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TMI Blog2024 (7) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of Finance, for this reason also the provision of regulation 6 (1) (o) of HCCAR, 2009 cannot be invoked. Reliance placed in the case of COMMISSIONER OF CUSTOMS, CUSTOM COMMISSIONERATE, LUDHIANA VERSUS M/S KRISHNA CARGO MOVERS PVT. LTD. [ 2019 (12) TMI 899 - PUNJAB HARYANA HIGH COURT] where it was held that ' It was duty of Government of India to specify rate and manner and it is axiomatic in taxation law that in the absence of mechanism, no recovery can be made. Thus, we find 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 .' In view of the above settled legal position, the order for confirmation of cost recovery charges is not sustainable. A recent judgment of Hon ble Telangana High Court in CENTRAL BOARD OF EXCISE AND CUSTOMS, REP. BY ITS MEMBER CUSTOMS, NORTH BLOCK, GOVERNMENT OF INDIA, NEW DELHI AND OTHERS VERSUS M/S. GMR HYDERABAD INTERNATIONAL AIRPORT LIMITED [ 2024 (3) TMI 1301 - TELANGANA HIGH COURT] , dealing with the same HCCAR, 2009 regulation wherein it was held the provision of cost recovery charges as ultra virus on the ground that under Section 157 of Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently decide whether to suspend or to revoke the approval granted under the scheme. The adjudicating authority does not possess any authority to adjudicate and demand any amount from the license holder Custodian and to order for recovery of any amount despite which the adjudicating authority had confirmed the demand. Therefore the impugned order needs to be set aside on this ground alone. 2.1 He submits that the adjudicating authority has ordered to recover cost recovery charges and confirmed the amount of said charges for violation of Regulation 5 of (2) and Regulation 6 (1) (o) HCCAR, 2009. He submits that both the regulation do not give any authority to the Commissioner of Customs to order to recover or confirm any amount of cost recovery chargers from the custodial. He submits that the Regulation 2 of HCCAR, 2009 provides to undertake to bear the cost of the Custom officers posted at custom area on cost recovery basis by the Commissioner and shall make payment at such rate in the manner prescribed unless specifically exempted an order of the Government of India and the Ministry of Finance. Therefore if the customs cargo service provider breeches conditions prescribed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduce below:- 4. Retrospective Application.- Any action taken or anything done in respect of appointment of Customs Cargo Service providers, immediately preceding the coming into force of these regulations, shall be deemed to have been done under the corresponding provisions of these regulations. Customs Cargo Service providers already approved on or before the date of coming into force of these regulations shall comply with the conditions of these 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 these Regulations. 5. Conditions to be fulfilled by Customs Cargo Service provider The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (1) . (2) Undertake 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 Government of India in the Ministry of Finance; 6. Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required by 2009 Regulations. Clause (o) of Regulation 6 (1) of Regulations casts obligation upon CFS to bear cost of officers posted by Commissioner. The same clause further provides that Government of India would specify rates and manner of charges and concededly, post 2009 Regulations, rates and manner of cost recovery charges are not specified. It was duty of Government of India to specify rate and manner and it is axiomatic in taxation law that in the absence of mechanism, no recovery can be made. Thus, we find 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 . In view of the above settled legal position, the order for confirmation of cost recovery charges is not sustainable. 4.1 The identical issue was considered by this Tribunal in the case of Goodearth Maritime Limited supra wherein this Tribunal passed the following order:- 10. We have heard both sides and perused the record. The limited issue to be decided is whether the appellant is required to pay cost recovery charges in terms of HCCAR 2009 or payment of MOT charges made by the appellant is correct. In the present case, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s Jetty. Therefore Rule 5 (2) and Rule 6 (o) is not applicable in case of the appellant. Moreover, the appellant have been paying MOT charges as per the authority of the department i.e. letter dated 05.05.2009 issued by the Assistant Commissioner, Customs Bhuj Division. 11. As regard the Contention of the Adjudicating Authority that CCAR is having retrospective effect, we find that on careful reading of Rule 4 which gives retrospective effect, we find that the said provision is only to regularize the appointment of Customs Cargo service providers which have been given license prior to issue of this Regulation HCCAR 2009. Therefore, this regulation cannot be applied retrospectively for cost recovery charges, particularly when no separate officer was posted. Moreover, as discussed above, even by any stretch of imagination, HCCAR 2009 in respect of cost recovery charges is made applicable retrospectively, even than cost recovery charges cannot be recovered in terms of rule 5 (2) read with Rule 6 (o) unless separate officer is posted. Therefore, under any circumstances, in the facts of the present case, the demand of cost recovery charges is not sustainable. 12. In the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collection of proper duty thereon. Appointment of an airport under Section 7 as a customs airport and appointment under Section 45 of a person as a custodian, both are obviously a one-time affair. Since the very nature of appointment partakes with it, the power to regulate subsequently any such appointment as customs airport or entrustment of the custodial services can also be recalled at any time later on for valid reasons. Therefore, it could be legitimate to expect the appointee under Section 7 and as well as the custodian under Section 45 to pay for a fees prescribed for appointment as such. A look at Section 141 of the Act in no uncertain terms makes the position clear that all conveyances and goods in a customs area shall be subject to the control of the officers of the customs for purposes of enforcing the provisions of the Act. Otherwise, it might possibly lead to easy evasion of the levy liable to be applied on them. Sub-section (2) of Section 141 makes it explicitly clear that the imported or export goods may be received, stored, delivered, dispatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such regulations can only be made for such purposes which are intended to be carried out under the Act and not otherwise. 10. Then, it takes us to understand the general purposes for which this special piece of legislation was enacted. It is not merely intended for purposes of garnering revenue to the State by levying duty on imports and exports. The invisible roots of this legislation lie in the State s primary obligation to nurture and protect the indigenous industrial sector from facing or measuring up to international standards and unhealthy competition. Further, India cannot be a free for all dumping yard . Otherwise giant multinational corporations would not allow sun to shine on our local corporations and consequently continue to exploit the local conditions and turn them in their favour. More importantly the natural resources of this nation move away across it s borders, for the good and welfare of others and they will scarcely become available for securing the wellbeing of our countrymen. The very foundations upon which this nation won its freedom would have been quickly weakened, otherwise. 11. Regulation 5 (2) of Regulations, 2009 undoubtedly prescribed the custodian to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rite law that his Majesty s subjects are free, if they can, to make their own arrangements so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the Legislature for the imposition of taxes, they make it their business to walk outside them. 14. However the limits of the right of the public authority to impose taxes lies with the Legislature, as taxation is the very prerogative of the Legislature. Hence the right to impose taxes and to determine the circumstances under which these will be done is the very privilege of the legislative power while mere administration of such a taxation statute is the responsibility of the executive power of the State. It is a common legislative practice to prescribe for the legislative policy broadly in the statute and then leave the guidelines for working out the details effectively behind the said legislative policy by delegating the power to frame rules or regulations, as the case may be. This practice of empowering the executive to make supporting Legislation strictly within the prescribed sphere has been evolved due to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . J., in Matthews v. Chicory Marketing Board (1) is often cited as a classic on this subject. A tax , said Latham, C. J., is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment for services rendered . In bringing out the essential features of a tax this definition also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money. By public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to decipher as to whether any service either special or even ordinary can be said to be rendered by the respondents to the petitioner for them to justify the levy. With the expansion or advent of quality infrastructural inputs such as roads, highways network, etc., rapid industrialization and manifold increase of commercial activities can be expected as the most inevitable corollary. Industrialization and increased commercial activities can lead to increase of import and export activity. Both imports and exports of goods are subject to levy of duty. Thus, in the process, the State s revenue gets augmented, apart from increased economic activity and development of human resources. The increase in the quantum of imports and exports therefore has a direct proportionate impact upon the revenue garnering and overall development. As was already noticed supra, appointment of a custodian of the customs space identified under Section 8 of the Act is only for ensuring the integrity of such a place so that no revenue loss and duty evasion occurs there. Beyond that, a custodian has no other role. He is a facilitator by providing for foolproof or tamper proof premises so that goods do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... todian clearing the goods which are either imported or meant for export. Clearing the international passengers or goods, imported or meant for export is a sovereign function of the State. For purposes of effective and efficient discharge of these functions, the custodian is required to provide the necessary infrastructural facilities. Sans such facilities, the customs clearance duties become imminently impaired. Therefore, while a demand for making available standard infrastructural facilities for facilitating efficient discharge of customs clearance functions is legitimate, but however, demand of reimbursement of cost recovery is totally unjust. There is yet another reason while preparing the appropriation estimates of revenue, adequate provision is always made towards the Head of salaries and allowances payable to the Government servants functioning under various Ministries/Departments. Such appropriations are placed for consideration and approval of the Parliament/Legislature of the State as the case may be. Once the salaries and allowances and other benefits such as pensions are thus already provided for, the question of seeking their reimbursement separately would not arise. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to refer to the relevant provisions of the 2009 Regulations. 19. Regulation 5 deals with the conditions to be fulfilled by an applicant for custody and handling of imported goods or export goods in a customs area. The impugned order has placed reliance upon Regulations 5 (2). It is reproduced below: 5. Conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area. Any person who intends to be approved as a Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods, in a customs areas, hereinafter referred to as the applicant, shall fulfil the following conditions, namely:- (1) -------- -------- -------- (2) the applicant shall undertake to bear the cost of the Customs officers posted, at such custom 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 in the Ministry of Finance. 20. Regulation 6 deals with responsibilities of Customs Cargo Service provider. The impugned Orders rely upon Regulation 6 (1) (o). It is reproduced below: 6. Responsibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o bear the cost of the custom officers posted on cost recovery basis and shall make payments at such rates and in such a manner as prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance. Regulations 6 deals with the responsibilities of Customs Cargo Service Provider and one of the responsibilities set out in Regulation 6 (1) (o) is that the Customs Cargo Service Provider and shall bear the cost of the custom officers posted by the Commissioner of Customs on cost recovery basis and shall make payments at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry. 23. The contention of the Appellants is that they were entitled to waiver of the cost of the Custom Officers posted by the Commissioner in terms of the Notification dated 12 September 2005 issued by the Board. It is stated that as no decision was taken on the said representation, Thar Port filed a Writ Petition in the Rajasthan High Court which is pending. Gemstone also sent a presentation to the Board in terms of the Circular for waiver of the recovery charges and for payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same is intended for levying of cost recovery charge and payment thereof. Similarly, the condition at 5 (2) only states that custodian or CCSP will have to undertake to bear expenses of the Customs officers posted in the Customs area on cost recovery charge basis as per the manner prescribed unless and until the same is exempted by the Ministry of Finance. Therefore, Regulation 6 (1) (o) of the Regulation (6) is not meant for recovery of default payment but only it says that the CCSP will have to bear the cost of officer deployed at their premises. Similarly, Regulation (12) of the CCAR does not prescribe for the recovery of defaulted cost recovery charge. But only states that the same is procedure for suspension or revocation of approval and imposition of penalty. 14. In view of above, we find that the learned Adjudicating Authority has not appreciated the legal provision as contained in HCR, referred above which do not indicate the machinery for realisation of cost recovery charge on account of being defaulted as is the case before us. In fact, we find that the show cause notice has invoked the provisions of Regulation 12 of HCCAR which does not provide for the realisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the Commissioner, committed an illegality in ordering recovery of the cost recovery charges under the aforesaid provisions of the 2009 Regulations. 30. The penalty is imposed under Section 12 (8) of the 2009 Regulations if a Customs Cargo Service provider contravenes any of the provisions of the Regulation or fails to comply with any provision of the Regulation with which it was its duty to comply. As it was held that cost recovery charges could not have been recovered under the aforesaid provisions of the Regulations, the penalty also could not have been imposed as there is no contravention of the Regulations. 31. Thus, for all the reasons stated above the impugned orders dated 26 February 2019 and 29 March, 2019 passed by the Commissioner to the extent that the demand of outstanding cost recovery charges has been confirmed and penalty has also been imposed are liable to be set aside and are set aside. The two Appeals bearing nos. 51122 of 2019 and 51280 of 2019 are allowed. From the above decisions, it can be seen that the similar issue has been considered consistently by two division benches of this Tribunal, in view of the above in the present case also the demand of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractors failed to lift. In so doing it was attempting to exercise a power which it did not possess. 14. No tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorises the imposition even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred by the statute cannot be transgressed by the rule-making authority. A rulemaking authority has no plenary power. It has to act within the limits of the power granted to it. 15. Another three-Judge Bench of the Supreme Court in Ahmedabad Urban Development Authority vs. Sharadkumar Jayantikumar Pasawalla held that no tax can be imposed by any rules or regulations unless the statute under which such subordinate legislation is made specifically authorized imposition of such tax. In the Regulations framed under the statute, levy of any tax or fee must be based on a specific statutory provision and not on any implied, incidental or ancillary authority. In paragraph 7, it has been held as under: 7. After giving our anxious consideration to the contentions raised by Mr. Goswami, it appears to us that in a fis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the Legislature's failure to express itself clearly. 17. On the touchstone of the aforesaid well settled legal principles, we may now take note of the relevant statutory provisions of the Customs Act, 1962. The Act has been enacted with the object to sternly and expeditiously deal with smuggled goods and curb the debts on the revenue thus caused. The Act inter alia provides for confiscation of goods and conveyance and imposition of penalties when any goods which are imported contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abandoning them to customs and destruction or rendering of goods commercially valueless in the presence of the proper officer under clause (d) of sub-section (1) of section 26A; (aii) the form and manner of making application for refund of duty under sub-section (2) of section 26A; (aa) the form and manner in which an application for refund shall be made under section 27; (ab) the form, the particulars, the manner and the time of delivering the passenger and crew manifest for arrival and departure and passenger name record information and the penalty for delay in delivering such information under sections 30A and 41A; (b) the conditions subject to which the transhipment of all or any goods under subsection (3) of section 54, the transportation of all or any goods under section 56 and the removal of warehoused goods from one warehouse to another under section 67, may be allowed without payment of duty; (c) the conditions subject to which any manufacturing process or other operations may be carried on in a warehouse under section 65 (d) the time and manner of finalisation of provisional assessment; (e) the manner of conducting pre-notice consultation; (f) the circumstances under whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act, 1962. 21. Now we may advert to the nature of levy. In Gupta Modern Breweries (supra), after taking note of the decision in CCE v. Chhata Sugar Company Limited, it was held as under: 27. In CCE v. Chhata Sugar Co. Ltd., [(2004) 3 SCC 466], one of the issues was whether the State Government s administrative charges to collect a levy could be passed on to the person from whom the tax, fee or levy was collected. This Court categorically held that such an imposition would be a tax and not a fee and must be duly authorised since it is a tax (at para 14), it is held: (SCC p. 483) Hence, administrative charge under the U.P. Act is a tax and not a fee. 28. It is, thus, clear from the aforesaid decisions that imposition of administrative services (sic charges) is a tax and not a fee. Such imposition without backing of statutes is unreasonable and unfair. 22. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Therefore, these regulations are traceable and safely to this legal provision. Thus, it is evident that the Division Bench of Bombay High Court did not examine the ground of challenge whether in the absence of any specific provision to levy cost recovery charges, whether the same could be imposed under the Regulations. Similarly, the Division Bench of Delhi High Court in Allied ICD Services Limited (supra) has relied on the decision of the Bombay High Court. Therefore, the aforesaid decisions rendered by Bombay High Court as well as Delhi High Court are distinguishable. 24. So far as the 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 dated 26.06.2002. Therefore, the undertaking furnished by the Company does not bind it in the facts of the case. 25. For the aforementioned reasons, we agree with the conclusion of the learned Single Judge that the impugned 2009 Regulations are ultra vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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