2025 (10) TMI 130 - HC - Customs

Seized second-hand multifunction printers deemed highly specialised equipment; provisional release ordered under Customs Act, 1962

HC held the seized second-hand digital multifunction print-copy-scan machines qualify prima facie as highly specialised equipment (HSE) and ordered ... Provisional release of various models of second hand highly specialised equipment - Digital Multifunction Print Copying and Scanning machines - respondents proceeded to forfeit the goods in spite of the report of the approved Chartered Engineer - HELD THAT:- The issue involved in the present writ petition is squarely covered by the earlier order passed by this Court in a batch of writ Petitions in TAANISH ENTERPRISES, M/S. MARUTI ENTERPRISES, M/S. BEST MEGA INTERNATIONAL AND OTHERS [2025 (7) TMI 1350 - MADRAS HIGH COURT] where it was held that 'In the case on hand, the petitioners claim that the imported goods, namely, MFDs are HSEs and therefore, they claim that they are exempted from the application of CRO, 2021, and the subsequent amended notifications. Their claim is also, on a prima-facie consideration, supported by the earlier decisions rendered by this Court and also by the decision of the Telangana High Court, which has been upheld by the Hon'ble Supreme Court, which has permitted provisional release of MFDs for other importers. A finding has also been rendered by the Telangana High Court that MFDs fall under the category of HSEs and they are freely importable. Though the respondents may contend that MFDs are not freely importable and are restricted items or have been prohibited items, the same cannot be conclusively established with the available materials at the stage of granting provisional release.' The Customs Department, Chennai, is directed to pass orders for provisional release of the goods, which is the subject matter of the dispute in this writ petition, by imposing conditions, as they deem fit, as per the provisions of the Customs Act, 1962, within a period of four (4) weeks from the date of receipt of a copy of this order - On fulfilment of the said conditions by the petitioner, the Customs Department, Chennai, is directed to release the goods provisionally to the writ petitioner within a period of two (2) weeks thereafter. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether goods consisting of used/second-hand Digital Multifunction Devices (MFDs) classified as highly specialised equipment (HSEs) are eligible for provisional release under Section 110A of the Customs Act pending adjudication. 2. Whether the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 (HOW Rules) prohibit import or bar provisional release of such MFDs, including application of Rule 13(2), Schedule III (Parts B and D) and Schedule VIII requirements. 3. Whether the 'benefit of doubt' principle applies to the importer's declaration and expert certification such that provisional release should be granted where Customs has not conclusively disproved the importer's claim. 4. Scope of the Customs Department's power to impose conditions on provisional release and to reverse such release in final adjudication, and whether provisional release precludes subsequent confiscation or penalties. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Provisional release of imported used/second-hand MFDs as HSEs under Section 110A of the Customs Act Legal framework: Section 110A of the Customs Act permits provisional release of seized or detained goods during investigation or adjudication subject to such conditions as the proper officer may deem fit. Precedent Treatment: The Court followed its earlier order in a batch of petitions addressing identical issues; decisions of other High Courts (including a Telangana High Court decision upheld by the Supreme Court) recognizing provisional release of MFDs informed the prima facie view. Interpretation and reasoning: On the materials before the Court, the importer's claim that the goods are HSEs was supported by an expert certificate (DGFT-approved Chartered Engineer) and prior judicial treatment. At the provisional stage, the Court confined itself to a prima facie appraisal and concluded that nothing on record conclusively showed that MFDs were contraband or items affecting national security. Given Section 110A's object to permit possession pending resolution, provisional release was appropriate with conditions. Ratio vs. Obiter: Ratio - Provisional release under Section 110A is appropriate where, on prima facie consideration, the imported items can reasonably be treated as HSEs and there is no conclusive material to prohibit import; such release may be conditioned and reversed on final adjudication. (This follows and is applied from the Court's earlier ruling.) Conclusions: Provisional release ordered subject to conditions to be imposed by Customs and subject to final adjudication; timelines for passing orders and actual release were specified. Issue 2 - Applicability of HOW Rules to imported MFDs and the effect of Rule 13(2), Schedule III and Schedule VIII Legal framework: HOW Rules define 'other wastes' (Rule 3(23)); Schedule III identifies wastes in Parts B and D; Rule 13(2) prescribes that import of 'other wastes' listed in Part D does not require prior Ministry permission but requires specified documents to be filed to Customs (Schedule VIII). Precedent Treatment: The Court relied on its prior detailed examination of HOW Rules in the connected batch of petitions. Interpretation and reasoning: The Court interpreted Rule 13(2) as not imposing an absolute prohibition on import of items listed in Part D; instead it requires filing of enumerated documents with Customs. The petitioners asserted compliance with Schedule VIII requirements (serial No.4(j) where applicable). The Court held that, on prima facie consideration, HOW Rules do not categorically bar import of MFDs or preclude provisional release, and that Customs could verify/document compliance as a condition of release. Ratio vs. Obiter: Ratio - The HOW Rules (Rule 13(2) and Schedule VIII) do not automatically prohibit provisional release of MFDs; compliance with documentary requirements can be made a condition of provisional release. (Applied from the earlier order.) Conclusions: No legal bar under HOW Rules to provisional release where documentary prerequisites are filed/verified; Customs may impose conditions relating to production/verification of documents. Issue 3 - Application of the 'benefit of doubt' principle to the importer's declaration and expert certification Legal framework: Principle that if Customs cannot sufficiently disprove an importer's declaration, the importer should be given the benefit of doubt at the provisional stage pending full adjudication. Precedent Treatment: The Court applied its prior reasoning and relevant judicial authorities recognizing benefit of doubt in customs contexts. Interpretation and reasoning: The importer presented an approved Chartered Engineer's report and other documentation supporting the classification as HSEs. Absent conclusive evidence from Customs to displace that material on the limited record before the Court, the benefit of doubt favoured provisional release. The Court emphasized that this is a provisional, prima facie determination and that final adjudication may reach a different conclusion. Ratio vs. Obiter: Ratio - Where on prima facie consideration the importer's declaration and supporting expert certification are not conclusively rebutted, the benefit of doubt supports provisional release under Section 110A; final adjudication remains open to reverse the provisional grant. Conclusions: Benefit of doubt applied to direct provisional release, subject to conditions and final adjudication. Issue 4 - Powers of Customs to impose conditions and to reverse provisional release at final adjudication Legal framework: Section 110A authorizes provisional release subject to conditions; Customs' adjudicatory powers include final orders of confiscation, penalties or reversal of provisional release consistent with the Customs Act. Precedent Treatment: The Court reiterated the standard approach as applied in the earlier batch order. Interpretation and reasoning: The Court clarified that provisional release is interim and does not fetter Customs' statutory powers. Conditions on release (including compliance with Schedule VIII, security, or other safeguards) may be imposed. The final adjudication may supersede the provisional order, including ordering confiscation or penalties if warranted. Ratio vs. Obiter: Ratio - Provisional release under Section 110A may be ordered with appropriate conditions; such release does not prevent or limit lawful reversal or punitive action in final adjudication. Conclusions: Customs directed to pass orders for provisional release within specified timeframes, impose conditions as deemed fit, release goods on fulfillment, and retain full power to reverse release at final adjudication. Overall Disposition (Court's Conclusion) On the combined legal grounds above, the writ petition was disposed by directing provisional release of the disputed MFDs subject to such conditions as Customs may impose under Section 110A, with specified timelines for passing release orders and effecting release, and with an express reservation that final adjudication may reverse the provisional release and impose consequences as per law.