2025 (11) TMI 1043 - HC - Customs

Provisional release ordered for second-hand multifunction printing, copying and scanning machines as not shown to be contraband

HC allowed provisional release of second-hand multifunction digital printing, copying and scanning machines, finding they are not shown to be contraband ... Seeking provisional release of various models of second hand highly specialised equipment - used Digital Multifunction Print, Copying and Scanning machines - Section 110-A of the Customs Act, 1962 - 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 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 - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether goods consisting of second-hand highly specialised equipment (MFDs - Digital Multifunction Print, Copying and Scanning machines) are entitled to provisional release under Section 110A of the Customs Act, 1962. 2. Whether the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 ('HOW Rules') operate to prohibit or require prior Ministry permission for import of the said MFDs. 3. Whether the report of a DGFT-approved Chartered Engineer and production of documents specified in Schedule VIII of the HOW Rules suffice, prima facie, to support a claim for provisional release. 4. The applicability of the 'benefit of doubt' principle in customs provisional release proceedings when final adjudication remains open. 5. Whether a provisional release order can be provisionally directed while preserving the Customs Department's power to reverse such release in final adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to provisional release under Section 110A of the Customs Act, 1962 Legal framework: Section 110A permits provisional release of seized or detained goods pending investigation or adjudication, subject to conditions and without prejudice to final adjudication. Precedent treatment: The Court relied on its earlier decision in a batch of writ petitions granting provisional release of MFDs; the earlier reasoning is followed and applied to the instant facts. Interpretation and reasoning: On a prima facie assessment, the imported MFDs are not shown to be contraband or items affecting national security; the Customs may impose conditions under Section 110A and can reverse provisional release at final adjudication. Given the statutory provision's purpose to permit possession pending resolution, provisional release is appropriate where preliminary requirements are met. Ratio vs. Obiter: Ratio - Provisional release under Section 110A is an available remedy where, on prima facie materials, goods are not shown to be contraband and statutory conditions can be imposed; the power to reverse in final adjudication remains. Obiter - procedural observations on time frames for compliance in this specific batch. Conclusion: Direction issued for provisional release on imposition of appropriate conditions within prescribed timelines, preserving Customs' final adjudicatory rights. Issue 2 - Effect of HOW Rules on importability of MFDs Legal framework: HOW Rules, 2016 define 'other wastes' and prescribe permissions and documentary requirements for import of wastes listed in Parts B and D of Schedule III; Rule 13(2) exempts importers of items in Part D from prior Ministry permission but requires filing of documents specified in Schedule VIII. Precedent treatment: The Court followed its prior analysis that HOW Rules do not prima facie prohibit import of MFDs and applied that interpretation to the present facts. Interpretation and reasoning: Rule 3(23) and Rule 13(2) together indicate that certain wastes (including those in Part D of Schedule III) do not require prior Ministry permission for import, but do require specified documentation to Customs. The petitioners asserted compliance with Schedule VIII requirements (serial No.4(j) where applicable). On prima facie review, HOW Rules therefore do not constitute an absolute bar to provisional release; documentary compliance may be made a condition of release. Ratio vs. Obiter: Ratio - HOW Rules, insofar as they concern imports listed in Part D of Schedule III, do not automatically prohibit import or provisional release where Schedule VIII documentary requirements are met; documentary verification can be made a condition of provisional release. Obiter - detailed distinctions as to classification of specific machines under Schedule parts (left for final adjudication). Conclusion: HOW Rules do not, on the material before the Court, preclude provisional release of MFDs; Customs may require verification of Schedule VIII documents as conditions of release. Issue 3 - Significance of Chartered Engineer's report and documentary production Legal framework: Customs adjudication assesses declarations and supporting technical reports; provisional release may be conditioned on production and verification of relevant documents and expert certifications. Precedent treatment: The Court accepted the evidentiary weight of a DGFT-approved Chartered Engineer's examination for prima facie purposes, consistent with earlier orders permitting provisional release where such certifications were produced. Interpretation and reasoning: The presence of an approved Chartered Engineer's report and asserted filing of Schedule VIII documents provides prima facie support for the importer's classification and exemption claims. At the provisional stage the Customs must produce affirmative evidence to displace the importer's declarations; absent such disproof, the importer is entitled to benefit of doubt. Ratio vs. Obiter: Ratio - A DGFT-approved Chartered Engineer's report and compliance with Schedule VIII documentation, if produced, supply sufficient prima facie basis to grant provisional release, subject to later verification. Obiter - scope and sufficiency of specific report content for final classification left to adjudication. Conclusion: The Chartered Engineer's report and asserted documentary compliance justify provisional release conditions; final sufficiency remains for adjudication. Issue 4 - Application of the 'benefit of doubt' principle Legal framework: In customs proceedings, if reasonable doubt exists regarding the accuracy of an importer's declaration and Customs cannot produce sufficient evidence to disprove it, the importer is generally entitled to the benefit of the doubt. Precedent treatment: The Court applied the benefit of doubt principle in line with prior decisions, including a Telangana High Court finding (upheld by the Supreme Court) that MFDs fall within HSEs and are freely importable, as supporting authority for provisional relief. Interpretation and reasoning: Given the absence of conclusive materials to show prohibition or restriction at the provisional stage, and the existence of supporting authorities and technical certification, the benefit of doubt favors provisional release. The existence of the final adjudicatory process mitigates risk to revenue or regulatory objectives because Customs retains power to reverse the provisional order. Ratio vs. Obiter: Ratio - Where prima facie materials support the importer's declaration and Customs lacks sufficient disproof, the benefit of doubt favors provisional release under safeguards. Obiter - reference to specific higher court affirmances as reinforcing but not determinative for final adjudication here. Conclusion: Benefit of doubt principle supports grant of provisional release subject to conditions and preservation of final adjudicatory rights. Issue 5 - Preservation of Customs' power to reverse provisional release in final adjudication Legal framework: Section 110A and related customs law permit provisional release without prejudice to outcomes of final adjudication; provisional measures may be reversed by final orders including confiscation or penalties. Precedent treatment: The Court reiterated its earlier order providing provisional release while expressly preserving Customs' power to reverse in final adjudication. Interpretation and reasoning: Provisional release is an interlocutory measure limited to possession pending resolution; it does not create substantive rights defeating later enforcement. The Court balanced interim relief with administrative safeguards by directing conditions, timelines for compliance, and explicit preservation of Customs' adjudicatory authority. Ratio vs. Obiter: Ratio - A provisional release order must explicitly preserve the Customs Department's power to reverse such release at final adjudication; such preservation is essential when directing provisional release. Obiter - procedural timelines imposed by the Court in the matter before it. Conclusion: Provisional release granted subject to conditions; Customs retains full power to reverse in final adjudication and to impose penalties/confiscation as appropriate.