2026 (1) TMI 28 - HC - Customs

Small enterprise importer's right to sell declared imported stock until 31.12.2025 and conditional goods release ordered

An importer classified as a small enterprise under the MSME Act sought release of imported goods and permission to sell declared stock. Interpreting the ... Entitlement for release of goods on the basis of CESTAT order - appeal still pending before the jurisdictional Tribunal - applicability of time limitation - manufacturer or an importer is permitted to sell, display or offer to sell, the declared stock only up till 31.12.2025 - HELD THAT:- The first amendment order was issued on 01.01.2025. It only enabled a manufacturer to sell or display or offer to sell the declared stocks up till 30.06.2025. By an amendment on 30.07.2025, in addition to the word ‘manufacturer’, the word ‘importer’ had been inserted. Insofar as schedules are concerned, it remained unaffected - That the petitioner is an importer is not in dispute. UDYAM Registration granted to the petitioner as a small enterprise is also not in dispute. That being the situation, the petitioner, being an importer and a small enterprise as per the MSME Act, would in my view, be entitled to the benefit of the amended order dated 30.07.2025. In other words, the petitioner would be entitled to sell, display or offer to sell the declared stocks up till 31.12.2025. Under Section 125 of the Customs Act, the adjudicating officer has the option to give to the owner of the goods, even if the importation or exportation of the goods are prohibited under the Customs Act or any other law for the time being in force, the option to pay a fine in lieu of confiscation - in terms of Article 261 of the Constitution of India, “full faith and credit” has to be given to judicial orders. CESTAT is a quasi judicial authority. It has kept the order-in-original in abeyance and had allowed the application. Hence, the respondent has to comply with the same. There shall be a direction to the respondent to forthwith release the goods imported - the release is subject to the petitioner deposing a sum of Rs. 15,00,000/- directly to the account of the respondent within 24 hours from today - In case of failure to deposit the aforesaid amount, the petitioner will not entitled for the benefit of this order. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, after CESTAT stayed the operation of the adjudication order and allowed the interim application, Customs was obliged to release the detained imported goods, and whether a writ of mandamus could issue to enforce compliance with that tribunal order. (ii) Whether, on the Court's construction of the Medical Textiles (Quality Control) Order and its amendments as discussed in the judgment, the importer (as a small enterprise) satisfied the conditions for the 'declared old stock' relaxation up to 31.12.2025, thereby supporting release pending appeal. (iii) Whether release, if directed, should be unconditional or could be made subject to a monetary deposit, having regard to the statutory scheme noted by the Court. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Effect of CESTAT's interim stay and permissibility of mandamus for release Legal framework: The Court treated CESTAT as a quasi-judicial authority whose orders must be honoured; it relied on the principle of 'full faith and credit' (Article 261) to require executive compliance with the tribunal's interim order. Interpretation and reasoning: The Court examined the CESTAT order allowing the interim application and recording a stay of the operation of the impugned adjudication order pending disposal of the appeal. Rejecting the contention that CESTAT had not directed provisional release, the Court held that once the adjudication order (confiscation, fine, penalty and re-export direction) was kept in abeyance, Customs could not ignore the tribunal's operative directions and refuse to act on the importer's request for release. Conclusion: Customs was bound to comply with CESTAT's interim order; mandamus was warranted to ensure release in accordance with that order, subject to conditions imposed by the Court. Issue (ii): Applicability of the QCO relaxation (as discussed by the Court) to an importer who is a small enterprise Legal framework: The Court considered the Medical Textiles (Quality Control) Order, its amendments (including insertion of 'importer' by the later amendment), and the requirement of conformity to the relevant Indian Standard and BIS marking, in the context of the relaxation permitting sale/offer of 'declared stock' up to 31.12.2025. Interpretation and reasoning: The Court found it undisputed that the petitioner was an importer and held UDYAM registration as a small enterprise. It construed the later amendment as extending the benefit to an importer (along with a manufacturer), permitting sale/display/offer of declared stock up to 31.12.2025, and rejected reliance on an Office Memorandum to narrow that statutory relaxation by excluding traders; an OM could not override the statutory notification. The Court further formulated the operative conditions from the combined reading of the orders: certification or application for BIS certification by the manufacturer, declaration that stock available with the importer/manufacturer (manufactured or imported prior to the relevant date) does not bear the standard mark, and eligibility to sell such declared stock until 31.12.2025. On the facts accepted by the Court, the manufacturer had applied for BIS certification and the orders for stocks were placed prior to 01.04.2025; together with MSME status, this supported entitlement to the benefit and consequential release pending appeal. Conclusion: The importer was held entitled to the relaxation benefit up to 31.12.2025 on the Court's reading of the amended QCO, and this reinforced the direction to release the goods in light of CESTAT's interim order. Issue (iii): Whether release should be unconditional or subject to deposit Legal framework: The Court referred to Section 125 of the Customs Act, which permits an option to pay fine in lieu of confiscation even where import is prohibited, to justify that release need not be unconditional. Interpretation and reasoning: While directing release, the Court declined the importer's request for unconditional release and considered it appropriate to secure the revenue/interest of the department pending final adjudication by the tribunal. It therefore required a monetary deposit as a condition precedent for release, expressly stating that it would be without prejudice to parties' rights and that failure to deposit would disentitle the importer to the benefit. Conclusion: Release was ordered, but only on condition of depositing a specified amount within a stipulated time; the Court also clarified that its observations would not influence the tribunal's decision on the pending appeal.