Legal principle

Under paragraph 11 of Circular No. 32/2016-Cus read with Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016, the hours of customs supervision actually availed—not the number of days—are determinative, so where services are taken only for a few hours a day and no exclusive officer is posted, charges are payable on MOT basis and a CRC demand is unsustainable.

Court decision

The Tribunal set aside the impugned order and allowed the appeal, holding that Flemingo is liable to pay service charges for customs services utilized only on MOT basis, and the demand confirmed on CRC basis is not sustainable in the eyes of law.

Facts

M/s Flemingo Dutyfree Shop Pvt. Ltd. operated a special bonded warehouse at NSCBI Airport, Kolkata under Special License No. 89/2016 dated 14.07.2016 issued under section 58A(1) of the Customs Act, 1962, for storage of imported liquor, tobacco, perfumes, cosmetics, cameras, watches, household items, food and confectioneries, for removal to its duty-free shops. As required by Regulation 3(e) of the Special Warehouse Licensing Regulations, 2016 read with paragraph 11 of Circular No. 32/2016-Cus dated 13.07.2016, it paid for daily supervision services of a Preventive Officer (for periods not exceeding two hours) on Merchant Over Time (MOT) basis from July 2016 to December 2018. The Department issued a Show Cause Notice dated 14.02.2019 demanding Rs. 1,36,77,319/- as differential Cost Recovery Charges (CRC) along with interest for that period. The Principal Commissioner of Customs (Airport & ACC), Kolkata confirmed the demand vide Order-in-Original dated 18.04.2024, and Flemingo appealed to the CESTAT, Kolkata.

Key provisions

• Regulation 3(e), Special Warehouse Licensing Regulations, 2016 — Licensing of special warehouse
• Section 58A(1), Customs Act, 1962 — Licensing of special warehouses
• Section 7, Customs Act, 1962 — Appointment of customs ports, airports