The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), set aside demand of cost recovery charges by Commissioner under 5(2) and 6(1)(o) of Handling of Cargo in Customs Area Regulations 2009.
The appellant, M/s. Rajasthan Small Industries Corporation Ltd is a State Government Undertaking. The Circular set out the guidelines for appointment of custodians of Container Freight Stations (CFS), Air Cargo Complexes (ACC) and Inland Container Depot (ICD). The appellant was appointed as a custodian of ICD Jodhpur under section 45(1) of the Customs Act by public notice.
It was stipulated that the posts should be filled up only when the appellant deposits the entire cost of the said posts which was 1.85 times of the monthly average cost of the post in advanced. Accordingly, the Managing Director of the appellant submitted an undertaking to the Customs Department that the custodian shall bear the cost of the staff. The Circular was replaced by the Handling of Cargo in Customs Area Regulations 2009.
Show cause notices were issued to the appellant, purportedly under Regulation 12 of the Handling of Cargo in Customs Area Regulations, that the appellant had contravened the provisions of Regulations 5(2) and 5(5) and the obligation mentioned in Regulation 6(1)(o) of the Handling of Cargo in Customs Area Regulations and is liable for suspension of approval of the custodianship under Regulation 11(1) of the Handling of Cargo in Customs Area Regulations and also forfeiture of security and imposition of penalty under Regulation 12(8).
The Commissioner passed orders confirming the demand of outstanding cost recovery charges under regulations 5(2) and 6(1)(o) of the 2009 Regulations and imposed penalty of Rupees five thousand but the custodianship of the appellant was not revoked nor security was forfeited.
The issue that arises for consideration is as to whether the recovery of cost recovery charges could have been confirmed by the Commissioner exercising powers under regulations 5(2) and 6(1)(o) of the 2009 Regulations and whether penalty of Rupees five thousand could have been invoked.
A Bench consisting of Justice Dilip Gupta, President and P V Subba Rao, Technical Member held that “The Commissioner committed an illegality in ordering recovery the cost recovery charges under the aforesaid provisions of the 2009 Regulations. The penalty that has been imposed is also liable to be set aside.”
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