2025 (7) TMI 1350 - HC - Customs

Categorisation of imported second-hand digital Multi-function Devices (MFDs) - detention for non-production of (a) Bureau of Indian Standards Certificate (BIS Certificate) and authorisation from the Director General of Foreign Trade (DGFT) - Principle of benefit of doubt - HELD THAT - Through the amendment dated 01.07.2021 HSEs are exempted from the applicability of CRO 2021 with a rider that those HSEs must fall within any of those criteria. In the case on hand the respective petitioners claim that MFDs imported by them are HSEs as they have fulfilled the twin criteria namely goods imported by them are in less than 100 units per model per year and weighing more than 80 kgs. and therefore they are freely importable. The Chartered Engineer s report also confirms the same. It is also an admitted fact that Telangana High Court has also held that MFDs fall under the category of HSE and therefore they are freely importable. In customs matters benefit of doubt principle generally means that if there is a reasonable doubt regarding the truth and accuracy of importer s declaration the Customs Authorities must provide evidence to support their doubts before rejecting the importer s declaration and if the authorities cannot provide sufficient evidence to disprove the declaration of the importer generally the importer will be given the benefit of doubt. In the case on hand the petitioners claim that the imported goods namely MFDs are HSEs and therefore they claim that they are exempted from the application of CRO 2021 and the subsequent amended notifications - 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 Customs Department Chennai is directed to pass orders for provisional release of the goods which are the subject matter of the dispute in these writ petitions by imposing conditions as they deem fit as per the provisions of the Customs Act 1962 within a period of four weeks from the date of receipt of a copy of this order - petition disposed off.

Summary

ISSUES:

Whether second-hand digital Multi-function Devices (MFDs) imported are freely importable, restricted, or prohibited goods under the Customs Act and Foreign Trade Policy (FTP).Whether prior certification from Bureau of Indian Standards (BIS) and authorisation from Director General of Foreign Trade (DGFT) are mandatory for import and provisional release of second-hand MFDs.The applicability and interpretation of the Compulsory Registration Order (CRO) 2012 and 2021, and the exemption for Highly Specialized Equipment (HSE) under Clause 8 of CRO, 2021.Whether the amendment Notification No.13/2024-25 dated 20.05.2024 affects the importability or provisional release of second-hand MFDs.Whether the petitioners' failure to make formal application for provisional release under Section 110A of the Customs Act affects their entitlement to such release.The effect of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 (HOW Rules) on import and provisional release of second-hand MFDs.Whether the principle of uniformity in the interpretation of taxing/revenue statutes requires acceptance of prior judicial decisions holding MFDs as freely importable goods.The scope and effect of provisional release under Section 110A of the Customs Act, including the ability of Customs to reverse such release upon final adjudication.Whether the "benefit of doubt" principle applies in favour of importers seeking provisional release of detained goods.

RULINGS / HOLDINGS:

The Court held that second-hand digital MFDs imported by the petitioners qualify as Highly Specialized Equipment (HSE) under Clause 8 of CRO, 2021, as they are imported in less than 100 units per model per year and weigh more than 80 kg, and are therefore "freely importable" goods exempted from CRO requirements.Prior certification from BIS and prior authorisation from DGFT are not mandatory for these goods because MFDs fall under Clause 2.31(I)(d) of the Foreign Trade Policy, 2023, which permits free import of second-hand capital goods other than those specifically restricted under Clauses I(a), I(b), and I(c).The amendment Notification No.13/2024-25 dated 20.05.2024 does not apply to the petitioners' cases and has no bearing on the provisional release of MFDs, as held in prior final orders of this Court.The petitioners' failure to make a formal application for provisional release under Section 110A is not fatal, as the goods were detained but not seized, and no seizure proceedings under Section 110 were initiated; hence, the Court can entertain the writ petitions for provisional release.The import of second-hand MFDs is not prohibited or restricted under the Hazardous and Other Wastes Rules, 2016, provided the importer files the required documents enumerated in Schedule VIII to Customs authorities; thus, these rules do not bar provisional release.Uniformity in the interpretation of taxing/revenue statutes requires acceptance of the prior judicial decisions by this Court, Telangana High Court, and the Supreme Court holding MFDs as freely importable, to avoid discrimination among importers.Provisional release under Section 110A of the Customs Act is discretionary and intended to prevent hardship to importers during investigation or adjudication; such release is subject to conditions including bonds or bank guarantees and does not preclude reversal upon final adjudication.The "benefit of doubt" principle applies, requiring Customs authorities to provide evidence to disprove importers' claims; since petitioners have prima facie established that MFDs are HSEs and freely importable, provisional release is warranted pending final adjudication.

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, particularly Section 110A governing provisional release, and the Foreign Trade Policy, 2023, including its classification scheme under Clause 2.31(I), to determine the importability status of second-hand MFDs.The Compulsory Registration Orders (CRO) of 2012 and 2021, along with the amendment dated 01.07.2021, were interpreted to exempt Highly Specialized Equipment meeting specified criteria (including weight exceeding 80 kg and limited units imported) from registration requirements.Precedent decisions by this Court, Telangana High Court, and the Supreme Court were relied upon to maintain uniformity and consistency in tax/revenue law interpretation, emphasizing the binding nature of Supreme Court rulings under Article 141 of the Constitution.The Court rejected the contention that failure to formally apply under Section 110A precludes provisional release when goods are detained but not seized, distinguishing the procedural requirements for seizure under Section 110.The Hazardous and Other Wastes Rules, 2016, were examined to clarify that import of MFDs is not prohibited but subject to procedural compliance, consistent with the principle that provisional release can be conditioned on verification of such compliance.The Court emphasized that provisional release is a temporary relief pending final adjudication and that Customs retains full authority to reverse provisional release orders if final adjudication so requires, preserving revenue protection.The "benefit of doubt" doctrine was applied to balance the interests of importers and Customs authorities, granting provisional relief where the importer's prima facie case is not conclusively rebutted at the provisional stage.No dissent or doctrinal shift was recorded; rather, the judgment reaffirmed established principles and prior authoritative rulings on the subject matter.