Telangana High Court
M/S. Ak Imports And Exports vs The Commissioner Of Customs Hyderbad Ii ... on 8 February, 2024
Author: P. Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
IN THE HIGH COURT FOR THE STATE OF TELANGANA,
HYDERABAD
***
WRIT PETITION Nos.2014 and 843 of 2024
WRIT PETITION No.2014 of 2024
Between:
M/s. Arka Business Solutions.
Petitioner
VERSUS
Superintendent of Customs and Ors.
Respondents
WRIT PETITION No.843 of 2024
Between:
M/s. AK Imports & Exports.
Petitioner
VERSUS
The Commissioner of Customs and Ors.
Respondents
ORDER PRONOUNCED ON: 08.02.2024
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to
see the fair copy of the Judgment? : Yes
__________________
P. SAM KOSHY, J
___________________
N. TUKARAMJI, J
::2::
* THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N. TUKARAMJI
+ WRIT PETITION Nos.2014 and 843 of 2024
% 08.02.2024
WRIT PETITION No.2014 of 2024
# Between:
M/s. Arka Business Solutions.
Petitioner
VERSUS
Superintendent of Customs and Ors.
Respondents
WRIT PETITION No.843 of 2024
# Between:
M/s. AK Imports & Exports.
Petitioner
VERSUS
The Commissioner of Customs and Ors.
Respondents
! Counsel for Petitioner(s) : 1) Mr. Dwarkanath in
W.P.No.4014 of 2023
2) Mr. G. Mohan Rao in
W.P.No.843 of 2024
^Counsel for the respondent(s) : 1) Mr. B. Mukherjee for
respondent No.2 in
W.P.No.2014 of 2024
2) Mr. Dominic Fernandes
for respondent No.1, 3
and 4 in W.P.No.2014 of
2024 and respondent
Nos.1 to 3 in
W.P.No.843 of 2024
<GIST:
> HEAD NOTE:
? Cases referred
::3::
THE HON'BLE SRI JUSTICE P. SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N. TUKARAMJI
WRIT PETITION Nos.2014 and 843 of 2024
COMMON ORDER:
(per Hon'ble Sri Justice P. SAM KOSHY) These two writ petitions have been primarily filed seeking for a relief of setting aside the seizure memo issued by respondent No.1 and to further direct to provisionally release the imported consignments seized by respondent No.1.
2. Heard Mr. Dwarkanath, learned Senior Counsel representing Mr. Karthik Ramana Puttamreddy, learned counsel for the petitioner in W.P.No.2014 of 2024, Mr. B. Mukherjee, learned counsel representing Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India appearing for Union of India/respondent No.2 in W.P.No.2014 of 2024, Mr. G. Mohan Rao, learned Senior Counsel representing Mr. Malla Reddy Gadipally, learned counsel for the petitioner in W.P.No.843 of 2024 and Mr. Dominic Fernandes, learned Senior Standing Counsel for CBIC appearing for the respondent Nos.1, 3 and 4 in W.P.No.2014 of 2021 and respondent Nos.1 to 3 in W.P.No.843 of 2024.
3. The brief facts relevant for disposal of the two writ petitions are that the petitioners in both these writ petitions are traders in the business of importing and sale of printing, photocopying and scanning machines. As a part of the business, the petitioners also ::4::
import and sale multi-functional devices used for printing, photocopying and scanning etc. In the course of trading, the petitioners purchased few MFDs from their supplier situated in foreign countries of UAE and Singapore respectively and proceeded to import them. When the product reached its intended place of final delivery, the petitioners filed a bill of entry before the respondent authorities. However, the respondent authorities did not allow clearance of the above referred consignment imported by the petitioners.
4. The contention of the learned Senior Standing Counsel for CBIC was that the goods have been imported without any authorization/license and that the aforesaid goods fall under the restricted goods under the foreign trade policy of the Government.
5. The seizure of these goods in the two writ petitions is on 04.11.2023 and 08.11.2023 respectively and the memos were also issued. The petitioners have moved their respective applications for provisional release of these goods with the respondent authorities and the said applications filed are still pending consideration before the authorities concerned. Meanwhile, the two writ petitions have been filed contending that the action on the part of the respondent authorities, firstly, in seizing of the product being in violation of the foreign trade policy itself and secondly, the goods that have been imported falls under the exemption category so far ::5::
as the requirement of authorization/license from the respondent authorities.
6. Learned Senior Counsel for the petitioner in W.P.No.2014 of 2024 refereed to the Electronic and IT Goods (Requirements Of Compulsory Registration) Order, 2012 (in short 'Order, 2012') which was subsequently superseded by a fresh order published in the year 2021 i.e. the Electronic and IT Goods (Requirements Of Compulsory Registration) Order, 2021 (in short 'Order, 2021').
Under both of which highly specialized equipments were exempted so far as the applicability of the aforementioned compulsory registration orders issued by the Government from time to time.
7. Learned Senior Counsel for the petitioner in W.P.No.2014 of 2024 referred to a couple of decisions. One rendered by the Division Bench of this High Court in W.P.No.7665 of 2019, so also the two recent decisions rendered by the Madras High Court in two bunch petitions, the first one being decided on 23.11.2023 and the subsequent batch of petitions decided on 18.12.2023 highlighting the fact that this High Court as also the Madras High Court in those bunch petitions have accepted the contention of the petitioner so far as the multi-functional devices imported by the petitioner to be one which stands exempted so far as the applicability of the aforementioned compulsory registration Order, 2012 and that of Order, 2021 and had directed the respondents to pass orders for release of the goods provisionally.
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8. Per contra, the learned Senior Standing Counsel for CBIC so also the learned counsel for Union of India opposing the petition submits that it is a case where the product which has been imported by the petitioner falls within the restrictive category under the foreign trade policy and therefore, the petitioner cannot be permitted for release of the goods provisionally.
9. According to the learned Senior Standing Counsel for CBIC, since these goods have been imported without proper authorization/license from the authorities concerned, they are liable to be confiscated and if the goods are provisionally released at this juncture, the same can cause irreparable loss to the Department as also to the Government.
10. Learned Senior Standing Counsel for CBIC contended that there are various aspects which have to be checked, verified, scrutinized and enquired into before passing of a final order of confiscation. It was further contended that the authorities are required to check whether the product imported is one which would otherwise fall within the category of an e-waste or not, whether the product is one which meets all the criteria in which it may fall within the ambit of a multi-functional device or for that matter a highly specialized equipment.
11. The contention of the learned Senior Standing Counsel for CBIC was that in terms of paragraph 2.31 of the foreign trade ::7::
policy, the product is one which is ordered to be treated as a restricted product and which could be imported only against an authorization, subject to the conditions laid down under the aforementioned Order, 2012, which stands amended from time to time. Such an authorization was not obtained by the petitioner before importing the aforesaid multi-functional device. Therefore, the relief sought for by the petitioner in the present writ petitions cannot be granted and further since the application for provisional release of the goods is pending consideration before the authorities concerned, the authorities must be left with to take appropriate decision strictly in accordance with the rules, regularization and guidelines governing the field.
12. It was further contended by the learned Senior Standing Counsel for CBIC that the so-called exemptions which have been harped upon by the petitioners cannot be attracted in the present cases for the reason that highly specialized equipment for which there is an exemption are specialized equipment for which testing is not viable or feasible because the import manufacturing is low in volume. Hence, the import of second hand goods read with the provisions of clause 2.31 of the foreign trade policy and the clarification given by the Officers of the Department would continue to be restricted under the foreign trade policy irrespective of the product falling under highly specialized equipment and for ::8::
the import of which authorization from Directorate General of Foreign Trade (DGFT) is mandatory.
13. It was the contention of the learned Senior Standing Counsel for CBIC that the intention of legislation in allowing highly specialized equipment is firstly that they are the equipment with most advanced technology, uniquely designed for particular purpose for which there are not enough testing facilities to the Department/BIS for certification. But at the same time, the importer should not suffer for the want of compliance. The examples are the high end servers imported by the nuclear reactors, space programmes, data centres/storages etc., which are designed as customer specific and cannot be generalised for manufacturing.
14. It was further contended that the goods imported by the petitioner are general purpose copiers/printers etc., that too as old as 10-15 years. Even if these goods are imported as new goods, it requires BIS certification as per the prevailing laws and the compliance is followed by all the reputed equipment manufacturers while importing this equipment. Under the said circumstances, it is highly unlikely and irrational to say that such second hand goods are eligible for exemption from BIS.
15. It was also the contention that since the impugned goods are specifically listed in the schedule of Order, 2021, the goods do not ::9::
merit classification as highly specialized goods and hence, the exemption does not apply.
16. Lastly, it was contended that the petitioner will be given every opportunity to represent his case before the Customs authorities to explain the technicalities and other aspects of the product in the adjudication proceedings to be taken up under Section 28 of the Customs Act, 1962 (for short, 'the Act'). This being the case, approaching the High Court at this juncture is clearly a misuse of process of law.
17. Having heard the contentions put forth on either side and on perusal of records, it would be relevant at this juncture to take note of the operation of foreign trade policy relied upon by the respondents so far as their contention of MFDs being a restricted good, which reads as under:
Import Policy for Second Hand Goods:
2.31 Second Hand Goods Sl.No. Categories of Second-Hand Import Conditions, if Goods Policy any I. Second Hand Capital Goods I(a) i. Desktop Computers, Restricted Importable against ii. Refurbished/re-conditioned Authorisation spares of re-furbished parts of Personal Computers/ Laptops;
iii. Air Conditioners;
iv. Diesel generating sets I(b) All electronics and IT Goods Restricted (i) Importable notified under the Electronics against an and IT Goods (Requirements of authorization Compulsory Registration) Order, subject to 2012 as amended from time to conditions laid time down under Electronics and IT Goods ::10::
(Requirements of
Compulsory
Registration)
Order, 2012 as
amended from time
to time.
(ii) Import of
unregistered/non-
complaint notified
products as in
CRO, 2012 as
amended from time
to tome is
"Prohibited"
I(c) Refurbished / re-conditioned Free Subject to
spares of Capital Goods. production of
Chartered
Engineer certificate
to the effect that
such spares have
at least 8-%
residual life of
original spare
I(d) All other second-hand capital Free
goods {other than (a) (b) & (c)
above}
II. Second Hand Goods other than Restricted Importable against
capital goods Authorisation
III. Second Hand Goods Imported for Free Subject to
the purpose of condition that
repair/refurbishing / re- waste generated
conditioning or re-engineering during the repair /
refurbishing of
imported items is
treated as per
domestic laws/
Rules/ Orders/
Regulations/
technical
specifications/
Environmental /
safety and health
norms and the
imported item is
re-exported back
as per the
Customs
Notification.
From the aforesaid table, it is evident that what has been held to be restricted under the foreign trade policy is the import of which ::11::
is permissible against an authorization subject to the conditions laid down under the above mentioned Order, 2012.
18. Now for further appreciating the contentions raised on either side, it would also be required to take note of the Order, 2012. Under the said Order, the schedule did not specify multi- functional devices. The product among others under the Order, 2012 which was held to be restricted was printers/plotters and during the said period when the Order, 2012 was in force, a similar dispute arose before this Court in W.P.No.7665 of 2019 which stood decided on 06.04.2018 whereby the High Court had allowed the writ petition of similar nature permitting release of the goods in accordance with law and also in accordance with the decisions taken in the past in this regard. A similar writ petition was again filed vide W.P.No.19587 of 2020 in which the Division Bench of this High Court on 09.11.2020 while admitting the writ petition, directed the respondents to provisionally release the petitioner's consignment of MFDs without insisting for authorization/license as contended by the Department.
19. Recently, in two set of writ petitions, first being W.P.No.29673 of 2023 and batch in the case of M/s.Simple Machines v. The Commissioner of Customs and Others vide order dated 23.11.2023, the Madras High Court relying upon an earlier decision of Madras High Court in W.P.No.1393 of 2022 in paragraph Nos.20 and 21 have held as under:
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"20. In the aforesaid circumstances, this Court is of the view that the petitioners are in a better position than the petitioners before the Supreme Court and the learned Single Judge. In view of the above findings, this Court does not find any impediment for the respondents to release the goods provisionally.
21. The other contention of respondents that the petitioners, without availing the appeal remedy, have straight away approached this Court is concerned, this Court finds that the goods were imported by the petitioners on 19.07.2023 and the department has not passed any order till date, which itself shows that the department is in a confused state of mind and that is the reason why they have not taken any decision till date. It is the duty of the department to pass appropriate orders within a reasonable time and they cannot unnecessarily detain the goods for a long period of time."
20. Subsequently, a similar view has further been taken by the Madras High Court in yet another batch of writ petitions leading of which being W.P.No.35143 of 2023 in the case of M/s.Atul Commodities Private Limited. v. Commissioner of Customs (Chennai II) Import, Custom House and Others decided on 18.12.2023 passing the same order as has been passed in the batch writ petitions of W.P.No.26973 of 2023 and batch, whereby the Madras High Court has reiterated its earlier view in the preceding paragraphs and has ordered for provisional release of the goods.
21. Keeping in view the aforesaid foreign trade policy of the Government, the Order of 2012 which stood replaced by the Order of 2021 and subsequent amendments brought to Order 2021 by inserting clauses 6, 7 and 8, what is apparently evident is that in Order, 2012 the product multi-functional device was not a notified ::13::
item. What was notified so far the writ petitions are concerned was only printers and plotters and the Order, 2012 was also preceded by a decision of the Government exempting highly specialized equipment from the coverage of Order, 2012. The Order, 2012 stood preceded by subsequent Order, 2021 which was issued and brought into force w.e.f 18.03.2021 and the schedule attached to Order, 2021 stood modified to the extent that in addition to printers and plotters the Government also notified multi-functional devices as an item so far as the foreign trade policy is concerned. This change in Order, 2021 so far as adding multi-functional devices in the schedule makes it amply clear that prior to Order, 2021 MFDs were not a notified item and since 18.03.2021 when the Order, 2021 was notified, MFDs became restricted goods under the foreign trade policy.
22. However, shortly thereafter vide a notification dated 01.07.2021, the Order, 2021 stood amended and in addition to the five clauses in Order, 2021 that was earlier notified, the Government introduced three more clauses i.e. clauses 6, 7 and 8. Clause 8 was introduced by way of an amendment dated 01.07.2021 and which is most relevant for the present dispute in the instant two writ petitions, which reads as under:
"8. Exemption for Highly Specialized Equipment (HSE) :
HSE as per the criteria given below shall stand exempted from the application of this Order provided they are manufactured/ imported in less than 100 units per model per year-
a. Equipment Powered by three phase power supply or ::14::
b. Equipment Powered by single phase power supply with current rating exceeding 16 Ampere or c. Equipment with dimensions exceeding 1.5 m × 0.8 m or d. Equipment with weight exceeding 8-Kg"
23. From plain reading of the aforesaid clauses, what is culled out is that by amendment brought into w.e.f 01.07.2021, prima facie, there appears to be a total exemption for highly specialized equipments from applicability of the Order, 2021. Only rider was that these highly specialized equipments must fall within any of those criteria as envisaged in clause 8. Though the learned Senior Standing Counsel for CBIC tried to give various interpretations to this clause, but on its plain reading, has its literal meaning and with the literal interpretation of the contents of clause 8, there does not seem to be any restrictions put by the Government so far as the classifications of highly specialized equipment is concerned. There also does not seem to be any mention of the said exemption not being applicable upon a second hand product as is envisaged under clause 2.31 of the foreign trade policy.
24. For all the aforesaid reasons, we are in agreement to the submissions made by the learned counsel for the petitioner so far as the import made by the petitioner of MFDs being a highly specialized equipment and the same being one which falls within the purview of an exempted category as per clause 8 of Order, 2021. For the said reason, we are in agreement with the view taken by the Division Bench of this High Court in the two writ petitions referred to in the preceding paragraphs as also we are in ::15::
agreement with the view taken by the Madras High Court in similar set of facts. For the aforesaid reasons, we are of the considered opinion that it is a fit case where the petitioner can be permitted for provisional release of the goods seized by the respondent authorities.
25. We are further inclined to allow the prayer of the petitioner considering the submissions made by the learned Senior Counsel for the petitioner in W.P.No.843 of 2024 wherein he states on instructions that in the order of the Madras High Court, the goods since been released subject to the conditions imposed by the High Court and to the best of his information, the order of the Madras High Court has not been challenged by the Department any further or at least the petitioner having not been intimated about the same. If the petitioners are not permitted for release of the goods provisionally, it would lead to a situation where the traders importing products in Telangana would be restricted from importing such product and whereas traders who import the said goods from Madras would be entitled for import of the said good, which may lead to a situation which would otherwise appear to be arbitrary.
26. Thus, for all the aforesaid reasons, it is ordered that let the respondent authorities pass an order on the application filed by the petitioners for provisional release of the goods subject to the conditions that:
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a) The petitioner shall pay/deposit the enhanced duty amount.
On receipt of such enhanced duty amount paid by the petitioners, the goods in question shall be released within a period of four (04) weeks thereafter.
b) For payment of such duty, quantification shall be made by the Customs forthwith within one (01) week from the date of receipt of a copy of this order. On receipt of such quantification, the payment shall be immediately made by the petitioners and on receipt of the payment in entirety, the goods shall be released as indicated above at the outer limit of four (04) weeks.
c) It is made clear that this order will not stand in the way for Customs Department to go ahead with the further proceedings including the adjudication in the manner known to law.
d) It is further made clear that so far as the condition of the petitioner that demmurage charges till date, for the goods be considered for waiver, in this regard, if any application is filed by the petitioners seeking such a waiver of demmurage charges, the same shall be considered and decided by the respondents objectively.
27. In addition, the petitioners are also directed to provide a bank guarantee worth 10 percent of the total price of the goods imported by them. Further, it is also ordered that in the event if ::17::
the petitioners upon release of the goods provisionally make and sell the supply to their customers, details of the customers that of relevant price and details of the respective transactions shall be maintained and made available to the respondent authorities from time to time.
28. The present writ petitions accordingly stands allowed. However, there shall be no order as to costs. Consequently, miscellaneous petitions pending if any, shall stand closed.
__________________ P. SAM KOSHY, J __________________ N. TUKARAMJI, J Date: 08.02.2024 Note: LR copy be marked: Yes B/O. GSD