Kannur International Airport Ltd vs Cochin-Cus on 23 September, 2025

[Cites 55, Cited by 0]

Custom, Excise & Service Tax Tribunal

Kannur International Airport Ltd vs Cochin-Cus on 23 September, 2025

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1

Customs Appeal No. 20346 of 2021

(Arising out of Order-in-Original No. 02/2021 CusTech CCP Kochi
dated 31.03.2021 passed by the Commissioner of Customs
(Preventive), Cochin.)

M/s. Kannur International
Airport Ltd., Appellant(s)
Mattanur,
Kannur, Kerala.

VERSUS
The Commissioner of Customs
(Preventive),
5th Floor, Catholic Center,
Broadway, Cochin - 682 031. 682 009.
Respondent(s)

With
(i). Customs Appeal No. 20301 of 2023
(M/s. Kannur International Airport Ltd.)
(Arising out of Order-in-Original No. 04/2021 CusTech CCP Kochi
dated 30.11.2021 passed by the Commissioner of Customs
(Preventive), Cochin.)

(ii). Customs Appeal No. 20239 of 2024
(M/s. Kannur International Airport Ltd.)
(Arising out of Order-in-Original No. 01/2023 CusTech CCP Kochi
dated 02.03.2023 passed by the Commissioner of Customs
(Preventive), Cochin.)

(iii). Customs Appeal No. 20062 of 2024
(M/s. Kannur International Airport Ltd.)
(Arising out of Order-in-Original No. 04/2023 CusTech CCP Kochi
dated 12.10.2023 passed by the Commissioner of Customs
(Preventive), Cochin.)

APPEARANCE:
Mr. Ravi Raghavan, Ms. Shradha Pandey and Ms. Purvi Asati,
Advocates for the Appellant
Mr. K.A. Jathin, Deputy Commissioner (AR) for the Respondent

CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MR PULLELA NAGESWARA RAO,
MEMBER (TECHNICAL)

Page 1 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

Final Order No. 21568 - 21571 /2025

DATE OF HEARING: 24.03.2025
DATE OF DECISION: 23.09.2025

DR. D.M. MISRA

These four appeals are filed against respective Orders-in-
Original, since involved common issues are taken up together for
hearing and disposal.

2. The facts involved in the aforesaid appeals are more or
less common; hence narration of facts in appeal No.
C/20346/2021 would suffice the purpose. Briefly stated the acts
of the case are that the appellant is a public limited company
established to build, own and operate their own airport. As per
Notification No.56/2017-Cus.(NT) dated 23.06.2017, the Central
Board of Indirect Taxes and Customs (CBIC) appointed Kannur
International Airport under Section 7 of the Customs Act, 1962
for unloading of imported goods and loading of goods for export
or any class of such goods. As per Notification No.01/2018
dated 29.11.2018, the Commissioner of Customs (Preventive),
Cochin specified the area of "Kannur International Airport" under
Section 8 of the Customs Act, 1962. As per CRB Post Creation
Order No.22/2018 dated 14.11.2018 issued by the Directorate
General of Human Resources & Development (DGHRD), 97 posts
of officers of Customs were created on cost recovery basis with a
condition to renew every year and consequently, Chief
Commissioner vide letter dated 22.11.2018 intimated the
posting of requisite officers on cost recovery basis. Alleging that
as per Regulation No.5(2) of the Handling of Cargo in Customs
Areas Regulations, 2009 (HCCAR 2009, for short) airport
operator has to bear the cost of the Customs officers posted, at
such customs area on cost recovery basis, and shall make
payments at such rates and in the manner prescribed, unless
exempted by the Ministry of Finance, Government of India, the

Page 2 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

appellant failed to pay an amount of Rs.5,85,60,018/- pertaining
to the period from 01.01.2020 to 30.11.2020, even though
repeated reminders were issued by the Department, show-cause
notice dated 15.02.2021 was issued to them proposing to
recover the said cost recovery charges under Section 142 of the
Customs Act, 1962 and proposed penalties under Section 117 of
the Customs Act, 1962. On adjudication, the demand was
confirmed with interest. Later, on similar grounds, three more
show-cause notices for the subsequent period from December
2020 to August 2021, September 2021 to August 2022 and
September 2022 to September 2023 were issued demanding
cost recovery charges of Rs.6,76,40,984-, Rs.10,01,73,164/-
and Rs.11,36,20,489/- respectively. On adjudication, the
demands have been confirmed along with interest and penalties.
Hence, these four appeals.

3. Assailing the impugned order, the learned advocate for the
appellant has submitted the following:-

➢ It is not the case of the Revenue that the Cost Recovery
Charge is a tax or duty. At best, it can be compared to a
fee and no such fee can be collected in respect of
deployment of customs officers at the Airport. In support
referred to the Judgments in:

i. GMR Hyderabad International Airport Ltd. v. CBEC,
2014 (299) ELT 320 (A.P.)
ii. CBIC v. GMR Hyderabad International Airport Ltd.
2024 (389) ELT 641 (Telangana High Court).
iii. Good Earth Maritime Limited v. Commissioner of
Customs (CESTAT Ahmedabad) - 2020 (3) TMI 494 -
CESTAT Ahmedabad,

➢ No services were being specially provided by the customs
officials to the appellant; hence demand of cost recovery
charges from the appellant is illegal. Reliance is placed on
the following judgments:
i. Central Warehousing Corporation v. CC, Ahmedabad,
2024-TIOL-939-CESTAT-AHM

Page 3 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

ii. Diamond and Gem Development v. CC, Ahmedabad,
2024-VIL-734-CESTAT-AHM-CU

➢ There cannot be a levy and collection of Cost Recovery
Charges in respect of the deployment of the Customs
officials in the Airport, which is a sovereign function of the
Government and consequently, the Cost Recovery Charges
is not payable by the Appellant.

➢ The Appellant in the present case is an airport operator
engaged in running the Airport and all the aspects related
to setting up and running of civil airports in India are
governed by the policies laid down by the Ministry of Civil
Aviation. In view of Clause 15(e) of the National Civil
Aviation Policy, 2016, no cost will be levied on the airport
operator for arranging the service of the customs, except
for: items to be billed to Passenger Service Fees (PSF); or
those covered under Handling of Cargo in Customs Area
Regulation 2009.

➢ Passenger Service Fee is an amount that is collected from
each embarking passenger at the airport by the airlines.
Cost of deployment of customs officials at the airport is not
charged to the embarking passengers and therefore it is
not covered under the heading of PSF.

➢ The SCN alleges that as per Regulation No. 5(2) of
Handling of Cargo in Customs Areas Regulations, 2009
(HCCAR, 2009) (as amended), Airport Operator has to
bear the cost of the Customs Officers posted, at such
customs area on cost recovery basis, by the Commissioner
and shall make payments at such rates and in the manner
prescribed, unless specifically exempted by an order of the
Government of India in the Ministry of Finance. There is
no statutory basis for cost recovery charges where the
airport is only handling passenger transport. The HCCAR,
2009 provides for the manner in which the imported

Page 4 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

goods/export goods shall be received, stored, delivered or
otherwise handled in a Customs area. The regulations also
prescribe the responsibilities of persons engaged in the
aforesaid activities. The HCCAR, 2009 is applicable to all
persons operating in a Customs area and engaged in the
handling of import/export goods which includes the
Custodians holding custody of import/export goods and
handling such goods and all persons working on behalf of
such custodians such as fork lift or material handling
equipment operators, etc. By the very nature, HCCAR,
2009 is applicable to cargo handling. Referring to
Regulation 3 of the HCCAR, 2009, it is submitted that by
no stretch of imagination can the said HCCAR, 2009 be
applied to passenger traffic related activities. In the
present case, the Appellant has not commenced cargo
operations till the date of filing the first appeal. On the
other hand, Customs officials are deployed during the
period only for clearing of international passengers at the
passenger terminal and not for cargo handling. Therefore,
the Regulation 5(2) of the HCCAR, 2009 is not applicable
in the present case. It is worth noting that the 'cargo
handling service' as defined under Section 65(23) of the
Finance Act, 1994 excludes handling of passenger
baggage.

➢ The scheme of Constitution of India, there is no scope for
recovering salaries payable to Government Employees
from Private Parties. Reliance was placed on the following
judgements:
i. Sun Global Logistic Pvt. Ltd. v. Union of India - 2021
(377) E.L.T. 793 (Mad.)
ii. Pearl Ports and Warehousing Private Limited v. ACC,
2022 (6) TMI 997 - MADRAS HIGH COURT.

➢ The impugned order refers to Section 142 of the Customs
Act, to propose the demand and recover the cost recovery
charges. Section 142 deals with the actual recovery of an

Page 5 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

amount due which is determinable under this act. The act
refers to Customs Act. Furthermore, there is no provision
for fixation of liability under the Act vis-a-vis cost recovery
charges. Hence, recovery proceedings cannot be under
142 as the adjudication has not taken place. Further, no
recovery mechanism is provided under the HCCAR, 2009.
In support referred to the decision in the case of Container
Corporation of India Ltd. v. CC, Jodhpur, 2019 (366) E.L.T.
745 (Tri. - Del).
➢ Regulation 7 provides power to relax and regulate. It
envisages that if the Commissioner of Customs is satisfied
that in relation to the custody and handling of imported or
export goods in a customs area, the Customs Cargo
Service provider, for reasons beyond his control, is unable
to comply with any of the conditions of regulation 5, he
may for reasons to be recorded in writing, exempt such
Customs Cargo Service provider from any of the conditions
of regulation 5. It is submitted that in present case, the
activity of Airport was suspended during the period from
25.03.2020 to 11.05.2020, on account of national
lockdown due to the pandemic Covid-19, therefore, the
Appellant has failed to fulfil the obligations cast upon
them, as envisaged in the Customs Act, 1962 and
defaulted the payment of cost recovery charges, the
reason of said default is beyond the control of the
Appellants. It is submitted that Ld. Commissioner in the
impugned orders has not disputed and held that the said
submissions made by the Appellant merits consideration.
However, he confirmed the demand of recovery charges,
holding that the issue has to be decided within the ambit
of the Customs Act, 1962. Therefore, appellant is entitled
for exemption from cost recovery charges under
Regulation 7 of the HCCAR, 2009.

Page 6 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

➢ In terms of the Board Circular No.16/2023-Customs dated
10.04.2013 and Board's Circular No. 02/2021-Customs
dated 19.01.2021, the operator is eligible to apply for
exemption from payment of cost recovery charges upon
fulfilling the performance benchmark as prescribed at para
8.2 of the said Circular for past two financial years or four
years. The said circular does not have retrospective
application as upheld in Sarveshwar Logistics v. Union of
India [2023 (386) E.L.T. 702 (Bom.)]. Therefore, for the
period prior to 19.01.2021, the said circular would not be
applicable.
➢ On achieving the performance benchmark as prescribed at
para 8.2 of the said Circular, the airport would be eligible
for waiver from payment of cost recovery charges. The
Appellant achieved the performance benchmark
consecutively for the FYs 2018-19, 2019-20, 2020-21,
2021-22 and 2022-23.

Period Criteria as per circular Criterion-I (No of flights
handled)
December 3500 flights per year Total No of Flights - 2,085
2018 to (for 4 months - 1167)
March 2019 3 Lakhs passengers Total passengers - 2,29,812
(for 4 months - 1 Lakhs)
April 2019 3500 flights per year Total No of Flights - 15,230
to March 3 Lakhs passengers Total passengers - 16,19,923
2020
April 2020 3500 flights per year Total No of Flights - 6,353
to March 3 Lakhs passengers Total passengers - 4,91,691
2021
April 2021 3500 flights per year Total No of Flights - 9,836
to March
3 Lakhs passengers Total passengers - 8,03,590
2022
April 2022 3500 flights per year Total No of Flights - 12,033
to March 3 Lakhs passengers Total passengers - 12,74,138
2023
April 2023 3500 flights per year Total No of Flights -10,979
to March 3 Lakhs passengers Total passengers -
2024 11,72,389

➢ The Appellant vide its letter dated 16.03.2020 requested
the Commissioner of Customs, for waiver of the Cost
Recovery Charges and vide letter dated 17.03.2020
requested the Ministry of Civil Aviation for exemption from

Page 7 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

the payment of cost recovery charges. Subsequently, the
Appellant vide letters dated 21.04.2021, 30.04.2021 and
01.06.2021 requested the CBIC, to waive / grant
exemption from the pending cost recovery charges and
considering the request and recommendation of the
Commissioner of Customs, the Directorate General of
Human Resource Development, CBIC vide its letter dated
18.08.2021 has granted exemption from Cost recovery in
terms of conditions mentioned in Board's Circular No.
02/2021-Customs dated 19.01.2021. In view of the
above, the Appellant is entitled for exemption from cost
recovery charges for the entire period as the assessee
cannot be penalized for the inaction on part of the
department. Reliance in this regard is placed on the case
of Commissioner of Customs (Imports), Mumbai vs. Tullow
India [2005 (189) ELT 401 (SC)].

➢ It is pertinent to note that cargo operations commenced
from October 2021 and the Appellant has been diligently
discharging Cost Recovery Charges on cargo operations
undertaken by it. The amount discharged as Cost Recovery
Charges are tabulated as follows:
S AMOUNT PAID in
I PERIOD ₹
1 OCT 2021 TO DEC 2021 60,37,667.00
2 OCT 2021 TO DEC 2021-ARREAR 1,24,542.00
3 JAN 2022 TO MAR 2022 61,62,209.00
3 APR 2022 TO JUNE 2022 61,62,209.00
4 JULY 2022 TO SEPT 2022 62,86,751.00
5 JAN 2022 TO JUNE 20222-ARREAR 2,49,084.00
6 OCT 2022 TO DEC 2022 62,86,751.00
7 ARREAR-JULY 2022 TO DEC 2022 3,32,112.00
8 JAN 2023 TO MAR 2023 50,34,827.00
9 JAN 2023 TO MAR 2023-DA ARREAR 1,29,559.00
1
0 APR 2023 TO JUNE 2023 51,64,386.00
1
1 JULY 2023 TO SEPT 2023 51,64,386.00
1
2 OCT 2023 TO DEC 2023 51,64,386.00
Total Cost Recovery Charges Paid in
respect of Cargo operations 5,22,98,869.00

Page 8 of 41
C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

➢ The demand for interest levied under Section 28AA of the
Customs Act, is not sustainable. It is evident that it is
applicable only if any duty is to be paid in accordance with
the provisions of Section 28 of the Customs Act, which is
clearly not the case at hand. Therefore, Section 28AA does
not have any application in the instant case. Reliance is
placed on Diamond & Gem Dev. Corporation [2016 (342)
ELT 366 (Guj)].

➢ In the instant case the ingredients of Section 117 of the
Customs Act have not been fulfilled and therefore the
same cannot be applied. Reliance in this regard has been
placed on M/s Hazel Mercantile Ltd. v. CC, Kandla [2013
(297) E.L.T. 70 (Tri. - Ahmd.)].

4. Per Contra, learned AR for the Revenue has reiterated the
findings of the learned Commissioner. Further submissions are
summarized as below:

➢ The appellant has claimed that in terms of clause 15(e) of
the National Civil Aviation Policy 2016 (NCAP), facilities for
government agencies like customs are to be arranged for
by the government and no cost is to be levied on the
airport operator.
Clause 15(e) of the said policy reads as under:
"15. Aviation Security, Immigration and Customs
...

e) Facilities for government agencies like CISF, Immigration, Customs, Police etc, other than reasonable office space and operational area, will be arranged for by the government on payment basis, except for items to be billed to Passenger Service Fees (PSF) or those covered under Handling of Cargo in Customs Area Regulation 2009 and CISF Act. No cost will be levied on the airport operator. Norms for such facilities will be finalized in consultation with the stakeholders." [Emphasis supplied] ➢ The appellant has claimed that cost recovery charges under Handling of Cargo in Customs Area Regulation, 2009 Page 9 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 (HCCAR, 2009) is applicable only to cargo handling and not passenger handling. The appellant is covered by Handling of Cargo in Customs Area Regulation 2009 (HCCAR, 2009) as explained below:

➢ As per Notification No. 56/2017-Customs (NT) dated 23.06.2017, CBIC had appointed Kannur International Airport under Section 7 of the Customs Act, 1962 for the unloading of imported goods and loading of goods for export or any class of such goods. As per Notification No. 01/2018 dated 29.11.2018, the Commissioner of Customs (Preventive), Cochin specified the area of Kannur International Airport under Section 8 of the Customs Act, 1962.

➢ As per HCCAR, 2009, 'Customs Cargo Service Provider' (CCSP) means any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred in section 45 of the Customs Act and persons as referred to in sub-section (2) of section 141 of the said Act. ➢ As per section 2(19) of the Customs Act, 1962, 'export goods' means any goods which are to be taken out of India to a place outside India.

➢ As per section 2(25) of the Act, 'imported goods' means any goods brought into India from a place outside India but have not been cleared for home consumption. As per section 2(22) of the Act, goods includes- ...

(e) any other kind of movable property.

Hence, baggage or any goods brought by the passenger which are cleared by Customs comes under the purview of HCCAR, 2009. Hence, the appellant is liable to pay the cost recovery charges in terms of Regulation 5(2) of Handling of Cargo in Customs Areas Regulations, 2009.

Page 10 of 41

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 ➢ Circular No.02/2021-Customs dated 19.01.2021, lays down the norms/conditions for availing the exemption from payment of cost recovery charges. The appellant has not satisfied the conditions of Circular 02/2021-Cus dated 19.01.2021 for exemption from cost recovery charges. ➢ Reliance is placed on the following case laws: (i)Apeejay Infra-Logistics Pvt Ltd vs. Union of India [2020 (374) ELT 530 (Del.)](ii)Rajasthan Small Industries Corpn Ltd vs. Commr. Of C.Ex., Jaipur [2019 (367) ELT 736 (Raj.)]

(iii) Allied ICD Services Ltd vs. Union of India [2018 (364) ELT 59 (Del.)] (iv) Mumbai International Airport Private Ltd vs. Union of India [2014 (310) ELT 3 (Bom.)] ➢ The appellant has relied on the decision of the single Judge in the case of the GMR Hyderabad International Airport Ltd. Vs. C.B.E. & C., New Delhi [2014 (299) E.L.T. 320 (A.P.)]. It is considered by the Division Bench of Bombay High Court in Mumbai International Airport Private Ltd vs. Union of India and dissenting from the view of the single Judge of the Andhra Pradesh High Court observed that the learned Single Judge has without in any manner appreciating the position of the Customs Officers and their authorities under the Act held that Regulation 5(2) purports to levy a tax. We are of the opinion that cost recovery charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before an importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be Page 11 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner.

➢ The judgment in the case of GMR Hyderabad International Airport Ltd. which has been affirmed by the Telangana High Court [2024 (389) E.L.T. 641 (Telangana) fails to consider the legislative intent, established judicial precedents, and the underlying statutory framework authorizing the 2009 Regulations.

➢ Section 141(2) of the Customs Act, 1962 explicitly empowers the Customs authorities to regulate the handling of imported / exported goods within customs areas. The power to regulate inherently includes the authority to impose reasonable fees or charges for oversight and administration. Section 157 of the Customs Act, 1962 grants the Central Board of Indirect Taxes and Customs (CBIC) broad regulatory powers to frame rules and regulations to carry out the purposes of the Act. The power to regulate includes incidental and ancillary powers necessary to enforce statutory obligations.

➢ Both the Bombay High Court in Mumbai International Airport Private Limited v. Union of India and the Delhi High Court in Allied ICD Services Limited v. Union of India, [2018 (364) ELT 59 (Del.) upheld the validity of the 2009 Regulations under Sections 141 and 157. The Telangana Page 12 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 High Court erred in holding that these provisions do not implicitly authorize the levy of cost recovery charges.

➢ Nature of Cost Recovery Charges: Fee vs. Tax; Hon'ble Telangana High Court has erroneously classified cost recovery charges as a tax rather than a regulatory fee. Cost recovery charges are fundamentally a regulatory fee levied for ensuring compliance, oversight, and continued statutory operations within customs areas. Quid pro quo in regulatory fees is not required to be a direct one-to-one correlation but must demonstrate an overall regulatory benefit, which the deployment of Customs officers at the appellant's premises clearly provides. There is a clear distinction between the nature of levy of tax and fee. Tax is imposed on the general population or class of persons with reference to certain factors without any specific services being expected to be rendered against payment of such taxes. Fee on the other hand is charged against delivery of certain services. In support referred to Hon'ble Supreme Court in the case of The Commissioner, Hindu Religious Endowments, Madras vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1954 AIR 282, 1954 SCR 1005, Hon'ble Madras High Court in the case of P. P. Kutti Keya v. The State of Madras (1) [1954] S.C.R. 1046. (2) [1954] S.C.R. 1055. (3) A.I.R. 1954 Mad. 621. State of West Bengal v. Kesoram Industries Ltd. [2004 (1) TMI 71 Supreme Court.

➢ The appellant provided an undertaking at the time of its application for custodianship under Section 45 of the Customs Act, 1962, explicitly agreeing to abide by the 2009 Regulations. Subsequent requests for waiver of certain conditions do not nullify or override the initial binding nature of the undertaking. The principle of estoppel applies, and the appellant cannot selectively Page 13 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 challenge the validity of the 2009 Regulations after having derived benefits under them. Customs officers deployed at the appellant's premises perform critical statutory duties, including: Oversight and monitoring of cargo clearance; Prevention of smuggling and illegal activities; ensuring statutory compliance with Customs regulations. The presence of customs officers at the premises of the custodian directly enables the custodian to fulfill their obligations under Section 45 of the Customs Act, 1962. Regulatory oversight constitutes a service, and the costs associated with it can legitimately be passed on through cost recovery charges.

➢ The Telangana High Court attempted to distinguish the judgements of Bombay High Court in Mumbai International Airport Private Limited, and Delhi High Court, Allied ICD Services Limited, without fully addressing their reasoning. Both judgments recognized the validity of 2009 Regulations and upheld the levy of cost recovery charges under Sections 141 and 157. The uniform interpretation of these provisions across jurisdictions is essential to avoid conflicting applications of statutory authority.

➢ The High Court held that as Section 157 does not enumerate any specific provision under which cost recovery charges can be recovered, hence, there is no authority to impose cost recovery charges by means of a Regulation. But Section 157 of Customs Act confers general power to make regulations consistent with Customs Act. The High court failed to consider that on a plain reading of sub-sections (1) and (2) of said Section 157, it is apparent that sub-section (1) confers powers to make Regulations generally to carry out the purpose of Customs Act. Sub-section (2) enumerates certain matters in respect of which such regulations may be made. The Page 14 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 usage of words and phrases "without prejudice to the generality of foregoing power" in sub-section (2) makes it abundantly clear that the matters enumerated in subsection (2) are only illustrative in nature and absence of enumeration of any matter specifically in the said subsection (2) does not in any way indicate that the regulations cannot provide for such specific matter. In other words, the power to make regulations under subsection (1) are of a general nature and, hence, of wide amplitude. Further, provisions of sub-section (2), which are only illustrative in nature, do not in any way curtail or derogate from the general powers conferred under subsection (1).

➢ The High Court erred in not appreciating that Payment of cost-recovery charges is one of the conditions to be fulfilled by a person who is desirous of being appointed as the Custodian as specified in these Regulations framed in exercise of powers granted under Section 141 (2) and Section 157 of the Customs Act. Having being made to carry out the purposes of the Act, viz., the Custodianship under Section 45 of the Act, the regulations framed are in no way inconsistent with the Act and, therefore, these can't be said to be ultra vires of the Act.

➢ The High Court failed to consider that prior to the framing of these regulations, the Government has laid down a standard set of guidelines for appointment of Custodians, including the various facilities and conditions to be fulfilled, as laid down in Circular No 34/2002- Cus dated 26.06.2002 as amended by Circular No. 27/2004-cus dated 06.04.2004.

➢ The High Court failed to appreciate that the transitional provisions have been provided under Regulation 4 so that Page 15 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 the existing appointments of custodians under section 45 of the Customs Act, 1962 shall continue and there may not be any disruption in their operations. However, the existing custodians would be required to provide facilities and fulfill the conditions mentioned in Regulation 5 & 6, as applicable, within the specified time period.

➢ Hon'ble High Court had not taken cognizance of Circular No. 13/2009-Customs dated 23.3.2009 provided that the cost of providing services shall be borne by the Airport Company. The para 5.4 of Circular No. 13/2009Customs dated 23.3.2009.

➢ Hon'ble High Court has not appreciated that though the Customs officers perform statutory or sovereign functions, in the course of time new International Airports, Air Cargo complexes, ICD's and CFS may emerge to cater the needs of growing international traffic. The sovereign is not obliged to provide service or appoint officers at every air cargo complex that may be set up as it entails additional costs to the sovereign resulting from the business ventures run for commercial considerations, as this entails additional burden on the exchequer.

➢ Hon'ble High Court did not consider that it is well within the power of the State to charge an amount relatable to the cost of the posts of the Customs officials deployed at such facilities that are established and operated for commercial considerations. It is only to service the facility provided at the ports run by the Custodians for their own commercial gains that the cost recovery charges are levied, at a specified rate, for the posts of customs officials additionally sanctioned for these ICDs/Air cargo Complex over and above the regular posts. Thus, the cost recovery charges are not taxes or fees as held by the Hon'ble High Page 16 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Court, but it is in the nature of recovery of costs incurred by the Government for the services rendered by customs officers at these port/ terminals.

➢ Hon'ble High Court did not appreciate that it is in the interest of public policy to ensure that commercial enterprises do not profit at the expense of taxpayer. The cost of deployment of Customs staff for providing clearance facilities at such locations has to be borne by the Custodian and the denial of payment of cost recovery charges by custodian is unacceptable as the demand of cost recovery is just and right. The non observance of such a policy would tantamount to commercial enterprises profiting at the expense of taxpayer ➢ Hon'ble High court did not appreciate that the Payment of cost recovery charges is one of the conditions specified, which is required to be fulfilled by the custodian in terms of said Notification read with Handling of Cargo Regulations, 2009 framed in exercise of the powers given under Section 141 (2) and Section 157 of the Act and the earlier guidelines as laid down in Circular No 34/02-Cus. dated 26.06.02 as amended by Circular No. 27/04-Cus dated 06.04.2004.

➢ Hon'ble High court had not taken cognizance of Section 158 of the Customs Act, 1962 which empowers the Board to make rules and regulations to levy fees for rendering of any services by the officers of Customs.

➢ Hon'ble High court has not appreciated that the charges being collected are cost recovery charges and are being uniformly charged to all the custodians without any arbitrariness. The officers are posted at the custodian's premises, wherein the custodian to further his business Page 17 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 interest has requested to notify him as custodian. Hence, there is quid pro quo wherein an amount can be charged by the Government in the name and nature of cost recovery charges, which is nothing but for recovery of additional expenditure the Government will incur for posting officers exclusively at the premises of the custodian.

➢ The 2009 Regulations are validly framed under Sections 141 and 157 of the Customs Act, 1962 and are essential for enforcing statutory obligations in customs areas. Cost recovery charges are in the nature of regulatory fees, not taxes, and are essential for maintaining statutory oversight. The appellant is bound by their undertaking and cannot retrospectively challenge the regulatory framework after benefiting from custodianship.

5. Heard both sides at length and perused the records.

6. The issues for determination are whether: (i) the Cost Recovery Charges (CRC) under the Handling of Cargo in Customs Areas Regulations, 2009 for the period April 2020 to September 2023 is recoverable from the Appellant under Section 142 of Customs Act, 1962; (ii) interest is leviable under Section 28AA of Customs Act, 1962.; and (iii) exemption under Circular No.02/2021 is admissible.

7. Undisputed facts of the case are that the appellant is an airport operator of Kannur International Airport which has been notified as International Customs Airport by virtue of amending Notification No.56/2017-Cus.(NT) dated 23.06.2017 to the Notification No.61/94-Cus.(NT) dated 21.11.1994. The relevant Notification reads as follows:-

Page 18 of 41

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Notification No. 56/2017-Cus. (N.T.), dated 23-6-2017 Kannur, in the State of Kerala appointed as Customs Airport -- Amendment to Notification No. 61/94-Cus. (N.T.) In exercise of the powers conferred by clause (a) of sub-section (1), read with sub-section (2) of section 7 of the Customs Act, 1962 (52 of 1962), the Central Board of Excise and Customs hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 61/94(NT)-CUSTOMS, dated the 21st November, 1994, published in the Gazette of India, vide number S.O. 828(E), dated the 21st November, 1994, namely :-

In the said notification, in the Table, against the serial number 9 relating to the State of Kerala, after item (c) and the entries relating thereto in columns 3 and 4, the following shall be inserted, namely :-

                 (3)                (4)
                 "(d) Kannur        Unloading of imported goods and loading
                                    of export goods or any class of such
                                    goods."

8. Consequent to the said Notification, the Director General of Human Resources Development on the request of the Chief Commissioner, issued an order viz. CRB Posts Creation Order No.22/2018 dated 14.11.2018 whereby 97 posts for Airport Kannur (Class 'B' Airport ) and 31 posts for Air Cargo Complex at Kannur have been sanctioned. At the request of the airport operator, 36 officers have been posted by order dated 22.11.2018 for operation of the Airport. Pursuant to the said order and on commencement of operations, the appellant had paid the applicable Cost Recovery Charges, as fixed and for the period 01.12.2018 to 30.11.2019 amounting to Rs.8,25,37,957/-

and from 01.12.2019 to 31.03.2020 amounting to Rs.2,92,80,010/-. Since they have not paid the CRC fully, a letter was issued on 19.12.2019 directing the appellant to pay Rs.8,78,40,029/- and thereafter correspondences were exchanged from time to time between the Department and the appellant for payment of the said CRC. The first show-cause notice was issued to the appellant on 15.01.2021 for recovery of the outstanding CRC for the period from April 2020 to November 2020 amounting to Rs.5,85,60,018/- along with interest under Section 28AA of the Customs Act, 1962. Replying to the said Page 19 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 notice, the appellant had communicated that due to their financial difficulty post-COVID, they could not pay CRC and requested time till 31.03.2021 to pay it and also requested to waive CRC for the financial years 2020-21 and 2021-22. The Commissioner however confirmed the demand of CRC with interest as proposed in the show-cause notice. Subsequently, periodically three show-cause notices were issued demanding CRC amounting to Rs.6,76,40,984/- for the period from December 2020 to August 2021; Rs.10,01,73,164/- for the period from September 2021 to August 2022 and Rs.11,36,20,489/- for the period from September 2022 to September 2023 along with interest. All these show-cause notices have been responded by submitting their reply to the said notices, wherein the appellant have disputed the applicability of HCCAR, 2009 to the passenger service rendered at the airport.

9. To appreciate the controversy, the relevant provisions of the Customs Act, 1962 and the corresponding Regulations of HCCAR, 2009 are reproduced below:

Customs Act, 1962 SECTION 45. Restrictions on custody and removal of imported goods. -- (1) Save as otherwise provided in any law for the time being in force, all imported goods unloaded in a customs area shall remain in the custody of such person as may be approved by the [Principal Commissioner of Customs or Commissioner of Customs] until they are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII.

(2) The person having custody of any imported goods in a customs area, whether under the provisions of sub-section (1) or under any law for the time being in force, -

(a) shall keep a record of such goods and send a copy thereof to the proper officer;

(b) shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in accordance with the permission in writing of the proper officer or in such manner as may be prescribed.

(3) Notwithstanding anything contained in any law for the time being in force, if any imported goods are pilferred Page 20 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 after unloading thereof in a customs area while in the custody of a person referred to in sub-section (1), that person shall be liable to pay duty on such goods at the rate prevailing on the date of delivery of an [arrival manifest or import manifest] or, as the case may be, an import report to the proper officer under section 30 for the arrival of the conveyance in which the said goods were carried.

SECTION 141. Conveyances and goods in a customs area subject to control of officers of customs. -- (1) All conveyances and goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs.

(2) The imported or export goods may be received, stored, delivered, despatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed.

SECTION 142. Recovery of sums due to Government. -- (1) Where any sum payable by any person] under this Act [including the amount required to be paid to the credit of the Central Government under section 28B is not paid, -

(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or

(b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs] or such other officer of customs; or

(i) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue; or

(ii) the proper officer may, on an authorisation by Principal Commissioner of Customs or Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of Page 21 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person :] Provided that where the person (hereinafter referred to as predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under section 28B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer, after obtaining written approval from the Principal Commissioner of Customs or Commissioner of Customs, for the purposes of recovering the amount so payable by such predecessor at the time of such transfer or otherwise disposal or change.]

(d)(i) the proper officer may, by a notice in writing, require any other person from whom money is due to such person or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;

(ii) every person to whom the notice is issued under this section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before the payment is made, notwithstanding any rule, practice or requirement to the contrary;

(iii) in case the person to whom a notice under this section has been issued, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Chapter shall follow.

(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.

Page 22 of 41

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 SECTION 157. General power to make regulations.

-- (1) Without prejudice to any power to make regulations contained elsewhere in this Act, the Board may make regulations consistent with this Act and the rules, generally to carry out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely :-

(a) the form [and manner to deliver or present] of a bill of entry, shipping bill, bill of export, arrival manifest or import manifest import report, departure manifest or export manifest, export report, bill of transhipment, declaration for transhipment boat note and bill of coastal goods;

(ai) the manner of export of goods, relinquishment of title to the goods and abandoning them to customs and destruction or rendering of goods commercially valueless in the presence of the proper officer under clause (d) of sub-section (1) of section 26A;

(aii) the form and manner of making application for refund of duty under sub-section (2) of section 26A;

[(aa) the form and manner] in which an application for refund shall be made under section 27;

(ab) the form, the particulars, the manner and the time of delivering the passenger and crew manifest for arrival and departure and passenger name record information and the penalty for delay in delivering such information under sections 30A and 41A;

(b) the conditions subject to which the transhipment of all or any goods under sub-section (3) of section 54, the transportation of all or any goods under section 56 and the removal of warehoused goods from one warehouse to another under section 67, may be allowed without payment of duty;

(c) the conditions subject to which any manufacturing process or other operations may be carried on in a warehouse under section 65. (ca) the manner and conditions for payment of duty and removal of goods under clause (C) of sub- section (1) of section 65A;

      (d)    the time and manner of finalisation of
      provisional assessment;
      (e)    the     manner      of    conducting  pre-notice
      consultation;
      (f)    the circumstances under which, and the

manner in which, supplementary notice may be issued;

(g) the form and manner in which an application for advance ruling or appeal shall be made, and the procedure for the Authority, under Chapter VB;

      (h)    the manner of clearance or removal of
      imported or export goods;
      (i)    the documents to be furnished in relation to
      imported goods;




                       Page 23 of 41

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

(j) the conditions, restrictions and the manner of making deposits in electronic cash ledger, the utilisation and refund therefrom and the manner of maintaining such ledger;

(ja) the manner of maintaining electronic duty credit ledger, making payment from such ledger, transfer of duty credit from ledger of one person to the ledger of another and the conditions, restrictions and time limit relating thereto;

(k) the manner of conducting audit;

(ka) the manner of authentication and the time limit for such authentication, the document or information to be furnished and the manner of submitting such document or information and the time limit for such submission, the form and the manner of furnishing alternative means of identification and the time limit for furnishing such identification, person or class of persons to be exempted and conditions subject to which suspension may be made, under Chapter XIIB;

(l) the goods for controlled delivery and the manner thereof;

(m) the measures and separate procedure or documentation for a class of importers or exporters or any other persons, or categories of goods or on the basis of the modes of transport of goods.]

(n) the form and manner, the time limit and the restrictions and conditions for amendment of any document under section 149.

HANDLING      OF   CARGO   IN   CUSTOMS     AREAS
REGULATIONS, 2009

[Notification No. 26/2009-Cus. (N.T.), dated 17-3- 2009 as amended] REGULATION 2. Definitions. - (1) In these regulations, unless the context otherwise requires, -

(a) "Act" means the Customs Act, 1962 (52 of 1962);

(b) "Customs Cargo Services provider" means any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred to in section 45 of the Act and persons as referred to in sub-section (2) of section 141 of the said Act;

(c) "specified" means specified by a notification or an order issued under the provisions of the Act; (2) the words and expressions used herein and not defined but defined in the Act shall have the same meanings respectively assigned to them in the Act.

REGULATION 5. Conditions to be fulfilled by Customs Cargo Service provider -- The Customs Cargo Service provider for custody of imported goods or export goods and Page 24 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 for handling of such goods in a customs area shall fulfill the following conditions, namely :-

(1) Provide the following to the satisfaction of the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, namely :

(i) Infrastructure, equipment and adequate manpower for loading, unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including :-

(a) standard pavement for heavy duty equipment for use in the operational and stacking area;

(b) 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;

       (c)    premises for user agencies with basic
       amenities and facilities;
       (d)    storage facility, separately for imported,
       export and transshipment goods;
       (e)    gate complex with separate entry and exit;
       (f)    adequate parking space for vehicles;
       (g)    boundary wall;
       (h)    internal service roads;
       (i)    electronic weigh-bridge and other weighing
       and measuring devices;
       (j)    computerized      system      for location  and

accountal of goods, and processing of documents;

(k) adequate air-conditioned space and power back up, hardware, networking and other equipment for secure connectivity with the Customs Automated system; and for exchange of information between Customs Community partners;

(l) facilities for auction, including by e-auction, for disposal of uncleared, unclaimed or abandoned cargo;

(m) facilities for installation of scanning equipment;

(n) security and access control to prohibit unauthorized access into the premises, and

(o) such other equipment or facilities as the Board or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may specify having regard to the screening, examination, custody and handling of imported or export goods in a customs area.

(ii) safe, secure and spacious premises for loading, unloading, handling and storing of the cargo for the projected capacity and for the examination and other operations as may be required in compliance with any law for the time being in force;

(iii) insurance for an amount equal to the average value of goods likely to be stored in the customs Page 25 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 area based on the projected capacity, and for an amount as the Principal Commissioner of Customs or Commissioner of Customs, as the case may be may specify having regard to the goods which have already been insured by the importers or exporters.

(2) Undertake to bear the cost of the Customs officers posted, at such customs area, on cost recovery basis, by the [Principal Commissioner or Commissioner] and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance;

10. During the course of argument, the learned advocate for the appellant has submitted that the issue has been settled by the Hon'ble High Court of Andhra Pradesh in the case of GMR Hyderabad International Airport Ltd. (supra); later appeal filed by the Revenue against the said order was dismissed by the Division Bench of the Telangana High Court reported as CBIC Vs. GMR Hyderabad International Airport Ltd.(supra) He has submitted that deployment of Customs officers at the airport is a sovereign function of the Government, besides Regulation (5) of HCCAR, 2009 has been declared as ultra vires hence CRC is not payable by the appellant accordingly the demand confirmed in the impugned orders are liable to be set aside.

11. The learned AR for the Revenue, on the other hand, vehemently argued that the vires of the regulation of HCCAR, 2009 has been considered by the Division Bench of the Bombay High Court in the case of Mumbai International Airport Private Ltd. (supra), Hon'ble Delhi High Court in the case of Allied ICD Services Ltd. (supra), and Apeejay Infra-Logistics Pvt. Ltd. (supra), followed by the Rajasthan High Court in the case of Rajasthan Small Industries Corporation Ltd. (supra) with detailed analysis and reasoning; hence the said judgments be followed.

12. On going through the judgments cited by both the sides, we find that the very same provisions of the HCCAR, 2009 has been considered by the Bombay high Court, Delhi High Court, Page 26 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Rajasthan High Court and Telangana High Court. In the judgments of the Bombay High Court, Delhi High Court and Rajasthan High Court the provisions of the said Regulation has been held to be valid whereas the Telangana High Court has declared the same as ultra vires. SLP filed against the order of the Bombay High Court, has been dismissed by the Hon'ble Supreme Court being withdrawn by the petitioner, keeping the question of law open. Against the division bench judgement of the Telangana High Court, SLP has been filed before the honourable apex court and the SLP is pending as on date.

13. In the case of Mumbai International Airport Private Ltd. (supra), the Division Bench of the Bombay High Court framed the following issues raised in the Writ Petition:-

2. The four essential reliefs that are prayed in this writ petition are as under :-

"(a) That this Court be pleased to issue a writ of Mandamus or an appropriate writ, order or direction under Article 226 of the Constitution of India declaring that the Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 is inapplicable to the Petitioner.

(b) That this Court be pleased to issue a writ of Mandamus or an appropriate writ, order or direction under Article 226 of the Constitution of India declaring that the Regulation 5(2) of the Handling of Cargo in Customs Areas, Regulations, 2009 is ultra vires Sections 157 and 158 or any other provision of the Customs Act, 1962.

(c) That this Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India declaring that the Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations, 2009 is ultra vires Article 14 and Article 19(1)(g) of the Constitution of India.

(d) That this Court be pleased to issue a writ or Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner's case and after going into the validity and legality thereof to quash the demand notices dated 8th June, 2011, 18th July, 2011, 29th March, 2012, 16th April, 2012 and 13th June, 2012.

Page 27 of 41

C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

14. Referring to Section 45 of the customs Act, 1962 and provisions of HCCAR, 2009, and tracing the history of the CRC, their Lordships observed as follows:-

34. Thereafter and as explained by the Respondents in their affidavits, the Notification under Section 45(1) of the Customs Act, 1962 has been issued on 3rd May, 2006. That notifies the appointment of the Petitioner as custodian of the imported goods unloaded at Air Cargo Complex, Sahar, Mumbai, as detailed in the schedule below the Notification, until they are cleared for home consumption or for warehousing or for transshipment in accordance with the provisions of Chapter VII and Chapter VIII of the Customs Act, 1962, as the case may be. Similarly, the Petitioner will also be the custodian of the export goods brought into the Customs Area earmarked for the purpose as detailed in the schedule below the Notification. The Notification itself states that as custodian of the imported goods, the Petitioner would be required to comply with the provisions of Section 45(2) and 48 of the Customs Act, 1962 as well as the Rules and Regulations and instructions issued from time to time in this regard. Even with regard to export Cargo the Petitioner will ensure the movement of the Cargo to respective Airlines storage areas, immediately after the "Let Export" order is given by the customs authorities. The Notification No. 1/2002, dated 19th October, 2002 as amended on 28th October, 2003 was further amended to this extent.

35. A bare perusal of Section 45(1) would reveal that all imported goods unloaded in a customs area shall remain in the custody of such persons as may be approved by the Commissioner of Customs until they are cleared for home consumption or warehoused or for transshipment in accordance with the provisions of Chapter VII. It is this sub-section of Section 45 which is part and parcel of the Notification dated 3rd May, 2006. Then, by sub-section (2) of Section 45, the duties and obligations of the persons having custody of any imported goods in a Customs Area have been set out. Then, by sub-section (3) the liability to pay duty on the goods which are pilfered shall be of the person having custody of the imported goods. In other words, if the imported goods are pilfered after unloading thereof in a customs area while in the custody of the person within the meaning of sub-section (1) of Section 45, then, it is his responsibility and he will be liable to make good the loss caused by such pilferage.

36. The Notification dated 19th October, 2002, copy of which is at Annexure-C appoints Airport Authority of India and M/s. Air India Ltd. to be the custodians in terms of the above provision. The Petitioners have stepped into their shoes. The guidelines which have been issued on 26th June, 2002, namely, standard set of guidelines for appointment of custodian of Sea Ports and Air Cargo Complexes have an annexure and which clarifies that the Page 28 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 custodian should provide safe, secure and spacious premises for loading/unloading/ storing of the Cargo. The infrastructure for loading/unloading and storage operations should be designed to handle the projected traffic of the port or Air Cargo Complex. The annexure to these guidelines, copy of which is at Annexure D to the Writ Petition at page 45 in clause (10) clarifies further that the custodian shall bear the cost of the Customs staff posted at the Sea Ports and Air Cargo Complexes. The Commissioner of Customs shall decide the number of staff, which is required to be posted in the facility considering the workload in the station. The custodian is obliged to provide free furnished space for the Customs Department.

...

40. It has been also clarified that these Regulations apply to the handling of imported goods and exported goods in Customs Area as specified under Customs Act, 1962. By clause (4) the Regulations have been given a retrospective operation.

41. By clause (5) the conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area are set out. That clarifies that any person who intends to be approved as a Customs Cargo Service Provider for custody of importer goods or export goods and for handling of such goods in a customs area labeled as an applicant, has to fulfill the conditions specified in clause 5(1)(i) and 5(2) which states that that this applicant shall undertake to bear the cost of the customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. ...

...

50. However, so long as a customs area and as defined under the Customs Act, Section 2(11) and other definitions under Section 2 together with Chapter II, III, IV, IVA to IVC, Chapter VI, VII and all sections appearing therein are read together, it is apparent that, none can be said to be beyond the purview of the Customs Act, 1962. Section 45 of the Customs Act, 1962 provides for restrictions on custody and removal of imported goods. That it is well within the ambit and scope of a comprehensive legislation like Customs Act to provide for such restrictions is beyond doubt. There is nothing illegal about such a stipulation. If the Customs Act, 1962 seeks to regulate the imports into India so as to ensure levy, assessment and recovery of the duty prescribed thereon, then such a provision can be very well incorporated. Therefore, sub-section (1) of Section 45 could be read as making a exception only if there is anything otherwise contained in any law. All imported goods unloaded in a customs area have to remain in the custody of such person as may be approved by the Page 29 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Commissioner of Customs. There is no dispute that the person has to seek approval of the Commissioner of Customs to take custody of the imported goods and to retain the same. Unless such approval is granted, a person cannot be called a custodian. Once he is a custodian and is obliged to act in terms of sub-section (2) of Section 45 and all other provisions enabling clearance of imported and exported goods, then, it is not possible to agree with Mr. Sridharan. There is at best and what could be called as an appointment of a custodian. That may be in a given case under some other law but if the only requirement that is dispensed with is of seeking approval from the Commissioner of Customs that does not relieve the Petitioners from compliance with other legal obligations. Else, it would have not sought exemption from such clearance. There is much substance in the contentions of Mr. Jetly in that regard. We find that the stand taken by the Respondent and reiterated before us by Mr. Jetly, deserves to be accepted once the above legal position is appreciated and in proper perspective.

51. Mr. Jetly was, therefore, justified in urging that the Petitioners communication firstly requesting for grant of a status as a custodian and thereafter seeking approval would bely their contentions and to the contrary. If some governmental functions have been now allowed to be performed and carried out by the private entities that will not make any difference. In that regard, Mr. Jetly's reliance on para-10 of the affidavit in reply and the annexures thereto, is well placed. Mr. Jetly also is justified in relying on Section 141(2) and the language of Section 157 of the Customs Act to support the validity and legality of the Regulations. By Act 18 of 2008, Section 141 has been renumbered as sub-section (1) and sub-section (2). By sub-section (1) what has been clarified is that all conveyances and goods in a customs area are subject to control of officers of customs. They are incharge of enforcing the provisions of this Act and duty bound to do so. It is in that regard and to enable them to enforce the provisions of the Customs Act properly and effectively that by sub-section (2) the receipt, storage, delivery, dispatch or otherwise handling of the imported and exported goods in a customs area has to be regulated and controlled. Therefore, it is open to the authorities to make prescription by way of rules or regulations so that responsibilities of person engaged in all the above activities are fixed. Therefore, these regulations are traceable and safely to this legal provision.

52. Similarly, the general power to make the regulations by Section 157 to carry out the provisions of the Act enables the authorities to frame the regulations. We do not find substance in the contentions of Mr. Sridharan that the regulations travel beyond the Act or that they are ultra vires the Act.(emphasis supplied)

53. If that was not be the position, the Petitioners would not have furnished a bond as required by the authorities. It is in these circumstances that we are unable to agree with Page 30 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 the Petitioners as they do not have any absolute exemption as claimed by them. The Petitioners have understood the law and its applicability to mean stepping into the shoes of a Authority like AAI does not mean automatic exemption. All custodians on which the status is claimed have to be complied with unless exempted. The staff of the Customs Department is deployed to enable the movement of goods from the notified Customs Area. That movement is possible only after the proper officer permits it. That proper officer is from the Department and if he is posted with a specific subject and purpose, then, charges of such posting will have to be borne by the Petitioners.

54. ... ...

55. Mr. Jetly's reliance upon Sections 7 and 8 of the Customs Act is also well placed. These sections have to be read together with the other provisions of the Act including Sections 45 and 141 so as to enable the customs staff to be posted by the Commissioner at the proper places in any Customs port or Customs airport for loading and unloading of goods or for any classes of goods. Similarly, if some ports and airports alone are customs airports or some places alone shall be designated as air freight station, and further some places alone shall be land customs stations for the clearance of goods imported or to be exported by land or inland container or any classes of such goods, then, the staff of the Customs Department posted therein is for enforcing the provisions of the Customs Act, 1962. The charges and expenses in relation thereto, have to be, therefore, paid and that is how the Circulars, guidelines and Regulations must be read and interpreted. So read, interpreted and considered, there is no scope for the argument that the Petitioners are not duty bound to pay the cost recovery charges or that any stipulation in that behalf is ultra vires the Customs Act over the mandate of Article 14 and 19(1)(g) of the Constitution of India. Mr. Jetly has rightly traced the entire history of the Regulations and to our mind he has, in that regard, justifiably placed reliance on the detailed affidavit in reply filed in these Writ Petitions.

56. Once the Petitioners have taken the responsibility and have agreed to abide by all the terms and conditions imposed on them, then, there is no substance in the contentions of Mr. Sridharan.

...

61. We do not decide any larger controversy. As far as the judgment of the Andhra Pradesh High Court is concerned, we find that there as well, the learned Single Judge has without in any manner appreciating the position of the Customs Officers and their authorities under the Act held that Regulation 5(2) purports to levy a tax. We are of the opinion that cost recovery charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of Page 31 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before a importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner. In such circumstances, and with great respect, we are unable to agree with the learned Single Judge of the Andhra Pradesh High Court. We find much substance in the contentions of Mr. Jetly that these matters cannot be looked at from the angle and in the manner approached by the Petitioners.

62. Alternatively, we find substance in the argument of Mr. Jetly that the cost recovery charges are in the nature of fee for the services rendered by Customs Officers to the custodian of the Port Terminal. These are officers posted on additional sanctioned posts than the regular strength. The details have been provided in the affidavit in reply. In that regard, we find that Mr. Jetly has rightly relied upon paras 32 to 37 of the affidavit in reply, wherein it has been pointed out as to how additional cost has to be incurred for providing the services of the staff and posting them at the disposal of the station. It is in these circumstances that though it is denied that this is in the nature of a tax or a fee but the recovery is supported assuming to be a fee by co-relating it with these services provided. There is, therefore, quid pro quo. There is no element of tax therein.

15. More or less a similar issue was raised before the Hon'ble Delhi High Court in the case of Allied ICD Services Ltd. (supra), wherein Writ Petitions filed for seeking directions to declare levy and collection of CRC and posting of Customs officers and staff at the Inland Container Depots (ICDs), Container Freight Stations (CFSs), Air Cargo Complexes (ACCs) / Export Processing Zones (EPZs), wholly illegal, unlawful, null and void. It was sought to quash Regulation 5(2) of HCCAR, 2009. Their Lordships observed as:-

2. The prayers are predicated primarily on the plea that customs officers are permanent employees of the Union of Page 32 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 India and duties performed by the customs officials at the ICDs/CFSs/ACCs/EPZs being sovereign functions, no charge could be recovered by the Union of India from the petitioners. The charge is not backed by any statutory provision.

Also, the issues to be addressed have been recorded as:-

11. At the outset, we would like to mention here that most of the petitioners have not disputed the notifications and circulars relied upon by respondents. They have not challenged the bonds and the undertaking executed by them to pay the cost recovery charges. Hence, what is primarily required to be decided and adjudicated is challenge to the validity of recovery of cost computed at the rate of 1.85 times the salary of the customs officers posted at the concerned ICDs/CFSs/ACCs/EPZs. While examining the said aspect, we would also consider the challenge to the constitutional vires, etc.

16. Their Lordships after analysing the concept of tax and fees referring to the judgment of the Hon'ble Supreme Court in the case of Commissioner, Hindu Religious Endowments Vs. Lakshmindra Thirtha Swamiar of Shri Shirur Mutt [AIR 1954 SC 282], observed as under:

15. The ICDs/CFSs/ACCs/EPZs located in the hinterland are operated by the custodians for their private commercial gains and profits. Government facilitates the operation of the ICDs/CFSs/ACCs/EPZs by providing the required services by posting customs officials at these stations. The affidavit in reply to the present writ petitions sets out and states additional costs have been incurred by the Government for the services of the staff and posted them at the ICDs/CFSs/ACCs/EPZs, to show co-relation between the services provided and cost recovery charges, to establish quid pro quo. Figures and increase in customs officers and staff have been explained with data and details in the counter-affidavit. This cannot be controverted and denied.

Analysing the provisions of Regulation 5(2) of the HCCAR, 2009, it is observed as:

19. Appointment of the custodians of ICDs/CFSs/ACCs/EPZs is governed by various provisions of the Act, and the fact is that the payment of cost recovery charges for the customs officers, who were posted for manning such additional facilities, was one of the conditions of appointment as a custodian in terms of notification issued under Section 45(1) of the Act. The Page 33 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Government has laid down a standard set of undertaking to be given by the custodians before they are so appointed under Section 45 of the Act, wherein one of the conditions/undertaking is that the custodian shall bear the cost of customs staff posted at the ICDs/CFSs/ACCs/EPZs.

20. The petitioners had obtained the necessary permissions from the respondent No. 2 for establishment of the ICDs/CFSs/ACCs/EPZs and thereafter, the petitioners were appointed as custodians of goods meant for import/export. Areas within ICDs/CFSs/ACCs/EPZs, were declared as Customs area for the purpose of the Act. The petitioners were required to comply and had accepted that they would comply with the provisions of the Act applicable to the ICDs/CFSs/ACCs/EPZs. They had executed a bond together with bank guarantees in favour of the respondent No. 3. The bonds together with appropriate bank guarantees were executed, primarily to ensure the compliance with the provisions of the Act and for indemnifying the customs authorities for any loss of duty suffered due to any negligence on the part of the petitioners-companies. Accordingly, and in terms of Section 45 of the Act and Regulation 5(2) of Handling of Cargo in Customs Area Regulations, 2009, that the circular dated 14th December, 1995 and the impugned letter of the Ministry of Finance dated 1st April, 1991 have been issued.

21. Petitioners as a pre-condition for becoming custodians of the respective ICDs/CFSs/ACCs/EPZs had willingly undertaken to bear the costs of the Customs staff posted at the ICDs/CFSs/ACCs/EPZs. Thus, the payment of cost recovery charges has sanction and authority of law to back the levy and imposition. Further, the cost recovery charges so levied are against expenses incurred by the Government for rendering the services at the ICDs/CFSs/ACCs/ EPZs.

Therefore, in view of the case laws above discussed, provisions of the Act and the documents on record, it is established that cost recovery charges are in the nature of "fee" for services rendered by the customs officers at the concerned ICDs/CFSs/ACCs/EPZs.

17. Finally, their Lordships justifying the collection of CRC referring to Financial Rules, held as follows:-

25. It is a fact that the cost recovery charges have been worked out and were/are payable by the Department of Revenue on the basis of general principles laid down in the General Financial Rules. As a condition for being appointed as a custodian, the petitioners had undertaken to bear the cost of the customs staff posted at the ICDs/CFSs/ACCs/EPZs. Cost was/is liable to change if the different components of this cost, such as, the salary, D.A., CCA, HRA, pay allowance and pension contribution at the rates in force from time to time, etc. were/are changed.

After the implementation of the recommendations of the 6th Pay Commission, these components had undergone a Page 34 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 change and as a result, the cost of the staff as worked out and was payable. Similar would be the position on implementation of the 7th Pay Commission's report.

26. In view of the Rules 112 and 113 of the General Financial Rules, recoveries of expenditure of the services rendered to both the Government and non-governmental parties are to be classified as receipts and the entire cost shall be recovered from the public or private body so that the net cost to the Government is nil. If the revision in cost due to implementation of the 6th Pay Commission was not carried out, then the government would had suffered a net loss and would have tantamounted and resulted in profiting of the private sector at the expense of the Government. Cost recovery @ 185% of the total salary of staff actually posted at ICDs/CFSs/ACCs/EPZs of the petitioners was being done as per the Board's instructions issued under F. No. 434/12/92/-Cus, dated 5-6-1992, Circular Nos. 128/95-Cus., dated 14-12-1995, 133/95-Cus., dated 22- 12-1995, 52/97, dated 17-10-1997 and 80/98-Cus., dated 20-10-1998.

27. Customs officers may perform statutory or sovereign functions, however, the sovereign is not liable to provide service and permit setting up ICDs/CFSs/ACCs/EPZs. Additional posts are created/sanctioned for the ICDs/CFSs/ACCs/EPZ for which the developer undertakes to bear the cost of the staff posted. The payment is in the nature of fee for the services rendered. Further, payment of cost recovery charges for the customs officers who are posted for manning such additional facilities is one of the conditions of appointment as a custodian in terms of notification under Section 45(1) of the Act and Regulation 5(2) of the impugned Regulations. In this regard, necessary undertakings were given by the petitioners before they were so appointed as custodian under Section 45 of the Act. They are therefore bound to bear the cost of the customs staff, posted for the ICDs/CFSs/ACCs/EPZs. The payment of cost recovery charges by the custodian of ICDs/CFSs/ACCs/EPZs has the statutory force of law and is within the jurisdiction of the respondents.

18. The principle laid down in both these judgments has been referred to and followed subsequently by the Hon'ble Rajasthan High Court in the case of Rajasthan Small Industries Corporation Ltd. Vs. CCE, Jaipur-I [2019(367) ELT 736 (Raj.) and by Hon'ble High Court of Delhi in the case of Apeejay Infra-Logistics Pvt. Ltd. Vs. UOI [2020(374) ELT 530 (Del.)].

19. The Division Bench of the Telangana High Court, on an appeal filed by the Revenue against the judgment of single Judge in GMR's case , framed the issue as follows:-

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C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

12. We have considered the submissions made on rival sides and have perused the record. The singular issue which arises for consideration in this intra Court Appeal is whether the impugned 2009 Regulations are ultra vires the Customs Act, 1962.

20. Referring to the power to impose tax as held by the Hon'ble Supreme Court in the case of Bimal Chandra Banerjee Vs. State of Madhya Pradesh [(1970) 2 SCC 467], Ahmedabad Urban Development Authority Vs. Sharadkumar Jayantikumar Pasawalla [(1992) 3 SCC 285] and in the case of Modi Naturals Limited Vs. Commissioner of Commercial Tax, UP [(2023) 12 Centax 91 (SC)], their Lordships observed as follows:-

17. On the touchstone of the aforesaid well settled legal principles, we may now take note of the relevant statutory provisions of the Customs Act, 1962. The Act has been enacted with the object to sternly and expeditiously deal with smuggled goods and curb the debts on the revenue thus caused. The Act inter alia provides for confiscation of goods and conveyance and imposition of penalties when any goods which are imported contrary to any prohibition imposed by or under the Act or any other law for the time being in force. Chapter-XVII of the Customs Act, 1962 deals with Miscellaneous. Chapter-XVII of the Act contains Section 141 and Section 157. Section 141 of the Act deals with 'conveyances and goods in a customs area subject to control of officers of customs'. Section 141 is extracted below for the facility of the reference.

"141. Conveyances and goods in a customs area subject to control of officers of customs. - (1) All conveyances and goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs.

(2) The imported or export goods may be received, stored, delivered, despatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed."

Thereafter, analysing the provisions of Sections 141, 142 and 157 of the Customs Act, their Lordships held as under:-

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C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

20. 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. 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.

21. Now we may advert to the nature of levy. In Gupta Modern Breweries (supra), after taking note of the decision in CCE v. Chhata Sugar Company Limited (2004) 3 SCC 466 = 2004 (165) E.L.T. 369 (S.C.)/[2004] 2004 taxmann.com 1198 (SC), it was held as under :

'27. In CCE v. Chhata Sugar Co. Ltd. [(2004) 3 SCC 466] , one of the issues was whether the State Government's administrative charges to collect a levy could be passed on to the person from whom the tax, fee or levy was collected.

This Court categorically held that such an imposition would be a tax and not a fee and must be duly authorised since it is a tax (at para 14), it is held: (SCC p. 483) "Hence, administrative charge under the U.P. Act is a tax and not a fee."

28. It is, thus, clear from the aforesaid decisions that imposition of administrative services (sic charges) is a tax and not a fee. Such imposition without backing of statutes is unreasonable and unfair."

22. 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. Therefore, the same is also violative of Article 265 of the Constitution of India. Even assuming that the said levy to be a fee, the same cannot be recovered from the respondent as no services are provided to it by deployment of additional staff at the Airport between the years 2008 and 2013.

23. We may take note of decision of Bombay High Court in Mumbai International Airport Private Limited (supra). In the aforesaid decision, the validity of Regulation 5(2) of the 2009 Regulations was challenged on the ground that the same is ultra vires Sections 157 and 158 of the Customs Act as well as violative of Articles 14 and 19(1)(g) of the Page 37 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 Constitution of India. The aforesaid ground of challenge was dealt by the Division Bench in paragraph 53, which reads as under :

"53. Mr. Jetly was, therefore, justified in urging that the Petitioners communication firstly requesting for grant of a status as a custodian and thereafter seeking approval would belie their contentions and to the contrary. If some governmental functions have been now allowed to be performed and carried out by the private entities that will not make any difference. In that regard, Mr. Jetly's reliance on para-10 of the affidavit in reply and the annexures thereto, is well placed. Mr. Jetly also is justified in relying on Section 141(2) and the language of Section 157 of the Customs Act to support the validity and legality of the Regulations. By Act 18 of 2008, Section 141 has been renumbered as sub-section (1) and sub-section (2). By sub-section (1) what has been clarified is that all conveyances and goods in a customs area are subject to control of officers of customs. They are incharge of enforcing the provisions of this Act and duty bound to do so. It is in that regard and to enable them to enforce the provisions of the Customs Act properly and effectively that by sub-section (2) the receipt, storage, delivery, dispatch or otherwise handling of the imported and exported goods in a customs area has to be regulated and controlled. Therefore, it is open to the authorities to make prescription by way of rules or regulations so that responsibilities of person engaged in all the above activities are fixed. Therefore, these regulations are traceable and safely to this legal provision."

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.

24. So far as the contention that the Company at the time of application seeking appointment as Custodian has furnished an undertaking that it shall abide by the 2009 Regulations is concerned, suffice it to say that the Company subsequently on 6-5-2007 and 22-11-2007 had submitted applications seeking to waive the Condition Nos. 10 to 13 of Circular No. 34/2002, dated 26-6-2002. Therefore, the undertaking furnished by the Company does not bind it in the facts of the case.

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C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024

25. For the aforementioned reasons, we agree with the conclusion of the Learned Single Judge that the impugned 2009 Regulations are ultra vires the Customs Act.(emphasis supplied).

21. The said judgment of the Telangana High Court has been followed by the Ahmedabad Bench of the CESTAT. It is argued by learned AR for the Revenue that the Department has filed SLP against the Judgment of Telangana High Court in GMR's case before the Hon'ble Supreme Court and the same is pending, hence the ratio of the said Judgment is in jeopardy; accordingly, the judgment of the Hon'ble Bombay High Court which reached Hon'ble Apex Court and appeal was withdrawn be followed in deciding the issue. We find that the Hon'ble Telangana High Court after considering the Judgments of the Hon'ble Bombay High Court and Delhi High Court declared the provisions of Regulation 2009 as Ultra Vires under which the Cost Recovery Charges has been confirmed by the Commissioner in the impugned Orders. We are of the opinion that even though SLP has been filed by the Revenue against the said judgment of Hon'ble Telangana High Court, in absence of stay of the said Order from the Apex Court and also in absence of contrary judgment of the jurisdictional High Court on the question of vires of the said provision, it is binding on all concerned as on date. In these circumstances, it is prudent to remand the issue to the adjudicating authority to decide the same after taking note of the outcome of the SLP pending before the Hon'ble Apex Court.

22. On the issue of confirmation of levy of interest under Section 28AA of the Customs Act, 1962 on the outstanding CRC, we find merit in the argument of the learned advocate for the appellant that it is not leviable. The said provision reads as follows:-

SECTION 28AA. Interest on delayed payment of duty. -- (1) Notwithstanding anything contained in any judgment, decree, order or direction of any court, Appellate Tribunal or any authority or in any Page 39 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 other provision of this Act or the rules made thereunder, the person, who is liable to pay duty in accordance with the provisions of section 28, shall, in addition to such duty, be liable to pay interest, if any, at the rate fixed under sub-section (2), whether such payment is made voluntarily or after determination of the duty under that section. (2) Interest at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid by the person liable to pay duty in terms of section 28 and such interest shall be calculated from the first day of the month succeeding the month in which the duty ought to have been paid or from the date of such erroneous refund, as the case may be, up to the date of payment of such duty.

(3) Notwithstanding anything contained in sub-section (1), no interest shall be payable where,--

(a) the duty becomes payable consequent to the issue of an order, instruction or direction by the Board under section 151A; and

(b) such amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment.

Interest under Section 28AA would be attracted only when the amount required to be paid is 'duty' which has not been levied, short-levied or short paid under Section 28 of the Customs Act, 1962, whereas in the present case, the CRC has been held to be not duty; hence, in our opinion, Section 28AA cannot be pressed into service for recovery of interest. So, the Order of the learned Commissioner for recovery of interest under Section 28AA of the Customs Act, 1962 on the outstanding CRC cannot be sustained.

23. On the issue of exemption from payment of CRC, we find that the appellant has referred to a letter dated 18.08.2021 issued by DGHRD, Department of Revenue, Min. of Finance in response to a letter dated 01.06.2021 where the appellant has requested for waiver of CRC narrating the difficulty encountered by them. It is the claim of the appellant that the said letter allows exemption to them from payment of CRC; whereas in the impugned order, the learned Commissioner while rejecting the contention of the appellant observed that to claim exemption from payment of CRC, the procedure prescribed thereunder need to be followed; the jurisdictional officer has not Page 40 of 41 C/20346/2021; C/20301/2023; C/20239/2024; C/20062/2024 recommended for any such exemption to be extended to the appellant. On going through the letter, it indicates that exemption from payment of CRC is granted in terms of the conditions mentioned in Board's Circular No.02/2021-Customs dated 19.01.2021 duly recommended by the jurisdictional Chief Commissioner / Commissioner. Since the Ld. Commissioner has denied the exemption observing that no such recommendation was ever forwarded by the jurisdictional Chief Commissioner / Commissioner, it is necessary to ascertain the facts in this regard. Thus, The Commissioner is directed to obtain necessary clarification from the DGHRD on the same and decide the issue of exemption accordingly.

24. All appeals are disposed of on the above terms.

(Order pronounced in Open Court on 23.09.2025) (D.M. MISRA) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) Raja...

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Kannur International Airport Ltd vs Cochin-Cus on 23 September, 2025