Legal principle

Interest under Section 28AA of the Customs Act, 1962 is attracted only where the amount payable is 'duty' under Section 28, and therefore cannot be levied on cost recovery charges, which are not duty.

Court decision

The Tribunal held the Telangana High Court's GMR judgment (declaring the 2009 Regulations ultra vires and CRC not duty) binding, there being no stay of it by the Supreme Court and no contrary jurisdictional High Court ruling on vires. It held interest under Section 28AA not leviable on CRC, setting aside the Commissioner's order to that extent, but remanded the CRC levy issue to the adjudicating authority to decide after taking note of the outcome of the pending SLP, and directed the Commissioner to obtain clarification from the DGHRD and decide the exemption claim accordingly. All appeals were disposed of on these terms.

Facts

M/s. Kannur International Airport Ltd., a public limited company operating Kannur International Airport, was appointed under Section 7 and had its area specified under Section 8 of the Customs Act, 1962, with 97 Customs officers posted at the airport on cost recovery basis. Invoking Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009, the department issued four show cause notices demanding cost recovery charges of Rs.5,85,60,018, Rs.6,76,40,984, Rs.10,01,73,164 and Rs.11,36,20,489 for the periods 01.01.2020 to September 2023. On adjudication, the demands were confirmed with interest under Section 28AA and penalties under Section 117, prompting four appeals. The appellant had not commenced cargo operations in the relevant period, the officers being deployed only for clearing international passengers.

Key provisions

• Section 157, Customs Act, 1962 — General power to make regulations
• Section 45, Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Section 141, Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 142, Customs Act, 1962 — Recovery of sums due to Government
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 158, Customs Act, 1962 — Provisions with respect to rules and regulations
• Section 7, Customs Act, 1962 — Appointment of customs ports, airports
• Section 8, Customs Act, 1962 — Power to approve landing places and specify limits of customs area
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Regulation 7, Handling of Cargo in Customs Areas Regulations, 2009 — Power to relax and regulate