Legal principle

Cost recovery charges in the nature of salaries of Customs officers performing statutory duties cannot be levied by regulation absent express statutory authorization, and such administrative charges, being a tax without statutory backing, offend Article 265 of the Constitution of India.

Court decision

The Division Bench (Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti) dismissed the writ appeal with no order as to costs, agreeing with the learned Single Judge that the 2009 Regulations are ultra vires the Customs Act, 1962, and that the cost recovery charges levied on the Company are wholly unsustainable.

Facts

M/s GMR Hyderabad International Airport Ltd (the Company), which developed and operated the Greenfield airport at Shamshabad under a 2004 Concession Agreement (under which GoI was to establish customs, immigration and quarantine procedures at its own cost), was granted Custodianship of the Air Cargo Complex under Section 45 of the Customs Act, 1962 by Notification No.2/2008 dated 11.03.2008. The Customs department then demanded cost recovery charges (establishment costs/salaries of Customs staff posted at the Air Cargo Complex) for 2008-2013, including Rs.2,72,54,865/- for 23.03.2008 to 31.03.2009, and the Company paid Rs.1.50 crores and Rs.1.00 crore under protest. The Board issued Notification No.26/2009 dated 17.03.2009 framing the Handling of Cargo in Customs Areas Regulations, 2009 in exercise of powers under Sections 141(2) and 157 of the Customs Act, followed by Circular No.13/2009 and Notification No.96/2010 on cost recovery. The Company challenged these in a writ petition, which the learned Single Judge allowed on 11.06.2012, holding Regulation 5(2) of the 2009 Regulations had no legal substratum and the cost recovery levy unsustainable; the Board filed this intra-court writ appeal.

Key provisions

• Section 157, Customs Act, 1962 — General power to make regulations
• Section 141, Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 158, Customs Act, 1962 — Provisions with respect to rules and regulations
• Section 45, Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider