2017 (12) TMI 676 - HC - Customs

Exemption from payment of deployment of staff - cost recovery charges - Circular dated 10.04.2013. Held that - the Government of India, issued a circular providing for exemption from payment of cost recovery charges by the custodians of the ports subject to certain conditions. The basic condition was of satisfying the basic performance norms of minimum cargo and documents handled during a certain period. Such norms would show that for a set up of specified number of officers of specified cadres, the seaport should have achieved a minimum volume and the value of import and export cargo. The port should also have minimum number of documents of bills of entry or shipping bills annually. Para 5 of the circular is of utmost important. Clause (a) of para 5 provides that volume/value and number of documents in case of seaports must be met in each of the preceding two financial years. Clause (b) of para 5 provides that exemption from gross recovery charges would be prospective. Clause (c) of para 5 imposes an additional condition that no cost of recovery charges shall be outstanding. The reference to no cost recovery charges shall be outstanding also has a bearing on this aspect of the matter. If on one hand, the Government of India expects that the custodian should pay up the charges and not be in arrears of such charges, when the application for exemption is being processed, the contention that such exemption even if later on granted, would only be prospective, would be incongruent. On one hand, the custodian would have to, pending finalization of the application for exemption, go on depositing the recurring charges with the Government of India, failing which, he would be stated to be breaching condition contained in clause (c) of para 5 of the circular, and on the other hand when such application is granted, the custodian would be told that no refund can be granted for such charges already deposited since the exemption is always prospective. Grant of exemption from the date of the application, if the application is in order and no delay can be attributed to the petitioners in either making the application or supplying necessary information to the department, cannot be stated to be retrospective operation of the order of exemption. Pending such application for exemption, the custodian cannot discontinue depositing the charges with the Government. In a given case, it may happen that the application is ultimately rejected for valid reasons. It is possible to argue that in such circumstances, the Government of India, cannot be left uncovered for the period during which such application was made and was pending with the authorities. It is perhaps therefore correct on the part of the Government of India to insist that pending such application for exemption, the petitioners should have gone on depositing the recurring cost recovery charges. However, in the present case, nonpayment of the charges cannot be the base for rejecting the grant of exemption from the date of the application. This is so because admittedly all the while when such application was pending, the petitioners were never conveyed that such application shall not be processed, entertained or granted since the current charges are not paid. The condition of grant of exemption under impugned order dated 15.12.2015 of the exemption being available from the date of the order is struck down. It is provided that such exemption for payment of cost recovery charges would be available from the date of the application i.e. 12.04.2013 - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Exemption from payment of cost recovery charges.
2. Effective date of exemption.
3. Conditions for granting exemption.
4. Payment of outstanding charges.
5. Validity of prospective exemption.

Detailed Analysis:

1. Exemption from Payment of Cost Recovery Charges:
The petitioners challenged an order dated 15.12.2015 by the Chief Commissioner of Customs, Gujarat Zone, which granted exemption from payment of cost recovery charges effective from the date of the order, not from the date of the application (12.04.2013). The petitioners argued that they fulfilled all conditions for exemption as per the circular dated 10.04.2013 and that the exemption should relate back to the date of their application.

2. Effective Date of Exemption:
The circular dated 10.04.2013 laid down that the exemption from cost recovery charges would be prospective. The petitioners contended that the exemption should be applicable from the date of their application. The court observed that the circular intended for the exemption to apply from the date of the application, provided the application was in order and no delay could be attributed to the petitioners. The court noted that the exemption should not be denied for the period during which the authorities processed the application.

3. Conditions for Granting Exemption:
The circular specified conditions for granting exemption, including meeting performance norms for the preceding two financial years and having no outstanding cost recovery charges. The petitioners met the performance benchmarks, and there was no communication from the department indicating non-consideration of the application due to outstanding charges. The court held that the condition of exemption being prospective did not imply it should only be from the date of the order but from the date of the application.

4. Payment of Outstanding Charges:
The petitioners had not paid the recurring cargo handling charges post-March 2013, leading to show cause notices. They cleared these charges upon receiving the notices. The court stated that the non-payment of charges could not be the basis for rejecting the exemption from the date of the application, as the petitioners were not informed that their application would not be processed due to non-payment. The court emphasized that the petitioners should have been told to continue depositing charges pending the application outcome.

5. Validity of Prospective Exemption:
The court examined the applicability of the prospective exemption clause and concluded that it aimed to ensure no entity could claim exemption for a period prior to the circular or application date. The court found that the exemption should be granted from the date of the application if all conditions were met and no delay was caused by the petitioners. The court struck down the condition making the exemption effective from the order date and directed that it be effective from the application date (12.04.2013). The charges paid by the petitioners were to be refunded by 15.04.2018, failing which interest would be applicable.

Conclusion:
The petition was allowed, and the exemption from payment of cost recovery charges was made effective from the date of the application, with directions for refund of charges paid by the petitioners. The court emphasized the importance of timely communication and processing of applications by the authorities.

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