2024 (3) TMI 1301 - HC - Customs

Levy and collection of Cost recovery charges - Validity Of Notification No.26/2009 issued by Central Board of Excise and Customs - Duties functions and obligations of custodian appointed under section 45 of the Customs Act 1962 - Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations 2009 - Regulation ultra vires to section 157 and 158 of the Customs Act 1962 - HELD THAT - It is submitted that even if the same are treated to be a fee there is no justification for levy of fees as no service is being rendered to the Company. In the absence of any element of quid pro quo it is urged that the decisions of Bombay and Delhi High Courts in Mumbai International Airport Private Limited 2014 (10) TMI 508 - BOMBAY HIGH COURT and Allied ICD Services Limited 2018 (8) TMI 1610 - DELHI HIGH COURT are distinguishable and the learned Single Judge of this Court has rightly held that the 2009 Regulations are ultra vires the Customs Act 1962. In support of the aforesaid submissions reliance has been placed on the decisions of the Supreme Court in Government of Maharashtra vs. Deokar s Distillery 2003 (3) TMI 727 - SUPREME COURT and Gupta Modern Breweries vs. State of Jammu and Kashmir 2007 (4) TMI 684 - SUPREME COURT . From a perusal of Section 157 of the Customs Act it is evident that Section 157 does not enumerate any specific provision under which cost recovery charges i.e. the amount of salary payable to the officials of the Customs Department who are deployed at the Airport who perform their statutory duties can be recovered. The 2009 Regulations have been framed in exercise of the powers conferred under Section 141 and Section 157 of the Customs Act. From a close scrutiny of the aforesaid provisions of Sections 141 and 157 it is evident that there is no express statutory provision conferring authority on the appellants to levy cost recovery charges. In the absence of any special authorization to levy cost recovery charges appellants have no authority to impose cost recovery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act 1962. Therefore the officers of the Customs Department who were employed at the Airport between the years 2008 and 2013 were deployed to perform their statutory duties. The levy of cost recovery charges which is in fact salaries payable to the customs staff deployed at the Airport is in the nature of administrative charges and is a tax. It cannot be exacted from the respondent without any statutory provision. Therefore the same is also violative of Article 265 of the Constitution of India. Even assuming that the said levy to be a fee the same cannot be recovered from the respondent as no services are provided to it by deployment of additional staff at the Airport between the years 2008 and 2013. Contention that the Company at the time of application seeking appointment as Custodian has furnished an undertaking that it shall abide by the 2009 Regulations is concerned suffice it to say that the Company subsequently on 06.05.2007 and 22.11.2007 had submitted applications seeking to waive the condition Nos.10 to 13 of Circular No.34/2002. Therefore the undertaking furnished by the Company does not bind it in the facts of the case. Thus we agree with the conclusion of the learned Single Judge that the impugned 2009 Regulations are ultra vires the Customs Act. In the result the Appeal fails and the same is hereby dismissed.

Summary

Issues Involved:
1. Validity of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009.
2. Legality of cost recovery charges imposed on the Company.

Summary:

1. Validity of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009:
The intra-court appeal challenges the order dated 11.06.2012, where the learned Single Judge held that Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, lacks legal substratum and is thus unsustainable. The learned Single Judge found that the 2009 Regulations are ultra vires the Customs Act, 1962, as neither Section 141 nor Section 157 of the Customs Act authorizes the framing of such regulations regarding cost recovery charges. The Court emphasized that statutory provisions must explicitly authorize the imposition of taxes or fees, and in this case, the 2009 Regulations did not meet this requirement.

2. Legality of Cost Recovery Charges Imposed on the Company:
The appellants argued that the Company had agreed to abide by the 2009 Regulations upon seeking Custodianship and that the validity of these regulations had been upheld by other High Courts. However, the Court noted that the Company had subsequently sought waivers of certain conditions, indicating that the initial undertaking did not bind it. The Court also highlighted that the cost recovery charges, which are essentially administrative charges for customs staff salaries, constitute a tax. Since there was no statutory provision for such a levy, it was deemed violative of Article 265 of the Constitution of India. The Court concluded that the imposition of cost recovery charges without statutory backing was invalid, and no services were rendered to the Company to justify such charges.

Conclusion:
The Court agreed with the learned Single Judge's conclusion that the 2009 Regulations are ultra vires the Customs Act, 1962, and dismissed the appeal, affirming that the cost recovery charges imposed on the Company were unsustainable.