Cost Recovery Charges Collected Without Legal Authority: CESTAT Allows Refund of Entire Amount to Appellant [Read Order]

The Allahabad Regional Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the levy and collection of Cost Recovery Charges (CRC) from the appellant was without any authority of law, and consequently directed a refund of the entire amount collected by the Department since 2009.

The appellant, CMA CGM Logistics Park Dadri Pvt Ltd, operating a Container Freight Station (CFS) at Dadri, had been functioning as a custodian since 2005 after obtaining approval from the Ministry of Commerce and Industry and the Commissioner of Customs, Noida. As a custodian under Section 45 of the Customs Act, the company had been paying CRC towards the salaries of customs officers deployed at the facility. Over the period from April 2009 to November 2015, the appellant deposited more than ₹3.13 crore under this head.

Seeking exemption from payment of CRC, the appellant had relied on CBEC Circular No. 13/2009, which allowed waiver subject to conditions. Although exemption was ultimately granted by the Chief Commissioner, it was made effective only from November 4, 2015. The appellant sought retrospective waiver from the date of the application and a refund of the CRC already paid, prompting a writ petition before the Allahabad High Court. The High Court granted liberty to the appellant to pursue the statutory appellate remedy before the Tribunal.

Before the Tribunal Bench, comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) the appellant argued that the issue was covered by the Gujarat High Court’s decision in Adani Ports & Special Economic Zone Ltd, where it was held that CRC exemption should operate from the date of application. The appellant further relied on the judgment of the Andhra Pradesh High Court in CBEC v. GMR Hyderabad International Airport Ltd, wherein the High Court declared the Handling of Cargo in Customs Areas Regulations, 2009 ultra vires to the Customs Act.

The High Court held that neither Section 141(2) nor Section 157 empowered the Government to impose CRC, and that salaries of customs staff deployed at a CFS or ICD could not be recovered through subordinate legislation.

The Tribunal observed that the ruling of the Andhra Pradesh High Court directly struck at the foundation of the CRC levy itself, declaring the Regulations under which CRC was imposed to be beyond the scope of the parent statute.

The Bench held that once the High Court has categorically ruled that the Customs Act contains no enabling provision to recover such charges, the Department had no authority at any stage to impose or collect CRC from any custodian. The Tribunal also noted that no appeal had been filed by the Department against the decision in GMR International, thereby indicating acceptance of the High Court’s view.

The Bench held that the impugned order granting exemption only prospectively was unsustainable. It emphasised that CRC collected from the appellant even prior to the 2009 Regulations was based merely on administrative instructions and circulars, which could not create an enforceable financial liability in the absence of statutory backing.

Allowing the appeal, the Tribunal set aside the Commissioner’s order and directed refund of all CRC ever paid by CMA CGM Logistics Park Dadri Pvt Ltd, along with consequential relief.

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