(Prayer: Petition Under Article 226 of the Constitution of India Praying that in the circumstances stated in the affidavit filed herein the High Court will be pleased to issue a “Writ of Mandamus or any other appropriate writ or order or direction (i) by declaring that Notification No.26/2009 – Customs (N.T.) dt. 17.03.2009 and Notification No.96/2010 – Customs (N.T.), dated 12-11-2010 to the extent of clause 5(1) (b), 5 (2) and 5 (5) and the consequent circulars dated 23-3-2009 and 10-1-2011 issued by 1st respondent are violative of Articles 14,19 (1 (g) and Articles 265 and 300-A of the Constitution of India apart from being contrary to Section 141 (2) and 157 of the Customs Act, 1962 (ii) by declaring that Notification No.26/2009-Customs (N.T.) dated 17-3-2009 to the extent of clause 4 issued by 1st respondent are violative of Articles 14 and 19 (1) (g) of the Constitution of India (iii) interdict the respondents from raising any demand towards purported costs of customs officers, Compliance of impugned notification dated 12-11-2010 (iv) direct the respondents to refund the amount of Rs.2,72,54,865/- collected towards customs officers charges for the period 23-3-2008 to 31-3-2009.)
1. With a view to cater to the ever increasing local demands and to provide top class infrastructural facility, a new Green Field International Airport at Hyderabad on “Public- Private Participation” basis has been conceived. The writ petitioner was declared as the preferred bidder, after following the usual tendering process, resulting in execution of a concessionaire agreement on 20.12.2004 between the Government of India, Ministry of Civil Aviation and the writ petitioner company for development, construction, operation and maintenance of the Green Field Airport at Shamshabad near Hyderabad. This arrangement gave birth to Rajivgandhi International Airport at Shamshabad. At all the airports, Customs, Immigration, Security and Quarantine services are performed by various officials belonging to the respective departments of the Government of India. Clearing international passengers at the Passenger Terminal is performed by the Customs Officials. Similarly, the international cargo imported or meant for export through the air cargo complexes created by the airport operator, is cleared by the Customs for purposes of levy of the Duty. For retaining the custody of such cargo, till it is cleared, Custodians are appointed under Section 45 of the Customs Act, 1962. Accordingly, the writ petitioner has submitted the necessary application on 07.12.2006 for appointment as a Custodian. Before any such application is considered, one is required to comply with the conditions stipulated in Circular No.34/2002-Cus. dated 26.06.2002, which were subsequently modified by Circular No. 27/2007-Cus dated 06.04.2004, issued by the Central Board of Excise and Customs . One of the stipulations contained in these circulars is that the salary and allowances payable to the officers posted from the Customs Department will be borne by the Custodian. Hence a representation has been submitted by the petitioner to the Central Board of Excise and Customs - first respondent herein for waiving Conditions 10-13 of Circular 34/2002-Cus dated 26.06.2002. The petitioner has specifically asserted that the cost component of the customs officials salary bill is not collected from the cargo operators at other airports namely Delhi, Mumbai, Chennai, Trivandrum, Ahmedabad and Cochin Airports. It is also pointed out that, no such charges are also collected from the cargo terminal operators at Begumpet Airport, Hyderabad. Through a notification No.2/2008 dated 11.03.2008, the petitioner was granted custodianship subject to the 24 conditions stipulated therein including the cost recovery condition. It is this condition which is specifically challenged in this writ petition.
2. Exercising the power available under Subsection 2 of Section 141 read with Section 157 of the Customs Act, 1962, the Central Board of Excise and Customs framed “The Handling of Cargo in Customs Areas Regulations, 2009” (henceforth called Regulations, 2009). These regulations were notified on 17.03.2009. Regulation 4 required all the customs cargo service providers who were already approved on or before the date of coming into force of these regulations to comply with the conditions contained in these regulations. Regulation 5 detailed the conditions to be fulfilled by an applicant for custody and handling of imported or export meant goods in a customs area. Regulation 5(ii) reads as under:
“5(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 and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance.”
3. Similarly, Regulation 6 which dealt with the responsibility of custom cargo service provider required in Clause (1)(o) thereof, to bear the cost of customs officers posted by the Commissioner of Customs on cost recovery basis and shall make payments at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry. Circular No.13/2009-Customs was issued by the Central Board of Excise and Customs on 23.03.2009. It is noted in the said circular that the Public Accounts Committee (2005-2006) in its 27th report had recommended for formulating appropriate legal provisions and guidelines to control the activities of the custodians. In paragraphs 5.3 and 5.4 of the said circular, the following guidelines have been indicated:
“5.3The charges in respect of the Customs officers deployed at the customs clearance facility (ICD/CFS/port/airport etc.) are required to be paid by the Custodian, unless these have been exempted for an individual custodian by an order issued by the Ministry of Finance or by a circular or instructions issued by the Ministry of Finance [Regulation 5(2)]. Payment of cost recovery charges in respect of ports and airports has been exempted for three categories of custodians specified in Circular No.27/2004-Customs dated 6.4.2004. It is clarified that these specified categories of custodian at ports/airports would continue to be exempt from the payment of charges for the customs officers deployed therein.
5.4 In terms of the Greenfield Airports Policy framed by the Government and notified by the Ministry of Civil Aviation for setting up of private Greenfield airports, it has been specified that in case of an international airport, the applicant for setting up of a Greenfield airport will obtain clearance form the Department of Revenue for provision of Custom services. The cost of providing these services will have to be borne by the Airport Company. Hence, such custodians shall also be required to pay cost recovery charges in terms of the extant policy.”
4. The whole question raised in the writ petition centers around the liability of the custodian appointed in terms of Section 45 of the Customs Act, 1962, to pay for this cost recovery.
5. Before we proceed further, it would be appropriate to notice the most relevant provisions of the Customs Act, 1962 (henceforth called the Act). The following expressions found in the said act have been defined in Section 2 in the following manner:
| Section 2(6) | “Board” means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) |
| Section 2(10) | “Customs Airport” means any airport appointed under clause (a) of section 7 to be a customs airport |
| Section 2(11) | “Customs Area” means the area of a customs station and including any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities |
| Section 2(12) | “Customs Port” means any port appointed under clause (a) of section 7 to be a customs port, and includes a place appointed under clause (aa) of that section to be an inland container depot |
| Section 2(13) | "Customs Station" means any customs port, customs airport or land customs station |
| Section 2(14) | “dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid; |
| Section 2(15) | "duty" means a duty of customs leviable under this Act; |
| Section 2(16) | "entry" in relation to goods means an entry made in a bill of entry, shipping bill or bill of export and includes in the case of goods imported or to be exported by post, the entry referred to in section 82 or the entry made under the regulations made under section 84; |
| Section 2(23) | “import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India |
| Section 2(24) | “import manifest" or "import report" means the manifest or report required to be delivered under section 30 |
| Section 2(25) | imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; |
| Section 2(32) | "prescribed" means prescribed by regulations made under this Act; |
| Section 2(35) | "regulations" means the regulations made by the Board under any provision of this Act; |
| Similarly, the other important provisions of the Act, also need to be given a closer look and they are: | |
| Section 7 | Appointment of customs ports, airports, etc(1) The Board may, by notification in the Official Gazette, appoint-- (a) the ports and airports which alone shall be customs ports or customs airports for the unloading of imported goods and the loading of export goods or any class of such goods; (aa) the places which alone shall be inland container depots for the unloading of imported goods and the loading of export goods or any class of such goods; (b) the places which alone shall be land customs stations for the clearance of goods imported or to be exported by land or inland water or any class of such goods; (c) the routes by which alone goods or any class of goods specified in the notification may pass by land or inland water into or out of India, or to or from any land customs station from or to any land frontier; (d) the ports which alone shall be coastal ports for the carrying on of trade in coastal goods or any class of such goods with all or any specified ports in India. (2) Every notification issued under this section and in force immediately before the commencement of the Finance Act, 2003 shall, on such commencement, be deemed to have been issued under the provisions of this section as amended by section 105 of the Finance Act, 2003 and shall continue to have the same force and effect after such commencement until it is amended, rescinded or superseded under the provisions of this section. |
| Section 8 | Power to approve landing places and specify limits of customs areaThe Commissioner of Customs may - (a) approve proper places in any customs port or customs airport or coastal port for the unloading and loading of goods or for any class of goods; (b) specify the limits of any customs area. |
| Section 13 | Duty on pilfered goodsIf any imported goods are pilfered after unloading thereof and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage. |
| Section 33 | Unloading and loading of goods at approved places onlyExcept with the permission of the proper officer, no imported goods shall be unloaded, and no export goods shall be loaded, at any place other than a place approved under clause (a) of section 8 for the unloading or loading of such goods. |
| Section 34 | Goods not to be unloaded or loaded except under supervision of customs officer.Imported goods shall not be unloaded from, and export goods shall not be loaded on, any conveyance except under the supervision of the proper officer : Provided that the Board may, by notification in the Official Gazette, give general permission and the proper officer may in any particular case give special permission, for any goods or class of goods to be unloaded or loaded without the supervision of the proper officer. |
| 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 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. (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, 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, dispatched 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 (c) if the amount cannot be recovered from such person in the manner provided in clause ( a) or clause ( b) -- (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 a 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 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 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. (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. |
| Section 152 | Delegation of powersThe Central Government may, by notification in the Official Gazette, direct that subject to such conditions, if any, as may be specified in the notification- (a) any power exercisable by the Board under this Act shall be exercisable also by a Chief Commissioner of Customs or aCommissioner of Customs empowered in this behalf by the Central Government; (b) any power exercisable by aCommissioner of Customs under this Act may be exercisable also by aJoint Commissioner of Customs or anAssistant Commissioner of Customs or Deputy Commissioner of Customs empowered in this behalf by the Central Government; (c) any power exercisable by a Joint Commissioner of Customs under this Act may be exercisable also by anAssistant Commissioner of Customs or Deputy Commissioner of Customs empowered in this behalf by the Central Government; (d) any power exercisable by an Assistant Commissioner of Customs or Deputy Commissioner of Customs under this Act may be exercisable also be a gazetted officer of customs empowered in this behalf by the Board. |
| Section 156 | General power to make rules(1) Without prejudice to apply power to make rules contained elsewhere in this Act, the Central Government may make rules consistent with this Act generally to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the manner of determining the transaction value of the imported goods and export goods under sub-section (1) of section 14; (b) the conditions subject to which accessories of, and spare parts and maintenance and repairing implements for, any article shall be chargeable at the same rate of duty as that article; [***] (d) the detention and confiscation of goods the importation of which is prohibited and the conditions, if any, to be fulfilled before such detention and confiscation and the information, notices and security to be given and the evidence requisite for the purposes of such detention or confiscation and the mode of verification of such evidence ; (e) the reimbursement by an informant to any public officer of all expenses and damages incurred in respect of any detention of any goods made on his information and of any proceedings consequent on such detention; (f) the information required in respect of any goods mentioned in a shipping bill or bill of export which are not exported or which are exported and are afterwards re-landed; (g) the publication, subject to such conditions as may be specified therein, of names and other particulars of persons who have been found guilty of contravention of any of the provisions of this Act or the rules. (h) the amount to be paid 6[for compounding and the manner of compounding] under sub-section (3) of section 137. |
| 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 of a bill of entry, shipping bill, bill of export, import manifest, import report, export manifest, export report,1[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; (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. (d) the manner of conducting audit of the assessment of duty of the imported or export goods at the office of the proper officer or the premises of the importer or exporter, as the case may be. |
| Section 158 | Provisions with respect to rules and regulations(1) All rules and regulations made under this Act shall be published in the Official Gazette. (2) Any rule or regulation which the Central Government or the Board is empowered to make under this Act may provide- (i) for the levy of fees in respect of applications, amendment of documents, furnishing of duplicates of documents, issue of certificates, and supply of statistics, and for rendering of any services by officers of customs under this Act ; (ii) that any person who contravenes any provision of a rule or regulation or abets such contravention or who fails to comply with any provision of a rule or regulation with which it was his duty to comply, shall be liable to a penalty which may extend to fifty thousand rupees. |
7. Heard Sri S.R. Ashok, learned senior counsel appearing for the writ petitioner and Sri A. Rajasekhar Reddy, learned Standing Counsel for the Customs and Central Excise.
8. Section 7 of the Act conferred power on the Board to appoint and notify such ports and airports which alone shall be customs ports or customs airports for purpose of unloading of imported goods and the loading of export meant goods. It is therefore clear that, not all ports or airports in India are customs ports or airports. It is only at the notified customs ports, customs clearance is undertaken by the officers of the Customs. Once the Board exercises this power, thereafter in accordance with Section 8 of the Act, it is the Commissioner of Customs who would approve proper places in such customs ports or customs airports for unloading and loading of goods. Section 33 and 34 regulate the operations of loading and unloading of goods at such specified places and that too under the supervision of the proper officer of the customs. Further, Section 13 of the Act makes it clear that an importer shall not be liable to pay the duty on pilfered goods unless such pilfered goods are restored to him. Thus, the entire scheme of the statute unmistakably conveys the necessity and primacy for integrity, for safety and security of the places meant for loading and unloading at customs ports and airports. This was warranted to ensure that the state’s revenue does not escape through porous premises at the customs port or customs airport. As a part of this well devised and designed activity and to fasten the custodial responsibility of the not yet cleared cargo, both imported and meant for export, provision is created under Section 45 for appointment of custodians. This measure would ensure the integrity of the cargo and also the collection of proper duty thereon. Appointment of an airport under Section 7 as a customs airport and appointment under Section 45 of a person as a custodian, both are obviously a one time affair. Since the very nature of appointment partakes with it, the power to regulate subsequently any such appointment as customs airport or entrustment of the custodial services can also be recalled at any time later on for valid reasons. Therefore, it could be legitimate to expect the appointee under Section 7 and as well as the custodian under Section 45 to pay for a fees prescribed for appointment as such. A look at Section 141 of the Act in no uncertain terms makes the position clear that all conveyances and goods in a customs area shall be subject to the control of the officers of the customs for purposes of enforcing the provisions of the Act. Otherwise, it might possibly lead to easy evasion of the levy liable to be applied on them. Sub-section 2 of Section 141 makes it explicitly clear that the imported or export goods may be received, stored, delivered, dispatched 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. The expression “Prescribed” was defined in Section 2(32) as meaning those as prescribed by the regulations made under the Act. Even if Sections 7, 45 and 141 are read together, what emerges is that, all goods imported or meant for export can be brought to the customs airport and thereafter they shall remain in the custody of the custodian until they are cleared for home consumption or are warehoused or are transshipped in accordance with the provisions contained in Chapter VIII of the Act. But however, any such physical custody of the cargo by the custodian is subject to the control of the officers of the customs, till they are properly cleared. Therefore, to my mind, Section 141(2) can only give scope for framing the regulations prescribing the responsibilities of the customs airport operators and more importantly of the persons engaged in storing, delivering, dispatching or otherwise handling the imported or export meant goods in a customs area (In a given case, the customs airport operator need not necessarily be the custodian appointed under Section 45 of the Act). Hence, this provision does not lay down any policy guideline for cost recovery of the salary and allowances payable to the customs officers under whose overall control the aforementioned operations are to be handled in a customs area.
9. Let us also have a closer scrutiny of the provision contained in Section 157 of the Act. Sub-section 1 thereof conferred power on the Central Board of Excise and Customs to frame regulations which can be consistent with the rest of the provisions contained in the Act and the rules, if any, framed by the Central Government and that too, such regulations can be made for carrying out the purposes of the Act. Sub-section 2 of Section 157, without prejudice to the generality of the provision contained under Sub-section (1) listed out the matters which can be the subject matter of regulations to be framed. It is significant to notice that, powers exercisable in terms of Section 7, 8 and 45 of the Act are not one of those subject matters which are enumerated under Sub-section 2 of Section 157. Therefore going by the generality of the power conferred by Subsection (1) of Section 157 on the Central Board of Excise and Customs to make regulations, the limitation that has got to be kept in mind is that, such regulations can only be made for such purposes which are intended to be carried out under the Act and not otherwise.
10. Then, it takes us to understand the general purposes for which this special piece of legislation was enacted. It is not merely intended for purposes of garnering revenue to the State by levying duty on imports and exports. The invisible roots of this legislation lie in the State’s primary obligation to nurture and protect the indigenous industrial sector from facing or measuring upto international standards and unhealthy competition. Further, India can not be a “free for all dumping yard”. Otherwise giant multinational corporations would not allow Sun to shine on our local corporations and consequently continue to exploit the local conditions and turn them in their favour. More importantly the natural resources of this nation move away across it’s borders, for the good and welfare of others and they will scarcely become available for securing the wellbeing of our countrymen. The very foundations upon which this nation won it’s freedom would have been quickly weakened, otherwise.
11. Regulation 5(2) of Regulations 2009 undoubtedly prescribed the custodian to bear the costs of the customs officers posted at such customs area on cost recovery basis. Now the question that is to be resolved is whether this falls within the general power of making regulations or not? Payment of one time fee for appointment as a customs airport or for recognizing a person as a custodian of goods in a customs area is different from obligating such a person to pay regularly for the costs of the customs officers posted at the customs port or customs airport. Both are not the same.
12. The concept of cost recovery is generally associated with the service rendered by a person or a set of persons or a public organization to another, which service is not otherwise liable to be provided.
13. A modern welfare state is obliged to provide for various services and beneficial measures to its citizens. Hence, a welfare state is entitled to make a levy even against the will of the people who are sought to be benefited in the process. In the matter of imposition of such levies, there is no role for the consent of the targeted group or the consent of the beneficiary. It is, hence, implicit that no levy can be imposed except through clear and unambiguous words. No one can be taxed by implication. It is, therefore, imperative that if a person had not been brought within the ambit of the charging provision by clear words, he cannot be taxed at all. What is of utmost significance is that, only through clear import of the language used alone, a levy can be imposed and consequently no attempt can be made to enlarge the scope of the charging provision so as to embrace matters not specifically provided for therein. It is therefore one of the fundamental principles evolved that a Court cannot read words which are not there in a charging statute or exclude the words which are already there (See Collector of Estate Duty Vs. R. Kanakasibai (AIR 1973 SC 1214). The language employed in a taxation statute therefore cannot be obscure for purposes of justifying the levy which is not intended or provided for in the statute. But at the same time, it is a settled principle in the matter of determination of liability, that the Court must have regard to the substance rather than the form. The rationale behind this concept has been explained by Lord Sumner in Levene Vs. Inland Revenue Commissioners (1928 Appeal Cases 217at 227) in the following illustrious words:
“It is trite law that his Majesty’s subjects are free, if they can, to make their own arrangements so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the legislature for the imposition of taxes, they make it their business to walk outside them.”
14. However the limits of the right of the public authority to impose taxes lies with the legislature, as taxation is the very prerogative of the legislature. Hence the right to impose taxes and to determine the circumstances under which these will be done is the very privilege of the legislative power while mere administration of such a taxation statute is the responsibility of the executive power of the State. It is a common legislative practice to prescribe for the legislative policy broadly in the statute and then leave the guidelines for working out the details effectively behind the said legislative policy by delegating the power to frame rules or regulations, as the case may be. This practice of empowering the executive to make supporting legislation strictly within the prescribed sphere has been evolved due to the practical necessities and pragmatic needs of the modern state as the legislatures, by the very nature of the limitations upon them to conceive all possible circumstances and contingencies at one go and also because of the extremely limited time factor. The legislatures can hardly work out all the necessary details by themselves. While the legislature puts in place the life line, the muscular support is supplied through ancillary legislation known as subordinate/delegated legislation, in the form of Rules or Regulations. However, without there being a clear and unambiguous charging provision, by way of ancillary legislation, no taxes can be imposed. In the instant case, the survey of the provisions of the Act have not contemplated for taxing either the appointee or the custodian. Therefore, by making a Regulation, a tax could not have been levied on such appointees of customs airports or the custodians of the uncleared cargo.
15. Assuming that what is levied is not a tax but a fee, it would be imperative to notice that a fee is a charge for special services rendered to individuals or organizations by some governmental agency or the other and such a charge has an element of quid-pro-quo ingrinded into it. It is true, that there is no grave distinction between a tax and a fee since both are compulsory exactions of money by public authorities. However, it will be appropriate to bear in mind that a tax is imposed as part of the scheme to garner revenue by the State or public authority for purposes of expending it to achieve and implement public purposes. Consequently, a tax is seldom supported by any considerations. In juxtaposition thereto, a fee is essentially levied for services commensurately rendered and hence there is a direct element of consideration or quid-pro-quo between the fee payer and the public authority which imposes it. Right at this stage, I consider it appropriate to be profited from the crisp statement of the legal principle enunciated by Justice P.B. Gajendragadkar (as the learned CJI was then) speaking on behalf of the majority of the Judges of the Constitution Bench of the Supreme Court, in The Hingir-Rampur Coal Co., Ltd. And others vs. The State of Orissa and others (AIR 1961 SC 459), while dealing with the validity of Orissa Mining Areas Development Fund Act, 1952:
“9. …………………………… The neat and terse definition of tax which has been given by Latham, C. J., in Matthews v. Chicory Marketing Board (1) is often cited as a classic on this subject. "A tax", said Latham, C. J., "is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment for services rendered". In bringing out the essential features of a tax this definition also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money. By public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated fund. It is earmarked and set apart for the purpose of services for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exempted from the payment of the cess. Though there is an element of quid pro quo between the tax-payer and the public authority there is no option to the tax-payer in the matter of receiving the service determined by public authority. In regard to fees there is, and must always be, co-relation between the fee collected and the service intended to be rendered. Cases may arise where under the guise of levying a fee Legislature may attempt to impose a tax; and in the case of such a colourable exercise of legislative power courts would have to scrutinise the scheme of the levy very carefully and determine whether in fact there is a co-relation between the service and the levy, or whether the levy is either not co-related with service or is levied to such an excessive extent as to be a presence of a fee and not a fee in reality. In other words, whether or not a particular cess levied by a statute amounts to a fee or tax would always be a question of fact to be determined in the circumstances of each case. The distinction between a tax and a fee is, however, important, and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes; but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course the fees taken in any Court.”
(Emphasis is generated by me)
It is, therefore, required of the Courts to hold a strict vigil over those to whom the legislature has entrusted vast powers and take care that no injury is caused by an extravagant assertion of such powers and confine their activity in strict conformity of the terms of their derived authority.
16. It was, therefore, appropriate to decipher as to whether any service either special or even ordinary can be said to be rendered by the respondents to the petitioner for them to justify the levy. With the expansion or advent of quality infrastructural inputs such as roads, highways network, etc., rapid industrialization and manifold increase of commercial activities can be expected as the most inevitable corollary. Industrialization and increased commercial activities can lead to increase of import and export activity. Both imports and exports of goods are subject to levy of duty. Thus, in the process, the state’s revenue gets augmented, apart from increased economic activity and development of human resources. The increase in the quantum of imports and exports therefore has a direct proportionate impact upon the revenue garnering and overall development. As was already noticed supra, appointment of a custodian of the customs space identified under Section 8 of the Act is only for ensuring the integrity of such a place so that no revenue loss and duty evasion occurs there. Beyond that, a custodian has no other role. He is a facilitator by providing for fool proof or tamper proof premises so that goods do not leave the premises before they are cleared by the customs and correspondingly the necessary duty/revenue is collected smoothly by the State. It is purely incidental, that the custodian may in turn earn some revenue for himself by charging the importer or exporter for facilities provided by him for smooth and eventual clearance of goods by the customs. That is of least importance in the matter of collection of customs duty by the State. I am therefore clearly of the view that, no services are being specially provided by the customs officials to the custodians at a customs port or customs airport, to enable them to collect any fee, from such a custodian. “Cost Recovery” of the salaries and allowances paid to the customs officials is only a dignified form of collection of a fee. Since, no services are specially or generally provided to the custodian, no such fees is liable to be charged.
17. There is no mistaking the respondents; they clearly hinted in their counter affidavit that what is demanded from the petitioner is a fee, by making the following statement:
“2) In reply to Para 2, it is submitted that the Constitutional Bench of the Hon’ble Supreme Court in the case of Commissioner, Hindu Religious Endowments, Madras Vs. Sri lakshimindra Thirtha Swamiar of Sri Shirur Mutt, reported as (1954) SCR 1005 (at 1040, 1041 and 1044) has held that “a fee could be charged by the state for the service rendered by some governmental agency as long as it is not arbitrary.” The Hon’ble Supreme Court has made the distinction between tax and fee and held “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. Another feature of the taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay. Coming 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 be based on the expenses incurred by the Government in rendering the service.” This judgment has been referred to by the Hon’ble Supreme Court in the case of Gupta Modern Breweries Vs. State of Jammu and Kashmir ((2007) 6 SCC 317).”
18. There is one other reason why a fee cannot be collected from the custodian clearing the goods which are either imported or meant for export. Clearing the international passengers or goods, imported or meant for export is a sovereign function of the State. For purposes of effective and efficient discharge of these functions, the custodian is required to provide the necessary infrastructural facilities. Sans such facilities, the customs clearance duties become imminently impaired. Therefore, while a demand for making available standard infrastructural facilities for facilitating efficient discharge of customs clearance functions is legitimate, but however, demand of reimbursement of cost recovery is totally unjust. There is yet another reason while preparing the appropriation estimates of revenue, adequate provision is always made towards the “Head of salaries and allowances” payable to the government servants functioning under various ministries/ departments. Such appropriations are placed for consideration and approval of the Parliament/Legislature of the State as the case may be. Once the salaries and allowances and other benefits such as pensions are thus already provided for, the question of seeking their reimbursement separately would not arise. Out of the overall collection of revenue, a certain percentage is thus set apart towards the concomitant expenditure liable to be incurred for raising such revenue. Salaries and allowances, pensions and other terminal benefits payable to the government servants are integral part of this element of expenditure. When the State directly pays to its employees, the State in turn expects absolute integrity and loyalty from such employees. In the case of employment between the State and its servants, it is appropriate to bear in mind that it is not regulated purely by contractual terms or by general conditions which are otherwise part of any master and servant relationship. There is a status conferred by the State upon its employees. By virtue of this status, it undertakes to protect them from undeserved and undesirable wants. Therefore, a provision is made in the budgetary proposals annually towards the head of their salaries and pensions.
19. Therefore, I am of the opinion that, Regulation 5(2) of Regulations 2009 has no legal substratum to survive and accordingly the consequential levy made on the petitioner by the respondents towards cost recovery charges is wholly unsustainable.
20. The writ petition, accordingly, stands allowed. Costs easy.