M/S. Ak Imports And Exports vs. The Commissioner Of Customs (Hyderbad Ii) Imports

Facts

Two writ petitions were filed by M/s. Arka Business Solutions and M/s AK-Import & Exports, traders in printing, photocopying, and scanning machines. They imported multi-functional devices (MFDs) from UAE and Singapore. Upon arrival, the petitioners filed bills of entry, but the respondent customs authorities seized the consignments. The seizure memos were dated November 4, 2023, and November 8, 2023. The petitioners had applied for provisional release of the goods, but these applications were pending. The petitions challenged the seizure as being in violation of the Foreign Trade Policy and contended that the imported goods fall under an exemption category, not requiring specific authorization or licenses. The petitioners sought setting aside of the seizure memos and provisional release of the imported consignments.

Held

The Court allowed the writ petitions, agreeing with the petitioners' submissions. It held that the imported MFDs qualify as 'highly specialized equipment' and fall within the exempted category as per Clause 8 of the Electronic and IT Goods (Requirements Of Compulsory Registration) Order, 2021. The Court found no restrictions in the plain reading of Clause 8 regarding the classification of highly specialized equipment, nor any mention that the exemption is inapplicable to second-hand products. The Court aligned with the views of the Division Bench of the Telangana High Court and the Madras High Court in similar cases. Consequently, the Court directed the respondent authorities to pass an order for the provisional release of the seized goods. The release is subject to the condition that the petitioners pay the enhanced duty amount, which is to be quantified by the Customs within one week. The goods are to be released within four weeks of the enhanced duty payment. The Court clarified that this order does not impede further proceedings, including adjudication, by the Customs Department. It also directed that any application for waiver of demurrage charges shall be considered objectively. Additionally, the petitioners are required to provide a bank guarantee worth 10 percent of the total price of the imported goods and maintain details of subsequent sales.

Key Issues

1. Whether the imported Multi-Function Devices (MFDs) are classified as 'highly specialized equipment' exempt from compulsory registration under the Electronic and IT Goods (Requirements Of Compulsory Registration) Order, 2021, thereby making their seizure illegal? 2. Whether the seizure of the imported MFDs is contrary to the Foreign Trade Policy, 2023-24, and the relevant exemption notifications? Petitioner's Arguments: - The learned Senior Counsel for the petitioner in W.P.No.2014 of 2024 argued that MFDs are 'highly specialized equipment' and are exempted under Clause 8 of the Electronic and IT Goods (Requirements Of Compulsory Registration) Order, 2021 (and its predecessor, Order, 2012). - Reliance was placed on decisions of the Telangana High Court (W.P.No.7665 of 2019) and the Madras High Court (decided on 23.11.2023 and 18.12.2023) which accepted similar contentions regarding MFDs being exempted and directed provisional release. - The petitioner in W.P.No.843 of 2024 argued that the seizure was illegal, arbitrary, and contrary to the Customs Act, 1962, the Import-Export Policy 2023, and Notification S.O. no.1248(E) dated 18.03.2021, violating their fundamental rights. Revenue's Arguments: - The learned Senior Standing Counsel for CBIC and the learned counsel for the Union of India contended that the goods were imported without authorization/license and fall under restricted goods under the Foreign Trade Policy.