2025 (7) TMI 1273 - HC - Customs

Seeking to release the goods covered under the two bills of entry - seeking for a direction upon the respondents to forthwith issue demurrage waiver certificate under 6(1)(l) of Handling of Cargo in Customs Area Regulation 2009 - seeking to claim the benefit of exemption memorandum - whether the respondents can be permitted to continue with the seizure for a prolonged period on the pretext of claiming that an investigation is in progress? - HELD THAT - It is found that more than 8 months haves elapsed since the goods had arrived in India. Investigation report including the clarification issued by the Gujarat Tyre House is already available with the respondents. It is not the case of the respondent that any further test of the tyre is in progress at least respondents is not aware of the same. From the documents on record a decision can be arrived at by the authorities as to whether the exemption memorandum dated 30th January 2012 can be made applicable in this case. Having regard thereto and taking note of the fact that the investigation is pending at the end of the respondents for a considerable period the investigation should be brought to a logical conclusion as expeditiously as possible but not later than four weeks from the date of communication of this order. Unless the respondents choose to drop the proceedings show cause if any must be issued within two weeks thereof. The petitioner shall in the event of issuance of show cause or in the alternative of non-issuance of the show cause if the goods are not released be entitled to apply for provisional release of the goods. If there are no other impediments the application for the provisional release will be considered subject to petitioner agreeing and undertaking to pay highest rate of duty and penalty and providing an undertaking that the goods would only be used on off-road basis. Petition disposed off.

Summary

ISSUES:

Whether off-road (OTR) tyres imported without BIS marking are exempt from BIS clearance under the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 ("the Control Order") and the exemption memorandum dated 30th January, 2002.Whether the classification of imported tyres under HSN Code 40118000 versus HSN Code 40112010 affects the applicable customs duty and licensing requirements.Whether the prolonged detention and seizure of the imported tyres under Section 110(1) of the Customs Act, 1962 is justified pending investigation.Whether the predominant or principal use of the tyres (mining/off-road vs. road use) determines applicability of exemption and classification.Whether the petitioner is entitled to the issuance of a demurrage waiver certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulation, 2009.

RULINGS / HOLDINGS:

The tyres imported are off-road tyres exempted from BIS clearance as per the exemption memorandum dated 30th January, 2002, subject to determination of their predominant use; the test reports confirm the tyres are "meant for mining purpose" though incidental road use cannot be ruled out.The classification under HSN Code 40118000 (10% BCD) versus 40112010 (15% BCD) is disputed; however, the petitioner's misclassification and lack of DGFT license for the higher duty category are under investigation, justifying the seizure at this stage.The prolonged detention of over eight months is not justified solely on the ground of ongoing investigation, especially when test reports and clarifications are available; the investigation must be completed within four weeks, failing which show cause notice must be issued within two weeks thereafter.Following the Supreme Court precedent, the "predominant user" or "principal or dominant use" of the tyres governs classification and exemption, not incidental or ancillary use; the petitioner cannot be penalized for wrongful use of tyres beyond their intended off-road purpose.The petitioner is entitled to apply for provisional release of goods if show cause is issued or not, subject to undertaking to pay highest rate of duty and penalty and to restrict use to off-road purposes; the authorities must act on the Deputy Commissioner's direction dated 2nd June, 2025 regarding demurrage waiver certificate under Regulation 6(1)(l).

RATIONALE:

The Court applied the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 and the exemption memorandum dated 30th January, 2002, interpreting the scope of BIS clearance exemption for off-road tyres.The Court relied on the Supreme Court judgment in Goodyear India Ltd. v. Union of India, which emphasized that "the striking ingredient" for classification is whether the vehicle or tyre is "adapted for use upon roads," focusing on "principal or dominant use" rather than incidental use.The Court balanced customs procedural safeguards under the Customs Act, 1962, particularly Sections 110(1) and 111, with the right to timely release of goods, requiring expedition of investigation and limiting prolonged seizure without cause.The Court recognized the regulatory framework under the Handling of Cargo in Customs Area Regulation, 2009, specifically Regulation 6(1)(l), directing the issuance of demurrage waiver certificates where applicable.No dissent or doctrinal shift was noted; the Court followed established precedent and statutory interpretation emphasizing predominant use and procedural fairness in customs investigations.