ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 05.12.2025
CESTAT Delhi Sets Aside Demand for Cost Recovery Charges
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, recently delivered a significant judgment in the case of M/s Thar Dry Port vs. Principal Commissioner of Customs (Preventive), Jodhpur. β This decision, pronounced on December 4, 2025, has far-reaching implications for customs custodians and the legality of cost recovery charges under the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009).
Background of the Case
The dispute arose when the Principal Commissioner of Customs (Preventive), Jodhpur, issued an order dated April 11, 2025, demanding cost recovery charges amounting to over βΉ15 crore from M/s Thar Dry Port (TDP). β The order also imposed a penalty of βΉ50,000 under Regulation 12(8) of HCCAR, 2009, and threatened suspension of custodianship approval if the dues were not paid within three months. β
TDP challenged the order, arguing that the 2009 Regulations were ultra vires the Customs Act, 1962, and that the demand for cost recovery charges was unlawful. β The appellant also contended that it had met the performance benchmarks for exemption from these charges, as outlined in the Ministry of Finance’s Notification dated September 12, 2005, and Circular No. β 2/2021.
Key Issues Addressed
The Tribunal examined several critical issues, including:
- Legality of Cost Recovery Charges: TDP argued that the 2009 Regulations were ultra vires the Customs Act, as the Act does not explicitly authorize the levy of cost recovery charges. β This argument was supported by the Telangana High Court’s decision in GMR Hyderabad International Airport Limited vs. Central Board of Excise and Customs, which declared the 2009 Regulations ultra vires. β
- Exemption from Charges: TDP claimed it was entitled to exemption from cost recovery charges, having met the performance benchmarks outlined in the 2005 Notification and Circular No. 2/2021.
- Calculation of Charges: TDP raised concerns about the methodology used to calculate the charges, arguing that allowances and transport costs should not have been included.
Tribunal’s Observations and Decision β
The Tribunal relied heavily on precedents, including the Telangana High Court’s judgment in GMR Hyderabad International Airport Limited and its own decisions in CMA CGM Logistics Park Dadri Private Limited vs. Commissioner of Customs, Noida and Container Corporation of India Limited vs. Commissioner of Customs, Jodhpur. β These rulings had established that the 2009 Regulations were ultra vires the Customs Act and that cost recovery charges could not be legally imposed under these regulations. β
The Tribunal concluded that:
- The Principal Commissioner had no legal authority to demand cost recovery charges under the 2009 Regulations. β
- The imposition of a penalty under Regulation 12(8) was also unsustainable, as there was no contravention of the 2009 Regulations. β
- The order dated April 11, 2025, was set aside, and the appeal was allowed. β
Implications of the Judgment
This landmark decision has significant implications for customs custodians across India:
- Legal Clarity: The judgment reinforces the principle that regulations must align with the parent statute. In this case, the Tribunal upheld that the Customs Act does not authorize the levy of cost recovery charges, making the 2009 Regulations invalid. β
- Precedent for Future Cases: The decision sets a strong precedent for other custodians facing similar demands for cost recovery charges. β It underscores the importance of challenging unlawful demands and regulations. β
- Impact on Policy: The judgment may prompt the government to revisit the legal framework governing cost recovery charges and custodianship to ensure compliance with the Customs Act.
Conclusion
The CESTAT’s decision in the M/s Thar Dry Port case is a victory for custodians and a reminder of the importance of adhering to statutory provisions. It highlights the need for clarity and fairness in regulatory frameworks and serves as a beacon for businesses navigating complex customs regulations. This case is a testament to the power of judicial review in upholding the rule of law and protecting the rights of stakeholders in the customs ecosystem. As the dust settles, it will be interesting to see how this decision shapes the future of customs regulations in India.
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Source: CESTAT Delhi
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