TaxTMI 
TaxTMI 
2026 (4) TMI 1366
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....ill of Entry No. 7724157 dated 10.01.2025 which, upon examination by Dock officer, was found to be parts of complete Drone being imported in complete Knocked-down /semi-knocked down condition (CKD/SKD) so as to make the drone complete after clearance from Customs in violation of DGFT Notification NO. 54/2015-20 dated 09.02.2022 that prohibits import of drones by Non-Government concern in completely built-up condition (CBU) or SKD/CKD Conditions and only parts/components of Drone are meant for free importation. On the basis of Dock officer's report, preliminary investigation was conducted by the Special Intelligence and Investigation Branch (SIIB), who noticed that importer had filed eight Bills of Entries at different CFS locations, out of which seven were given out of charge (OCC) and goods have been removed from Customs area. Further enquiry revealed that both appellants' are controlled by same person named Ishan Haydn as the Director of the Private Limited Firm that imported certain spares/ components while the other being a proprietorship firm imported the remaining spares/components in CKD/SKD condition so as to make the drone complete. Those goods were accordingly seized unde....
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....e a new product having a distinctive name, character or use which shall include also refrigeration, repacking, polishing, labelling, re-conditioning, repairing re-furbishing, testing, calibrating and/or re-engineering (P-27C ) and most of those conditionalities were fulfilled by the appellant when anyone of them including polishing levelling, testing or calibration could also be considered as manufacture under the Foreign Trade Policy and it is acknowledged by the Commissioner of Customs, in his rejection order for release of goods, that appellant was claiming to have been doing activities like calibration, testing, sensor alignment configuration etc. but he was not prepared to accept those as constituting 'Manufacturing' process (Para 3.3). 3.2 To refuse permission for release of seized goods, Ld. Commissioner had also relied upon the Chartered Engineer's certificate in which he formed the opinion that except assembling components by using screw driver, soldering of lift drive/rotor wire, no major task was required to complete the process of the drone manufacturing that has been disputed by the Ld. Counsel for the Appellant by placing his argument on record that there is nothin....
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....ailed graphical presentation of the drone with names of components, origin and functional integration and divided the components into three categories, out of which category-A comprising of six items with sub-division namely landing feet/pads, structural brackets, oxalate plastic enclosures, rotating sack, rotating sachet etc. which are fully domestically procured, manufactured and developed components but the same is lost sight of the attention of Chartered Engineer apparently for the reason that seizure was made from the factory and premises of the appellant in which all components of drone were kept for being assembled without any segregation of domestically procured components from imported companies. (57.16). 3.5 Ld. Counsel for the appellant also asserted that the Director General of Civil Aviation (DGCA) being the license Sanctioning Authority had registered appellants' firm as a drone manufacturer having Registration No. EGCA ID; IAEDN 2025000392 and its being a policy making authority at the National level, with Government of Madhya Pradesh having recognised the appellant as drone manufacturer under Madhya Pradesh Drone promotion and Usage Policy as the State Nodal Agen....
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....se of seized goods including challenge to the Show-cause issued post Provisional Release denial order. It has arguments against placing reliance on the Court of Justice of Europeon Union judgment dated 27.04.2023 and the application of Rules 2(a) of the General Rules for Interpretation concerning simultaneous presentation of parts for customs clearance vis. a vis. components /parts required to be covered by single customs declaration but the said judgment is not relied upon by the Commissioner in the provisional release order, though that could be considered as having persuasive value. Appellant also had placed in its written note the effectiveness of Show-cause notice issued after statutory period is over but those being extraneous to the issue before us, instead of going by the arguments laid by the parties, we would only analyse the grounds of rejection available in the provisional release order passed by the Commissioner Customs on dated 16.10.2025 and look into its legality. 6. In his order, ld. Commissioner (Customs) has opined that import of components of the drones are permissible under Notification No. 54/2015-20 and not drones in built-up/complete or semi knock-down co....
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....the (Drone) UAMS system, in conformity with its applicable design including prototype and therefore assembling or production of drone itself would be covered under the definition of manufacturer and being manufacturer of drone they have every right to supply/sale it to its customers including Indian Defence, State Government Surveillance Agencies etc. 6.2 On close analysis of the above findings and submissions, what could be noticeable is that Appellants have together brought major components of the drones through separate Bills of Entry and it is the observation of the Respondent Department, based on Chartered Engineer's report that those components are sufficient to produce a functional drone while the same is disputed by another report brought by the appellant from an Organisation having more expertise in the field namely Centre for Artificial Intelligence and Robotic, IIT Mandi, though the same is to be considered as weak piece of export evidence as samples were not drawn from the representative sample or with the knowledge and consent of the Department. However, we are only concerned with the undisputed pictorial description of the drone placed on record through additional ....
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....at by purchase Agreement dated 19.10.2023, appellant had requested the Supplier SZC-Fly to supply whole drone but packaging was required to be done in parts. Though there is evidence also on records available to the effect that the Director of Company had stated in his statement recorder under 108 that they were importing drone components from BC-Fly and another Company, Ld. Authorised Representative Mr. Ram Kumar has submitted the list of suppliers name in Annexure with a copy of letter dated 27.03.2026 received from the concerned Commissionerate to the effect that SZC-FLY Tech Company Limited was not the suppliers in the Bills of Entry under dispute. This being so, such an attempt could have been considered as a 'preparation' only and not Commission of the Act for which no punishment is prescribed under the law, apart from the fact that Ld. counsel for the Appellant has also taken us through the statement of Director of the Appellant Company who had specifically being put with such a query during recording of his statement but he denied having made any final deal with that company (SZ C-Fly) nor the purchase agreement dated 19.11.2023 was acted upon(Appeal memo page 290). Had it ....
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....t when national security interests are involved, liberal interpretation or benefit of doubt cannot be extended to private commercial importers...." 8.1 During course of haring of the appeal, Ld. Counsel for the appellant has not expressively added points in his submission to counter these aspects but in submitting proof of invoices issued to the Indian Defence in the form of Tax Invoice (page 32 onwards upto page 43 ) of the Appeal Paper Book including invoice issued to Rashtriya Rifle Battalion at Jammu (Page 44) and registration documents issued by the Madhya Pradesh State Electronic Development Corporation regarding drone Project registration certificate (page-53 of additional written submission dated (10.03.2026), he has demonstratively established that appellant is a recognized manufacturer of drones in India and its major clients are Indian Defence and other Governmental Security Agencies. This being so appellant cannot be put in the category of illegal importer of drones in CKD/SKD condition for the purpose of endangering public safety or to hamper National security, since its supply of drones would otherwise tighten the security umbrella. Further the said notification do....