovery basis and shall make payments in advance on half yearly basis." The said stipulation was neither ambiguous nor co....
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....ealities emerging from the records. (38) The principle of contemporanea expositio est optima et fortissima in lege [contemporaneous exposition is the best and strongest in law], also lends support to the respondent's interpretation of the regulatory framework. The consistent executive understanding of the Regulations of 2009, the Public Notices, Circulars and administrative practice unmistakably indicate that operators of ICDs/CFSs are liable to bear the expenses of customs personnel deployed for facilitation and supervision of customs operations unless specifically exempted. Such contemporaneous administrative construction, particularly in matters involving specialised fiscal and customs administration, deserves due weight unless shown to be manifestly arbitrary or contrary to statute. The petitioner has failed to establish any such inconsistency. On the contrary, the petitioner's own conduct over several years in remitting cost recovery charges accords with the respondent's interpretation of the regulatory scheme. (39) The subsequent subsuming of diverted posts into the existing cadre strength of the department also does not extinguish the petitioner's liability retrospecti....
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....lid, if they meet the essential purpose of a law, despite missing minor procedural formalities. It acts as an equitable tool to prevent technicalities from overriding justice when the core objective is achieved. The key aspect of the doctrine is that, it differentiates between mandatory, substantive requirements (which need strict adherence) and directory, procedural steps (which can be relaxed). This doctrine prevents harsh consequences and ensures that if genuine efforts have been made to comply and achieve the "intended use" or "objective", technical flaws do not invalidate the action, though by its application, fundamental statutory requirement to constitute the essence of the law cannot be touched. (42) In a recent judgment in Sumita Jha Vs. Aaone Developers Private Limited [2025 SCC OnLine SC 1822], the Supreme Court, though was dealing with absolute different fact situation as well as legal context, has propounded a principle that "substantial compliance", in simple terms, refers to a pragmatic approach whereby Courts in exceptional circumstances, recognize a party's partial or not-so-strict adherence to the statutory procedural requirements, provided the basic legislativ....
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....c servant can hold a non-sanctioned post, but whether the petitioner, after availing customs services and operating under statutory permission, can deny liability towards cost recovery charges on the basis of internal administrative modalities concerning cadre sanction. The ratio of the said judgment has no application to the controversy involved herein. (45) The challenge to the impugned communication dated August 12, 2020 also fails. Once the petitioner persistently defaulted in payment of cost recovery charges despite repeated demands, the respondent authorities were justified in imposing operational restrictions upon the CFS in order to protect revenue and ensure regulatory compliance. The restriction imposed was neither arbitrary nor disproportionate but a consequential administrative measure flowing from continued non-compliance by the petitioner. In the facts of the present case, the respondent authorities cannot be faulted for taking such action after the petitioner failed to honour its admitted obligations under the governing statutory and contractual framework. (46) This Court is also mindful of the limited scope of judicial review in contractual or fiscal matters i....