TaxTMI 
TaxTMI 
2026 (6) TMI 1310
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.... 703 and, inter alia, engaged in the business of running duty free shops at several airports and seaports in India. 3. By and under a Special License No.89/2016 dated 14.07.2016 issued by the Commissioner of Customs (Port), Kolkata, under section 58A(1) of the Customs Act, 1962 ("Customs Act"), the appellant was permitted to operate a special bonded warehouse at Netaji Subhas Chandra Bose International Airport ("NSCBI Airport"), Integrated Terminal Building, Kolkata, West Bengal, for storage of imported liquor, tobacco, perfumes, cosmetics, camera, watches, transistors, household items, food and confectionaries, accessories and such other items. As per condition 14 of the License, "The licensee shall take the services of Custom Officer either on Cost Recovery basis or MOT fees basis." 4. As part of its normal business operations, the appellant is required to remove its products from its special bonded warehouse and bring them to its duty-free shops for sale. Being an operator of a special bonded warehouse, the appellant is required to comply with Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016 ("Warehousing Regulations"), which requires a licensee to pay ....
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....e Ld. Counsel appearing on behalf of the appellant submitted that the Ld. Principal Commissioner has failed to act in terms of Regulation 3(e) of the said Regulations read with Paragraph 11 of the Circular. It is submitted that as per Regulation 3 of the Regulations read with Paragraph 11 of the Circular, where the services of the Customs Officer is required once a day or once a week, the operator/licensee of the special bonded warehouse is required to pay costs of supervision on MOT basis; that recovery of costs on CRC basis is required only in certain circumstances when the services of the customs officer is required for an entire day or for better part thereof. 8.1. It is submitted that in the present case, the services of the Customs Officer were availed only once a day and that too for a period not exceeding 2 hours and as such, the recovery of costs on CRC basis is per se arbitrary, illegal and contrary to the provisions of Regulation 3 of the Warehousing Regulation read with Paragraph 11 of the Circular. Accordingly, the appellant contends that the impugned order is contrary both on law and facts. 8.2. He further submitted that the appellant had begun its operations at....
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....is only an administrative office of the Customs Authorities. No Customs Officers are deputed from the Customs House which is located at a distance of 30 kms approximately from the warehouse of the Appellant located at the basement of the integrated Terminal Building of NSCBI Airport. The Preventive Officer is deputed from the station at the upper ground floor of the integrated Terminal Building of NSCBI Airport. As such, the reliance of the Principal Commissioner of Customs upon the Renewal Application of the appellant is completely misplaced and a red herring. (iii) That the interpretation of Regulation 3(e) of the Warehousing Regulations by the Principal Commissioner of Customs is erroneous and perverse. Regulation 3(e) of the Warehousing Regulations does not require the Appellant to book the customs officer for a dedicated timeslot. As such, the Principal Commissioner of Customs is reading into the provisions of the Warehousing Regulations, which conduct on the part of the Principal Commissioner of Customs is contrary to the law and mandate of the Customs Act and the Rules and Regulation framed thereunder. (iv) That the purported finding of the Principal Commis....
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....appellant had been granted a Special Warehouse Licence by the Commissioner of Customs (Port), Kolkata vide Special License No.89/2016 dated 14.07.2016 under section 58A(1) of the Customs Act, 1962, to operate a special bonded warehouse at Netaji Subhas Chandra Bose International Airport ("NSCBI Airport"), Integrated Terminal Building, Kolkata, West Bengal, for storage of imported liquor, tobacco, perfumes, cosmetics, camera, watches, transistors, household items, food and confectionaries, accessories and various other items. As per condition 14 of the License, "The licensee shall take the services of Custom Officer either on Cost Recovery basis or MOT fees basis." 12. Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016 ("Warehousing Regulations") requires a licensee to pay for the services of supervision of the warehouse by the officers of customs on recovery of costs, in compliance with paragraph 11 of Circular No.32/2016-Cus dated 13.07.2016 issued by the Central Board of Excise and Customs. For ease of reference, paragraph 11 of the C.B.E.C. Circular No. 32/2016-Cus. dated 13.07.2016 is reproduced below: - "11. Recovery of costs: Clause (e) ....
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....or an entire day or for better part thereof, or (ii) where the services are required twice a day; or (iii) where the services are requested for the entire day. 13. In the present case, from the records, it is evident that the appellant have utilized the services of the officers only for six hours or part of a day. We find that the appellant themselves worked out the MOT charges payable by them for the services utilized. For ready reference, the charges worked out by the appellant for the period from 01st December, 2016 to 31st December, 2016, as submitted by the appellant vide its letter dated 06.01.2017 to the Superintendent of Customs (Bond), NSCBI Airport, Kolkata, is extracted below: - Mot fee for the period of 1st December.2016 to 31st December. 2016 Sr. No. RELEASE APPLICATION NO. Date Day MOT Fees (Rs.) 1 57/12 Friday, December 02, 2016 Fri 1070 2 58/12 Monday, December 05, 2016 Mon 1070 3 59/12 Tuesday, December 06, 2016 Tue 1070 4 60/12 Wednesday, December 07, 2016 Wed 1070 5 61/12 Thursday, December 08, 2016 Thur 2940 6 6....
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....t of approximate 586 working days of the said period. Regarding duration of services provided by the Customs officers, it has been contended by the Revenue that one or two Customs officers are required for a major part of the day on a daily basis, which fact could be corroborated from the MOT calculation done by M/s Flemingo DFS Pvt. Ltd. By virtue of the above submissions, the Ld. Authorized Representative of the Revenue contended that the services rendered by the customs officers are chargeable on the basis of Cost Recovery in this case. 15.1. It is observed that in the case on hand, the claim of the Revenue is that the officers were posted from Customs House to attend the work relating to the Warehouse located in the Airport. However, we find that there is no evidence available on record to show that the said officers have actually worked for more than six hours. In the absence of any substantive evidence, it cannot be concluded that the services of the customs officers have been utilized for the full day. Therefore, the above contention of the Ld. Authorized Representative of the Revenue is devoid of merit. 16. From the details of the impugned demand, it is observed that ....
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....rs only for 63% of the total period. 19. In view of the above, we find that there is no corroborative evidence on record to establish that the services of the officers of customs have been used for the entire day or for the better part thereof, as alleged by the Revenue, and therefore, in terms of Circular No.32/2016-Cus dated 13.07.2016, we hold that the appellant is liable to pay service charges for the services utilized by them only on Merchant Over Time (MOT) basis. Thus, the demand confirmed in the impugned order by demanding service charges as per Cost Recovery Charges (CRC) basis is not sustainable in the eyes of law. 20. We also take note of the fact that an identical matter, pertaining to the appellant's operations at Dabolim International Airport, Goa, has already been decided by the Ld. Deputy Commissioner of Customs, Custom House, Marmagoa, Goa vide Order-in-Original No.05/2020-21-DC(CUS)/ADJ dated 27.02.2021, wherein a similar demand for recovery of costs on CRC basis made was dropped. The relevant observations as recorded by the Ld. Deputy Commissioner of Customs in the above Order-in-Original are reproduced below: - "11. In terms of Board Circular No. ....
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.... that the DFS operators store goods in warehouses in and around the precinct of the airport which qualify to be licensed as bonded warehouses as they are capable of being under the lock of customs. Further clarificatoin regarding recovery of costs through MOT or Cost recovery basis has been brought out in paragraph 11 of the Circular 32/2016 Reading both the circulars together I find that though it has been acknowledged that the warehouses are in or around precinct of airport, nowhere it exempts the licensee from payment towards MOT or cost recovery charges when warehouse is situated in the precinct of the airport which is in fact Customs station notified under Section 7 of the Customs Act, 1962. 16. Circulars issued by the Board are binding in law on the authorities under the respective statutes. Hence I find that though it is seen from the evidences produced that there is no basis for demand of cost recovery charges, MOT as prescribed under Customs (Fees for rendering services by Customs Officers) Regulations 1998, is clearly applicable. 17. Once I find that MOT is admissible in this case, amount of Rs. 2,95,460/- (Rupees Two Lakhs Ninety Five Thousand ....