Legal principle

A custodian appointed under section 45 of the Customs Act who voluntarily accepts custodianship and facility approvals subject to the Handling of Cargo in Customs Areas Regulations, 2009 is bound by Regulation 5(2), and cost recovery charges for Customs staff posted at the facility are a fee/reimbursement for services rendered with a quid pro quo, not a tax.

Court decision

The Bombay High Court dismissed both writ petitions and discharged the Rule without costs, upholding the demand notices: Regulation 5(2) applies to the petitioner as custodian, the cost recovery charges are not a tax but a reimbursement/fee for services rendered by Customs staff with a quid pro quo, and the petitioner is bound by conditions attached to the approvals it voluntarily sought.

Facts

M/s. Mumbai International Airport Pvt. Ltd. (MIAL) operates and develops Chhatrapati Shivaji International Airport and the Air Cargo Complex, Sahar under an OMDA and SSA, and was appointed custodian of the Air Cargo Complex under section 45 of the Customs Act, 1962 by Public Notice No.1/2006 dated 3 May 2006, replacing AAI and Air India. The Handling of Cargo in Customs Areas Regulations, 2009 (notified under section 141 read with section 157) imposed by Regulation 5(2) the condition that the custodian bear the cost of Customs staff posted at the facility, replicating Condition No.10 of Circular No.34/2002-CUS. After Circular No.4/2011-CUS clarified that even pre-Regulation custodians must comply with Regulations 5 and 6, the Commissioner issued Public Notice No.02/2011 (clause 24) holding MIAL liable, and the department raised demand notices dated 8 June 2011, 18 July 2011, 29 March 2012, 16 April 2012 and 13 June 2012 for cost recovery of Customs staff. MIAL challenged the applicability and validity of Regulation 5(2) and the demand notices under Article 226.

Key provisions

• Section 45, Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Section 157, Customs Act, 1962 — General power to make regulations
• Section 141(2), Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 7, Customs Act, 1962 — Appointment of customs ports, airports
• Section 158, Customs Act, 1962 — Provisions with respect to rules and regulations
• Section 8, Customs Act, 1962 — Power to approve landing places and specify limits of customs area
• Section 2, Customs Act, 1962 — Definitions
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 48, Customs Act, 1962 — Procedure in case of goods not cleared, warehoused, or transhipped within thirty days after unloading