Madras High Court
M/S.Pearl Ports And Warehousing ... vs Union Of India on 10 March, 2022
W.P.(MD).No.7744 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 10.03.2022
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.(MD).No.7744 of 2021
and
W.M.P.(MD).No.5890 of 2021
M/s.Pearl Ports and Warehousing Private Limited,
Represented by its Chairman-cum-Managing Director,
Shri Ramilshah. ... Petitioner
Vs.
1.Union of India,
Represented by Secretary
to Government of India,
Ministry of Finance,
Department of Revenue,
North Block,
New Delhi – 110001.
2.The Chairman,
Central Board of Indirect Taxes and Customs,
Department of Revenue,
Ministry of Finance,
North Block,
New Delhi – 110001.
3.The Commissioner of Central Excise,
Chennai-III commissionerate,
26-1, Mahatma Gandhi Road,
Chennai – 600 034.
4.The Assistant Commissioner of Central Excise,
Inland Container Depot,
Plot No.53,
SIPCOT-1, Hosur – 635 126.
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W.P.(MD).No.7744 of 2021
5.The Commissioner of Customs(Preventive),
No.1, Williams Road,
Cantonment,
Tiruchirappalli – 620 001.
6.The Assistant Commissioner of Customs,
Inland Container Depot,
Plot No.53,
SIPCOT-1,
Hosur – 635 126. ...Respondents
Prayer : Writ Petition filed under Article 226 of the Constitution of India,
praying this Court to issue a Writ of Certiorarified Mandamus, to call for
records relating to the impugned demand notice dated 06.07.2020 of the sixth
respondent in file C.No.VIII/48/04/2018-CR and quash the same and to direct
the fifth respondent to demand cost recovery charges in respect of the customs
officers actually deployed to the petitioner Inland Container Depot from
26.06.2015 to 31.03.2020 within a time frame as may be decided by this Court.
For Petitioner : Mr.M.Karthikeyan
For R1 : Mrs.S.Ragaventhre
Junior Standing Counsel
For R2 to R6 : Mr.R.Aravindan
Senior Standing Counsel
ORDER
The writ petition has been filed for a writ of Certiorarified Mandamus to
call for the records of the impugned demand notice, dated 06.07.2020 of the
sixth respondent Assistant Commissioner of Customs, Inland Container Depot,
SIPCOT at Hosur-26, demanding a sum of Rs.2,14,31,618/- from the petitioner.
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W.P.(MD).No.7744 of 2021
2. The above amount has been demanded from the petitioner over and
above the amount already paid by the petitioner towards cost recovery charges
for deputing officers of the customs in the petitioner’s Inland Container Depot
(ICD), Hosur. The case of the petitioner appears to be that the petitioner was
appointed as a Customs Cargo Service Provider for its ICD in Hosur in the year
2014. They commenced its commercial operations in 2015. Being governed by
the provisions of the Handling of Cargo in Customs Area Regulation 2009, the
petitioner was required to bear the cost borne by the Customs, Department
towards the salary payable to the Customs Officer posted in the aforesaid ICD
of the petitioner on cost recovery basis.
3. It is the specific case of the petitioner that after the petitioner paid the
initial amount of Rs.43,96,401/- for the period between April 2017 and March
2019 after adjusting the amount of Rs.21,45,330/- and further sum of Rs.
3,62,234/- for a period between April 2019 and August 2019. It is submitted
that the petitioner had filed an application for grant of waiver from the Cost
Recovery Charges in terms of Circular dated 12.09.2005 inasmuch as the
petitioner has been handling more than 7,200 TEUs containers at ICD, Hosur
per annum from September 2017 onwards.
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W.P.(MD).No.7744 of 2021
4. The learned counsel for the petitioner submits that though the
Department has been continuously demanding the payment of Cost Recovery
Charges from 2015 onwards for the entire post of officers approved though
none were posted till 2017 and only few/part of the approved strength of
officers were posted from April 2017 onwards. It is submitted that in the
impugned order of the sixth respondent, dated 06.07.2020, demanding Cost
Recovery Charges from the date of inspection i.e., from 25.06.2015 to June
2020 for the entire strength of posts approved without such staff being deputed
is unwarranted.
5. The learned counsel for the petitioner relied on the following
judgments:
(i) Kottayam Port and Container Terminal Services Private Limited Vs
union of India in W.P.(C) No.12088 of 2013, dated 11.10.2013.
(ii) M/s.Allied ICD Services Limited Vs Union of India and others, dated
27.08.2018.
6. Opposing the prayer, the learned counsel for the respondents submits
that the writ petition is misconceived. It is submitted that for customs clearance
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W.P.(MD).No.7744 of 2021
customs staff are provided at the Inland Container Depot (ICD)/Central Freight
Station (CFS) on cost recovery basis and the sanction for posting of officers
was issued by the Administrative wing of Central Board of Excise and
Customs(CBEC). The petitioner as a custodian and licensee was required to pay
185% of total salary of officers actually posted at its ICD.
7. The Cost Recovery Charges for the period commencing from June
2017 to March 2017 for the services rendered to the petitioner, are as under:
(A) Pending Cost Recovery Charges for Period from 3,40,53,147
25.06.2015 to 31.03.2020
Payment-1 Advance/Initial Amount paid vide TR6 challan 21,45,330
dated 06.03.2015
Payment-2 Amount paid vide TR6 Challan 04/2019 dated 43,96,401
15.03.2019
Payment-3 Amount paid vide TR6 Challan 28/2019 dated 3,62,234
01.11.2019 for the period April 19 to 31.08.2019
(B) Total Amount Paid 69,03,965
A-B Balance to be paid 2,71,49,182
8. The Government had taken a decision to waive requirement of cost
recovery charges to be paid by ICD/CFS, if they fulfilled the conditions laid
down and were in existence for a consecutive period of two financial years with
certain performance bench marks. Waiver of Cost Recovery Charges would be
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W.P.(MD).No.7744 of 2021
prospective no claim for past period was to be entertained. The norms include
parameters such as the total number of imports or exports containers handled,
customs declaration filed for export or import etc. Waiver in respect of Cost
Recovery Charges at ICD can be considered only as per the norms laid down in
its circular, dated 25.06.2015, bearing reference F.No.434/17/2004 -customs IV.
It is submitted that since the petitioner fails to pay the arrears, question of
granting waiver does not arise.
9. The learned counsel for the respondents further submits that when the
Superintendent, Inspector and Head Havildar were posted permanently and
were working for the petitioner and they have not been assigned any other job
other than the work for the petitioner at ICD, therefore the claim of the
petitioner were not posted exclusively for the petitioner is not correct. It is
submitted that for the rank of Assistant Commissioner only 33% of the cost
recovery charges were demanded since the work undertaken for the petitioner
was on additional charge basis. The learned counsel for the respondents submits
that required man power were posted at the request of the petitioner and
therefore the petitioner cannot claim for waiver.
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W.P.(MD).No.7744 of 2021
10. I have considered the arguments advanced by the learned counsel for
the petitioner and the learned counsel for the respondents.
11. The issue relating to the payment of cost recovery charges was
elaborately considered in Sun Global Logistics Private Limited Vs Union of
India, in W.P.Nos.7937, 7938 and 8248 of 2013 vide order, dated 02.06.2021.
After examining the existing circulars and the decisions that were available, it
was concluded as follows:
61.There is no question of the Customs Department
deploying any person who is not an employee of the Customs
Department or was already in the Public Service of the Union.
Though, section 158(2) of the Customs Act, 1962 permits the
Central Government or the Central Board of Excise and Customs
to frame Rules for rendering of any services by officers of the
Customs, under the provisions of the Customs Act, 1962, it cannot
permit recovery of the entire salary to be paid as such amounts are
payable by the Central Government. Cost Recovery Charges (CRC)
can be only in proportion to the excess amount that may be
required to be paid to officers on being deployed in such facilities
on special occasions. Where such officers are required to be
present all through the period in the facility outside the Custom
House or the Port, question of recovering the entire salary from
such facilities cannot be permitted except for such travel
allowances and extra amounts that are paid. Therefore, unless
there is an appropriate amendment to the provisions and the
Customs Act,1962 and the Rules made thereunder which fall within
the four corners of Part XIV of the Constitution of India Cost
Recovery Charges equivalent to the Salaries packs paid to such
officials of the Customs Department cannot be justified.
62.Since such officers deployed continue to be officers of the
Customs Department and report to their jurisdictional superiors
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W.P.(MD).No.7744 of 2021
within the jurisdiction of the Custom House of their Chief
Commissioner of Customs or Commissioner of Customs of the
Custom House, there is neither a Legal basis nor any justification
collecting the entire salary payable to such officer from Customs
Cargo Service Providers.
63.Cost Recovery Charges can be only compensatory and
such amounts may be charged for the excess amount paid/payable
to the employees of the Customs Department by way of
reimbursement of expenses. Merely because the VI Pay
Commission was implemented by itself did not entitle the Customs
Department to recover the entire amount separately from the
Container Freight Stations(CFS) or Internal Container
Depots(ICD). This was contrary to the statutory scheme of the
Customs Act, 1962 and Constitution of India.
64.Container Freight Stations(CFS) or Internal Container
Depots(ICD) were allowed to be set up with the view to ease the
congestions and the delay at the ports which were traditionally the
custom area where the assessments were to be carried out.
65.Earlier, the imported goods had to be first assessed and
thereafter cleared from such port of import after their import either
into the Domestic Tariff Area or for being warehoused by filing in
bond bill of entry. There was no question of CRC being recovered
by Department from the AIR Port Authority of India or Port Trust
merely because the Customs also had its officers stationed there.
66.It is further noticed that Handling Of Cargo In Customs
Area Regulations, 2009 contemplates payment of costs towards the
cost of customs officers posted at the customs area on Cost
Recovery Basis on such rates and in such manner unless
specifically exempted by an order of the Government of India in the
Ministry of Finance.
67.After the above Regulation, 2009 came into force, there
should have been a proper notification specifying the manner in
which such payments were to be levied and collected from the
Customs Cargo Service Providers.
68.No order of the Government of India has been brought to
the attention of the court which has specified and fixed the amounts
to be paid and collected on Cost Recovery Charges for the purpose
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W.P.(MD).No.7744 of 2021
of the aforesaid Rules.
69.In absence of any direct notification/government order
specifying the rates to be levied towards Cost Recovery Charges
under the aforesaid Regulation for deploying its officers the
collection of Charges on Cost Recovery basis from the petitioner
has been made contrary to the above Regulation.
70.A Division Bench of this Court in EternetEverest Ltd vs
Union of India 1997 (89) ELT Madras 28 has held that demand
under section 11D of the Central Excise And Salt Act, 1944 as it
stood then was unsustainable in absence of a proper machinery.
Same reasoning is applicable to the facts of the present case.
71. The petitioner has reportedly paid an amount Rs.
45,01,960/- in the past. Neither the aforesaid amount nor the
excess amount that was demanded would have been payable by the
petitioner had a proper notification/order been issued. The amount
collected also cannot be directed to be refunded back to the
petitioner as the petitioner would have passed on incidence of such
amount to the customer who had availed of services of the
petitioner. Therefore, there can be no order for refunding of the
amount. Therefore, only way out is to regularize the amounts
already paid & collected in the past.
72.Since the petitioner has also demonstrated that it had
fulfilled the criteria/benchmark for exemption from payment of
Cost Recovery Charges during the first two years of approval and
operation, the case of the petitioner deserves to be considered for
waiver/exemption from payment of Cost Recovery Charges in terms
of the guidelines of the Central Board of Excise and Customs in its
meeting held on 18 June 2015 in respect of BMB No 5/2015,
content of which has been extracted above in this order.
73.There cannot be any discrimination between different
approved “Customs cargo service provider” under the provisions
of the Handling of Cargo in Customs Areas Regulations,2009. It
has to be also underlined that there is no direct provision under the
Handling of Cargo in Customs Areas Regulations,2009 for
granting waiver from payment of Cost Recovery Charges payable
by an approved “Customs Cargo Service Provider”. Power to
grant such waiver/exemption has been exercised right from 1997
through circular and the practice has been continued by issuing
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W.P.(MD).No.7744 of 2021
circulars by the Central Board of Excise and Customs even after
the above Regulation came into force.
74.These, circulars which have been issued at best can be
said to have been issued in aid of Regulation 7 of the Handling of
Cargo in Customs Areas Regulations,2009 as per which powers
have been vested with the Commissioner of customs to relax a
“Customs Cargo Service Provider” from operation of Regulation
5. There is no other provisions under which these
circulars/clarification granting exemption can be legitimized.
75.There is no connect between the provisions of the above
Regulation as it stands today and the practice that is being
followed by the Department for levying and exempting a Customs
Cargo Service Providers from payment of Cost Recovery Charges.
Therefore, while disposing these writ petitions in favour of the
petitioner by directing the respondents to regularize the payments
already made by the petitioner and by directing the respondents to
grant waiver to the petitioner for the period after the petitioner has
achieved the required benchmark/criteria as per the CBEC
Circular dated 12.09.20-5 bearing Reference F.No.434/17/2004, I
direct the Central Board of Excise And Customs to issue :-
i.issue appropriate notifications for the benefit of Trade and
Public within a period of 6 months specifying the rates /charges
payable by a “Customs Cargo Service Providers” on Cost
Recovery Charges(CRC)basis operating under the Provisions of
the Handling of Cargo in Customs Areas Regulations, 2009 in
consonance with the provisions of the Customs Act, 1962 and the
Constitution of India;
ii.suitably amend the Provisions of the Handling of Cargo in
Customs Areas Regulations, 2009 incorporating provisions for
grant of waiver/exemption from payment of amounts on Cost
Recovery Charges (CRC)basis payable under the aforesaid
provisions.
76. I also direct the jurisdictional Commissioner/Chief
Commissioner to regularize the case of the petitioner by granting
waiver/exemption to the petitioner by an order with effect from the
date on which the petitioner achieved the benchmark as per the
CBEC Circular dated 12.09.2005 bearing Reference F.No.
434/17/2004.
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77. These writ petition stands disposed with the above
observation. No costs. Consequently, connected miscellaneous
petitions are closed.
12. Thus, I do not find any merits in the contention of the respondents in
the impugned order. Therefore, the writ petition stands allowed with the above
observations. No costs.
10.03.2022
Index : Yes / No
Internet : Yes/ No
sn
To
1.Union of India,
Represented by Secretary
to Government of India,
Ministry of Finance,
Department of Revenue,
North Block,
New Delhi – 110001.
2.The Chairman,
Central Board of Indirect Taxes and Customs,
Department of Revenue,
Ministry of Finance,
North Block,
New Delhi – 110001.
3.The Commissioner of Central Excise,
Chennai-III commissionerate,
26-1, Mahatma Gandhi Road,
Chennai – 600 034.
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W.P.(MD).No.7744 of 2021
4.The Assistant Commissioner of Central Excise,
Inland Container Deport,
Plot No.53,
SIPCOT-1,
Hosur – 635 126.
5.The Commissioner of Customs(Preventive),
No.1, Williams Road,
Cantonment,
Tiruchirappalli – 620 001.
6.The Assistant Commissioner of Customs,
Inland Container Depot,
Plot No.53,
SIPCOT-1,
Hosur – 635 126.
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W.P.(MD).No.7744 of 2021
C.SARAVANAN,J.
sn
W.P.(MD).No.7744 of 2021
10.03.2022
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