2025 (11) TMI 1125 - HC - Customs

Used electronic components imported into SEZ not subject to prior DGFT authorization or E-Waste Rules under S.O.2667(E)

Commissioner of Customs (General) Versus Direct Logistics and Export Co. Ltd.

HC held that used electronic components imported into an SEZ were not subject to prior DGFT authorization or E-Waste Rules compliance and authorities ... Restricted goods or not - goods being old and used electronic components - free import without prior authorization from DGFT or compliance with E-Waste (Management) Rules, 2016 - subsequent cancellation of Request IDs for DTA clearance - lack of authority to investigate or take action in respect of the impugned goods situated within a Special Economic Zone (SEZ), overlooking the powers conferred under Notification No.S.O.2667 (E) dated 05.08.2016 issued under Section 22 of the SEZ Act, 2005 - HELD THAT:- As a condition precedent for the re-export, the redemption fine of Rs.1.10 Crores was directed to be deposited with the Prothonotary and Senior Master of this Court, and was to be directed to be invested in a fixed deposit in a nationalized bank for a period of one year, subject to further orders passed by this court in this Customs Appeal. It is not in dispute before us that the goods which form the subject matter of the aforesaid three Bills of Entry have been reexported and the redemption fine of Rs. 1.10 Crores has been deposited with the Prothonotary and Senior Master. Since we have admitted the above Appeal, we direct that the amount of Rs. 1.10 Crores deposited with the Prothonotary and Senior Master, shall continue to be invested by the Prothonotary and Senior Master in a nationalised bank until the further orders passed by this Court in the above Customs Appeal. Considering the peculiar facts and circumstances of the present case, the hearing of the above Appeal is expedited. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order. ISSUES PRESENTED AND CONSIDERED 1. Whether the tribunal was justified in holding that the goods described as old and used electronic components are not 'restricted goods' under Para 2.31(II) of the Foreign Trade Policy (2015-20) and the E-Waste (Management) Rules, 2016, and therefore may be imported without prior DGFT authorization or compliance with the E-Waste (Management) Rules, 2016. 2. Whether the tribunal erred in failing to find that the importer's registration under the Online system for DTA clearance, along with generation and subsequent cancellation of Request IDs for DTA clearance, manifested an intention to import restricted goods into the DTA attracting confiscation and penal provisions under Section 111(d), (l), (m) of the Customs Act, 1962 read with Para 2.31(II) of the FTP (2015-20). 3. Whether the tribunal was correct in holding that Customs lacked authority to investigate or take action in respect of the impugned goods situated within a Special Economic Zone, in light of Notification No. S.O.2667(E) dated 05.08.2016 issued under Section 22 of the SEZ Act, 2005 and the prior written intimation to the Development Commissioner. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of goods as 'restricted' under Para 2.31(II) FTP and applicability of E-Waste (Management) Rules, 2016 Legal framework: Para 2.31(II) of the Foreign Trade Policy (2015-20) (classification of restricted goods and requirement of prior DGFT authorization); E-Waste (Management) Rules, 2016 (regulatory regime for electronic waste and controls on import of e-waste); Customs Act, 1962 (import control regime and related enforcement powers). Precedent treatment: No appellate or judicial precedents are cited or applied in the text of the order admitting the appeal. Interpretation and reasoning: The tribunal held that the subject goods, being old and used electronic components, were not 'restricted goods' within the meaning of Para 2.31(II) FTP and fell outside the regulatory ambit of the E-Waste (Management) Rules, 2016, thereby permitting import without prior DGFT authorization or compliance with the E-Waste Rules. The High Court admits the question as an arguable point of law for detailed consideration. Ratio vs. Obiter: The tribunal's holding on this legal question is the principal matter under challenge; the High Court has not resolved the correctness of that holding but has framed the issue for substantive adjudication. Therefore any statement in the admission order is procedural and not a final ratio on the merits. Conclusion: The Court has admitted the question for hearing as an arguable point of law; no final determination on whether the goods are 'restricted' or whether E-Waste Rules apply has been made. Issue 2 - Effect of DTA-request activity (registration, Request ID generation and cancellation) on mens rea and application of Section 111(d),(l),(m) Customs Act and Para 2.31(II) Legal framework: Section 111(d), (l), (m) of the Customs Act, 1962 (confiscation and penalty provisions for attempted or fraudulent importation); Para 2.31(II) of FTP (restrictions and requirement of authorization for specified goods); procedural aspects of DTA clearance and electronic Request ID system for in-bond movements. Precedent treatment: No prior decisions are referenced in the order admitting the appeal. Interpretation and reasoning: The Revenue contends that registration for DTA clearance and the generation followed by cancellation of Request IDs demonstrates intent to divert restricted goods into the DTA, thereby triggering confiscation and penal liability under Section 111 provisions read with Para 2.31(II). The tribunal did not accept this inference. The High Court finds this to be a substantial question of law warranting admission and further hearing. Ratio vs. Obiter: The question concerning the legal effect of generating and cancelling Request IDs on the mens rea/culpability under Section 111 is preserved for adjudication; the Court's admission is procedural and not a determination of ratio. Conclusion: The issue is admitted for hearing as a bona fide question of law; no conclusive finding on intention, confiscation or penalties has been recorded in the admission order. Issue 3 - Jurisdiction and authority to investigate/take action within an SEZ in view of Notification under Section 22 of the SEZ Act, 2005 and prior intimation to the Development Commissioner Legal framework: SEZ Act, 2005 - statutory regime and Notification No. S.O.2667(E) dated 05.08.2016 under Section 22 (scope of powers relating to customs and other agencies in SEZs); Customs Act, 1962 (enforcement powers); rules governing movement of goods into/out of SEZs and FTWZs. Precedent treatment: No precedents are cited in the admission order; the Court does not resolve the jurisdictional interplay at this stage. Interpretation and reasoning: The tribunal held that Customs lacked authority to investigate or take action in respect of the impugned goods situated within an SEZ, despite the Revenue's reliance on the Notification under Section 22 and prior written intimation to the Development Commissioner. The High Court considers the legal question sufficiently arguable to admit it for hearing and determination. Ratio vs. Obiter: The admission order does not constitute a ratio on the correctness of the tribunal's jurisdictional finding; the point is preserved for final adjudication. Conclusion: The jurisdictional issue is admitted for hearing; the Court has not decided whether Customs possessed authority to act within the SEZ or whether the Notification and prior intimation alter that position. Ancillary procedural and interlocutory directions and conclusions recorded by the Court The Court recorded that while the appeal was pending admission the respondent effected re-export of the goods covered by three In-Bond Bills of Entry and deposited a redemption fine of Rs. 1.10 Crores with the Prothonotary and Senior Master, as required by a writ-court direction permitting re-export. The Court directed the deposited amount to remain invested in a nationalised bank until further orders in the Customs Appeal. The Court noted a contention raised by the respondent regarding maintainability of the appeal under Section 130 of the Customs Act versus the exclusivity of appeals under Section 130E where valuation issues arise, and left that question open for consideration at the hearing. Given the facts, the Court ordered expedition of hearing of the appeal and authorized service of the digitally signed admission order by the Court's Private Secretary/Personal Assistant, permitting reliance on fax or email of the digitally signed copy.