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F.No.: 450/105/2008-Cus.IV

159A, North Block, New Delhi.

Dated the 25th July, 2008.


Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs


All Chief Commissioners of Customs.

All Chief Commissioners of Customs & Central Excise.

All Commissioners of Customs

All Commissioners of Customs & Central Excise.

All Directorates General / Directorates under CBEC.

The Comptroller & Auditor General of India.

Subject: Outsourcing / Sub-letting / Transfer of Operations by CFS/ICD – Clarification - reg.

Sir / Madam,

It has been brought to the notice of the Board that in certain cases, violation of licensing conditions by CFS/ICD operators have been noticed and clarification has been sought as to how such violations of conditions of licensing or approval by CFS/ICD operators should be dealt with.

2. In this regard, it is stated that the jurisdictional Commissioner of Customs is the appropriate authority for approval of any place as ‘Customs Area’ and to approve / appoint a custodian under section 8 & 45 of the Customs Act, 1962 respectively. In terms of the section 16 of the General Clauses Act, 1897, powers vested with an authority for any appointment include the power to suspend or dismiss the person so appointed. Hence, the Commissioner of Customs also has the authority to de-notify or take away the custodianship in case of non-compliance by observing the principles of natural justice.

3. The approval of the Government for setting up an ICD / CFS is given to the person who had applied for the same and hence, trading in custodianship, in full or in part, is against the principle of custodianship vested on the person to whom approval for setting up of an ICD / CFS and Letter of Intent was given. Hence, transfer of custodianship by way of lease, gift, sale or transfer in part or in full is not permissible. However, activities such as aggregation of cargo at ICD / CFS by bulk buyers abroad or segregation or similar operation, provision of fork lifts and other material-handling equipments, cleaning and housekeeping etc. which do not take away the primary responsibility of a custodian and the chain of custody of goods shall be permissible to be outsourced subject to prior approval of the jurisdictional Commissioner of Customs.

4. In view of the above, it is clarified that the jurisdictional Commissioner of Customs is the competent authority to decide in a specific case whether subletting / outsourcing of any of the functions of CFS/ICD should be permitted and to give approval or reject the same after taking into account the concerns of the revenue for safeguarding the duty on imported goods and ensuring that the custodian duly appointed by the Commissioner on the approval of Inter-Ministerial Committee (IMC) continues to be held responsible for proper discharge of his functions including the ones that have been outsourced with prior permission.

5. Board had also noted that earlier, in case of violations of the conditions / guidelines prescribed under the Circular No.34/2002-Customs dated 26.6.2002, some of the Commissioners had taken action against the erring custodians imposing penalty under the Customs Act, 1962.

6. As such, cases of subletting / sub-contracting / outsourcing / gift or lease of any of the services of CFS/ICD have to be dealt by the jurisdictional Commissioner of Customs concerned and they may be requested to verify the existing position in various CFS/ICDs under their jurisdiction and initiate necessary action against the erring CFS / ICD accordingly under the Customs Act, 1962.

Yours faithfully,


(Aseem Kumar)

Under Secretary (Customs)

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