Container Freight Station Cannot Operate Without Customs Supervision: Calcutta High Court

On 15 May, the Calcutta High Court upheld cost recovery charges imposed on a Container Freight Station at Haldia and rejected a challenge to demand notices issued by Customs authorities, holding that such facilities cannot function outside the framework of statutory supervision and regulatory control.

The Bench of Justice Rai Chattopadhyay dismissed the plea filed by Apeejay Infra Logistics Pvt. Ltd. and observed that a Container Freight Station cannot function without supervision, examination, sealing, clearance, and allied regulatory activities under the Customs Act. she held:

“A Container Freight Station operating under the Customs Act cannot practically function in the absence of customs supervision, examination, sealing, clearance, and allied regulatory activities. Therefore, the argument that no services were rendered or that no officers were deployed is wholly misconceived and contrary to the operational realities emerging from the records.”

Apeejay Infra Logistics, acting as custodian of a Container Freight Station at Haldia, bore cost recovery charges under its appointment terms for deployment of customs officers on an advance-payment basis.

Customs authorities issued demand notices seeking recovery of alleged dues since January 2015, which culminated in a demand of Rs. 6.75 crore for the period between 2015 and August 2020. They also restricted movement of incoming cargo from August 2020 due to alleged non-payment.

The company challenged the action and contended that Customs could not levy cost recovery charges because authorities had not sanctioned posts or physically deployed officers at the facility, which it treated as mandatory preconditions. It further contended that earlier payments occurred under ignorance of law and could not create continuing liability.

The respondents submitted that the petitioner, as a notified custodian of a customs area, undertook contractual liability to bear cost recovery charges and furnished bonds and bank guarantees. They further submitted that customs operations continued throughout and that the petitioner benefited commercially from the arrangement.

Rejecting the challenge, the Bench held that Regulation 6(1)(o) of the Handling of Cargo in Customs Areas Regulations, 2009 does not make liability dependent on prior sanction of posts as argued. It further held that administrative restructuring, including subsuming of posts into the departmental cadre, did not affect existing contractual and statutory obligations.

The Bench also recorded that Apeejay Infra Logistics accepted the obligation at the stage of securing permission to operate the CFS, made payments over several years, and even sought waiver of cost recovery charges, which Customs authorities rejected. It observed:

“Admittedly, the petitioner's prayer for waiver/exemption was rejected on February 18, 2016, on the ground of ineligibility. Therefore, in the absence of any specific exemption order granted in favour of the petitioner, the liability under Regulation 6(1)(o) continued to operate.”

Further, the Bench found that customs officers supported the functioning of the CFS throughout and held that the facility operated within the customs regulatory framework. Therefore, it upheld the demand notices and the restriction on cargo movement, finding no illegality or arbitrariness.

Accordingly, the High Court dismissed the petition.

For the Petitioners: Mr. S.N. Mukherjee, ld. Sr. Adv., Mr. Sagar Bandopadhyay, Mr. Rudraman Bhattacharya, Mr. Lalit Baid, Mr. Saptarshi Banerjee, Ms. Saberi Saha

For the Respondents: Mr. Bhaskar Prasad Banerjee, Mr. Tapan Bhanja