Telangana High Court Holds 'Handling Of Cargo In Customs Areas Regulations, 2009' As Ultra Vires Of The Customs Act, 1962

The Telangana High Court holds 'Handling of Cargo in Customs Areas Regulations, 2009' by way of which cost of living expenses were recoverable from the Customs Cargo Service Provider as ultra vires of the Customs Act, 1962.

“In the absence of any special authorization to levy cost recovery charges, appellants have no authority to impose cost recovery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act, 1962.”

The order was passed by a division bench comprising, Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti in a Writ Appeal preferred by the Central Board of Excise and Customs against the order passed by a single judge bench, wherein section 5(b) of the Customs Regulations, 2009 was held ultra vires and consequently, it was held that Custom Officers placed at the Rajiv Gandhi International Airport, Hyderabad were not entitled to recover the cost of living expenses from the Custodian of Sea Ports and Air Cargo Complexes (M/s. GMR Hyderabad International Airport Limited, Rep. by its General Manager/ R1) of the RGIA, Hyderabad.

To understand this order better, certain facts need to be established:

In 1999, the Government of India (GoI), Airports Authority of India (AAI) and the erstwhile 3 Government of Andhra Pradesh (GoAP) agreed to set up a new Greenfield International Airport at Hyderabad on Public Private Participation basis.

Tenders were issued and the respondent herein was selected as the preferred bidder. A Concession Agreement was entered into by the respondent company and GoI, AAI and GoAP.

In 2009, the Central Government issued the Handling of Cargo in Customs Areas Regulations, 2009 by way of which, the Customs Cargo Service Provider was entitled to provide free of cost or rent fully furnished office accommodation for Customs, Customs Electronic Data Interchange (EDI) Service Centre, with required amenities and facilities and residential accommodation and transportation facilities for customs staff.

The Respondent Company challenging this provision approached the Court.

It was contended that even at the time of signing the Concession Agreement it had sought to waive the above-mentioned mandate. It contended that the customs officers were present at the Airport to fulfil their statutory obligation and were not providing any facilities to the respondent/Company (so as to be entitled to a fee).

The Single Bench, conceding with this argument, allowed the plea of the Respondent company, giving rise to the present Writ Appeal.

Findings of the Division Bench:

The Division Bench in the appeal, before dwelling into the facts, reiterated that while dealing with a taxation statute, interpretation should be made on express language and there is no room for consideration or presumption.

With this view, the Bench noted that the appellant had contended to have issued the rules in furtherance of sections 141 and 157 of the Customs Act and that a plain reading of the sections would make it abundantly clear that provision for recovery of the cost-of-living expenses was made.

“Thus, from a perusal of Section 157 of the Customs Act, it is evident that Section 157 does not enumerate any specific provision under which cost recovery charges i.e., the amount of salary payable to the officials of the Customs Department, who are deployed at the Airport who perform their statutory duties, can be recovered. The 2009 Regulations have been framed in exercise of the powers conferred under Section 141 and Section 157 of the Customs Act. From a close scrutiny of the aforesaid provisions of Sections 141 and 157, it is evident that there is no express statutory provision conferring authority on the appellants to levy cost recovery charges.”

The Telangana High Court, while passing the order has distinguished its judgment from those passed by the Bombay and Delhi High Courts in the Mumbai International Airport Private Limited vs. Union of India and Allied ICD Services Limited vs. Union of India, respectively.

The Court noted that both the above-mentioned Courts had failed to examine whether in the absence of any specific provision to levy cost recovery charges, whether the same could be imposed under the Regulations.

“Thus, it is evident that the Division Bench of Bombay High Court did not examine the ground of challenge whether in the absence of any specific provision to levy cost recovery charges, whether the same could be imposed under the Regulations. Similarly, the Division Bench of Delhi High Court in Allied ICD Services Limited (supra) has relied on the decision of the Bombay High Court. Therefore, the aforesaid decisions rendered by Bombay High Court as well as Delhi High Court are distinguishable.”

The Court reiterated that the Customer Officers were deployed to the airport on official duty and could not expect a salary from the airport authorities.

“Therefore, the officers of the Customs Department, who were employed at the Airport between the years 2008 and 2013, were deployed to perform their statutory duties. The levy of cost recovery charges, which is in fact salaries payable to the customs staff deployed at the Airport is in the nature of administrative charges and is a tax. It cannot be exacted from the respondent without any statutory provision.”

Thus, the Bench held that any levy made on the Respondent/Company towards cost recovery charger for the year 2008-2013 had no legal substratum and was unsustainable.

WRIT APPEAL No.1321 of 2012

Central Board of Excise and Customs vs. M/s. GMR Hyderabad International Airport Limited, Rep. by its General Manager & Ors.

Counsel for appellants: B.Narasimha Sarma, Additional Solicitor General of India, rep. by Swaroop Oorilla, Senior Standing Counsel for CBIT and Customs.

Counsel for respondents: S.Niranjan Reddy,(Sr) for S.Vivek Chandra Sekhar.

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