Legal principle

Cost recovery charges for customs officers posted in a customs area cannot be confirmed or recovered from a Customs Cargo Service provider where HCCAR, 2009 prescribes no recovery mechanism and the Government of India has not specified the rates and manner of payment — a levy without statutory backing is without jurisdiction and offends Article 265 of the Constitution.

Court decision

The Tribunal allowed the assessee's appeal with consequential relief and dismissed the Revenue's appeal. It held that in the absence of any statutory mechanism to recover cost recovery charges, the Principal Commissioner's confirmation of the demand was without jurisdiction and without authority of law; Regulation 6(1)(o) could not be invoked because nothing on record showed that rates and manner of payment had been specified by the Government of India/Ministry of Finance. It found no error in dropping the HRA and transport allowance components, since accommodation and transport had been provided by the assessee to the officers.

Facts

Diamond and Gem Development Corporation Limited, a custodian/Customs Cargo Service provider at Sachin, Surat, was adjudicated by the Principal Commissioner of Customs, Ahmedabad, who by OIO dated 17.06.2020 confirmed recovery of cost recovery charges of Rs. 1,56,79,663/- (out of Rs. 1,79,27,123/- proposed in the SCN) towards the cost/salaries of customs officers posted at the customs area, invoking Regulations 5(2) and 6(1)(o) of the Handling of Cargo in Customs Areas Regulations, 2009. The balance demand, representing Transport Allowance and House Rent Allowance, was dropped because the assessee had provided accommodation and transport to the departmental officers. The assessee appealed against the confirmed demand, and the Revenue filed a cross-appeal against the dropping of the HRA and transport allowance components.

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
• Regulation 6(1)(o), Handling of Cargo in Customs Areas Regulations, 2009 — Responsibilities of Customs Cargo Service provider
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Regulation 12, Handling of Cargo in Customs Areas Regulations, 2009 — Procedure for suspension or revocation of approval and imposition of penalty
• Regulation 2, Handling of Cargo in Customs Areas Regulations, 2009 — Definitions
• Section 158, Customs Act, 1962 — Provisions with respect to rules and regulations