Legal principle

Cost recovery charges from a custodian under Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 are unsustainable in law because customs clearance is a sovereign function, no special service or quid pro quo is rendered by Customs to the custodian, and salaries of Customs officers are already provided for by legislative appropriation.

Court decision

The Tribunal allowed the appeal and set aside the impugned Order-in-Original, holding that the demand of cost recovery charges would not sustain, in consequence of the High Court judgment which not only set aside such a demand but also held Regulation 5(2) of the 2009 Regulations illegal; consequential relief, if any, was granted in accordance with law.

Facts

M/s Goodearth Maritime Limited, sub-licensee of the original licensee M/s Jakhau Salt Company Pvt Ltd, operated a private jetty at Jakhau, Kutch, declared a landing place under Section 8(a) of the Customs Act, 1962 (Notification 08/2002/CC dated 23.04.2002), and was appointed custodian for goods meant for loading of salt for export/import and coastal movement under Section 45(1) vide Notification 09/2002/CC dated 23.04.2002. By letter dated 05.05.2003, the Assistant Commissioner, Bhuj, allowed the appellant to operate the jetty on payment of Merchant Over Time (MOT) charges under the Customs (Fees for Rendering Services of Customs Officers) Regulations, 1998, till separate posting of Customs staff on cost recovery basis, and the appellant paid MOT charges. A show cause notice dated 20.03.2018 (corrigendum dated 26.02.2019) alleged that, as a Customs Cargo Service Provider under the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR), the appellant was liable to pay cost recovery charges of Rs. 1,42,81,265 for the period 17.03.2009 to 31.03.2015 under Regulations 5(2) and 6(1)(o), having paid only Rs. 18,41,005 as MOT. The Commissioner, by Order-in-Original dated 19.03.2019, confirmed recovery of Rs. 1,45,55,246 (appropriating the MOT paid), imposed a penalty of Rs. 20,000 under Regulation 12(8) of HCCAR 2009, and directed suspension of operations from 01.07.2019 if the demand was not paid by 30.06.2019.

Key provisions

• 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
• Regulation 6(1)(o), Handling of Cargo in Customs Areas Regulations, 2009 — Responsibilities of Customs Cargo Service provider
• Regulation 12(8), Handling of Cargo in Customs Areas Regulations, 2009 — Procedure for suspension or revocation of approval and imposition of penalty
• Regulation 5(2), Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 8(a), Customs Act, 1962 — Power to approve landing places and specify limits of customs area
• Regulation 2(b), Handling of Cargo in Customs Areas Regulations, 2009 — Definitions