The Calcutta High Court has held that where a Container Freight Station (CFS) operator has been appointed as custodian under section 45(1) of the Customs Act, 1962 subject to an express condition that it shall bear the cost of Customs Officers posted at the facility on cost recovery basis, and has accepted that condition, operated the facility under customs supervision, paid such charges for a substantial period, and failed to secure exemption under the applicable regulatory framework, it cannot subsequently deny liability to pay cost recovery charges by contending that formal sanction of posts was absent.
Regulation 6(1)(o) of the Handling of Cargo in Customs Areas Regulations, 2009 does not make such liability contingent upon prior formal sanction of posts in the manner asserted by the petitioner, particularly where customs personnel were in fact deployed and the CFS functioned under active customs control, added the Court.
The Court further held down that administrative subsuming or regularisation of diverted posts into the existing cadre strength does not, by itself, extinguish the custodian’s liability to pay cost recovery charges; exemption arises only upon satisfaction of the prescribed norms and issuance of a specific exemption order. It also held that after an earlier adjudication upholding the regulatory framework and leaving open only the issue of quantification, the petitioner is barred from reopening the foundational issue of liability in a subsequent writ petition, and that operational restrictions imposed for persistent default in payment of such charges are a valid consequential administrative measure.
A Single Judge Bench of Justice Rai Chattopadhyay observed that the petitioner had been appointed as custodian subject to an express condition that it would bear the cost of Customs Officers posted at the CFS on cost recovery basis, and that this condition was accepted unequivocally. The Single Judge held that the petitioner, after availing the benefit of operating the CFS for several years, furnishing bond and bank guarantee, remitting cost recovery charges from November 2012 to December 2014, and even seeking waiver under the relevant circular, could not now contend that no liability ever existed. The plea that such conduct was due to “ignorance of law” was found unacceptable in the case of a commercial entity operating a customs bonded facility under statutory control.
The Bench further observed that Regulation 6(1)(o) of the Handling of Cargo in Customs Areas Regulations, 2009 requires the Customs Cargo Service Provider to bear the cost of Customs Officers posted by the Commissioner of Customs on cost recovery basis unless specifically exempted, and that the provision does not make the liability dependent on prior formal sanction of posts by the Department of Expenditure in the manner suggested by the petitioner. The Bench recorded that the materials on record demonstrated that Customs personnel were in fact deployed for functioning of the petitioner’s CFS and that the facility could not have operated without customs supervision and clearance support.
The Bench also observed that the subsequent subsuming of diverted posts into the existing cadre strength did not extinguish the petitioner’s liability either retrospectively or prospectively in the manner contended. According to the Bench, the Board proceedings dated 18 June 2015 and the office order dated 23 February 2016 only reflected an administrative regularisation of posts, whereas exemption from payment of cost recovery charges was not automatic and depended upon fulfilment of prescribed norms and a specific exemption order. Since the petitioner’s waiver request had been rejected and no exemption order had been granted in its favour, the liability under Regulation 6(1)(o) continued.
The Bench further held that the petitioner’s attempt to deny liability on the basis of absence of formally sanctioned posts was an overtechnical reading divorced from the substance and object of the statutory framework. It applied the doctrine of substantial compliance, holding that in the facts of the case, the essential purpose of the law stood fulfilled because customs infrastructure, supervision and manpower had in fact been made available for operation of the CFS. The Bench also found force in the respondent’s objections based on res judicata, estoppel and acquiescence, observing that after the Delhi High Court proceedings, only the issue of quantification could survive, and such issue involved disputed factual questions not amenable to writ adjudication.
Briefly, the petition challenged three demand notices and a letter by which restrictions were imposed on movement of incoming container/cargo to the petitioner’s Container Freight Station at Haldia/Kolkata Port with effect from 13 August 2020, on the ground of alleged non-payment of cost recovery charges. The petitioner company had been notified as operator of the CFS and appointed as “custodian” under section 45(1) of the Customs Act, 1962.
Under Public Notice No. 34/12 dated 13 August 2012, one of the conditions of such appointment was that the custodian would bear the cost of Customs Officers posted at the CFS on cost recovery basis and make advance half-yearly payments. The petitioner had in fact paid cost recovery charges for the period from 14 November 2012 to 31 December 2014, and had also applied for waiver under the relevant circular, though such waiver request was rejected on 18 February 2016 for not meeting the eligibility criteria. Thereafter, the respondent raised further demands for the period beginning 1 January 2015, and eventually imposed operational restrictions on the CFS for continued non-remittance.
The petitioner’s case was that no liability to pay cost recovery charges arose because the mandatory preconditions for such levy had not been fulfilled, namely sanction of posts meant for the CFS and actual physical deployment of Customs personnel against such sanctioned posts. The petitioner argued that neither sanction nor proper posting had taken place in its case, that earlier payments and the waiver application had been made under ignorance of law, and that once certain diverted posts were later subsumed in the existing cadre strength of the Customs department, no further liability could continue unless fresh cost recovery posts were sanctioned in the prescribed manner.
The respondent contended that the petitioner, having accepted the terms of appointment as custodian, furnished bond and bank guarantee, operated the CFS under customs supervision, and paid charges for several years, could not deny liability for cost recovery charges. It was also asserted that customs officers had in fact been deployed, that the CFS could not have functioned without customs support, and that the impugned restriction dated 12 August 2020 was a consequential administrative measure after persistent default in payment.
Appearances:
S.N. Mukherjee, Sr. Adv., Sagar Bandopadhyay, Rudraman Bhattacharya, Lalit Baid, Saptarshi Banerjee, Saberi Saha, for Petitioners
Bhaskar Prasad Banerjee, Tapan Bhanja, for Respondents
