2020 (9) TMI 1006 - HC - Customs

Interpretation of the Exemption Circular - Circular No.128/95-Cus dated 14.12.1995 - Demand for Cost Recovery Charges CRC towards cost of the Customs staff posted at the station - respondents contend that the petitioner has not met the performance benchmark stipulated in the exemption Circular - whether Petitioner fulfils the eligibility criteria for availing the benefit of exemption or waiver of CRC in terms of the Circulars issued by the Revenue? HELD THAT - The evaluation of the performance of the Petitioner is based primarily upon two criteria firstly, on the number of containers/TEUs handled by CFS as given in Clause 1 (ii), and secondly, on the number of BoE/SB processed by CFS as given in Clause 1 (iii).The simple question that hinges before us is whether these criteria at Clauses 1 (ii) and 1 (iii) were to be satisfied simultaneously, or whether the satisfaction of any one of the Clauses would suffice, in order to make the Petitioner eligible for waiver of CRC. The data presented reflects that, for instance, in the year 2014-15, while the petitioner had processed 5218 TEUs, in contrast, it had only processed 602 BoE/SBs. Upon analysis of the data given, the petitioner has computed that for one BoE/SB, there were 9 TEUs i.e. to say, a ratio of 1 9. On this basis, it is implied by the petitioner that one BoE/SB pertains to more than one TEU. To buttress this contention, the petitioner also relied upon data from Kolkata Port Trust which indicates a ratio of 1 4 i.e. for one BoE/SB there are minimum of 4 TEUs. On the strength of the aforesaid workload data, it was argued before us that, even if the lower ratio of 1 4 was applied to the present factual matrix, a minimum requirement of 1200 BoE/SB would translate into 4800 TEUs. By this analysis, it was argued by the petitioner that if the requirement of 1200 BoE/SB is fulfilled by a custodian, then requirement of 1200 TEUs as prescribed in Clause 1(ii) would be rendered meaningless as it would automatically stand fulfilled - This, in our view, is an incorrect and distorted way to look at and interpret the exemption criteria laid down in the said Circular. The purpose behind the exemption clauses is that those ICD/CFS which achieve the necessary performance benchmark are not burdened with CRC. In the absence of the conjunction or between the conditions, it cannot be suggested that the aforesaid criteria have to be applied in the alternative, as sought to be presented by the petitioner. Further, the benchmark at Clause 1 (iv) makes it clear without any ambiguity that the benchmark at Clauses 1(ii) and (iii) have to be taken into consideration cumulatively in order to be eligible to claim exemption or waiver of CRC. The benchmarking is evaluated both on the basis of number of containers handled by ICD/CFS, as well as the number of BoE/SB processed, and both these conditions need to be satisfied simultaneously and not just one of them in order to be eligible to claim waiver from the payment of CRC. Both criteria envisage different parameters of performance by an ICD/CFS operator. Clause 1 (ii) envisaged number of and volume of goods handled (container/TEUs), whereas, Clause 1 (iii) envisaged the number of documents and volume of business handled. As pointed out by Mr. Bansal, there can be a situation where a document (BoE/SB) may contain goods that require more than one container, but conversely, there can also be an eventuality where a container may contain goods that are subject matter of more than one document. This would largely depend on the nature of goods. Thus, there can be a situation when there would be no correlation between the two. Mr. Bansal has further explained that a container is provided by the shipping line and it is for them to determine how to extract them. He submits that for less bulky goods, there might be more than one BoE/SB container. This situation, as portrayed by Mr. Bansal, cannot be ignored. There can be circumstances where there may be more than one BoE/SB per container. It is for this reason that the benchmarking criteria has been prescribed in such a manner that the performance can be evaluated on dual parameters for deciding the eligibility for exemption from CRC. The same is also evident on the basis of the file noting which have been placed on record by the respondent, a perusal of which throws light upon the rationale behind the issuance of the Exemption Circular. According to the petitioner s written rejoinder submissions, the rationale behind such incentivization was to promote the import/export of goods, to encourage business efficacy by targeting increase in actual business of importing/exporting of TEUs, and not the quantum of paper-work required for the same. Firstly, we must point out that this is an inference of the Petitioner which lacks material foundation. Secondly, this argument is wholly misconceived and self-contradictory. We cannot interpret business efficacy in the manner that the Petitioner contends. We also cannot agree with the Petitioner s rationale that actual business is only TEUs, and not the documents i.e. BoE/SB, or that efficacy will always be achieved when more TEUs are imported/exported in one BoE/SB, and not when the same TEU is imported/exported through multiple BoEs/SBs. If we accept this contention, it would mean that those CFS which have higher volume of paper-work should be deemed as inefficient and be denied the exemption, which cannot be correct. Clause 1 (iii) of the Exemption Circularis not to be rendered dead letter or meaningless. In our opinion, the quantum of documentation vis-avis TEUs would be driven by the requirements of each business, and it is not for the court to construe a provision merely on the perceived understanding of some data analysis. Both conditions foresee different parameters of evaluating the performance of CFS. The statistical ratio cannot be used to interpret the provision. The petitioner has contended that the plain and ordinary meaning of the benchmark shows that each benchmark is a separate criterion and there is nothing in the Exemption Circular to indicate that the petitioner was required to simultaneously satisfy more than one benchmark prescribed. On the basis of the above discussion, we are unable to agree with this interpretation of the petitioner. Furthermore, in our opinion, this viewpoint is flawed because we cannot read something that does not emerge from a plain reading of the exemption circular. The bare reading of the provision leads to a conclusion that the conditions or the performance benchmarks are required to be fulfilled simultaneously. We cannot read any requirement to the contrary. We also find the emphasis on the comma punctuation mark (,) used in Clause 5.5 of the Circular dated 23.03.2009 to be misdirected. The stress given to this separator is entirely out of context. The surrounding words both preceding and succeeding the comma have to be read together to give a complete meaning. The complete sentence reads as- These norms include parameters such as the total number of import or export containers handled, the customs declarations filed for import or export, etc The sentence expressly uses the expression such as , and then mentions some of the parameters by way of illustration or example, separated with the use of a comma, and followed by the word etc . This makes it clear that the comma has been merely used to separate the descriptive parameters, which are being mentioned inclusively. It is also obvious that these are a few of the parameters, which have been illustrated, and there may be more. All of the above makes it abundantly clear that the sentence cannot be construed to mean that the parameters, as separated by the comma, are to be read disjunctively to imply satisfaction of individual parameter separate from the rest. Lastly, we also do not find any merit in the contention of the Petitioner that file noting dated 04.08.2006, cannot be used to explain the rationale behind the language used in the Exemption Circular, on account of the noting being made after the date of issue of the Exemption Circular. The file noting was prepared pursuant to certain queries raised by the Finance Minister, minuted in the noting as (1) Will the cost recovery be prospective, i.e. after date of issue or orders? (ii) Is it ensured that no claim for past period (i.e. from date of establishment of ICD/CFS) will be made or entertained? (iii) Is It correct to infer that the benchmark will apply to actuals and not on the basis of projections made at the time of establishment of ICD/CFS? . The noting reiterates the rationale behind the concept of exemption. Therefore, in our opinion, the noting, though subsequent to the Exemption Circular, is still relevant in order to gauge the intent of the Exemption Circular. The petitioner had failed to satisfy all the conditions for becoming eligible for the exemptions - Petition dismissed.

Summary

Issues Involved:
1. Challenge to Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009.
2. Impugned demand for Cost Recovery Charges (CRC) towards the cost of Customs staff.

Issue-wise Detailed Analysis:

1. Challenge to Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009:
The Petitioner, a private Container Freight Station (CFS) at Haldia, West Bengal, originally challenged Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009. However, this challenge does not survive due to the authoritative decision in Allied ICD Services Ltd. Vs. Union of India and Ors., 2018 SCC OnLine Del 10816, where the impugned provision was upheld. The said judgment is pending challenge by way of a Special Leave Petition before the Supreme Court, without any stay against it.

2. Impugned Demand for Cost Recovery Charges (CRC):
The Petitioner also impugned the demand raised by the respondents for the recovery of CRC of customs employees posted at the Petitioner’s station.

Factual Background:
- The appointment of custodians of ICDs/CFSs/ACCs/EPZs was opened to the private sector as per Circular No.128/95-Cus dated 14.12.1995, which required custodians to bear the cost of the Customs staff posted at their premises.
- Circular No.52/97-Cus dated 17.10.1997 provided that Customs staff for all new ICDs/CFSs was sanctioned on a cost recovery basis.
- On 12.09.2005, Circular No.F.No.434/17/2004-Cus. IV (Exemption Circular) was issued, allowing regularization of cost recovery posts at ICDs/CFSs that had completed two years of operation and achieved the performance benchmark.
- Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, mandated applicants to bear the cost of Customs officers posted at such customs areas on a cost recovery basis unless exempted by an order of the Government of India.

Petitioner’s Contention:
- The Petitioner argued that they were entitled to a waiver from the payment of CRC, having achieved the performance benchmark of handling 1200 TEUs per annum as required in Clause 1(ii) of the Exemption Circular.
- They contended that the requirement to simultaneously satisfy both the benchmarks of handling TEUs and processing BoE/SB was misconceived and contrary to the object of the Exemption Circular.
- The Petitioner relied on workload data to argue that the requirement of processing 1200 BoE/SB would render the requirement of 1200 TEUs meaningless, as one BoE/SB usually pertains to more than one TEU.

Respondents’ Contention:
- The Respondents argued that the Petitioner’s request for waiver was rightly rejected as the Petitioner did not meet the performance benchmark of processing 1200 BoE/SB per annum as stipulated in Clause 1(iii) of the Exemption Circular.
- They contended that both the conditions of handling TEUs and processing BoE/SB had to be satisfied concurrently to be eligible for the waiver.
- The Respondents referred to file notings of the Ministry of Finance, which suggested that the conditions regarding the number of containers and documents processed had to be satisfied simultaneously.

Court’s Analysis:
- The Court noted that the cost recovery charges are in the nature of fees incurred by the government for services rendered by Customs staff to the custodian of the ICDs/CFSs.
- The Court held that the Exemption Circular clearly required the satisfaction of both criteria (handling of TEUs and processing of BoE/SB) simultaneously to be eligible for the waiver.
- The Court rejected the Petitioner’s argument that the criteria should be read disjunctively, noting that both criteria envisage different parameters of performance and must be met independently.
- The Court emphasized that the plain reading of the Exemption Circular indicated that the performance benchmarks were to be fulfilled simultaneously, and there was no ambiguity requiring interpretation.

Conclusion:
The Court dismissed the petition, holding that the Petitioner had failed to satisfy all the conditions for becoming eligible for the exemption from CRC. The interim order dated 3rd June 2016, as confirmed vide order dated 21st January 2019, was vacated.