M/S. Arka Business Solutions vs. Principal Commissioner Of Customs

Held

The Court held that the imported MFDs, meeting the criteria of Clause 8 of CRO, 2021, were indeed Highly Specialised Equipment and thus freely importable. The Court found that the all-India, model-specific reckoning of the 100-unit threshold was an unsustainable interpretation and that the exemption was importer-specific. A restrictive reading that depletes an importer's exemption based on imports by others is not warranted. Furthermore, the Court noted that the show cause notice did not mention the all-India threshold, thus offending the principle that a person must know the case they have to meet. The confiscation under Section 111(d) was deemed contrary to the Court's prior holding in Writ Petition No. 2014 of 2024. The Court also found no basis for confiscation under Section 111(m) or penalty under Section 112. The Court set aside the Order-in-Original concerning confiscation and redemption fines, directing the release of goods subject to conditions outlined in a previous judgment concerning the same petitioner, including payment of enhanced duty.

Facts

The petitioner, M/s. Arka Business Solutions, imported 73 used Multi-Function Devices (MFDs) from the USA. Upon arrival, a Bill of Entry was filed, and customs examination confirmed the goods matched the declaration. A Chartered Engineer certified them as functional second-hand capital goods with over 6 years of residual life, weighing over 80 kg each, thus qualifying as Highly Specialised Equipment (HSE) under Clause 8(d) of CRO, 2021. Despite this, a show cause notice was issued alleging the need for DGFT authorization and BIS registration, proposing confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, and enhancement of value. The impugned Order-in-Original confiscated 36 units as "prohibited" and 37 units as "restricted," permitting re-export or redemption on payment of fines, based on an all-India, model-specific threshold of 100 units for HSE exemption.

Key Issues

1. Whether the imported used MFDs, weighing over 80 kg each and certified as functional second-hand capital goods with a residual life of over six years, qualify for exemption as Highly Specialised Equipment (HSE) under Clause 8 of the Compulsory Registration Order (CRO), 2021, thereby rendering the requirement for DGFT authorization under Para 2.31 of the Foreign Trade Policy inapplicable, and making the goods freely importable under Entry 1(d) of Para 2.31 of the Foreign Trade Policy? The petitioner argued that compliance with Clause 8 of CRO, 2021, negates the need for DGFT authorization and BIS registration, making the goods freely importable, and cited this Court's judgment in Writ Petition No. 2014 of 2024. The revenue contended that despite the HSE exemption, DGFT authorization was still required, and that the 100-unit threshold for HSE exemption was to be applied on an all-India, model-specific basis, exhausting the exemption for the petitioner's consignment. 2. Whether the confiscation of goods under Section 111(d) of the Customs Act, 1962, based on an all-India reckoning of the 100-unit threshold, is sustainable when this basis was not communicated in the show cause notice? The petitioner argued that the adjudicating authority cannot travel beyond the show cause notice, and a finding based on uncommunicated grounds is illegal. The revenue did not record any specific argument on this point.