2025 (10) TMI 163 - HC - Customs

Provisional release ordered for second-hand multifunction print-copy-scan machines; goods not deemed contraband at provisional stage

HC directed provisional release of second-hand digital multifunction print-copy-scan machines, holding the goods are not contraband or security threats ... Seeking direction to provisionally release various models of second hand highly specialised equipment - Digital Multifunction Print Copying and Scanning machines - case of petitioner is that the respondents proceeded to forfeit those 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 M/S. TAANISH ENTERPRISES [2025 (7) TMI 1350 - MADRAS HIGH COURT] where it was held that '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. Further, the goods in question are not contraband items or items which affects security of India, like, explosives, etc. Therefore, by applying the benefit of doubt principle as well, this Court will have to give the benefit of doubt to the importer at this stage, as the respondents (customs department) do have the power to reverse the provisional release order at a later date through its final adjudication order. Therefore, in the interest of justice, provisional release will have to be granted as prayed for in these writ petitions.' The case in hand is also squarely covered by the above order. 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 provisional release of imported second-hand highly specialised equipment (Digital Multifunction Print Copying and Scanning machines / MFDs) under Section 110A of the Customs Act is permissible where the importer has produced a DGFT-approved Chartered Engineer's report and other documents required under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 (HOW Rules) / Schedule VIII. 2. Whether MFDs imported as used second-hand equipment fall within 'other wastes' or restricted items under the HOW Rules such that prior permission of the Ministry of Environment, Forest and Climate Change is required for import, thereby precluding provisional release. 3. The applicable standard for provisional release in customs matters: scope of the 'benefit of doubt' principle and the permissibility of imposing conditions on provisional release pending final adjudication, including the power of Customs to reverse provisional release in final adjudication. ISSUE-WISE DETAILED ANALYSIS - 1. Provisional release under Section 110A where importer produced Chartered Engineer's report and Schedule VIII documents Legal framework: Section 110A of the Customs Act permits provisional release of goods during investigation or adjudication upon conditions as the Customs authority may impose. Schedule VIII to the HOW Rules enumerates documents to be filed with Customs for imports of specified wastes; Rule 13(2) of the HOW Rules addresses import of 'other wastes' listed in Part D of Schedule III. Precedent treatment: The Court relied on an earlier batch order of the same Court granting provisional release of MFDs where similar documents and engineer's certifications were filed; that order was applied to the present facts. Interpretation and reasoning: On the materials before the Court (engineer's report and claimed compliance with Schedule VIII documentary requirements), there is no prima facie bar to provisional release under Section 110A. Provisional release is an interim measure and may be conditioned; Customs retains power to verify documents and to impose conditions and to reverse provisional release at final adjudication. The Court therefore treated production of the Chartered Engineer's report and claimed document production as sufficient, at the provisional stage, to merit release subject to conditions. Ratio vs. Obiter: Ratio - Where importer produces a DGFT-approved Chartered Engineer's report and complies, prima facie, with Schedule VIII documentary requirements, provisional release under Section 110A is permissible subject to conditions and final adjudication. Obiter - The Court's comments on specifics of document verification as a condition are procedural guidance. Conclusion: Provisional release was ordered subject to Customs imposing appropriate conditions and subject to reversal upon final adjudication; Customs directed to pass provisional-release orders within fixed timelines on fulfillment of conditions. ISSUE-WISE DETAILED ANALYSIS - 2. Whether MFDs are 'other wastes'/restricted requiring prior MEFCC permission under HOW Rules Legal framework: HOW Rules, 2016 definitions - Rule 3(23) defines 'other wastes' as including wastes specified in Parts B and D of Schedule III; Rule 13(2) provides that importers need not obtain Ministry permission for import of other wastes listed in Part D of Schedule III but must file enumerated documents in Schedule VIII to Customs at time of import. Precedent treatment: The Court referred to prior decisions (including a Telangana High Court decision upheld by the Supreme Court) and the earlier order of this Court holding that MFDs fall within the category of highly specialised equipment (HSEs) and are freely importable for the purposes of provisional release; those authorities were applied rather than distinguished. Interpretation and reasoning: A prima facie reading of the HOW Rules shows no absolute prohibition on import of MFDs classified as items in Part D of Schedule III; Rule 13(2) expressly contemplates import without prior Ministry permission provided Schedule VIII documentary requirements are filed. Thus, the mere contention by Customs or the Ministry that MFDs are restricted cannot be conclusively established at the provisional stage absent material demonstrating prohibition. The Court emphasised that documentary compliance can be verified as a condition of provisional release. Ratio vs. Obiter: Ratio - Under the HOW Rules, import of items listed in Part D of Schedule III does not require prior Ministry permission; compliance with Schedule VIII documentation suffices for provisional release consideration. Obiter - Observations on classification disputes and potential final adjudicatory outcomes are procedural and illustrative. Conclusion: The HOW Rules do not bar provisional release of MFDs where the importer has filed the required documents; classification as restricted or prohibited cannot be conclusively made at the provisional stage and may be addressed in final adjudication. ISSUE-WISE DETAILED ANALYSIS - 3. Standard of 'benefit of doubt', interim nature of provisional release, and Customs' power to reverse Legal framework: Principle of benefit of doubt in customs: if Customs cannot adduce sufficient evidence to disprove the importer's declaration, the importer may be entitled to the benefit of doubt. Section 110A provides for provisional release pending adjudication; final adjudication can confiscate goods or impose penalties. Precedent treatment: The Court applied established customs jurisprudence affording benefit of doubt at provisional stage where importer's declaration and supporting documents are not conclusively rebutted; prior decisions permitting provisional release of MFDs were followed. Interpretation and reasoning: Given that provisional release is an interim remedial measure, the Court held that where there is no conclusive material to rebut the importer's claim (e.g., HSE classification, documentary compliance), the benefit of doubt should be accorded and provisional release granted subject to conditions. The Court stressed that provisional release does not impair Customs' statutory power to reverse the release upon final adjudication if contrary findings emerge; hence provisional release balances the importer's interest in possession of goods with Customs' investigatory and adjudicatory authority. Ratio vs. Obiter: Ratio - At the provisional stage, where reasonable doubt exists and documentary/engineer evidence has been produced, the benefit of doubt favors provisional release; such release is subject to conditions and may be reversed in final adjudication. Obiter - Practical suggestions about types of conditions Customs may impose were procedural guidance. Conclusion: The benefit of doubt principle supports provisional release in the present circumstances; Customs may impose conditions and is free to reverse the provisional release in final adjudication. CONCLUDING DIRECTIONS (Legal Outcome) The Court directed Customs to pass provisional release orders within a specified short timeframe imposing conditions as deemed fit under the Customs Act; upon fulfillment of those conditions the goods were to be provisionally released within a further specified period; provisional release expressly remained subject to final adjudication and to Customs' power to reverse the provisional order. No costs were awarded.