Thar Dry Port v. UOI and Ors

* % IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 12* February, 2018 Date of Decision: A7/X. August, 2018 +

W.P.tCY 13770/2009 ALLIED ICD SERVICES LTD. Petitioner Through Mr. K.K.Rai, Sr. Adv. with Mripunj^an Kumar and Mr. Anshul Rail UOI AND ORS + versus,. .^..Respondents ir-:? fSi# Throu^|?^]!^®|p^s^^^ Mr.l^ufc|sh '^'4' 'Ku^ftrSwari and Mr.Abh'ishek ^^^^^^s.fbrR-1/UOL ^ |&.i[a^reet Singh, Sr. Standing f ^.plfnA with Mr.Swesh Choudhary ^^^a^Kghavya Dubey, Advs. for 1 \ le. iS B V Ir^l lustoms. THAR DRY PORT wjSSmiimgF Petitioner Through Mr.K.K.RiitSr. Adv. with and Mr.Anshul ' Rai, Advs. versus UOI AND ORS. Respondents Through Mr. Ruchir Mishra, Mr. Mukesh Kumar Tiwari and Mr. Abhishek Rana, Advs. for R-l/UOI. WPfCJ No.13770/2009 and connected matters Page 1 of29 //////// +

W.P.(a 6543/2010 THAR DRY PORT Petitioner Through Mr.K.K.Rai, Sr. Adv. with, Mr.Gunj an Kumar and Mr.Anshul Rai, Advs. UOIANDORS. + versus Respondents Through .. Mr-.- Ruchir Mishra, Mr. Mukesh . Kumar :fT^ and Mr. Abhishek Rana, Advs^fer R-l/UOI. y->M||M^ Aioraf-bO^SC with I®^^ibhu Tripathi, S^:?>'TSiSK3sM|Skarma, Advs. for R-1/ r%: Petitioner JAIPUR GEMSTONE EX®i>®ftfi-Thrp;P®^|§|^F|ai, Sr. Adv. with ''' \,||'^|S*^^^l^Kumar and Mr.Anshul versus UNION OF INDIA Respondents Through Mr. Riichir Mishi:a, Mr.. Mukesh Kumar Tiwari and Mr. Abhishek Rana, Advs. for R-1/UOI. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE CHANDER SHEKHAR WPCQ NO.13770/20G9 and connected matters Page 2 of 29 //////// PH ANDER SHETOIAR. J. This common judgment will dispose of the aforestated four writ petitions filed by different petitioners seeking similar reliefs. Petitioners have prayed for a writ, order or direction to declare levy and collection of cost recovery charges for posting of and work perfonned by the custom officers and staff at the Inland Container Depots (ICDs)/Container Freight Stations (CFSs)/Air Cargo Complexes (ACCs)/Export Processing Zones ^

(EPZs) of the petitioners, Sanand and Jaipur respectively, as wholly iliegdi^ iiniawful, null and vbid.jiThe petitioners seek direction that the fe#ondentsMbjdfiSre^df^l,^e charts ^collected from them since inc|3tion. Anotl%S^^^^^plquashin#k|ie demands issued for recovery of cost of custom .sM^^ rate of 1.85 tirpbs^the salary of the custom staff posted at' theplrespJcti^^tl^C It is ] -'pi f-5 ^Iso prayed that the Union of In;ia||iii^|rie a policy to appoint and post i • • r, , . . •• . dustom officers at the ICDs/CF^i^s||iZ^the petitioners on non-cost recovery basis. ^ Additionally prayer t^||||j|^^^|^377(K2()09, W.P.(C) No. 3912/2010 and W.P.(C) No. 6543 of 2010 is for the quashing of Guideline No.lO of Circular No.l28/9|||is^|^d^J^^mber, 1995 (hereinafter the "impugned Guideline") as yiiig tf/ra'vfe' to the provisions of Article 14 and Article 265 of the Constitution of India. Petitioner in W.P.(C) No.6392/2012, has sought quashing of Regulation 5(2) of the Handling of Cargo in Customs Areas Regulations th 2009 (hereinafter the "impugned Regulation") and demand letter dated 29 June, 2012 as being ultra vires to the provisions of Article 14 and Article 265 of the Constitution of India. In W.P.(C) No.13770/2009, prayer has been WP[CJ No.13770/2009 and connected matters Page 3 of29 ///// made to quash the demand letter dated 09^'' June, 2009 issued by the respondents.

¶2The prayers are predicated primarily on the plea that custom officers are permanent employees of the Union of India and duties performed by the custom 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.

¶3Brief facts common to thes^y® pptionswe as fbllows:- Pursuant to the policyA^ecision taken vide'''Circular No. 128/95-Cus dated 14^^ December, 1994,<^^op,^aiph^fpJr-IpDs/CFSs^A]eCs/EPZs was opened to private/ sector. pfiyate sector m infi'astructure^development and^tojovere^idf^^^^ at the gateway ports arising from growth in businessWn^ widespread industrialization and economic growth. In order ||)p|c||pgUt existing ports and cities, ICDs/CFSs/ACCs/EPZs were ,t|^^cf^^^n the interior parts of. the country. Government wante^'|^^^^.|^j^C|I|S/EPZs to be established across length and breadth foreign trade and exports by facilitating custom clearance of goods at multiple points. These stations were to offer all sewices including custj!® clearance like any other port. Intention was to bring iriipoa "and^exiiorl! "facilities to the doorstep of the business community right across the country.

3.2 Applications and proposals for setting up the ICDs/CFSs/ACCs/EPZs by private or public sector required clearance from Inter-Ministerial Committee, which was given on the basis of recommendations of the jurisdictional Commissioner, who would first examine applications/proposals received on parameters stated in the guidelines. On WP(C} No.13770/2009 and connected matters Page 4 of29 /////// clearance, letters of intent were issued and thereupon, the operator was required to set up infrastructure within the prescribed time. Jurisdictional Commissioner of Customs, on being satisfied that required infrastructure was in place, would then issue a notification under Section 8 of the Customs Act, 1962 (Act, for short), approving the concerned ICDs/CFSs/ACCs/EPZs. Operators of the said ICDs/CFSs/ACCs/EPZs were thereupon appointed as custodians under section 45 of the Act. Such appointment was conditional upon the operators furnishing an undeHaphgin terms of the Circular dated 14^^ December, 1995 fdr lD,ehring''the costs of Ihe^cubtom -staff posted in the ICDs/CFCs/ACCs®Zs.

3.3. Customs ^.personnel ^tJ^q^at0th|M0is/CFSs/A^£^^^ were responsible for customs clearaMiijf«|Mid imports of goods through ' the ICDs/CFSs/ACCs/EPZs. ''^^^M^isaged that the petitioners as operators and custodians woiiflApS^ personnel posted at f 'fmi if-ICDs/CFSs/ACCs/EPZs on cosjM4&ri|M|.

¶4Circular No. impugned, stipulates as "(10) Custodian shall bear the cost of the Customs staff, posted for the ICD/CFS/EPZ. The Commissiop^^r^ of Customs shall Impugned Regulation 5(2), of Handling of Cargo in Customs Areas Regulations, 2009 reads:- "5. Conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area.- XXX WP(Q No.13770/2009 and connected matters /////////

(2) The 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 payments at such rates arid in the maimer prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance;" The impugned letter issued by the Ministry of Finance F.Np. A/11018/9/91-AD IV dated 1st April, 1991 requires the operators of the ICDs/CFSs/ACCs/EPZs to pay co^sts.at the.rate of 1.85 times the total salary of the officers posted at.ICDs/CFSs/A&i/EPZs^'y^" . .

¶5The contention bfthe petifdl^ftis that ciiitPrte^officers being Government ofh^r^perfbrmisbv^plfuii^^ dutiescm terms and as per the statutp^? mandate uh^tj the ActJ|&j^6ther enactrriMs^ Customs officers do n^Tender service who act as. custodian under I . ,1 the Act and as operators of ICDs/CFSs/A^^^ The petitioners should not be burdened with tax or chai^ef!w|yfe 1.85 times the gross salary of the customs officers pqlSS^I^i^/CFSs/ACCs/EPZs. Indian Constitution does not permift^^^|^&® for discharge of statutory functions sovereign in characterT^'Thefefdfeffecovery of costs plus charges from the petitioners was ba4 and contrary to Articles 14 and violates Article 265 of the Constitution.

¶6In alternative, petitioners submit that fee and recovery @

1.85 times the costs incurred, i.e. the salary paid, was grossly unreasonable and arbitrary. The amount recovered was unreasonably high and does not comrhensurate with the services rendered. Recovery at the, rate of 1.85% of the salary was an act of unjust enrichment. Petitioners also question the additional burden and recoveries pursuant to iniplementation of the Sixth WP(C) No.13770/2009 and connected matters ////////// Pay Commission in terms of Central Civil Services (Revised Pay) Rules, 2008 with retrospective effect from 1®^ January, 2006.

¶7Per contra, the respondents. submit that payment of cost recovery charges for the salary of customs officers, posted at the ICDs/CFSs/ACCs/EPZs, was a condition for appointment of the petitioners as a custodian under Section 45(1) of the Act. Consequently, cost recovery charges at a specified rate were/are levied in terms of the statutory mandate. Levy -of cost recovery charges Isllom' th^e custodians of concerned ICDs/CFSs/ACCs/EPZsrhave^afutory force for which/feliance is placed on Section 45 -of the Acti:^ \

¶8Even otljer^se, the a feetrelatable to the costs of te-customs 'iMfflsg^Wfloned depioygjd^p at the ICDs/CFSs/ACCs/EPZs in addifimS|p|5lie#g^^ officers. Operation of ICDs/CFSs/ACCs was a comrh^fiiiii'ilent&e and enterprise, a business proposition for profit and gJ^isM^ttOovernment has sanctioned additional manpower to ma^^cj^||rfeli|%e ICDs/CFSs/ACCs/EPZs. -as ..iMeufeate#^^^ Additional manpower and . posted-at the ICDs/CFSs/ACCs/EPZs throughout the year. Collection of cost recovery charges has a am'd pro ow^l^and was not ultrgj^ms Article 14 and Ailicle 265 of the Constitution of India. " ^ '4

¶9Respondents submit that the norms fixed by the Central Board of Excise and Customs for Cost Recovery Charges are in accordance with the Ministry of Finance's letter F. No.A/11018/9/91-ADIV dated 1®^ April, 1991. The petitioners being custodians of ICDs/CFSs/ACCs were required to pay charges at the rate of 1.85 times the salary of the officers posted at ICDs/CFSs/ACCs. The salary would include D.A., C.C.A., H.R.A. etc. Said WP(CJ No.13770/2009 and connected matters Page 7 of29 //////// si costs were to be recovered in advance from the custodians. The Integrated Finance Unit ('IFU') wing of the Ministry of Finance had given concurrence to this method of charging cost recovery charges vide their Dy. No.2/FA(F)/91 dated 01®^ January, 1991 with effect from 01®^ April, 1991. The cost recovery charges had been worked out by the Department of Revenue on the basis of general principles laid down in the General Financial Rules. Under Rules 112 and 113 of the General Financial Rules, recovery of expenditure of thei; services Ifender^d .to both government and r } '' '* ^ non-govemment parties; were-to be classified as receiptsfand the entire cost would be recovered^from the pPblic.or pri^ateibody so thaUnet cost to the Government wdkhil. If cust6QiS®\faiTt^&6n®l^ate the cos|s including the ■cost due to implementation of|p||^|||y^d^tission, then thefgovernment would suffer net loss and woulHit^nla^l-unt^ by the private sector at the expense of the government^ |f s fS W 'SlfJ.-M-.

¶10Learned counsel for respondent's Millieksubmitt^ that custodians had posted at themselves . ICDs/CFSs/ACCs/EPZs as %rp^e^cQfi&m&& being appointed as a custodian under Section 45 of the Act. This-cost was liable to change, if the components constituting thOrGOgt-such as the W|tfy, D.A., CCA, HRA etc. change. Accordingly, costs "were iretlisea'fr^ time to time. After the implementation of the 6^*" Pay Commission, payment viz these components had increased and, consequently the cost recovery charges were also increased proportionally.

¶11At 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 WP(C) No.13770/2009 and connected matters Page 8 of29 /////// 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.

¶12We would first examine decisions elucidating jurisprudential differences between "tax" an4'^p5|® itareme Court in the, Chief Commissioner, Delhi dh%jihr. v. The Delhi Cloth andiGeneral Mills Co. "f-I 'C y* ^ Ltd. and Ors., AIR 19.78 SO 1 J:8%.fi^h(ffi^M-t^der: , . "3. The jpam poin^^fii^Ji^^s^f^^^nsideratih^ Jp. this case is^fis to whethei^K^^t^^h^^^'charged unUer>the notificatU^ issued by ^^^^^^sioner was migal impost justified by the pf^!$s0p^^^0Constitution. It is well settled that a fee in ord^yf^Mem^ fee must satisjy two conditions: f |l 4ft'f' iMJ .

(i) there must be an ele^^^0^Mg^:quo that is to say, the authority levying the j& service for the fee . levied however remote

(ii) that the fee realised musfbe spent for the purposes oj the imposition and should not form part of the general revenues of , _ *•5?!... tSS)> the State.

¶4Two elements are thus essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes. WP(C) No.13770/2009 and connected matters Page 9 of29 ///////// The same view was reiterated in Ratilal Panachand Gandhi v. The State of Bombay and Grs. [1954] S.C.R.P. 1055." 13_. Earlier in the matter of the Commissioner ISindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mil//., AIR 1954 SC 282, the Supreme Court had the opportunity to examine distinction between "tax" and "fee" and it was held as follows: "44. The learned Attorney-General has argued in the first place that our Constitution makes a clear distinction between taxes and fees. It is true, qs^ l^e\has pqfnted'^Oft^jfiat there are a number of entriesHn List Tof the Sevenih^Scpedule,^ relate matters dealtfwith in is witMregqrd to entries 46fib 62 in to taxes arid, here again tmdast entry leviable in resf ect of the different matters speci^^q^nfff^p^i^It. appears that articles 110 and 119 of the Cons'$fff^^^0^eal with "Money Bills" lay down expressly that be deemed to be a "Money Bill" by reason offifftMilff^pfhvides for the imposition of ft! fees imposition or regulatic^ff^0^^^^^^^dys be a Money Bill. Article 277 also mentionMdkds^BMMYMhdfees separately. It is not clear, however, whether the word "tax" as used in article 265 has not been used, in the wider sense dsJncluding all other impositions like cesseM^^^^^PPi^liq^t least seems to be the implication of clause (2%f-of article 366 which defines ' taxation as including the imposition of any tax or impost, whether general, local or special. It seems to us that though levying of fees is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fees under a separate category for purposes of legislation and at the end of each one of the three legislative lists, it has given a power to the particular legislature to legislate on the imposition of fees in respect to every one of the items, dealt With in the list itself. WP(C) No.13770/2009 and connected-matters Page 10 of29 //////// Some idea as to what fees are may be gathered from clause (2) of articles 110 and 119 referred to above which speak of fees for licences and for services rendered. The. question for our consideration really is, what are the indices or special characteristics that distinguish a fee from a tax proper? On this point we have been referred to several authorities by the learned counsel appearing for the different parties including opinions expressed by writers of recognised treatises on public finance.

¶45A neat definition of what "tax" means has been given by Latham C.J of the Jfi^h f Amtmlia in Matthews v. Chicory Marketing^BbpiMf60 C?L.R. 263^fM). "A tax", according to- - the leafned .. Chief Justice, "is a compulsory.; exaction pf^mpneyjfyjpublw^^ public purpose f?enforceable4jjy^^^fdndy^^,^fll0ayment foHservices rmdere^fipt paymenif^efm^$f^^fd. This definition brmgs^'^^^^^^inion, the essential characteristics of a tax c|| from other forms of imposition which, in a gerierUl sensefim'e included within it. Ill: ill It is said that the esseneMM0d^ki^fMiii^k9ompulsion, that is to say, it IS imposed underAstptutpmp0dyewm^ the taxpayers consent and Mainland Dairy The second characteristic of tax is that it is an imposition made for public purpose wiih^^f0f^rmc^fiQ;-qpyfspecial benefit to be conferred on the payef J/IzS is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected form part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is,, as it is said, no element of quid pro quo between the taxpayer and the public authority (See Findlay Shirras on "Science of Public Finance", Vol. p. 203.). Another feature of taxation is that as it is a part of the common WP(C) No.13770/2009 and connected matters Page 11 of29 ///////////// % burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay.

¶46Coming now to fees, a fee' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to I be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to _ pay (VideLutzon ''Public Finarice'fp-215.). These are undoubtedlyfSolne df^the get^rdJfehdrqpteristics, but as there may, bewcirious kindsf^pfffees, it is ywfyppssible to formulate a definition thaf wduld bd^applicable to alffqses.

¶47As regards the d0hnctioh ^b^00^^tax and cffe^y-it is argueddnfthe first place^hr^Hcdf^B^pspondent that is something voluntary to pay if hd wants certain services from the^'Wovernm^i^s^pt there is no obligation on his part to seek such'^^^iM^c^^he does not want the services, he can avoid the ''pfmig^tf0i^^e example given is of a licence fee. If a pian W(^t^^^Mib^^t is entirely his own choice and then only h0Ms'^fqf^a§^Mi^^ but not otherwise. We think that a carefuMxdmihSib^mimlle^ that the element ^ of compulsion or cobriy^^^^^^^psent in all kinds oj imposition, though in different d^^^ees and that it is.not totally absent in fees. This, therefore, cannot be made the sole or even a material criteriondf0r^di0^uishi0^d§fpx from fees. It is difficult, we think, to conc'eW^^0d^Mxcept, it be something like a poll tax, the incidence of which falls on all person within a State. The house tax has to be paid only by those who own houses, the land tax by those who possess lands, municipal taxes or rates will fall on those who have properties within d municipality. Persons, who' do not have houses, lands or properties within municipalities, would not have to pay these taxes, but nevertheless these impositions come within the category of taxes and nobody can say that it is a choice of these people to own lands or houses or specified kinds of properties, so that there is no compulsion on them to pay taxes at all. WP(C) No.13770/2009 and connected matters Page 12 of29 //////// Compulsion lies in the fact that payment is enforceable by law against a man in spite of his unwillingness or want of consent; and this element is present in taxes as well as in fees. Of course, in some cases whether a man would come within the category of a service receiver may be a matter of his choice, but that by itself would not constitute a major test which can be taken as the criterion of this species of imposition. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. Fees confer a specialpappcity,^alMpugplh^ advantage, as for example mth^p^e^4^l''^^'^citibi^j^ojorj^cuments or marriage licmces^^Hs secoTj;da00o the prinij^ ^Motive of regulation 1)^ on "Science &fmc Puai^i>^rest seems tfFeMt the basii^^lf^;^^^0but in a fee itfjsjpme speciaVMefiefit which thM:^0$^^^^Ues. As Seligmdp-says, it is thtipecial benefU'lmmX^diwidual which is the reason for payment in th0dasefgf fees};myi the case of a tax, the particular advantage if ^ incidental result of State action (Vide Seligptan'^sjfEss^sfpn.^ p. 408.).

¶48If, as we hold, a sort of return or consideration for sen^^^^^^f^^^^absolutely necessary that the levy of fees ^'ih&^^ph^^tli^dce of the legislative provision, be co-related to me expenses incurred by Government in rendering the services. As indicated in Artid^^^^^ G^^fdhdn, ordinarily there are two classes of cases where Government imposes fees' upon persons. In the first class of cases. Government simply grants a permission or privilege to'^a person to do something, which otherwise that person would not be competent to do and extracts fees either heavy or moderate from that person in return for the privilege that is conferred. A most common illustration of this type of cases is furnished by the licence fees for motor vehicles. Here the costs incurred by the Government in maintaining an office or bureau for the granting of licences may be. very small and the amount of imposition that is levied is WP(C) No.13770/2009 and connected matters Page 13 of29 /////// - V u based really not upon the costs incurred by the Government but upon the benefit that the individual receives. In such cases, according to all the writers on public finance, the tax element is-predominant (Vide Seligman's Essays on Taxation, p. 409.), and if the money paid by licence holders goes for the upkeep of roads and other matters of general public utility, the licence feo cannot but be regarded as a tax.

¶49In the other class of cases, the Government does some positive work for the benefit ofpersons and the money is taken as the return for the work done or services rendered. If the money thus paid is setppdrtjand dpproprfated specifically for-the performance pf such wdrk and is hoPr}ferged,,m the. public revemies for .^fhd' benefit of:tfie':iig^neral public it could be counted as f^Cs and ]uf(Wy^c§0^§reyIs really no generic differencefbetween by Sehgman, the taxing f ower of a in three different forms l^own respectivel^'0sW§eII)M0ks0sments, fees ahd4axes (Ibid.p406.).

¶50Our Constitution hd$ )^^/^^l^ive purposes, made a distinction between a tax while there are various entries in the legislatiy^^ii^^ip^^^^d to various forms of taxes, there is cm entryf^fmfi^i'^^^ph^pne of the three lists as matters that is included^Hmlt^M^mWhbdtion - , . 1 r '' 'j ^ 7 fees have special reference to governmental action undertaken in respect to any of these matters. " The aforesaid decision holds "that it was not clear whether the word "tax" used in Article 265 has been or has not been used in the wider sense to include cesses and fees, but by implication, of clause (28) of Article 366, taxation includes imposition of any tax'or impost, whether general, local or special. Levy of fees is a form of exercise of taxing power of the State, albeit our Constitution has placed fees under a separate category for purposes of legislation and at the end of each one of the three legislative lists WP(Cj No.13770/2009 and connected matters Page 14 of29 . /////// \ empowering the particular legislature to legislate on iniposition of fees in respect of the one of the items dealt with in the list itself. Fee is something voluntary which a person has to pay if he wants certain services or special benefit which the individual receives from the government. Conversely, there is no obligation if a person does not want the services and thereby he can avoid the obligation to pay fee. Nevertheless, there could be an element of compulsion and coercion of different degree, even when fee is imposed and payable to the government. % Cdm|ursibn,iies in the fact that payment is enforceable by law in-spife bFihe persons unwillin^nessfand want of consent to make the paymeiit;-This would "nbt ^be'^the\sole and m^ criteria to distinguish "tak^Jlrbm "fee". The'principl^||ference between "tax" and "fee" is that a"f'tax" is levied as a part of a cbhimon burden, whire-"fee" is a payment for a special benefil or privilege.^VMifefore, "fee" is regarded as a • 3 'W sort of return for services lenderpd!,'[TfeSecision does state that if the money paid is -set apart and apj3|pp|ia^p||j|bcifically for performance of ^he benefit of the \ general public, it is a "fee" aS^|te^dppllherefbre, distinction between "tax" and "fee" may be drawn if money is paid for performance of work and not merged in the public frevenue...; Neverthele%,' the primary distinction remaihs and is the element of quiapr'o qiio; mat is to say, the authority levying the "fee" must render some service for the fee levied, however remote the service may be. Sri Lakshmindra Thirtha Swamiqr of Sri Shirur Mutt, (supra) also cautions and states that there is really no generic difference between "tax" and "fee" as taxation power of the State may manifest-itself in different ways. WP(C] No.13770/2009 and connected matters ///////// '6 ,>•

¶14Referring to the element of quid pro quo, whether imposition was and is in accordance with the constitutional mandate and whether levy of fee was/is legal, the Bombay High Court in Mumbai International Airport Private Ltd. v. The Union of India, 2014 (310) ELT 3 had observed: "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 V' 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. "

¶15The ICDs/CFSs/ACCs^^l#afeMt®ip hinterland are operated by the custodians for their privafe^^G.ohjm%rcialVigd^^ and profits. Government facilitates the operation of the'^f©®s/©FSs/ACC by providing the required services by posting customs officials at |^ese stations. The affidavit in reply to the present writ pefifiqh^^^ oll^and-states additional costs have been incurred by the government for the services of the staff and posted them at the ICDs/CFSs/AGCs/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 has been explained with data and details in the counter affidavit. This cannot be controverted and denied. WPCQ No.13770/2009 and connected matters Page 16 of29 ///////

¶16The petitioners-companies charge certain amount per container, from the exporter/importer. In this manner cost recovery charge paid to the goveinment was recouped and passed on to the importer/exporter. It was added to the expense or cost. It was treated as element and part of Service rendered to the importer/exporter. Hence, the petitioners, in turn, would be bound to make payment as cost recovery charge for the posting of the custom officers at the said ICDs/CFSs/ACCs/EPZs. The cost recovery charges were intended to coyenthel^^e pffrie^ovemment in deputing Customs personnel to; theHTCDs/CFSs/AC6sMPZs.^ pro quo is established and can^iotbe "Cv

¶17Section di of the Act-fi:h|ps-una® % SECTim 45. Reslncimg^^^^mcnd removal:^ imported goods. - . for the time being in force)mllfii^mr^^^ unloaded in a customs area shall remaifi^p^^^^l& of such person as may be approved by the Customs until they are cleared for home o'* cire transshipped in accordqnc^MtmM^ oj Chapter VIII.

(2) • The person having c^^^^^^^^fphported goods in a customs area, whether under the provisions of sub-section

(1) or under any law fgr the time being info^e, -

(a) shall keep a -reS^^^A^: 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.

(3) Notwithstanding anything contained in any law for the time being in force, if any imported goods are pilfered 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 import manifest or, as the case may be, WP(C) No.13770/2009 and connected matters ^ 7 of29 ////// an import report to the propef officer under section 30 for the arrival of the conveyance in which the said goods were carried. As per the said provision, all imported goods unloaded in a customs area have to remain in the custody of such person as may be approved by the Commissioner of Customs till they are cleared for home consumption or are warehoused or transshipped. The section is subject to any other law. In ^ ~ exercise of power confeired by SpcdQnrd-S of the Act, the petitioners have been' appointed as cust^iam^br importddr goods^ unloaded ■in the ICDs/CFCs/EPZs. Section 45 peiml^%d ^allows anyv.o&er law to be enacted or framed^for till the^^^tfe cleared etc. Thus cost recolfty, it is appafd3ft%|ff^''|o^|^|e^^th .services provided by the Union of IndSto a private or|mtiia»iWp petitioners. Costs incurred - . are to be recovered from the ct|st§d|ai|. jFeftinently, as noticed below the petitioners had undertaken to be^||#ti|Kof customs officers posted at the ICDs/CFSs/ACCs/EPZs as a.il^ctMtion^f on appointment as a custodian under Section 45(1) of the ^

¶18Cost recovery charges are'^ls^o'^a^able^in terms of Regulation 5 (2) of Handling of Cargo in Customs Area Regulationsii2009. The said regulations have '.been made in terms dfVS'^c^^^l of"the Act. Relevant portions of Regulation 5 are as under. "5. Conditions to be fulfilled by an applicant for custody and liandlingjof imported or export goods in a customs area, - Any person who intends to be approved as a Customs. Cargo Service provider for custody of imported goods or export goods and for handling of such goods, in a customs area, hereinafter referred to as - the applicant, shall fulfill the following conditions, namely WP(C) NO.1377G/2009 and connected matters //////

(1) The applicant shall provide the following to the satisfaction of the Commissioner of Customs, namely: xxxx

(j) 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; xxxx

(m) security and accesspqntrqfip prohfditMpaMthorized access into thepremises;fiinMi,f

(n) stick-otb^j^uitiesjas^tfie^^o^tn^^oner of ^Customs may specify hqyingi regard0i. ]the;c'^t^dy^^;T'hpndling%fJmported or exporfgmds in a VYYY {'■ XXXX ^

(2) The applicant shalUf^^^e^m^§^^hear the cost of the Customs officers posted, d^s^0S£^^ area, on cost recovery basis, by the Commissioner'(qhd isdimllffake payments at such rates and in the mapn^^^fi^d, unless specifically exempted by an ordef§fcfy^fI:^l^Ml^r^^ of India in the Ministry of Finance; * IM y4' '1 ■ -4 xxxx

(5) The applicant shall undertake to comply with the provisions and abide by all the^mpvisions .of jhe$rAct and the rules, regulations, notfycatidhsmndi^i^r:^0Mdfmereimder;

¶19Appointment of the custodians of ICDs/CFSs/ACCs/EPZs is governed by various provisions of the Aet, and the fact is that the payment of cost recovery charges for-the customs officers, who were posted for manning such , additional facilities, was dnb of the conditions of appointment as a custodian in terms of Notification issued under Section 45(1) of the Act. The Government has laid down a standard set of undertaking to be given by the WP(C) No.13770/2009 and connected matters Page 19 of29 //////// A m custodians before they are so appointed under Section 45 ofthe 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.

¶20The 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 I declared as Customs area for the purpose ofThe Actl The-petitioners were required to f'\ \ k // comply and had accepteS'thatthey would compry>with^fhe provisions of the Act applicable to the^TCDs/CFSs^^Ss/^PZs^v They Sad%ecuted a bond together with bank'/guaranteeaiin fav'o'tofo'f|Wf(^pondent No.S.^.The bonds together withfappropriate ba^Ma^^^^re executed, ^primarily to ensure the compliance with th^ifpyisMslg^^ Act and for indemnifying 3f. fryF^ifw-" the customs authorities for any ' lOss bf M^4^,& ^ue to any negligence on the part of the petitionersr:|Q%^ahps|& and in terms of impugned letter of the Ministry of Finance dated V April, 1991 have been issued. I

¶21Petitioners as a pre-coriaitiMr f6f^ 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 recoveiy^ 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 law above WP(C) No.13770/2009 and connected matters Page 20 of29 /////// 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.

¶22On the issue and question of quantum and whether the government can levy the cost recovery charges at the rate of 1.85 times the salary of the customs officers, we would observe, the actual cost cannot be restricted and confined to salary paid. There are hidden and other expenses involved. It would be unfair and wrong to coMpu^expst by^merely adding the wage or salary actually paid to tffexustbm staff deployed. ^Tfiis^jisiriiot the actual cost incurred and the cosf to the governhieMlphercqst factor was-worked out on the basis of priiicipies underihe'.GenerallEihaSciali,Rules. This assertion and . - yiPy. rv. +\^q of WfWIfWW' India, 2011 (267) ELT 319 (]\i|d|,|piA similar issue was rejected holding that the petitioners thei;eihi#drel^^ pay fee for the deployment of customs officers. Relevantf Jar|i|®|^» read as under:- "Z The contention that the Officers of the Customs department %f^e§armrtg their statutory duties under the Customs Act. Their function is a sovereign function. function. The Government^isk^BpoW^gc under Section 12 of the Customs Act. Therffiore, further cost recovery is void ab initio and violative of Articles 14 and 265 of the Constitution of India. The cost recovery made by the respondents is nothing but a fee. Charging at the rate of 185% of total salary, of the Customs Officers is extravagant and exorbitant. Even in other-ports, writ petitions have been filed questioning the recovery of charges for payment to the Customs Officers. Any revision of pay scale by the Central Government will apply to payment of salary by the Union Government to its employees. If any retrospective effect were to give on such WP(C) No.13770/2009 and connected matters //////// •i;. revision of scales of pay, that cannot he passed on to the handlers of Export and Import. It is also stated that the Kerala High Court in similar circumstances had upheld the case of the petitioners.

¶9At the CPS and ICDs, the Customs personnel are provided on a cost recovery basis. The sanction of postings of officers will be issued by the administrative wing of the Central Board of Excise and Customs. The custodians are required to pay 185% of total salary^ of the-officersfactually posted at the CPS. Normally one. CPS Mil have^lS Sffifefffpf various ranks. As per the guideline, dated^^Md-d2.1995, more lparticularly guideline NoJIO, it is thepGuWddiphjwihe..^shall oedjftne cost of the CusfomP persofmeliii&dfl^iWp^ ^^duties at ICD/CPS/EPZ. Purthm^fMml^fmdn No.26/20O9i the Governm.ent by the '^c^^i^^^^t^^ower under Section 141(2f dfthe Customs regulations Im as Handling of Cargo in}^0iJi^Ii^^^AI^s Regulations, 2009. Regulation 3 has made itslrdgmdiionsfto. come into effect with retrospective operations^l&^dei'^^^^tion 5, it is clearly stipulated that the Cus^p0^f0I^^^^ the cost of Customs staffposted in the stati^fl^^^d^^i^er of Customs shall decide the number of ^^^0j^0^^^osted in the facility. I It is also provided that the Customs Cargo provider shall bear the cokt of customs officers posted at C_J the Commissioner of Customs on cost recovery basis and in the manner specified bfff0eff^pmK^^ Ministry of Pinance unless specificMy W^ an order of the Ministry.

¶12....In normal circumstances, the officers of the Customs department perform their duty only in the Customs House located in the Gateway Port and they discharge different functions. When ICD and CPS are running by Custodians for their own commercial: gains and located in the hinterland, the . cost recovery charges will ha\>e to be paid for the posting of WP(C) No.13770/2009 and connected matters Page 22 of29 //////////// -4-customs officials who are additionally sanctioned for these ICDs and CFS over and above the regular posts. Running an ICD or CFS is a commercial proposition. The Government cannot bear the costs of additional manpower sanction. The services of the Customs officials are required throughout year during working hours. The cost recovery charges are in the nature of fees. The recovery at the rate of 1.85% of total salary is directly relatable to the additional creation of posts. Apart from the normal salaries, additional dearness allowance and notional HRA will have to be paid. Therefore, 1.85 times of the monthly average are collectedMs per. the Government of India's letter, dated 1.4.1991: This 'L85%^$me''s^ y^^morked out by the Department of Revenue oh the basis of principles laid down under the GeherdTFinancial0uWskln terms ofiRuleS:s.ll2 and 113 of the-jFffidncial RMd%Mmbyefiesfof expenditures'of the services rendered towpm!^Gmemrnpntkand Non Government parties af%-to be classifiFdlds^rledeipfsfdhd the entire-cdst':shall be reedyefed from bodies so that'net expenditure of the Govefii^n^s^^lf^^iher, while calculating the cost recovery chargih.Jp^ffi^ ffi^^ the cost of the staff includes the component ofj^py^pk^^dh^wances, contribution of pension will Therefore, there was f^Q^:^0ftdnf^Mir^ in demanding 1.85 times. The obligations§^^i^ii^^^;^^ not merely flowing from the bonds exe^^^^^^^^dut the requirements of Customs Act will havdffif-Bs^difdwed. The judgment of Kerala High Court may not have any relevance, as it did not decide the issue reldtfngfa co^st recoy^Jbjmrges to be met by the Cus todians. "

¶23In Sanco Trans Limited v. Union of India, 2011 (185) ECR 21 (Madras), the Madras High Churt applying the ratio decidendi of Hari CFS (supra), had dismissed the writ petitions.

¶24In Mumbdi International-Airport Private Ltd. (supra), the Bombay High Court upheld imposition and levy of cost recovery charges with the following observations WP[Q No.13770/2009 and connected matters Page.23 of29 ////// "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 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.

¶54There is justification for the argument of the Respondents that even if there was a certain exemption in favour of their predecessor in title or the Airport Authority of India that is specific and qua the premises. That could be qua part or whole of the premises transferred. The Respondents have clarified that custodianship for part of the Air Cargo Complex, was transferred to Air India by the Airport Authority of India. That is why the exemption enjoyed by these two entities and claimed by the Petitioners is restricted to the area. The Perishable Cargo Complex is a facility which has been developed and with ■.-ff the participation of another entity. That was not covered as original premises and under the Notification issued on 19'^^ October, 2002. Therefore, as regards this Perishable Cargo Terminal, there cannot be any exemption. Similarly, the argument of the Respondents that in the backdrop of the Circulars and Notifications referred by us above, it is apparent that nOne of the functions under the Customs Act could be discharged and carried out nor the power exercised in that behalf, except by the officers functioning under the Customs Act is accurate. The 'Customs staff is under control of the Commissioner of Customs. It is in these circumstances that it is fallacious to argue that the staff of this Customs Department reports to other entities much less the Petitioners. None can displace them or take over their duties and functions which are statutory. Even if that is not the position in law still it would be WP(C) No.13770/2009 and connected matters Page 24 of29 ////////// ^3, X open for the authorities under the Customs Act to call upon parties like the Petitioner to pay the costs and charges in respect of the staff of the customs department posted at the terminal or in the area which is a notified Customs area. If this staff is posted to work there at and since the area or premises are claimed by the Petitioners, then, all the more, by their understanding and agreement itself, they have to pay the charges.

¶57We find that reliance by Mr. Jetly on Exhibit 7 to the affidavit in reply is, thus, well placed. There the Perishable Cargo Terminal permission refers to the Handling of Cargo in Customs Area Regulations, 2009. As per para 4 (XXIII) thereof, the Petitioners have to bear the charges of the Customs staff posted at the Perishable Cargo Terminal by the Commissioner of Customs, Air Cargo Complex, Mumbai on cost recovery basis. The Petitioners would not have been permitted to outsource the function of handling of Cargo within this terminal premises unless the Regulation 6(2) of these Regulations had permitted them to do so. Further, they could not have been appointed as custodian and within the meaning of the said term and as contemplated section 45 of the Customs Act, 1962, unless, they subjected themselves to these provisions. That they j did so voluntarily does not mean that they can pick and choose favourable or beneficial terms and conditions and leave our or omit the so called onerous one's. Therefore, "shall remain in custody of such person" are the relevant words and to understand the concept. The permission to set up a Perishable Cargo Terminal for exports was sought by the Petitioners. That the facility was constructed by the Cargo Service Centre India

(P) Ltd. on a Build,-Operate and Transfer basis is clear from Exhibit '7' to the affidavit in reply. That entity is also designated as "Customs Cargo Service Provider" is further clear. The function of Cargo is outsourced but the Petitioners appointment as custodian under the Customs Act is not disturbed and remains untouched. Therffore, conditional approval contained in Exhibit '7' binds the Petitioners or else the approval wouldfall. Once the permissions have been sought WP(C) No.13770/2009 and connected matters Page 25 of29 //////// :Q and from the various authorities under the Customs Act, then, it is not proper to urge that the conditions imposed by such authorities will not be binding,

¶59For these reasons, we do npt find any substance in this Writ Petition. Rule is discharged in both of them.

¶61We 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 setup a Perishable Cargo Terminal andfor exports. That was granted and in that terminal,, seiwices 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 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. Ihat their services are utilized is clear and therefore the reimbursem.ent of the charges incurred on them is undertaken-to be made by the Petitioners. Such a payment and of cost recovery charges does.not comesvithin the ambit of the. controversy-dealt wUhhy the Hon'ble Supreme Court. It is in these circumstances": Jthat-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 WP(C) No.13770/2009 and connected matters //////// cannot be looked at from the angle and in the manner approached by the Petitioners."

¶25It 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 I cost of the customs staff posted at the ICDs/CFSs/ACCs/EPZs. Cost was/is liable to change if the differenttbdmpdnefits of this. cost, such as, the salary, D.A., CCA, HRA, pay" aildwance aiid,,l|ension bontridufion at the fates in force from time toMme etc. wefe/^fe''changed.-After the^mplementation of the recommendations of the 6 ."P-aw'^ CommiSsfdh, these components had undergone a^chahge and as a resdltv^tlie^cosflof fhe staff as worked out and was payable. Similar would be^^^^^^^'^p^laiplementation of the 7^ pay Commission-report. I ?l |l J 1' Itlj I . . ,

¶26In view of the Rules 11^.4hatilf3,,omthe General Financial Rules, recoveries of expenditure of#hefesbrvices'^rehaefed to both the government and non-govemment parties 'ar^j,to||^b^fepmed 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 theFfeyisioruin costldueptMmplementation of the 6-Pay Commission was not carried "^out, then "the government would had suffered a net loss and v/ould have tantamounted and resulted in profiting of the private sector at the expense of the govemnient. 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 Boards instructions issued under F. N0.434/12/92/-CUS dated 05.06.1992, Circular Nos.l28/95-CUS dated WPCQ No.13770/2009 and connected matters. Page 27 of29 ///////

14.12.1995, 133/95-CUS dated 22.12.1995, 52/97 dated 17.10.1997 and 80/98-CUS dated 20.10.1998.

¶27Customs 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 fecbvety charges for the customs officers who are posted for mannin^su'ch additional facilities' is one of the conditions of appointment as^ia'^ustodian^hafefihsibTtootificationlunHe^ Section 45(1) of the Act and Regulation 5(i|:fp&helmpugril'd® regard, necessary undertakings were given! fbyithef]|§jtitioners before they were so appointed as custodian under" Section" J45apffthe Act. They are therefore I I bound to bear the cost of '.'the f/Quslpms staff, posted for the V

M-II If ICDs/CFSs/ACCs/EPZs. The^-^i^d^bi^n^^^^pst recovery charges by the custodian of ICDs/CFSs/AC^sl^|;Z^S|%]j§s|atutory force of law and is \ •+!..• +1, • ..I* II ■• V+U i Within the jurisdiction of the r^sR9pd:||i|S||^r |^'• '

¶28As mentioned earlier, as per the norms of Central Board of Excise and Customs for-Cost Recove^ijCharges in accordance with the Ministry of Finance's letter F. No.A/llOi8/9/9l^i® Iv^aated T April, 1991, custocians of ICDs/CFSs/ACCs/EPZs are required to pay 1.85 times the total salary of the officers posted at. the ICDs/CFSs/ACCs/EPZs. The IFU wing of the Ministry of Finance, had given concurrence to this method of charging Cost Recovery charges vide their Dy. No.2/FA(F)/91 dated OF' January, 1991 with effect from OF' April, 1991. WP(C) No.13770/2009 and connected majtters^ ///////// A i

¶29The judgment relied upon by the petitioner in Union of India v. National Tyre & Rubber (I) Ltd. (W.A. No.891/2005) is not applicable to the facts and circumstances of the present case. In the said judgment, the. Kerala High Court has not unsettled the principle of payment of cost recovery charges by the custodian. As regards the judgment relied upon by the learned counsel for the petitioner in GMR Hyderabad International Airport Ltd. v. Central Board of Excise & Customs, 2012 (193) ECR 188

(AP), the Bombay High Court has patenlly ^distin^ished the same in its ""•j *• Vv fS 'fi ''o subsequent judgment m the case of Mumbai International Airport Private *> -s Ltd. (supra) in paras61^^thereof.and.,has5e?mrbsse.d: its dissehf^ith the decision of the Single Judge'/of the Ahd&a/P/adeM^Hi^h Cburt. %

¶30In view ,of the aforesaid discussiorilflwfe. are of the opinion ,that no case is made out for the grant of the--'feliefsla'sfpfayed for in the writ petitions. All the four writ petitions are accordihgly^dism'issed, with no order as to costs. I .PS ..'Q . il^^^aph^NDER^KHA^ J. dl C. AUGUST ^7 ,2018/b SANJIVKHANNA, J. WP(Q No.13770/2009 and connected matters //////