Telangana High Court Deems 'Handling Of Cargo In Customs Areas Regulations, 2009' Contrary To Customs Act, 1962

Telangana High Court Deems 'Handling Of Cargo In Customs Areas Regulations, 2009' Contrary To Customs Act, 1962

The Telangana High Court has declared 'Handling of Cargo in Customs Areas Regulations, 2009,' which allowed the recovery of living expenses from the Customs Cargo Service Provider as ultra vires of the Customs Act, 1962.

The division bench, comprising Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti, issued the order in a Writ Appeal filed by the Central Board of Excise and Customs against a judgment by a single judge bench. The single judge bench had deemed Section 5(b) of the Customs Regulations, 2009, ultra vires, ruling that Customs Officers stationed at the Rajiv Gandhi International Airport, Hyderabad, were not authorized to recover living expenses from the Custodian of Sea Ports and Air Cargo Complexes of the RGIA, Hyderabad.

The Hyderabad International Airport was established in 1999 through a collaboration between the Government of India (GoI), the Airports Authority of India (AAI), and the erstwhile Government of Andhra Pradesh (GoAP) on a public-private partnership (PPP) basis.

The respondent was chosen as the preferred bidder after tenders were issued. Subsequently, a concession agreement was signed between the respondent company and the GoI, the AAI, and the erstwhile GoAP.

In 2009, the Central Government issued the Handling of Cargo in Customs Areas Regulations. According to these regulations, the Customs Cargo Service Provider was obligated to offer fully furnished office accommodation, including the Customs Electronic Data Interchange (EDI) Service Center, along with necessary amenities and facilities, as well as residential and transportation facilities for customs staff, free of cost or rent.

The respondent company, contesting this provision, approached the court.

It was argued that, at the time of signing the concession agreement, the company had requested to waive the mentioned requirement. It asserted that the customs officers at the airport were there to fulfill their statutory duties and were not offering any services to the respondent/company that would warrant a fee.

The judge, in agreement with this argument, granted the plea of the respondent company, leading to the initiation of the current Writ Appeal.

The Division Bench, before delving into the facts, reaffirmed that when interpreting a taxation statute, one must adhere strictly to the express language, leaving no space for inference or presumption.

Considering this perspective, the Bench observed that the appellant argued that the rules were promulgated in accordance with sections 141 and 157 of the Customs Act. Upon a straightforward reading of these sections, it is evident that provisions for recovering the cost of living expenses were indeed included.

“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 and 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.”

While issuing the order, the Telangana High Court made a clear distinction between its ruling and the judgments delivered by the Bombay and Delhi High Courts in the cases of Mumbai International Airport Private Limited v. Union of India and Allied ICD Services Limited v. Union of India, respectively.

The Court observed that both the aforementioned courts had neglected to assess whether, in the absence of any explicit provision authorizing the imposition of cost recovery charges, such charges could be enforced under the Regulations.

“Thus, it is evident that the Division Bench of the 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 has relied on the decision of the Bombay High Court. Therefore, the aforesaid decisions rendered by Bombay High Court as well as Delhi High Court are distinguishable.”

The Court reaffirmed that customs officers were stationed at the airport for official duties and could not expect remuneration from the airport authorities.

Hence, the Customs Department officers, stationed at the airport from 2008 to 2013, were assigned their statutory obligations. Charging cost recovery fees, essentially salaries for these customs personnel, amounts to administrative fees and constitutes a form of taxation. Without a statutory provision, such charges cannot be imposed on the respondent.

Consequently, the Bench concluded that any imposition of cost recovery charges on the Respondent/Company for the period 2008–2013 lacked a legal basis and was untenable.