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TMI Blog2018 (9) TMI 1910X X X X Extracts X X X X X X X X Extracts X X X X ..... force, (a) shall keep a record of such goods and send a copy thereof to the proper officer; (b) shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in accordance with the permission in writing of the proper officer. HCCAR, 2009 have been framed in terms of Sections 157 and 158 of the Act. The respondent was fully justified in computing such charges @ 1.85 times of the salary of the Customs officers which may also include benefit of revised pay scales consequent upon acceptance of recommendations of VI and VII Pay Commissions, as the case may be. There is, therefore, nothing illegal on the part of the respondent for insisting on recovery of differential charges of the salary upon implementation of revised pay scale rules. Circular of the Board No. 128/95-Cus., dated 14-12-1995 prescribed the procedure for appointment of custodian of ICDs and also stipulated that the custodian was required to pay the cost recovery charges. The Ministry of Finance upon appointment of custodian, specifically created posts of custom staff for manning the ICDs. Letter dated 24-7-1996 has been placed on record, in para 3 of which, the sanction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal, New Delhi (for short the Tribunal ) whereby the appeals filed by the appellant have been dismissed and adjudication orders passed by the Commissioner of Cus., dated 6-11-2012, 1-3-2013 and 19-8-2013 have been confirmed. 3. The aforesaid appeals were admitted by this Court vide order dated 15-11-2017 on the following substantial questions of law : In DB Custom Appeal No. 3/2017 :- (i) Whether on the facts and in the circumstances of the case and in law the Hon ble CESTAT was justified in confirming that the demand of ₹ 1,71,47,255/- along with interest as cost recovery charges raised by Ld. Commissioner of Income Tax under the provisions of Regulation 5(2) read with Regulation 6(1)(o) of the HCCAR, 2009 was not without jurisdiction? (ii) Whether on the facts and in the circumstances of the case and in law the Hon ble CESTAT was justified in confirming the demand of cost recovery charges raised by the Ld. Commissioner of Income Tax pursuant to the 6th Pay Commission. (iii) Whether on the facts and the circumstances of the case and in law the Hon ble CESTAT was justified in confirming the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble CESTAT was justified in confirming the demand of cost recovery charges raised by the Ld. Commissioner of Income Tax pursuant to the 6th Pay Commission. (iii) Whether on the facts and the circumstances of the case and in law the Hon ble CESTAT was justified in confirming the penalty of ₹ 20,000/- imposed by the Ld. Commissioner of Customs on account of alleged non-compliance with the provisions of the Act and the rules, regulation made thereunder. (iv) Whether on the facts and in the circumstances of the case and in law the Hon ble CESTAT was justified in confirming the order passed by the Ld. Commissioner of Customs pertaining to the suspension or revocation of the approval granted to the Appellant as custodian in respect of ICD- Bhilwara? (v) Whether on the facts and in the circumstances of the case and in law the Hon ble CESTAT was justified in not declaring the order dated 6-11-2012 passed by the Ld. Commissioner of Customs to be non est in the eyes of law being in violation of the principles of natural justice, Nemo debat esse judex in propria sua causa (i.e. no man can be judge in his own case)? 4. For conveni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said regulations for a period of five years from the date of compliance with the conditions stipulated in Clause 4 thereof. Clause 4 of HCCAR, 2009 stipulated that Customs Cargo Service Providers already approved on or before the date of coming into force HCCAR, 2009, shall comply with the conditions of the regulations within a period of three months or such period not exceeding a period of one year as the Commissioner of Customs may allow from the date of coming into force of HCCAR, 2009. In the event of non-compliance, the Commissioner of Customs, in terms of Clause 11 of HCCAR, 2009, would suspend or revoke the approval granted to the Customs Cargo Service Provider subject to the observance of procedure prescribed under Clause 12 and also order for forfeiture of security, if any. 5. According to the appellant, it regularly paid cost recovery charges for staff of Customs posted at ICD, Bhiwadi till 31-3-2008, which fact is borne out from para 4 of the adjudication order dated 1-3-2013 passed by the Commissioner of Customs, Jaipur. The appellant, in terms of the provisions of HCCAR, 2009, submitted compliance report to the Commissioner of Customs vide letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms, the tender participant M/s. Hasti Petro Chemical and Shipping Limited filed Civil Writ Petition No. 1540/2010 before this Court. Consequently, the process for appointment of Handling and Transportation Agent could not be pursued any further. The appellant vide letter dated 23-7-2009 and 9-11-2010 again requested the Commissioner of Customs to grant permission to enter into contract of Handling and Transportation of Cargo, but no response was received. According to the appellant, owing to the aforesaid developments and apathy on the part of the respondents, the ICD at Bhiwadi remained non-functional and therefore the appellant did not generate any revenue. Since there was no Custom work at ICD, Bhiwadi, no officer was ever deployed and therefore neither the department issued any demand note for cost recovery charges nor did the appellant pay any after September, 2009. 6. Further case of the appellant is that its Board of Directors, in 323rd meeting held on 26-3-2012, resolved to temporarily close the ICD and requested the Commissioner of Customs vide letter dated 12-4-2012 to suspend the approval/to withdraw the staff. The department immediately thereafter issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay cost recovery charges and its quantum have been disputed by the appellant. Details have not been provided in the show cause notice as to how the amount demanded has been reached so as to give proper reply. The cost recovery charges have been contested on various grounds as stated in the reply to show cause notice. The defense submissions have not been recorded in the adjudication order, therefore, the findings recorded in its para 4 that cost recovery charges payable have not been disputed is perverse. This goes to show the biased manner in which the adjudication order has been passed by the Commissioner of Customs. 9. Learned Counsel further submitted that the obligation undertaken by the appellant to pay cost recovery charges cannot be stretched too far to be construed to say that the appellant agreed to pay cost recovery charges in all the situations notwithstanding the default/lapse/negligence on the part of the Customs department in discharging reciprocal obligation cast on them under Regulation 6(2) to grant permission to outsource activities etc. Clue can be taken from Section 51 of the Indian Contract Act, which is based on the principle of equity and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for outsourcing was correct or the stand of the Commissioner that permission granted will amount to virtually handing over ICD to the third party was correct to come to the conclusion that the Department of Customs was correct in denying permission. It is submitted that all these aspects are disputed questions of fact which require fair adjudication by an independent authority. No cogent reasoning has been given by the Tribunal on the jurisdictional issues raised by the appellant. Without prejudice to above, it is submitted that HCCAR, 2009 came into force on 17-3-2009 and as per Regulation 4, the maximum period of one year can be granted by the Commissioner to the appellant to comply with the regulation i.e. 17-3-2010. Therefore, the action of the Commissioner of Customs to order recovery of the cost recovery charges beyond 17-3-2010 or even allegedly keeping the officers posted beyond that date is ultra vires to HCCAR, 2009 itself and thus demand itself is void. 12. It is argued that reliance placed by the respondents on the judgment of Madras High Court in M/s. Hari CFS v. Union of India Others, (Writ Petition (MD) No. 2634 of 2009 along with other writ petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly unjustified as the appellant is a State Government Undertaking and therefore no willful default can be attributed to it for non-payment of cost recovery charges. Learned Counsel in support of his arguments relied upon judgment of the Supreme Court in State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli, (1987) 2 SCC 160 and judgment of High Court of Chhattisgarh at Bilaspur in Kymore Engineering Works Pvt. Ltd. v. State of Chhattisgarh Others, (Writ Petition (C) No. 817 of 2016 decided on 2-8-2017). 14. Mr. Anuroop Singhi, Learned Counsel for the respondents opposed the appeals and submitted that the Commissioner of Customs was justified in passing the impugned adjudication orders and the Tribunal was also equally justified in confirming the same. Learned Counsel referred to Clause 5(2) of HCCAR, 2009 and argued that according to said clause, the appellant had undertaken to bear the cost of the 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 Ministry of Finance, Government of India. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of his arguments, Learned Counsel also relied upon the judgment of Bombay High Court in Mumbai International Airport Private Limited v. The Union of India, 2015 (1) Bom CR 472 = 2014 (310) E.L.T. 3 (Bom.). 16. We have given our anxious consideration to rival submissions and carefully examined the material on record. 17. The controversy involved in the present matters stands covered not only by judgment of Madras High Court in M/s. Hari CFA (supra), but also by two subsequent judgments; one by the Division Bench of Bombay High Court in M/s. Mumbai International Airport Private Limited v. The Union of India Others (Writ Petition No. 584 of 2013 and 697 of 2013 decided on 13-10-2014) and another by Division Bench of Delhi High Court in Allied ICD Services Ltd. v. Union of India Others (Writ Petition (C) No. 13770/2009 along with other connected matters decided on 27-8-2018) [2018 (364) E.L.T. 59 (Del.)]. 18. The Delhi High Court in the aforesaid case of Allied ICD Services Ltd. (supra) was also considering challenge to the levy and collection of cost recovery charges for posting of and work performed by the custom officers and staff at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with appropriate bank guarantees were executed, primarily to ensure the compliance with the provisions of the Act and for indemnifying the customs authorities for any loss of duty suffered due to any negligence on the part of the petitioners-companies. Accordingly, and in terms of Section 45 of the Act and Regulation 5(2) of Handling of Cargo in Customs Area Regulations, 2009, that the circular dated 14th December, 1995 and the impugned letter of the Ministry of Finance dated 1st April, 1991 have been issued. 28. Petitioners as a pre-condition for becoming custodians of the respective ICDs/CFSs/ACCs/EPZs had willingly undertaken to bear the costs of the Customs staff posted at the ICDs/CFSs/ACCs/EPZs. Thus, the payment of cost recovery charges has sanction and authority of law to back the levy and imposition. Further, the cost recovery charges so levied are against expenses incurred by the government for rendering the services at the ICDs/CFSs/ ACCs/EPZs. Therefore, in view of the case law above discussed, provisions of the Act and the documents on record, it is established that cost recovery charges are in the nature of fee for services rendered by the customs offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Notification under Section 45(1) of the Act and Regulation 5(2) of the impugned Regulation. In this regard, necessary undertakings were given by the petitioners before they were so appointed as custodian under Section 45 of the Act. They are therefore bound to bear the cost of the customs staff, posted for the ICDs/CFSs/ACCs/EPZs. The payment of cost recovery charges by the custodian of ICDs/CFSs/ACCs/EPZs has the statutory force of law and is within the jurisdiction of the respondents. 20. Appointment of the appellant in the present cases as custodian of the ICD has been made in terms of Section 45(1) of the Act according to which all imported goods unloaded in a customs area shall remain in the custody of such person as may be approved by the Commissioner of Customs until they are cleared for home consumption or are warehoused or transshipped. Sub-section (2) of Section 45 of the Act provides that the person having custody of any imported goods in a customs area, whether under the provisions of sub-section (1) or under any law for the time being in force, (a) shall keep a record of such goods and send a copy thereof to the proper officer; (b) shall not permit suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s void ab initio and violative of Articles 14 and 265 of the Constitution of India. The cost recovery made by the respondents is nothing but a fee. Charging at the rate of 185% of total salary of the Customs Officers is extravagant and exorbitant. Even in other ports, writ petitions have been filed questioning the recovery of charges for payment to the Customs Officers. Any revision of pay scale by the Central Government will apply to payment of salary by the Union Government to its employees. If any retrospective effect were to give on such revision of scales of pay, that cannot be passed on to the handlers of Export and Import. It is also stated that the Kerala High Court in similar circumstances had upheld the case of the petitioners. .. 9. At the CFS and ICDs, the Customs personnel are provided on a cost recovery basis. The sanction of postings of officers will be issued by the administrative wing of the Central Board of Excise and Customs. The custodians are required to pay 185% of total salary of the officers actually posted at the CFS. Normally one CFS will have 13 officers of various ranks. As per the guideline, dated 14-12-1995, more particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be recovered from the public or private bodies so that net expenditure of the Government is nil. Further, while calculating the cost recovery charges, apart from the cost of the staff includes the component of pay and allowances, contribution of pension will have to be recovered from their salaries. Therefore, there was no exorbitant claim in demanding 1.85 times. The obligations of Custodians are not merely flowing from the bonds executed by them, but the requirements of Customs Act will have to be followed. The judgment of Kerala High Court may not have any relevance, as it did not decide the issue relating to cost recovery charges to be met by the Custodians. 23. The Bombay High Court in M/s. Mumbai International Airport Private Ltd. (supra) also dealt with the same issue and repelled the challenge to imposition/levy of cost recovery charges. Relevant discussion made in paras 53, 54, 57 and 59 of the Report reads as under : 53. If that was not be the position, the Petitioners would not have furnished a bond as required by the authorities. It is in these circumstances that we are unable to agree with the Petitioners as they do not have any absolute e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s area. If this staff is posted to work there at and since the area or premises are claimed by the Petitioners, then, all the more, by their understanding and agreement itself, they have to pay the charges. .. 57. We find that reliance by Mr. Jetly on Exhibit 7 to the affidavit in reply is, thus, well placed. There the Perishable Cargo Terminal permission refers to the Handling of Cargo in Customs Area Regulations, 2009. As per para 4 (XXIII) thereof, the Petitioners have to bear the charges of the 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 conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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. In such circumstances, and with great respect, we are unable to agree with the Learned Single Judge of the Andhra Pradesh High Court. We find much substance in the contentions of Mr. Jetly that these matters cannot be looked at from the angle and in the manner approached by the Petitioners. 25. Circular of the Board No. 128/95-Cus., dated 14-12-1995 prescribed the procedure for appointment of custodian of ICDs and also stipulated that the custodian was required to pay the cost recovery charges. The Minist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use and the dispute ought to be adjudicated by a neutral body, which can be a competent civil court is also noted to be rejected. In the nature of the present case, arithmetical computation done by the Commissioner of Customs, would in no manner, attach any disability to him to make such computation because he did so in the same manner as he computes the customs duty in any other case. Such computation is subject to challenge by the appellant before the Tribunal and in fact, the appellant had challenged the same before the Tribunal which has upheld the same. We are, therefore, not inclined to uphold the argument that rather than computing the cost recovery charges, the Commissioner of Customs ought to have filed civil suit for such recovery. Judgment of the Supreme Court cited on behalf of the appellant in State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli (supra) and judgment of the High Court of Chhattisgarh in Bilaspur in Kymore Engineering Works Pvt. Ltd. (supra) are wholly distinguishable on the facts of the present case and do not afford any help to the appellant. 28. In view of above discussion, we do not find any infirmity in the view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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