2025 (7) TMI 1472 - HC - Customs

Prayer for direction upon the respondents to release the goods - seeking further direction upon the respondents to forthwith issue demurrage waiver certificate under 6(1)(l) of Handling of Cargo in Customs Area Regulation 2009 - HELD THAT - It is apparent and clear that the petitioner seeks to claim the benefit of exemption memorandum. According to the petitioner since tyres have been imported for mining purpose the same stands exempted from the purview of BIS clearance. It is also not in dispute from the test reports that the tyres are meant for mining purpose though from such test reports it would also appear that the user of tyres for other commercial purposes cannot be ruled out. The question still remains as to 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. It is found that more than 8 months have 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 - the issues involved in the present case and in the case of Goodyear India Ltd. 1997 (2) TMI 229 - SUPREME COURT are not entirely different. In the said case the question that fell for consideration was whether the tyres of a particular size for fitment to heavy moving vehicles such as dumpers and earth movers mainly are eligible to excise duty as tyres for motor vehicles. The petitioner cannot be held responsible for wrongful user of the tyres for which they are not meant they may invite consequences but cannot be a ground to withhold the goods. Having regard thereto and taking note of the fact that the investigation is pending at the end of the respondents for a considerable period though as reinvestigation has been sought for by the petitioner the investigation should be brought to a logical conclusion end as expeditiously as possible. Unless the respondents choose to drop the proceedings show cause if any must be issued within two weeks from the date of conclusion of the investigation/reinvestigation. 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. The appropriate authority should act on the basis of the direction issued by the Deputy Commissioner of Customs - Petition disposed off.

Summary

ISSUES:

Whether off-road tyres imported without BIS marking are exempt from BIS clearance under the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 and related exemption memorandum.Whether the classification of imported tyres under a particular HSN code is correct and its impact on applicable customs duty and import authorization requirements.Whether goods can be detained/seized for an extended period pending investigation when test reports and clarifications are available.The relevance of predominant or primary use of tyres in determining their regulatory classification and applicability of exemption.Whether the importer can be penalized for wrongful use of tyres by end-users when the tyres are imported for exempted off-road purposes.The procedural requirements for issuance of demurrage waiver certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulation, 2009.

RULINGS / HOLDINGS:

The imported off-road tyres are exempt from BIS clearance as per the exemption memorandum dated 30th January, 2002, since they are "meant for mining purpose" and do not require BIS marking under the Control Order.The classification of the tyres under HSN Code 40118000 (used on construction, mining or industrial handling vehicles) attracting 10% BCD is appropriate given their predominant use, notwithstanding potential incidental use on commercial vehicles.Prolonged detention of goods for over eight months without further testing or investigation is unjustified; the authorities must conclude the investigation expeditiously and either release the goods or issue a show cause notice within two weeks of conclusion.The predominant or primary use of tyres is the decisive factor in regulatory classification, as held in the Supreme Court precedent: "The use of the heavy mover on the road may only be ancillary or incidental to the main use" and emphasis is on "principal or dominant use".The importer cannot be penalized for wrongful use of tyres by end-users under the Motor Vehicles Act, 1988, as such misuse does not alter the nature of the imported goods or justify withholding them.The petitioner is entitled to apply for provisional release of goods if show cause notice is issued or goods are not released post-investigation, subject to undertaking to pay highest duty and penalty and restricting use to off-road purposes.The appropriate authority should act in accordance with the direction issued by the Deputy Commissioner of Customs for issuance of demurrage waiver certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulation, 2009.

RATIONALE:

The Court applied the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 and the exemption memorandum issued by CBEC dated 30th January, 2002, which exempts certain off-road tyres from BIS clearance requirements.The Supreme Court precedent in Goodyear India Ltd. Vs. Union of India was relied upon to determine the relevance of predominant use over incidental use in classifying tyres under customs and excise law, emphasizing that "the striking ingredient" is that a motor vehicle must be "adapted for the use upon roads".The Customs Act, 1962 provisions relating to seizure under Section 110(1) and confiscation under Section 111 were considered, with the Court stressing that seizure cannot be prolonged indefinitely without concluding investigation.The Court recognized the principle that importers cannot be penalized for end-user misuse, consistent with the Motor Vehicles Act, 1988, and that such misuse does not justify withholding goods.The Court endorsed the procedural framework under the Handling of Cargo in Customs Area Regulation, 2009, particularly Regulation 6(1)(l) for demurrage waiver certificates, directing authorities to follow the Deputy Commissioner's guidance.No doctrinal shift or dissent was noted; the judgment follows established legal principles and statutory interpretation regarding classification, exemption, and procedural fairness in customs detention and release of goods.