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TMI Blog2014 (10) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... which are pilfered shall be of the person having custody of the iported goods. In other words, if the imported goods are pilfered after unloading thereof in a customs area while in the custody of the person within the meaning of sub section (1) of Section 45, then, it is his responsibility and he will be liable to make good the loss caused by such pilferage. By clause (5) the conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area are set out. That clarifies that any person who intends to be approved as a Customs Cargo Service Provider for custody of importer goods or export goods and for handling of such goods in a customs area labeled as an applicant, has to fulfill the conditions specified in clause 5(1)(i) and 5(2) which states that that this applicant shall undertake to bear the cost of the customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. There the Perishable Cargo Terminal permission refers to the Handling of Cargo i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner. These are officers posted on additional sanctioned posts than the regular strength. The details have been provided in the affidavit in reply. In that regard, we find that Mr. Jetly has rightly relied upon paras 32 to 37 of the affidavit in reply, wherein it has been pointed out as to how additional cost has to be incurred for providing the services of the staff and posting them at the disposal of the station. It is in these circumstances that though it is denied that this is in the nature of a tax or a fee but the recovery is supported assuming to be a fee by corelating it with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1956. They are, inter alia, engaged in the operation, management and development of Chhatrapati Shivaji International Airport, Mumbai, (for short C.S.I.A. ) and the Air Cargo Complex, Sahar, Mumbai. The Respondents are the officers and authorities exercising powers under the Customs Act, 1962 and the regulations framed thereunder. 4] The Petitioners submit that as a part of the policy to encourage private sector participation in the development of Airport infrastructure, the Government of India granted an inprinciple approval for developing the C.S.I.A. and the adjoining Air Cargo Complex. The Petitioner company was selected as a successful bidder through the bidding process for the purposes of implementation of this policy. In terms of this decision, the necessary legislations, namely, the Airport Authority of India Act, 1994 were amended. The Petitioner herein entered into an Operation, Development and Maintenance Agreement dated 4th April, 2006 with the Airports Authority of India (hereinafter referred to as 'OMDA') and a State Support Agreement dated 26th April, 2006 (hereinafter referred to as 'SSA') with the Hon'ble President of India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: (10) The custodian shall bear the cost of the Customs Staff posted at the Sea Ports and Air Cargo Complexes. The Commissioner of Customs shall decide the number of staff, which is required to be posted in the facility considering the workload in the station. 9] Subsequently, vide Circular No.27/2004CUS dated 6th April, 2004, it was notified by Respondent No.2 that certain categories of custodians shall be exempt from following the guidelines issued under the aegis of Circular No.34/2002CUS dated 26th June, 2002. Relevant paragraph of the aforementioned Circular is reproduced herewith: ....... Doubts have been raised by the field formations whether these guidelines will apply only to custodianship of new ports and new air cargo complexes or they will also apply to the following cases in respect of already functional ports or air cargo complexes (including courier terminals). (i) Custodian notified under section 45 of Customs Act, prior to 26th Jun, 2002 and no change in custodianship or area after 26th June, 2002. (ii) Custodian notified prior to 26th June, 2002 but part or whole of the same premises transferred (on lease or otherwise) to new custodian on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20th May, 2011, Joint Commissioner of Customs accorded the concurrence for commencement of operations at the new Perishable Cargo Terminal for export cargo with effect from 16th May, 2011, however, for the limited hours from 8.00 a.m. to 10.00 p.m. against the Petitioner's request for 24X7 hours. 14] The Petitioner vide its letter dated 28th May, 2011 responded to the Respondents letter dated 20th May, 2011 explained the practical difficulties faced by the Petitioner for the limited operation from 8.00 a.m. to 8.00 p.m. and once again requested to allow 24 hours custom operations. Vide letter dated 6th June, 2011, the Respondent No.3 sought intimation as to the Tariff for the new perishable cargo terminal has been approved by Airport Economic Regulatory Authority (AERA) and also sought total tonnage of cargo handled at new perishable cargo terminal for the month of May 2011. Subsequently, the Respondent No.7 vide letter dated 8th June, 2011, directed the Petitioner to pay cost recovery charges in terms of the regulations amounting to ₹ 8,16,366/. However, no word on this was received from the Respondents to the aforementioned letter. Accordingly, vide letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (including courier terminals). (i) Custodians notified under section 45 of Customs Act, prior to 2662002 and no change in custodianship or area after 2662002. (ii) Custodians notified prior to 2662002 but part or whole of the same premises transferred (on lease or otherwise) to new custodian on or after 2662002. [e.g. Airport Authority of India (AAI) is the custodian of Mumbai Air Cargo Complex from a period prior 2662002. They have later, after 2662002, transferred custodianship for part of the Air Cargo Complex to Air India]. (iii) Custodians notified prior to 2662002 but premises extended after 2662002 under the same custodianship. 2. The matter has been examined by the Board and it is clarified that the new guidelines issued vide Board's Circular No.34/2002Cus, dated 2662002 will not apply to the above categories of cases. However, the conditions and obligations already being discharged by the earlier custodians for such existing air cargo complexes (including courier terminals) or ports should be retained and applied to the new custodians also. A bare perusal of the same shows that the Petitioner is covered within clause (ii) of the same. 18] The Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erit in the Writ Petitions and deserve to be dismissed. He submits that the Petitioner have not pointed out the true and correct facts. It is the Petitioners who requested for construction of Perishable Cargo Center for exports vide their letter dated 13th April, 2009. By letter dated 26th March, 2010, the Petitioners submitted certain features of this Center. Thereafter, a letter dated 3rd May, 2011 was received from the Vice President, Cargo, of the Petitioners regarding custodian bond and indemnity bond for center for perishable cargo. Further, request was made to grant approval as per section 45 of the Customs Act, 1962 to the Petitioners and M/s. CSC India Pvt.Ltd. who act as custodian and an outsourced agency to operate the facility and issue necessary Notification and approval in this regard. 23] The Commissioner of Customs (Exports) approved the appointment of Cargo Service Center India Pvt. Ltd. as Customs Cargo Service Provider for a period of two years from the date of issue of the letter. 24] Mr. Jetly, therefore, submits that not only this document but a Notification issued on the very date i.e. 5th May, 2011 under section 8(a) of the Customs Act, 1962 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Area Regulation' 2009 implies that while the Custodians approved under any other statute need not take approval of the Commissioner of Customs, they are not absolved from their obligation and responsibilities as envisaged under the Handling of Cargo in Customs Area Regulation, 2009. These regulations have been framed under section 141(2) which is uniformly applicable for manner of receipt, storage and dispatch of goods in customs area. In other words irrespective of the fact whether Custodians are appointed by Customs or are created under any other statute, the manner of receipt, storage and dispatch of goods in customs area etc. shall be uniform and also the responsibilities and obligation cast upon Custodians under HCCAR framed under section 141 of the said Act. 28] Mr. Jetly submits that as per Regulation 5(2) of Handling of Cargo in Customs Area Regulations, 2009, the CCSP shall undertake to bear the cost of Customs officers posted, at such customs area on cost recovery basis, by the Commissioner and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance. The Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot notified as Customs Area. This is a new construction and new customs notified area. Thereafter, Mr. Jetly has pointed out that the customs Commissionerate has also notified a new Air Freight Station at Mulund vide Notification No.3/2012 dated 9th April, 2012 for which the cost recovery charges have been demanded. Therefore, a Government of India undertaking also paid the same. Mr. Jetly relied upon several policies and guidelines formulated for controlling the activities of Custodians and urged that the handling of Cargo in Customs Areas Regulations, 2009 have been framed by the Department consequent to the amendment of the said Act. Therefore, according to Mr. Jetly, Section 141(2), 157 and the Notifications and Circulars should be read together. Mr. Jetly relied upon a Custodian Bond submitted by the Petitioners for Perishable Cargo Terminal and a copy thereof is annexed as Annexure 11. He relied upon para 9 thereof at page 164 of the paper book. 31] Mr. Jetly submits that for the reasons that have been set out in the affidavit, it is apparent that the Petitioners will have to comply with the demand. They have always understood that the liability to pay these charges would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2006. That was on the subject of transfer of custodianship. A copy of this letter is annexed as AnnexureA to the Writ Petition and the same reads as under: For development and management of worldclass airport at Delhi and Mumbai Airports the Government of India had decided to form a Joint Venture Company with strategic private partners holding 74% of the equity and the balance 26% to be held by AAI. After international competitive bidding process, a consortium led by M/s. GMR Infrastructure Ltd. was selected for the strategic partnership for operation, development and management of Delhi Airport and similarly consortium led by M/s. GVK Industries Ltd. for Mumbai Airport. The two Joint Venture Companies namely Delhi International Airport Private Limited and Mumbai International Airport Private Limited have accordingly been incorporated to take over Operations and Management of Delhi and Mumbai Airport. At present AAI, erstwhile IAAI, is declared as Custodian of cargo in respect of IGIA, New Delhi vide Custom's Public Notice No.30 of 1986 (copy enclosed). Similarly in respect of Mumbai, Commissioner of Customs, Air Cargo Complex, Sahar, Andheri (East) Mumbai has iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for home consumption or warehoused or for transshipment in accordance with the provisions of Chapter VII. It is this sub section of section 45 which is part and parcel of the Notification dated 3rd May, 2006. Then, by sub section(2) of section 45, the duties and obligations of the persons having custody of any imported goods in a Customs Area have been set out. Then, by sub section (3) the liability to pay duty on the goods which are pilfered shall be of the person having custody of the imported goods. In other words, if the imported goods are pilfered after unloading thereof in a customs area while in the custody of the person within the meaning of sub section (1) of Section 45, then, it is his responsibility and he will be liable to make good the loss caused by such pilferage. 36] The Notification dated 19th October, 2002, copy of which is at AnnexureC appoints Airport Authority of India and M/s. Air India Ltd. to be the custodians in terms of the above provision. The Petitioners have stepped into their shoes. The guidelines which have been issued on 26th June, 2002, namely, standard set of guidelines for appointment of custodian of Sea Ports and Air Cargo Complexes have an an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... todian as referred to in section 45 of the Act and persons as referred to in subsection (2) of section 141 of the said Act. 40] It has been also clarified that these Regulations apply to the handling of imported goods and exported goods in Customs Area as specified under Customs Act, 1962. By clause (4) the Regulations have been given a retrospective operation. 41] By clause (5) the conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area are set out. That clarifies that any person who intends to be approved as a Customs Cargo Service Provider for custody of importer goods or export goods and for handling of such goods in a customs area labeled as an applicant, has to fulfill the conditions specified in clause 5(1)(i) and 5(2) which states that that this applicant shall undertake to bear the cost of the customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. 42] The Petitioners rely upon a Circular No.13/2009Cus dated 23rd Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larified that no exemption is available to existing Custodians/CCSP in so far as provision of facilities and fulfillment of the prescribed conditions in Regulation 5 and 6, as applicable, within the specified limit are concerned. Further, custodians under the Major Port Trusts Act, 1963 and Airports Authority of India Act, 1994 shall not be required to make an application under Regulation 4 or 9 for approval or renewal under these regulations, but they would be required to necessarily discharge the responsibilities cast upon them in terms of Regulations 5 and 6 of the regulations without any exception. 45] Then, we find a Notification No.2/2011 dated 5th May, 2011 issued under section 45(1) and 141(2) of the Customs Act, 1962 and copy of the same is at AnnexureJ which approves the appointment of the Petitioner as custodian of the export goods. That is because of an agreement between the Petitioner and Cargo Service Center (I) Pvt. Ltd. (CSC) to operate the Perishable Cargo Terminal on their behalf and in pursuance to a bond styled as a Bond and Indemnity Bond in terms of the 2009 Regulations. 46] The first response by the Petitioner to this communication/Circular is that, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey referred to the agreements with the authorities enabling them to step in and further documents by which the MIAL being declared as a custodian in place and instead of Airport Authority of India. The Petitioner relied on the position which according to them emerges from the agreement enabling them to take over the operations and management of the CSIA and Air Cargo Terminal. They submitted that they step into the shoes of AAI and therefore, automatically and legally entitled to the exemption which AAI enjoyed from payment of cost recovery charges. The department of customs, however, went on dispatching the demand notices and the Petitioner claimed to have made payment under protest and without prejudice. However, what they pointed out by their letters is that there is no such exemption which the Petitioner enjoyed and the reliance placed on the order passed by the Andhra Pradesh High Court, namely, GMR Hyderabad International Airport Private Limited dated 11th June, 2012 is misplaced. The public notice dated 29th August, 2012 and the further documents and which are annexed to the Writ Petition would go to show that the Petitioner was seeking all benefits and advantages of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be called as an appointment of a custodian. That may be in a given case under some other law but if the only requirement that is dispensed with is of seeking approval from the Commissioner of Customs that does not relieve the Petitioners from compliance with other legal obligations. Else, it would have not sought exemption from such clearance. There is much substance in the contentions of Mr. Jetly in that regard. We find that the stand taken by the Respondent and reiterated before us by Mr. Jetly, deserves to be accepted once the above legal position is appreciated and in proper perspective. 51] Mr. Jetly was, therefore, justified in urging that the Petitioners communication firstly requesting for grant of a status as a custodian and thereafter seeking approval would bely their contentions and to the contrary. If some governmental functions have been now allowed to be performed and carried out by the private entities that will not make any difference. In that regard, Mr. Jetly's reliance on para10 of the affidavit in reply and the annexures thereto, is well placed. Mr. Jetly also is justified in relying on section 141(2) and the language of section 157 of the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anship for part of the Air Cargo Complex was transferred to Air India by the Airport Authority of India. That is why the exemption enjoyed by these two entities and claimed by the Petitioners is restricted to the area. The Perishable Cargo Complex is a facility which has been developed and with the participation of another entity. That was not covered as original premises and under the Notification issued on 19th October, 2002. Therefore, as regards this Perishable Cargo Terminal, there cannot be any exemption. Similarly, the argument of the Respondents that in the backdrop of the Circulars and Notifications referred by us above, it is apparent that none of the functions under the Customs Act could be discharged and carried out nor the power exercised in that behalf, except by the officers functioning under the Customs Act is accurate. The Customs staff is under control of the Commissioner of Customs. It is in these circumstances that it is fallacious to argue that the staff of this Customs Department reports to other entities much less the Petitioners. None can displace them or take over their duties and functions which are statutory. Even if that is not the position in law still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs staff posted at the Perishable Cargo Terminal by the Commissioner of Customs, Air Cargo Complex, Mumbai on cost recovery basis. The Petitioners would not have been permitted to outsource the function of handling of Cargo within this terminal premises unless the Regulation 6(2) of these Regulations had permitted them to do so. Further, they could not have been appointed as custodian and within the meaning of the said term and as contemplated section 45 of the Customs Act, 1962, unless, they subjected themselves to these provisions. That they did so voluntarily does not mean that they can pick and choose favourable or beneficial terms and conditions and leave our or omit the so called onerous one's. Therefore, shall remain in custody of such person are the relevant words and to understand the concept. The permission to set up a Perishable Cargo Terminal for exports was sought by the Petitioners. That the facility was constructed by the Cargo Service Centre India (P)Ltd. on a Build, Operate and Transfer basis is clear from Exhibit '7' to the affidavit in reply. That entity is also designated as Customs Cargo Service Provider is further clear. The function of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the judgment of the Andhra Pradesh High Court is concerned, we find that there as well, the learned Single Judge has without in any manner appreciating the position of the Customs Officers and their authorities under the Act held that Regulation 5(2) purports to levy a tax. We are of the opinion that cost recovery charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before a importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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