Diamond And Gem Development ... vs Union Of India
2021 Latest Caselaw 15336 Guj

     C/SCA/15320/2018                           JUDGMENT DATED: 30/09/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 15320 of 2018


FOR APPROVAL AND SIGNATURE:

HONOURABLE MS. JUSTICE SONIA GOKANI

and
HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN

==========================================================

1     Whether Reporters of Local Papers may be allowed              YES
      to see the judgment ?

2     To be referred to the Reporter or not ?                       YES

3     Whether their Lordships wish to see the fair copy              NO
      of the judgment ?

4     Whether this case involves a substantial question              NO
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

==========================================================
      DIAMOND AND GEM DEVELOPMENT CORPORATION & 1 other(s)
                             Versus
                    UNION OF INDIA & 2 other(s)
==========================================================
Appearance:
MR ABHISHEK M MEHTA(3469) for the Petitioner(s) No. 1,2
NOTICE SERVED BY DS(5) for the Respondent(s) No. 1
PRIYANK P LODHA(7852) for the Respondent(s) No. 2,3
==========================================================
    CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
          and
          HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN

                       Date : 30/09/2021
                      ORAL JUDGMENT

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. The petitioner no.1 is a company engaged in the

business of development of industrial parks, special economic

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zones in different parts of the country as contemplated under

the provisions of the Special Economic Zones Act, 2005

(hereinafter referred to as 'the SEZ Act'). The petitioner no.1

is also appointed as Custodian under the provisions of Section

45 of the Customs Act, 1962 (hereinafter referred to as 'the

Act'), amongst others, for Surat Hira Bourse (SHB for short)

vide Notification No. 2/95 (CCP) dated 20.10.1995 as

enumerated in Customs Public Notice No. 59/95 (CCP) dated

20.10.1995 and is also deemed to be the Custom Cargo

Service Provider in terms of Regulation No. 10(1) of the

Handling of Cargo in Customs Area Regulation, 2009 ('the

Regulations, 2009' for short).

2. The petitioner challenges the letter/order dated

15.12.2015 issued by the respondent no.2 to the extent that it

does not grant exemption from payment of cost recovery

charges to the petitioner company with effect from the date of

application for the said purpose made by the petitioner

company i.e. from 02.11.2009 onwards and instead granted

the same with prospective effect i.e. from 15.12.2015. The

grievance on the part of the petitioner is that the exemption

ought to have been made effective from the date on which the

petitioner made an application i.e. 02.11.2009 pursuant to the

circular issued by the Central Board of Excise and Customs on

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12.09.2005 laying down the criteria for the purpose of grant

of exemption for the payment of cost recovery charges. The

reliance is placed on the decision of the Apex Court rendered

in case of Commissioner of Central Excise vs. M.P.V. and

Engg. Ind., reported in 2003(153) ELT 485, wherein it is held

that the benefit of exemption to an assessee is to be given

with effect from the date on which the application for grant

thereof was made before the competent authority. Thus, the

exemption with prospective effect is urged not to be

sustainable.

2.1. By way of Notification No. 70/92-Customs (N.T.) dated

04.12.1993, the respondent no.1 in exercise of powers under

Section 7 of the Act appointed the SHB at the Diamond

Industrial Park, Sachin, Surat as Inland Container Depot (ICD

for short) for unloading of imported goods and loading of

exported goods and the said SHB has continued as ICD from

then onwards. Thereafter, by way of Notification No. 2/95

(CCP) dated 20.10.1995 issued by the Commissioner of

Customs (Preventive), Ahmedabad, the petitioner no.1 came

to be appointed as custodian under Section 45 of the Act for

SHB in place of earlier and a public notice No. 59/95 (CCP)

dated 20.10.1995 came to be issued in this regard. It is

therefore the say of the petitioner that SHB was also an ICD

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for the purpose of loading and unloading of imported goods

and he continued as custodian for the SHB and notifications in

this regard were issued from time to time.

2.2. The present controversy arose when on 12.09.2005 the

respondent no.1 issued circular laying down certain norms as

well as conditions of grant of exemption from the payment of

cost recovery charges for all facilities including ICDs, CFS,

etc. The circular directed all the customs and excise

commissionerates to provide information in respect of

ICDs/CFS for the year 2003-04 and 2004-05 and the same had

been submitted on 19.09.2005.

2.3. On 02.07.2008, the respondent no.1 again issued a letter

marked to the Chief Commissioner by issuing certain

instructions in respect of the decision taken vide circular

dated 12.09.2005. The information were to be furnished by

31.07.2008. The respondent no.2 thus was required to provide

the details regarding the status of the ICDs/CFS for the

purpose of eligibility of grant of exemption for cost recovery

charges. No steps were taken and hence, by way of letter

dated 02.11.2009 the petitioner no.1 in respect of SBH which

was designated as ICD informed the respondent no.2

regarding the eligibility of the petitioner no.1 from the

C/SCA/15320/2018 JUDGMENT DATED: 30/09/2021

payment of cost recovery charges and requested to submit the

proposal to the competent authority as mentioned in the

circular so that the petitioner no.1 could get the benefit of the

exemption at the earliest.

2.4. The respondent no.1 addressed a letter/circular in the

year 2010 calling for the details from the concerned

commissionerates to be submitted to the Central Board of

Excise and Customs and directed the said details to be

provided for consideration of the respondent no.1 by

20.09.2010. The respondent no.1 also specifically spelt out the

criteria and minimum performance standard for Diamond

Plaza, Sea Port, Courier Terminal, Air Cargo Complex, etc.

and specified that said criteria would be subject to existing

conditions for ICDs/CFSs.

2.5. A circular also meanwhile was issued on 26.05.2011 by

the respondent which requested all the concerned parties to

provide requisite informations in enclosed proforma and

checklist duly signed by the officers authorized by the

Commissioner in respect of already forwarded as well as any

ICDS/CFS that might be fulfilling the criteria and where a

proposal has been received for exemption/ waiver of cost

recovery charges.

C/SCA/15320/2018 JUDGMENT DATED: 30/09/2021

2.6. The petitioner no.1 though had made an application for

grant of exemption way back in the year 2009, the respondent

no.3 addressed a letter dated 10.06.2011 to the Assistant

Commissioner of Customs, Custom House, Navrangpura to

state that no norms have been fixed for ICDs like SHB for the

petitioner no. 1 which handles rough/polished diamonds, gold

jewellery etc. The report submitted along with the letter dated

10.06.2011 states that the petitioner no.1 is fulfilling all

required norms for the purpose of grant of exemption from

the cost recovery charges.

2.7. By way of a letter dated 18.06.2011, the petitioner

clarified and responded to the contents of the letter of the

respondent no.3 and reiterated its request for exempting the

petitioner no.1 from the payment of cost recovery charges

since he was complying with the required norms from the

year 2009 onwards. As there was no response, the petitioner

once again addressed a letter dated 13.07.2011 stating that

even as per the norms for diamond plaza under the category

of ICDs the petitioner was eligible all throughout for getting

benefit of exemption from cost recovery charges.

2.8. Yet another letter was sought on 07.09.2011 and the

response was received on 08.09.2011 from the respondent

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no.3 informing to approach the competent authority.

Therefore, the petitioner addressed a letter on 13.03.2012 to

the respondent no.2 referring to the earlier correspondence

and request and further reiterated its request to waive the

customs cost recovery charges. When no heed was paid, he

addressed a letter to the Chairman, Central Board of Excise

and Customs on 16.04.2012. On 11.05.2012, a letter was

received addressed by the Assistant Commissioner (Tech)

Customs, Ahmedabad in the office of the respondent no.2

through the respondent no.3 wherein a checklist for

exemption of the ICD/CFS for their eligibility in respect of

waiver of cost recovery charges was forwarded.

2.9. The petitioner again addressed a letter on 01.06.2012 to

the Chairman, Central Board of Excise and Customs under the

Union of India requesting to waive the customs cost recovery

charges. On 01.08.2012, the Assistant Commissioner of

Customs, SHB, Surat addressed a letter to the Assistant

Commissioner of Customs, Ahmedabad submitting a report in

respect of the request for exemption/ waiver of the petitioner.

It is the grievance of the petitioner that on various occasions

he had appraoched various authorities personally also for the

follow-up actions and requested for the waiver of cost

recovery charges.

C/SCA/15320/2018 JUDGMENT DATED: 30/09/2021

2.10. On 26.02.2014, the concerned officer of the Directorate

General of respondent at New Delhi addressed a letter in

respect of such waiver of cost recovery charges and the

petitioner also gave undertaking regarding the arrears of

customs cost recovery for the staff posted at SHB since the

said aspect was being addressed by the petitioner and was

under consideration of the authorities on principle of law and

the same was also sub-judice qua other similarly situated

persons like the petitioner in other commissionerates.

2.11. On 05.11.2015, a letter was addressed by the petitioner

that the waiver of cost recovery charges has been granted not

from 2009 when he first applied. Thereafter, for

reconsideration of such waiver from 2009, another letter was

addressed on 19.11.2015. Yet another letter dated 01.02.2018

was addressed urging therein that the petitioners'

establishment was exempted from payment of cost recovery

charges w.e.f. 15.12.2015 and the petitioner was eligible from

November, 2009 and the effect of exemption should be given

from November, 2009 and further urged that an amount of Rs.

3,01,36,085/- being an amount of excess recovery towards the

cost recovery charges should be refunded. When no heed was

paid, he approached this Court with the following prayers:-

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"(A) Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ order or direction directing the respondents to grant exemption from payment of cost recovery charges under provisions of Handling of Cargo in Customs Areas Regulations, 2009, with effect from November 2009.

(B) Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ order or direction directing the respondent no. 2 to refund amount of Rs. 3,01,36,085/- deposited by the petitioner company towards cost recovery charges alongwith interest at applicable rate.

(C) Pending hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondent no.2 and/or respondent no.3 to refund amount of Rs. 3,01,36,085/- (please calculate the recovery amount) deposited by the petitioner company towards cost recovery charges.

(D) Any other further relief/s as may deem fit in the facts of the case may also be granted."

3. On issuance of notice, the authority concerned i.e. the

Deputy Commissioner, Customs, Surat Hira Bourse, Surat for

and on behalf of respondent nos. 2 and 3 filed affidavit in

reply.

3.1. According to the respondent, the CBIC vide its

Notification Nos. 85/2017-Cus.(NT) dated 24.08.2017,

86/2017-Cus.(NT) dated 14.09.2017, 99/2017-Cus.(NT) dated

27.10.2017, 119/2017-Cus.(NT) DATED 28.12.2017 AND

03/2018-Cus.(NT) dated 10.01.2018 has made vast

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administrative re-organization in the department, and as a

matter of consequence, all the customs related work (EOU

included) which was previously dealt with by CGST (Erstwhile

Central Excise and Service Tax) were transferred to customs

exclusively.

3.2. In view of the notification issued by the CBIC, public

notices were issued by the Principal Commissioner, Customs,

Ahmedabad stating therein that the Export Promotion Circles

(EPCs for short) have been formed to undertake all such

customs related functions either to be performed by

Excise/GST formation which includes drawback, import of

goods at concessional rate of duty, issuance of end use

certificate, installation certificate, customs work related to

EOU/EHTP/STP, sealing of containerized cargo, etc and

accordingly the case has been transferred to the Customs,

Surat Hira Bourse, Surat.

3.3. The main contention on the part of the respondent is

that after a considerable lapse of about three years of the

decision taken by the authority to grant benefit prospectively

w.e.f. 15.12.2015, the petitioner has approached the

authority. The bare perusal of the prayer clause reflects that

there had been no challenge to the communication dated

C/SCA/15320/2018 JUDGMENT DATED: 30/09/2021

15.12.2015 whereby he was granted benefit of exemption

from payment of cost recovery charges prospectively. He

without challenging the said communication dated 15.12.2015

has preferred the present petition seeking benefit of

exemption retrospectively. These are the preliminary

objections with respect to the maintainability.

3.4. According to the respondent on 12.09.2005, the CBEC

decided to consider the waiver of cost recovery charges at

ICD/CFSs which have been in operation for two consecutive

years with certain performance benchmark for past two years

with two of the conditions that the waiver of cost recovery

charges would be prospective with no claim for past period

and no cost recovery charges are under dispute or pending

the payment as on 31.08.2005.

3.5. According to the respondent, vide letter dated

30.08.2010 addressed to the Chief Commissioner of Customs,

Banglore, the diamond plaza for waiver of cost recovery

charges which included one of the conditions that the waiver

of cost recovery charges will be prospective with no claim for

the past period. Vide letter dated 26.05.2011, CBEC

forwarded checklist for exemption of ICD/CFS for their

eligibility in respect of waiver of cost recovery charges and

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also stated that waiver of cost recovery charges shall be

perspective and hence all the payments due to the department

should have been paid and the concerned Commissionerate

shall certify that there is dues of the department pending.

3.6. According to the respondent, the Board vide Circular

No. 16/2013-Customs dated 10.04.2013 fixed norms for

waiver of payment of cost recovery charges for the customs

staff posted at Seaports, Air Cargo Complexes, Courier

Terminal and Diamond Plaza in the like manner of norms in

force for ICDs/CFSs. Again the exemption was contemplated

to be prospective and no cost recovery charges ought to have

been outstanding. In light of this, it is urged that the decision

dated 15.12.2015 is just and proper.

3.7. It is further the say of the respondent that two

correspondences from the respondent no.3 dated 10.06.2011

and 11.05.2012 informed the respondent no.2 that no norms

had been fixed for the ICDs like SHB which handles the

rough/polished diamonds, gold jewellery etc. in parcels only

and petitioner no.1 had not paid differential amount of Rs.

22,47,017/- for cost recovery charges as a result of 6 th Pay

Commission and hence, the respondent no.3 did not

recommended the waiver/exemption from the payment of cost

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recovery charges for non-fulfillment of the conditions

prescribed in the letter dated 12.09.2005. It is thus reiterated

by various circulars of the Customs Department that there

was fundamental requirement that no cost recovery charges

should be outstanding and the exemption from cost recovery

charges shall be prospective.

3.8. An attempt is made also to distinguish the facts and the

applicability of the decision of the Apex Court in case of

Commissioner of Central Excise vs. M.P.V. and Engg. Ind.

(supra). According to the respondent, the petitioner no.1 had

paid all the pending dues on 23.11.2015 and hence, he

became qualified the eligibility for exemption from 23.11.2015

only. Accordingly, vide order dated 15.12.2015, the authority

concerned had exempted it. The claim of refund, according to

the respondent is an afterthought.

4. The rejoinder affidavit has been filed by the petitioner

where it has categorically denied the contents of paragraphs

14, 15, 16 and 17 and it is urged that they are contrary to the

record of the petitioner. The differential amount of cost

recovery charges and the dues were paid on 29.06.2012 and

therefore, the respondent no.3 vide letter dated 01.08.2012

recommended for the waiver from the cost recovery charges

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and therefore, the petitioner became eligible atleast from

26.06.2012 when he paid all the dues and was immediately

required to be granted exemption.

4.1. Reliance was placed on the subsequent documents as on

29.06.2012 he already met with the criteria and therefore, he

cannot be denied the exemption from the cost recovery

charges. It is further stated that the petitioner was diligently

and faithfully paying the dues towards the cost recovery

charges under protest. It is denied categorically that he paid

all the pending dues on 23.11.2015 as according to him, they

were paid on 29.06.2012 towards the differential amount of

cost recovery. The amount was paid on 23.11.2015 is an

erroneous and misleading statement. He has insisted to pay

him from 2009 but atleast from 29.06.2012 his entitlement

cannot be denied.

5. This Court has extensively heard both the sides and also

have considered the entire material which has been brought

on record.

5.1. Reliance is placed on the decision of Adani Ports and

Special Economic Zone Limited and Another vs. Union

of India and others rendered in Special Civil Application

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No. 4083 of 2016, where the challenge has been made to the

order of Chief Commissioner of Customs, Gujarat Zone, which

granted exemption to the petitioners from the payment of cost

recovery charges which would be effective from the date of

order and not from the date of application. The Court

considering the documents on facts, contentions and the law

on the subject allowed the petition. The condition of grant of

exemption under the impugned order dated 15.12.2015 of the

exemption being available from the date of order is struck

down. It was provided that such exemption would be available

from the date of application and the petitioners before the

Court having already deposited with the respondents, under

their insistence such charges, the same were directed to be

refunded by a specified date and if not done, the sum would

carry an interest liable at the rate of 7.5% per annum from the

date of deposit till the actual payment. The findings and

observations of the Court deserves reproduction:

"3. Petitioner no.1 is a company registered under the Companies Act. Petitioner no.2 is a shareholder of the petitioner no.1 company. The petitioners are engaged in the activity of providing Customs Cargo Service at Mundra Port and the petitioners have been declared as a custom cargo service provider in terms of regulation 2(b) of Handling of Cargo in Customs Areas Regulations, 2009. Since the petitioners provide cargo services at the Mundra port which is managed by the petitioners, the Government of India is required to deploy custom

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staff at the said port for assessment, levy and collection of taxes. In this petition we are concerned with the liability of the petitioners to pay to the Government of India the charges for deployment of such staff which is referred to as "cost recovery charges". The petitioners in the present petition do not dispute their liability otherwise to pay such charges. It is however, also not in dispute that the Government of India issued a circular dated 10.04.2013 granting exemption to the cargo service providers from payment of cost recovery charges, subject to fulfillment of conditions laid down therein. From the circular, one gathers that a committee of the Chief Commissioners was constituted for identifying the performance benchmarks that would make a particular facility eligible for grant of exemption for the customs staff posted at various privately managed ports. Based on the report of such committee, the Central Board of Excise and Customs with the approval of the competent authority laid down the norms for granting such exemption which were embodied in the said circular. The relevant portion of the circular concerning the parameters for grant of exemption to the sea ports reads as under:

        Customs     Dy./   Appraiser/ Inspector/ STA           Sepoy Total
        Facility    Asst.  Superinte Examiner /TA
                    Commis ndent
                    sioner
        Sea Port    2       4               12        2        12         32

        Complex

        Terminals

        Terminals

Norms for eligibility for grant of exemption from the payment of cost recovery charges:

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Facility Minimum Minimum Annual Annual Number Volume/Value of Documents-

                                     of Import &       Bills         of
                                     Export Cargo      Entry/Shipping
                                                       Bills
         Sea Port                    6 Lakhs MTs. 3000
         Air Cargo Complex           12,000 MTs        35000
         Courier Terminals           1.5     Lakh 20000
                                     Packages
         Diamond Plaza               Rs.15,000         12000
                                     Crores

        Note:-Both     performance    norms     (cargo   and
        documents) would      be   reduced    by   50%    for

facilities that handle only import or export cargo.

4. Para 5 of the circular laid down the conditions for grant of exemption. Para 6 laid down the procedure for grant of exemption. Paras 5 and 6 of the circular read as under:

"5. The conditions for grant of exemption from payment of cost recovery charges for all facilities viz. Sea Ports, Air Cargo Complexes, Courier Terminals, Diamond Plazas and Airports shall be as follows:

(a) Both performance norms i.e. volume/value and number of documents in case of Sea Ports, Air Cargo Complexes, Courier Terminals, Diamond Plazas and number of international flights and number of passengers in case of Airports must be met in each of the preceding two financial years.

                   (b) Exemption from cost         recovery          charges
                   shall be prospective; and

                   (c) No cost     recovery    charges         should         be
                   outstanding.

6. It has also been decided that based upon the

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aforementioned norms, jurisdictional Commissioners would review the existing facilities and send proposals for waiver of cost recovery charges for eligible facilities within 60 days . The proposal shall be sent to DG, HRD, CBEC. Thereafter, similar review would be undertaken in April each year and proposals for waiver of cost recovery charges sent to DG, HRD, CBEC by 30th April, DG, HRD, CBEC will process the proposals to ensure the necessary orders for exemption of cost recovery charges and regularization of posts are got issued in a time bound manner."

5. We would peruse the circular more minutely at a later stage. A cursory glance at this stage would demonstrate that the Government of India decided to grant exemption to the cargo service providers from payment of cost recovery charges based on its cargo handling pattern of the recent past. The intention of the Government of India appears to be that at the ports where the handling of the cargo in the recent past has been of a certain minimum turnover, the service provider would not be asked to pay the cost of deployment of the customs staff. If on the other hand the total turnover of the business done at the port is less than the minimum threshold level, it would not be worthwhile for the Government of India to post its officers, bear the salary and waive such salary charges from the cargo service providers. In addition to satisfying these criteria, the person seeking exemption from payment of such charges would have to satisfy two additional conditions. One, both performance norms i.e. volume and value and number of documents in case of sea ports must be met in each of the preceding two financial years. As per clause (b) of para 5, the exemption from cost recovery charges would be prospective. As per clause (c) of para 5, no cost recovery charges should be outstanding. In terms of para 6 of the circular, the jurisdictional Commissioner would review the existing facilities and send the proposal for waiver of cost recovery charges for eligible facilities within 60 days. Similar review would be undertaken in April each

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year and proposals for waiver of the cost recovery charges be sent to the concerned departments. Such departments would process the proposals to ensure the necessary orders for exemption and regularization of posts in a time bound manner.

6. The petitioners applied to the Commissioner of Customs, Kandla, under letter dated 12.04.2013 for grant of exemption from payment of cost recovery charges in terms of the said circular dated 10.04.2013. The petitioners have produced an interdepartmental communication dated 22.04.2013 in which the Assistant Commissioner of Customs has recorded that the application of the petitioners for waiver of the charges has been verified with the data available and it is found in order. On 30.04.2013, the Commissioner of Customs, Kandla, wrote to the Director General of Human Resources Development, forwarding the documents of the cargo handled by the petitioners and further stating that the petitioners are eligible for consideration for grant of exemption from payment of cost recovery charges in terms of circular dated 10.04.2013.

7. Despite these internal communications, the exemption as applied for by the petitioners did not comeforth immediately. In the meantime, it appears that the petitioners had not paid the recurring cargo handling charges. The Commissioner of Customs, Mundra, therefore, issued a show cause notice dated 16.03.2015 calling upon the petitioners why the cost recovery charges of Rs.11,14,86,640/ which have remained unpaid post March, 2013, should not be recovered with penalty and other consequences. Another similar show cause notice dated 18.11.2015 came to be issued seeking further cost recovery charges of Rs.4,64,74,327/. We are informed, thereupon the petitioners cleared all these charges.

8. On 15.12.2015, the Chief Commissioner conveyed to the petitioners that it has been decided to exempt the cost recovery charges for the sanctioned strength of the staff. This was however subject to fulfillment of following conditions:

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"(a) Exemption from payment of cost recovery charges would be prospective.

(b) Further continuance of the exemption shall be made by the CBEC on receipt of a certificate from the respective jurisdictional Commissioner to the effect that the performance of the particular ICD/CFS/Seaport/Diamond Plazas during the preceding year was in accordance with the prescribed benchmark, and

(c) In case any ICD/CFS/Seaport/Diamond Plazas falls to maintain performance as per the prescribed benchmark, in any given year, it shall be liable to pay 1.85 times of the cost of the operational post i.e. customs personnel deputed during that year."

9. The petitioners object to the above noted condition (a) under which the exemption from payment of cost recovery charges has been made prospective. In other words, from the date of issuance of the order, the petitioners would not pay the cost recovery charges. However, for the period between 12.04.2013 when the petitioners applied for such exemption till 15.12.2015 when the order was passed, the petitioners would be liable to pay the same.

10. Taking us through the materials on record, the learned counsel for the petitioners submitted that there was no requirement for the petitioners to apply for waiver of the cost recovery charges in terms of circular dated 10.04.2016. The circular provided for an inbuilt mechanism under which, the Commissioner would suomotu examine the requirements of the circular and recommend the case accordingly to the concerned departments who would take a decision based on such report. Even otherwise, the petitioners had without any delay, applied for the exemption on 12.04.2013 itself. No further details or documents were called for from the

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petitioners by the department. Whatever delay that took place in processing and granting the application for exemption, can be attributed only to the respondents. Once the competent authority was of the opinion that the petitioners satisfied necessary requirements for grant of exemption, such exemption must relate back to the date of application. Counsel further submitted that the petitioners fulfilled all the requirements. At no stage, there was any communication from the respondents that in view of the outstanding payments for cost recovery charges, application of the petitioners would not be considered for such period.

11. In support of his contentions, counsel relied on following decisions:

I. In case of Commissioner of Central Excise v. M.P.V. & Engg. Industries reported in 2003(153) E.L.T. 485 (S.C.), in which, it was held and observed that upon a unit being registered as an SSI, the exemption for SSI units would be made available to such a unit from the date of the application for registration.

II. In case of Santdas Idanmal & Company v. Union of India reported in 1981(8) E.L.T. 561 (Del.), in which, the learned Single Judge of the Delhi High Court held that revalidation of Quota Transfer Certificate would take effect from the date of reconstitution of the firm.

III. In the decision of the Delhi Bench of CEGAT in case of Commissioner of C. Ex., Cochin v. Poulose Matthen reported in 2001 (137) E.L.T. 1184 (Tri-Del), in which, it was held that the classification of goods would relate back to the date of filing of classification list. It was pointed out that such decision was approved by the Supreme Court.

12. On the other hand, learned advocate Shri Sudhir Mehta for the department opposed the petition contending that in terms of circular dated

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10.04.2013, grant of exemption from payment of cost recovery charges was subject to fulfillment of certain conditions. First condition was that such exemption would be prospective and the second condition was that no charges should be outstanding. In case of the petitioners, after 01.04.2013, the charges were not paid by the petitioners. Their application was therefore not considered. Only upon payment of charges, the same was granted and the exemption was made prospective. In support of his contentions, counsel relied upon following decisions:

I. In case of Mumbai International Airport Private Ltd. v. Union of India reported in 2014 (310) E.L.T. 3 (Bom.), where the Division Bench of the Bombay High Court upheld the authority of the department to levy cost recovery charges.

II. In case of Thiru Rani Logistics Pvt.

Ltd. v. Dir. General, DGHRD, C. & C.E., New Delhi reported in 2016 (340) E.L.T. 160 (Mad.), where the learned Single Judge of the Madras High Court held that as long as the order of waiver from payment of such charges is not granted, the custodian is bound to pay the charges. A writ petition seeking stay against such recovery pending the application for waiver was dismissed.

13. In background of such facts and contentions, we may peruse the materials on record more minutely. As noted, the Government of India, issued a circular providing for exemption from payment of cost recovery charges by the custodians of the ports subject to certain conditions. The basic condition was of satisfying the basic performance norms of minimum cargo and documents handled during a certain period. Such norms would show that for a set up of specified number of officers of specified cadres, the seaport should have achieved a minimum volume and the value of import and export cargo. The port should also have minimum number of documents of bills of entry or shipping bills annually. Para

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5 of the circular is of utmost important. Clause (a) of para 5 provides that volume/value and number of documents in case of seaports must be met in each of the preceding two financial years. Clause (b) of para 5 provides that exemption from gross recovery charges would be prospective. Clause (c) of para 5 imposes an additional condition that no cost of recovery charges shall be outstanding.

14. The impact of the said circular, therefore, would be that with respect to ports which have handled a minimum volume/value of imports and exports and also the minimum number of shipping bills in last two preceding years, the port operators would be exempt from payment of cost recovery charges for the set up specified in the said circular. The exemption would only be prospective and that no cost recovery charges of the past should be outstanding. As per para 6, the jurisdictional Commissioner would undertake the exercise of reviewing the existing facilities and send the proposal for waiver of the cost recovery charges for the eligible facilities within 60 days. Similar review should be undertaken in April of each year.

15. Two things emerge from para 6 of the circular. One is that the Commissioner would undertake a review of the existing facilities and would send proposal for grant of exemption to the extent of eligible facilities which would have a direct bearing on the cargo i.e. value and volume of the import/export and number of shipping bills handled by the seaport which would be done within 60 days from the date of the circular. Similar exercise would be undertaken in April of each year.

16. It is not in dispute that in case of the petitioners, the necessary requirements of minimum handling of cargo and shipping bills were satisfied for the sanctioned staff deployed at the port. It is not even the case of the department that looking to the value/volume and number of shipping bills through seaport in last two

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preceding years, a certain staffing pattern was not justified and that therefore either partially or totally the exemption from payment of cargo handling charges was not justified. This is precisely why the department itself granted to the petitioners the exemption from payment of such charges under the order dated 15.12.2015. If this be so, only question is, did the authorities make a mistake in making such exemption prospective i.e. effective from the date of the order and leaving the earlier period from the date of the application till the date of the order uncovered.

17. In this context, the conditions laid down in clauses (b) and (c) of para 5 would have to be examined. Clause (b) of para 5 does provide that such exemption from cost recovery charges would be prospective and clause (c) provides that no cost recovery charges should be outstanding. These two clauses are pressed in service by the department for denying exemption to the petitioners from the date of application. Since these two conditions in some sense overlap, we may examine the applicability and fulfillment of these conditions by the petitioners simultaneously.

18. When clause (b) of para 5 of the circular provides that the exemption from cost recovery charges would be prospective, in our opinion, it never aims to make such exemption available only from the date of order and not from the period interior to the date of the order. This is for variety of reasons. Firstly, upon issuance of the circular, the Commissioner in terms of para 6 would undertake an exercise to review the facilities and the cargo handling data of a particular seaport and make a recommendation within 60 days. Any such report of the Commissioner would have to be processed minutely by the concerned departments and this would take a reasonable time. The circular never intended that during all this while even if a particular entity is entitled to exemption, such exemption would be denied for the period during which the authorities i.e. the Commissioner and the concerned department take time to process

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the data and come to a definite conclusion. Further, para 6 itself provides that similar exercise would be undertaken in April of every year. Even otherwise, no such exercise can be undertaken prior to month of April since it is the cargo handing over the last two years a sea port for the purpose of clause (2) of immediately preceding year which would decide its eligibility for grant of exemption. The data for such period would be available only after 31st March of a particular year. The question of grant or nongrant of exemption from payment of cargo handling charges would relate to a beginning of the financial year and can be examined only after the end of the previous financial year. No intention appears from the circular that year after year every port would lose the exemption from the period during which such exercise is undertaken and completed. The purpose of mentioning that the exemption shall be prospective was to ensure that no entity can claim such exemption for a period prior to the date of the circular or for a period prior to the application for such period i.e. the period under review for exemption.

19. The reference to no cost recovery charges shall be outstanding also has a bearing on this aspect of the matter. If on one hand, the Government of India expects that the custodian should pay up the charges and not be in arrears of such charges, when the application for exemption is being processed, the contention that such exemption even if later on granted, would only be prospective, would be incongruent. On one hand, the custodian would have to, pending finalization of the application for exemption, go on depositing the recurring charges with the Government of India, failing which, he would be stated to be breaching condition contained in clause (c) of para 5 of the circular, and on the other hand when such application is granted, the custodian would be told that no refund can be granted for such charges already deposited since the exemption is always prospective. Grant of exemption from the date of the application, if the application is in order and no delay can be attributed to the petitioners in

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either making the application or supplying necessary information to the department, cannot be stated to be retrospective operation of the order of exemption.

20. It is possible to take one view that pending such application for exemption, the custodian cannot discontinue depositing the charges with the Government. In a given case, it may happen that the application is ultimately rejected for valid reasons. It is possible to argue that in such circumstances, the Government of India, cannot be left uncovered for the period during which such application was made and was pending with the authorities. It is perhaps therefore correct on the part of the Government of India to insist that pending such application for exemption, the petitioners should have gone on depositing the recurring cost recovery charges. However, in the present case, nonpayment of the charges cannot be the base for rejecting the grant of exemption from the date of the application. This is so because admittedly all the while when such application was pending, the petitioners were never conveyed that such application shall not be processed, entertained or granted since the current charges are not paid. It is part of the record that once the petitioners through show cause notice were called upon to make such payments, the same were made without delay. If the stand of the department therefore was that even for the period during which the petitioners had applied for exemption, till such exemption is not granted, the petitioners must go on depositing the charges as scheduled, the department should have conveyed the same to the petitioners. One way of looking at condition contained in clause (c) of para 5 is that at the time of making of the application, no past charges should be pending. If the stand of the Government of India was and a stand which may even be plausible, that awaiting outcome for application of exemption, the custodian should continue to deposit such amount with the Government, it should have specified the stand with the petitioners.

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21. One more ground raised in the affidavit in reply to oppose the petition is that additional staff was deployed at the port which consumed some time since large number of similar applications were received from various regions in the country.

We are not finding any fault with the Government of India in consuming some time in deciding the petitioners' request for exemption. However, once such application is accepted in facts of the present case, the exemption should have been granted from the date of the application. If the unspecified contention in this respect is that the performance benchmark of the petitioners for the last two preceding years was not examined in light of the additional sanctioned strength, no such reference is available from the order. In plain terms in the order, the Government of India agrees that the petitioners fulfilled the necessary performance benchmark provided in circular dated 10.04.2013 even in relation to the additional staff deployed at the port."

6. Therefore, the issue is no longer res integra as to

whether the petitioner would be entitled to get from the date

of order or from the date of his application. In the case on

hands, an application admittedly of the petitioner is from the

year 2009 specifically from 02.11.2009. The two conditions

which were needed to be fulfilled by the petitioner claiming

the benefit of exemption was of being declared as ICD for

unloading of imported goods and loading of exported goods

vide notification dated 04.12.1993 and SHB was declared as

ICD on dated 20.10.1995 as per the Customs Public Notice

No. 59/95 (CCP), as also the payment of arrears of customs

cost recovery for the staff posted at SHB. All throughout, it

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had been maintained that the petitioner fulfilled both the

conditions to avail the benefit of exemption extended to him

with effect from the date on which the application was made.

The law laid down in this regard also has been relied upon.

6.1. However, considering the affidavit-in-reply and the

rejoinder affidavit, it is quite clear that second condition of the

total payment of outstanding dues had been cleared by the

petitioner in the year 2012 as is also quite apparent from the

correspondences addressed by the respondent no.3 and thus,

entitlement of the petitioner would be not from the date of

application i.e. from the year 2009 of the waiver and

exemption from the cost recovery charges but from

29.06.2012 when the dues were paid by the petitioner

towards differential amount of cost recovery.

6.2. It was argued on the part of the respondent that the

petitioner was not an ICD but the diamond plaza and that was

also a hampering ground, however, if one looks at the

Customs Public Notice No. 59/95 (CCP), the SHB at the

Diamond Industrial Park, Sachin, Surat has already been

declared as ICD on 20.10.1995 and therefore, to contend that

it was not eligible for not being ICD is unsustainable.

6.2. Relying on the decision of this Court in case of Adani

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Ports and Special Economic Zone Limited (supra) as well

as the decision of the Apex Court rendered in case of

Commissioner of Central Excise (supra), where the

benefit was made available with effect from the date on which

the application was made fulfilling the criteria.

7. Resultantly, the petition deserves to be partly allowed by

directing the respondent to grant exemption of cost recovery

charges with effect from 29.06.2012 i.e. from the date on

which the petitioners fulfilled both the criteria and not from

the date of their application. The differential dues had been

completely paid although the entitlement would be after all

other criteria are fulfilled. As admitted in the rejoinder

affidavit, and since the department's own stand is that the

dues were paid by the petitioner on 29.06.2012 towards

differential amount of cost recovery, the petitioner had been

recommended for the waiver of the cost recovery charges in

terms of the letter dated 30.08.2010, the dues even as per the

department's case also were paid by the petitioner. Although,

the payment of cost recovery charges being a continuous

process, it will not be justifiable to say that the complete

payment is made on 23.11.2015. The testimonial document is

also the communication of the respondent no.3 recommending

the case of the petitioner for having fulfilled all criteria on

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29.06.2012.

8. From the foregoing discussion, petition is ALLOWED

PARTLY. Respondents shall grant cost recovery charges to

the petitioner with effect from 29.06.2012. The petitioners

having already deposited with the respondents entire amount

of charges, refund if due, shall be refunded within six (6)

weeks from the date of receipt of writ of this order. If so done

by the time, the sum shall not carry any interest, failing

which, the sum shall carry the amount of simple interest at

the rate of 7.5% per annum from the date of deposit till the

actual payment.

(SONIA GOKANI, J)

(RAJENDRA M. SAREEN,J) Bhoomi