Legal principle

Cost Recovery Charges cannot be levied or collected from a Customs Cargo Service Provider in the absence of a notification/Government order specifying the rates under the Handling of Cargo in Customs Areas Regulations, 2009, and waiver must be granted from the date the prescribed benchmark is achieved, though amounts already collected are regularized rather than refunded where the incidence was passed on to customers.

Court decision

The Madras High Court disposed of all three writ petitions in favour of the petitioner. It held that collection of CRC from the petitioner was made contrary to the Handling of Cargo in Customs Areas Regulations, 2009, since no notification/Government order specifying the rates was shown. No refund of the Rs.45,01,960 already paid was ordered, as the incidence was passed on to customers, but the payments were directed to be regularized; the jurisdictional Commissioner/Chief Commissioner was directed to grant waiver/exemption with effect from the date the petitioner achieved the benchmark under the CBEC Circular dated 12.09.2005; and the Central Board was directed to issue, within six months, notifications specifying CRC rates payable by Customs Cargo Service Providers and to amend the 2009 Regulations to incorporate provisions for waiver/exemption.

Facts

M/s. Sun Global Logistics Pvt. Ltd, approved as a Customs Cargo Service Provider operating a Container Freight Station (CFS) with effect from 11.07.2008, had Customs officers deployed at its CFS on Cost Recovery Charges (CRC) basis. After the VI Pay Commission increased salaries, the department demanded differential CRC of Rs.5,86,428 for July–December 2008 and advance monthly CRC of Rs.2,60,275 from January 2009. The petitioner, claiming it had completed two years of operation with the prescribed benchmarks, sought waiver of CRC under Circular No.52/97-Cus dated 17.10.1997 and Board instruction F.No.434/17/2004-Cus-IV dated 12.09.2005. Instead, by communication dated 11.02.2013 it was directed to pay Rs.1,24,23,213 as CRC arrears (net of a gross demand of Rs.1,64,25,173 after adjusting Rs.40,01,960 paid), and it also challenged the Customs Manual para 2.10 and the 12.09.2005 instruction insofar as waiver was made only prospective with no claim for the past period.

Key provisions

• Section 157, Customs Act, 1962 — General power to make regulations
• Section 158, Customs Act, 1962 — Provisions with respect to rules and regulations
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 141(2), Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 36, Customs Act, 1962 — Restrictions on unloading and loading of goods on holidays, etc.
• Section 7(aa), Customs Act, 1962 — Appointment of customs ports, airports
• Regulation 7, Handling of Cargo in Customs Areas Regulations, 2009 — Power to relax and regulate
• Section 45, Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Regulation 4, Handling of Cargo in Customs Areas Regulations, 2009 — Retrospective Application