2025 (11) TMI 321 - HC - Customs

Provisional release ordered for seized digital multifunction printers under Customs Act, 1962; release within four weeks subject to conditions

The HC allowed the petition and directed the Customs Department to grant provisional release of the seized digital multifunction print/copy/scan machines ... Seeking provisional release of various models of second hand highly specialized equipment - the Digital Multifunction Print, Copying and Scanning machines - 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.' 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 weeks from the date of receipt of a copy of this order - Petiiton disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether goods described as used second hand highly specialised equipment (MFDs) are eligible for provisional release under Section 110A of the Customs Act during investigation/adjudication. 2. Whether the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 ('HOW Rules') and the contention that MFDs fall under 'other wastes' or restricted items preclude provisional release or import without prior permission of the Ministry of Environment, Forest and Climate Change. 3. Whether the Customs Department was justified in proceeding to forfeiture notwithstanding the production of a DGFT-approved Chartered Engineer's report and related documents required under Schedule VIII to the HOW Rules. 4. Application of the 'benefit of doubt' principle in customs provisional release decisions where prima facie materials support the importer's classification and documentation. ISSUE-WISE DETAILED ANALYSIS - Provisional Release under Section 110A Legal framework: Section 110A of the Customs Act permits provisional release of seized goods pending investigation or adjudication, subject to conditions and without prejudice to final adjudication including confiscation or imposition of penalties. Precedent Treatment: The Court followed its earlier order in a batch of writ petitions which granted provisional release of similar MFDs, applying established principles permitting provisional release with conditions and subject to later reversal. Interpretation and reasoning: The Court observed that provisional release is an interlocutory measure that preserves the owner's possession while allowing the Customs to complete investigation and adjudication. The power to reverse provisional release in final adjudication safeguards enforcement interests. Given the nature of the goods (not contraband or national security items), provisional release is appropriate when prima facie materials and documentation support the importer's claim. Ratio vs. Obiter: Ratio - Provisional release under Section 110A is permissible where prima facie evidence supports the importer's classification and Customs can protect its ultimate adjudicatory rights by imposing conditions and reserving power to reverse. Obiter - Observations on particular conditions to be imposed (left to Customs' discretion) are ancillary. Conclusions: Provisional release of the disputed goods must be ordered within specified timelines, subject to such conditions as Customs may impose, and without prejudice to final adjudication and possible reversal. ISSUE-WISE DETAILED ANALYSIS - Applicability of HOW Rules and Requirement of Prior Permission Legal framework: HOW Rules define 'other wastes' (Rule 3(23)); Schedule III lists wastes; Rule 13(2) governs import of other wastes listed in Part D of Schedule III and specifies that importers shall not require permission of the Ministry for such items but must file documents enumerated in Schedule VIII to Customs at import. Precedent Treatment: The Court relied on its prior reasoning that, on a prima facie consideration, HOW Rules do not ipso facto prohibit import of MFDs classified as HSEs and that Rule 13(2) does not mandate Ministry permission for items listed in Part D of Schedule III, only documentary compliance. Interpretation and reasoning: The Court interpreted Rule 13(2) as creating a distinction between items requiring prior permission and those in Part D which only require filing of prescribed documents; therefore, mere classification as 'other wastes' under Schedule III does not automatically render MFDs restricted from import or provisional release. Where the importer has filed the applicable Schedule VIII documents (or can be required to produce them as a condition of provisional release), prohibition cannot be established at the provisional stage. Ratio vs. Obiter: Ratio - Rule 13(2) permits import of items in Part D without prior Ministry permission provided Schedule VIII documentation is filed; this precludes denial of provisional release solely on the basis of HOW Rules where documentary compliance is or can be secured. Obiter - Detailed treatment of environmental policy considerations beyond documentary requirements. Conclusions: The HOW Rules do not, on prima facie grounds, bar provisional release of MFDs where the importer has complied with (or can comply with) Schedule VIII documentary requirements; Customs may condition provisional release on production/verification of such documents. ISSUE-WISE DETAILED ANALYSIS - Effect of Chartered Engineer's Report and Customs' Forfeiture Action Legal framework: Import classification and admissibility often depend on technical verification; DGFT-approved Chartered Engineer reports are relevant materials in Customs adjudication. Precedent Treatment: The Court relied on the petitioners' submission and prior orders recognizing the probative value of approved technical reports at the provisional release stage. Interpretation and reasoning: The Court noted that the petitioner had produced the DGFT-approved Chartered Engineer's report to Customs and that, in the absence of conclusive materials to rebut that report at the provisional stage, forfeiture cannot be sustained as a basis to deny provisional release. The existence of the report supports a prima facie case for classification as HSEs and for allowing conditional provisional release. Ratio vs. Obiter: Ratio - Where an importer produces an approved technical report supporting its classification and admissibility claim, Customs needs affirmative material to displace that prima facie showing before denying provisional release; mere initiation of forfeiture is insufficient at that stage. Obiter - The specifics of how much weight a particular report should carry in final adjudication. Conclusions: The presence of an approved Chartered Engineer's report supports provisional release; Customs may verify the report and impose conditions but cannot refuse provisional release solely because forfeiture proceedings were initiated. ISSUE-WISE DETAILED ANALYSIS - Benefit of Doubt Principle in Customs Proceedings Legal framework: In customs law, where reasonable doubt exists regarding importer's declaration and Customs cannot produce sufficient evidence to disprove the declaration, the importer is ordinarily entitled to the benefit of doubt. Precedent Treatment: The Court applied established principles granting benefit of doubt at the interlocutory stage where prior judicial decisions and documentary evidence support the importer's position. Interpretation and reasoning: The Court found prima facie support, including prior High Court decisions (and related Supreme Court affirmance concerning other importers), that MFDs qualify as HSEs and are importable. Given that the contested classification cannot be conclusively determined at the provisional release stage and the goods are not contraband or security threats, the benefit of doubt favours the importer. Customs retains the power to reverse provisional release during final adjudication if later evidence warrants. Ratio vs. Obiter: Ratio - When prima facie materials favour the importer and Customs lacks sufficient material to rebut the declaration, the benefit of doubt supports provisional release under appropriate safeguards. Obiter - Broader policy observations about non-contraband status influencing provisional relief. Conclusions: The benefit of doubt principle entitles the importer to provisional release when prima facie evidence supports its claim and Customs' countervailing material is lacking; provisional relief remains subject to later reversal. COURT'S DIRECTIONS AND CONCLUSION Directions: The Customs Department is directed to pass orders for provisional release within a specified short period, impose conditions as deemed fit under the Customs Act, and release the goods upon fulfillment of those conditions within a further specified timeframe; provisional release is expressly made subject to final adjudication and does not preclude reversal by Customs. Conclusion: Provisional release is warranted in the circumstances presented where documentary and technical evidence prima facie support the importer's claim, the HOW Rules do not preclude import without Ministry permission for Part D items provided Schedule VIII compliance, and the benefit of doubt favors provisional relief while preserving Customs' adjudicatory rights.