Second-hand Digital MFDs Qualifying as Highly Specialized Equipment Are Freely Importable and Eligible for Provisional Releases: Madras HC [Read Order]

Taanish Enterprises and several other petitioners had filed a batch of writ petitions seeking provisional release of imported second-hand digital MFDs that were detained by the Chennai Customs Department. The department claimed the goods were restricted imports requiring prior Bureau of Indian Standards (BIS) certification and authorisation from the Directorate General of Foreign Trade (DGFT).

The petitioners’ counsel argued that the goods met the criteria for classification as Highly Specialized Equipment under Clause 8 of the Compulsory Registration Order (CRO), 2021 issued by the Ministry of Electronics and Information Technology (MEITY), and were exempt from BIS and DGFT requirements.

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The petitioners’ counsel relied on previous rulings of the Madras High Court, the Telangana High Court, and the Supreme Court which had upheld the provisional release of similar goods under Section 110A of the Customs Act. They submitted reports from chartered engineers confirming that the machines weighed over 80 kg and that the imports were under 100 units per model per year, satisfying the HSE criteria.

They also argued that the goods fell under Clause 2.31(I)(d) of the Foreign Trade Policy (FTP) 2023, which allows free import of second-hand capital goods other than those expressly restricted.

The Customs Department and MEITY, in their counter affidavits, submitted that the goods were restricted under Clause 2.31(I)(b) of the FTP and required BIS registration. They also pointed to the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 to argue that the goods fell under the category of “other wastes” and required environmental clearance.

They further submitted that the petitioners had not filed formal applications under Section 110A seeking provisional release.

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The bench comprising Justice Abdul Quddhose held that once the imported MFDs met the conditions under Clause 8 of CRO, 2021, they were exempt from BIS and DGFT requirements. The court observed that similar goods had already been adjudicated as freely importable by other High Courts and the Supreme Court.

The court explained the need for consistency in interpreting national trade laws. The court also held that no formal application under Section 110A was necessary as the goods had only been detained and not seized, making the writ petitions maintainable.

The court further observed that MEITY and the Ministry of Environment had not challenged previous decisions allowing provisional release of MFDs and were stopped from raising objections in the present case. It also clarified that the Hazardous Waste Rules only required filing of documentation at the time of import and did not bar provisional release.

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Considering that the petitioners had established a prima facie case and that the Customs Department retained the power to reverse the release through final adjudication, the court invoked the benefit of doubt principle in favour of the importers.

The court directed the Customs Department to provisionally release the goods within four weeks, subject to conditions as per the Act, and permitted release within two weeks thereafter upon compliance. The writ petitions were allowed.

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