2019 (12) TMI 899 - HC - Customs

Exemption from payment of cost recovery charges - Whether the appellant can be held responsible for non-payment of cost recovery charges when no calculation was made by the Revenue? - HELD THAT - The appellant started working as CFS with effect from 1-3-2008 and as per instruction dated 14-12-1995 read with Circular No. 52/97-Cus., dated 17-10-1997, a CFS is required to deposit in advance the cost recovery charges. It is fact on record that cost recovery charges are to be calculated by the Revenue, the appellant cannot pay cost recovery charges without calculation of demand of cost recovery charges payable by the appellant. Therefore, in the absence of any calculation of the demand made by the Revenue, the appellant cannot be responsible for non-payment of cost recovery charges. As per C.B.E. C. circular dated 12-9-2005, if CFS achieved bench mark performance during the previous years, it is entitled for waiver of charges. Admittedly, in this case the appellant has achieved the bench mark performance within the initial two years. As the appellant has achieved the bench mark performance, in that circumstance, the Revenue is duty bound to examine the issue and disposed of the claim of waiver failing which the Revenue cannot continue to demand of cost recovery charges from the appellant. On perusal of the said provision, the CFS is required to pay the cost recovery charges at rate and manner specified by the Ministry. As, no manner or rate has been prescribed under the regulation or any other way subsequent to the regulation, in that circumstance, we are of the view that cost recovery charges cannot be demanded from the appellant. Respondent during 2008-2010 achieved benchmark performance and instructions of 2005 as well 2009 nowhere require filing of application by CFS seeking waiver of cost recovery charges. As per instructions no dues should be pending on 31.8.2005 and it is not case of Appellant that anything was pending against Respondent on 31.8.2005. Even otherwise, the Respondent cleared dues of 2008-10 prior to notice dated 04.06.2012(Annexure A-1) issued by Appellant. Prior to 2009 only instructions were holding the field and Respondent-CFS cannot be asked to pay cost recovery charges when it had already achieved benchmark performance which is the paramount requirement. The Respondent has not claimed exemption for the period 2008-2010, thus there seems no reason to charge cost of officers when benchmark performance stood achieved. There are substance in the findings recorded by Tribunal that no demand of cost of officers can be made in the absence of specified rates and manner. Appeal dismissed - decided in favor of appellant.

Summary

Issues Involved:
1. Applicability of Ministry Instructions/Circulars on cost recovery charges post-HCCAR, 2009.
2. Justification of CESTAT's decision on cost recovery charges post-HCCAR, 2009.
3. Conditions for waiver of cost recovery charges based on Ministry’s letter dated 12.09.2005.
4. Requirement of specific order for waiver of cost recovery charges under CBEC’s Circular No. 13/2009-Cus.

Detailed Analysis:

1. Applicability of Ministry Instructions/Circulars on cost recovery charges post-HCCAR, 2009:
The Appellant argued that the instructions issued prior to the Handling of Cargo in Customs Area Regulations, 2009 (HCCAR, 2009) remained applicable even after the regulations came into effect, and the Respondent, being a Container Freight Station (CFS), was obligated to pay the cost recovery charges for customs officers posted at its station. The Respondent countered that post-2009 regulations, the government was required to specify the 'Rates and Manner' of cost recovery charges, which was not done, making the demand unsustainable. The Tribunal, relying on the Supreme Court judgment in Commissioner of Central Excise and Customs, Kerala Vs. Larsen and Toubro Ltd., held that in the absence of specified rates and manner, the demand for cost recovery charges could not be sustained.

2. Justification of CESTAT's decision on cost recovery charges post-HCCAR, 2009:
The Tribunal found that the Respondent achieved the benchmark performance required for waiver of cost recovery charges within the initial two years of operation. It held that in the absence of any calculation of demand by the Revenue, the Respondent could not be held responsible for non-payment of cost recovery charges. The Tribunal's decision was based on the fact that the Respondent had met the benchmark performance criteria and that the government had not specified the rate and manner of charges as required by the 2009 regulations.

3. Conditions for waiver of cost recovery charges based on Ministry’s letter dated 12.09.2005:
The Appellant relied on the instructions dated 12.09.2005, which required a CFS to achieve benchmark performance and have no cost recovery charges under dispute or pending to qualify for a waiver. The Respondent had achieved the benchmark performance during 2008-2010 and had cleared the dues prior to the demand notice dated 04.06.2012. The Tribunal noted that the instructions did not require the filing of an application by the CFS for waiver and that the Respondent had met all necessary conditions for the waiver.

4. Requirement of specific order for waiver of cost recovery charges under CBEC’s Circular No. 13/2009-Cus:
The Tribunal held that the waiver of cost recovery charges applied even without a specific order from the competent authority, as the Respondent had achieved the benchmark performance. The Tribunal emphasized that the government’s failure to specify the rate and manner of charges post-2009 regulations meant that no demand could be made.

Conclusion:
The High Court upheld the Tribunal’s decision, finding no reason to interfere with its findings. The court noted that the Respondent had achieved the benchmark performance and cleared the dues for 2008-2010 prior to the demand notice. The court agreed with the Tribunal that in the absence of specified rates and manner of cost recovery charges post-2009 regulations, no demand could be made. The appeal was dismissed as it lacked merit.