Telangana High Court
M/S. Arka Business Solutions vs Superintendent Of Customs 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
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* 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
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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
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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
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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
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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
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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
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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
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(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
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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
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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
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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
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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
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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
