HC Allows Provisional Release of Seized Goods after Collection of Customs Duty

Black Gold Technologies Vs Union of India (Madras High Court)

In the Instant case, the petitioner is seeking provisional released for the goods seized by the customs officer due to mis-declaration of the cargo in order to circumvent the import restriction imposed by the extant Foreign Trade Policy.

High Court states that, as per Schedule 3 there are two parts. Part A contains a list of hazardous wastes applicable for import and export with prior informed consent. Part B contains the list of other wastes applicable for import and export and not requiring prior informed consent. Schedule VI sets out hazardous and other wastes prohibited for import. It is not the case of the respondents that the imported goods in the case on hand fall under Schedule VI. Once the application of the Schedule VI of the 2016 Rules is ruled out, the only question is whether the import of the goods is free or restricted. Under either case, in view of the decision of the Hon’ble Supreme Court in Atul Automations, provisional release is very much permissible. The respondents have seized the goods under Section 110 of the Customs Act, 1962. Therefore, Section 110A of the Customs Act, 1962 will automatically kick in. As per Section 110A, “Any goods, documents or things seized under Section 110, may, pending the order of the adjudicating authority be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.” Further, the statutory scheme obtaining in the Customs Act, 1962, the Foreign Trade Development and Regulation Act, 1992, Foreign Trade (Regulation) Rules, 1993 and the earlier Hazardous Wastes Rules concluded that despite the fact that the goods, whose import is restricted in terms of the Foreign Trade Policy, should be construed to be prohibited goods, there is no bar for the release of the goods. The learned Judge also noted that it is not open to the customs authorities to insist on re-export. This was to be done only by the authorities specified in Schedule VII of the Hazardous and Other Wastes Rules, 2016. As in that case, in the present case also, no proceedings have been initiated by the authorities in terms of the Hazardous Wastes Rules for directing the petitioners to re-export the goods. High Court therefore of the view that the petitioners are entitled to provisional release of the goods under Section 110A of the Customs Act, 1962. Therefore, the respondents are directed to assess and permit the provisional release of the goods in question upon payment of applicable duties of customs subject however to the eventual adjudication. The respondents shall release the goods after assessing and collecting the customs duty and other charges provisionally within a period of three weeks from the date of receipt of a copy of this order.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

The petitioners had imported consignments of “Used Rubber Tyre Cut in Two Pieces”. According to the petitioners, the said goods are freely importable and they are meant for manufacturing “rubber crumbs” to be eventually used for road laying.

2. The customs authorities were called upon to clear the goods in question on the ground that they have been classified under CTH 40040000. The respondents after examination came to the conclusion that the goods have been misdeclared. Though they had been declared as used tyre with one cut in bead wire, a random examination of the goods revealed that there was no cut in the bead wires. Therefore, it was referred to SIIB for detailed examination for import assessment. As per the examination report of the said officers, the cargo was found to be used rubber tyres in pressed bales. But there was no cut in the bead wires. Though import of used tyres with one cut in the bead wire is free, import of used rubber tyres is restricted. Hence, on the reasonable belief that the importer has mis-declared the cargo in order to circumvent the import restriction imposed by the extant Foreign Trade Policy, the entire cargo was seized for further investigation under the Customs Act, 1962. Following such seizure, the petitioners made a request for provisional release in terms of Section 110A of the Customs Act, 1962. Since the request was not complied with, these writ petitions came to be filed.

3. The petitioners’ request is opposed by the respondents. The respondents challenge the claim of Black Gold Technologies, that the imported goods were meant for manufacturing rubber crumbs at their unit said to be located in Alwar, Rajasthan. In Paragraph Nos.7 and 8 of the counter affidavits, the respondents have taken a stand that the seized goods have been restricted for import as per the Foreign Trade Policy and that they could have been imported only under due authorisation. Since the importer did not obtain valid licenses from DGFT, the goods were rightly seized. It is further contended that since the goods also constitute a hazardous waste, prayer for provisional release is also not maintainable. It is finally contended that the writ petitions have to be dismissed for non exhaustion of the alternative remedy available under the statute.

4. The counsel on either side filed their written arguments and reiterated the contentions set out therein. They also relied on a host of case laws. The learned standing counsel placed heavy reliance on the provisions of the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. Some of the provisions relied on by the learned standing counsel are as under :

“3.(17).-“hazardous waste” means any waste which by reason of characteristics such as physical, chemical, biological, reactive, toxic, flammable, explosive or corrosive, causes danger or is likely to cause danger to health or environment, whether alone or in contact with other wastes or substances, and shall include –

(i) waste specified under column (3) of Schedule I;

(ii) waste having equal to or more than the concentration limits specified for the constituents in class A and class B of Schedule II or any of the characteristics as specified in class C of Schedule II; and

(iii) wastes specified in Part A of Schedule III in respect of import or export of such wastes or the wastes not specified in Part A but exhibit hazardous characteristics specified in Part C of Schedule III;”

“3.(23).-“other wastes” means wastes specified in Part B and Part D of Schedule III for import or export and includes all such waste generated indigenously within the country;”

“13.Procedure for import of hazardous and other wastes.- (1) Actual users intending to import or transit for transboundary movement of hazardous and other wastes specified in Part A and Part B of Schedule III shall apply in Form 5 along with the documents listed therein, to the Ministry of Environment, Forest and Climate Change for the proposed import together with the prior informed consent of the exporting country in respect of Part A of Schedule III waste, and shall send a copy of the application, simultaneously, to the concerned State Pollution Control Board for information and the acknowledgement in this respect from the concerned State Pollution Control Board shall be submitted to the Ministry of Environment, Forest and Climate Change along with the application.

(2) For the import of other wastes listed in Part D of Schedule III, the importer shall not require the permission of the Ministry of Environment, Forest and Climate Change. However, the importer shall furnish the required information as per Form 6 to the Customs authorities, accompanied with the following documents in addition to those listed in Schedule VIII, wherever applicable. For used electrical and electronic assemblies listed at serial numbers 4 (e) to 4(i) of Schedule VIII (Basel No. B1110), there is no specific requirement of documentation under these rules:

(a) the import license from Directorate General of Foreign Trade, if applicable;

(b) the valid consents under the Water (Prevention and Control of Pollution) Act, 1974 (25 of 1974) and the Air (Prevention and Control of Pollution) Act, 1981 (21 of 1981) and the authorisation under these rules as well as the authorisation under the E-Waste (Management and Handling) Rules, 2011, as amended from time to time, whichever applicable;

(c) importer who is a trader, importing waste on behalf of actual users, shall obtain one time authorisation in Form 7 and copy of this authorisation shall be appended to Form 6.

(3) For Part B of Schedule III, in case of import of any used electrical and electronic assemblies or spares or part or component or consumables as listed under Schedule I of the E Waste (Management and Handling) Rules, 2011, as amended from time to time, the importer need to obtain extended producer responsibility authorisation as producer under the said E-Waste (Management and Handling) Rules, 2011. (4)Prior to clearing of consignment of wastes listed in Part D of Schedule III, the Custom authorities shall verify the documents as given in column (3) of Schedule VIII.

(5) On receipt of the complete application with respect to Part A and Part B of Schedule III, the Ministry of Environment, Forest and Climate Change shall examine the application considering the comments and observations, if any, received from the State Pollution Control Boards, and may grant the permission for import within a period of sixty days subject to the condition that the importer has –

(i) the environmentally sound facilities;

(ii) adequate arrangements for treatment and disposal of wastes generated;

(iii) a valid authorisation and consents from the State Pollution Control Board;

(iv) prior informed consent from the exporting country in case of Part A of Schedule III wastes.

(6) The Ministry of Environment, Forest and Climate Change shall forward a copy of the permission to the concerned Port and Customs authorities, Central Pollution Control Board and the concerned State Pollution Control Board for ensuring compliance with respect to their respective functions given in Schedule VII.

(7) The importer of the hazardous and other wastes shall maintain records of the hazardous and other waste imported by him in Form 3 and the record so maintained shall be made available for inspection.

(8) The importer of the hazardous and other wastes shall file an annual return in Form 4 to the State Pollution Control Board on or before the 30th day of June following the financial year to which that return relates.

(9) Samples of hazardous and other wastes being imported for testing or research and development purposes up to 1000 gm or 1000 ml shall be exempted from need of taking permission for import under these rules.

(10) The Port and Customs authorities shall ensure that shipment is accompanied with the movement document as given in Form 6 and the test report of analysis of the waste, consignment, wherever applicable, from a laboratory accredited or recognised by the exporting country. In case of any doubt, the customs may verify the analysis.”

“15.Illegal traffic.- (1)The export and import of hazardous or other wastes from and into India, respectively shall be deemed illegal, if,-

(i) it is without permission of the Central Government in accordance with these rules; or

(ii) the permission has been obtained through falsification, mis-representation or fraud;

or

(iii) it does not conform to the shipping details provided in the movement documents; or

(iv) it results in deliberate disposal (i.e., dumping) of hazardous or other waste in contravention of the Basel Convention and of general principles of international or domestic law.

(2) In case of illegal import of the hazardous or other waste, the importer shall re-export the waste in question at his cost within a period of ninety days from the date of its arrival into India and its implementation will be ensured by the concerned Port and the Custom authority. In case of disposal of such waste by the Port and Custom authorities, they shall do so in accordance with these rules with the permission of the Pollution Control Board of the State where the Port exists.

(3) In case of illegal import of hazardous or other waste, where the importer is not traceable then the waste either can be sold by the Customs authority to any user having authorisation under these rules from the concerned State Pollution Control Board or can be sent to authorised treatment, storage and disposal facility.”

5. The learned standing counsel would point out that even according to the petitioners, the imported goods would fall under the category B3140 which falls under Part B of Schedule 3 of the aforesaid rules. If that be so, the petitioners could have imported the same only with the permission of the Ministry of Environment, Forest and Climate Change. It is not the case of the petitioners that such permission was obtained. Therefore, the import has to be deemed illegal as per Rule 15. Rule 15(2) mandates that such illegally imported wastes shall be re-exported. The learned standing counsel points out that the rules have been made under the relevant provisions of Environment (Protection) Act, 1986. The said Act has a overriding effect on other laws. He therefore would contend that the question of provisionally releasing the goods cannot arise.

6. In support of this contention, the learned counsel relied on a decision of the Hon’ble Division Bench of the Madras High Court reported in 2013 (287) E.L.T 161 (Mad), (Commissioner of Customs (Imports) Chennai vs. V.S.Govindan. That was also a case of imported used tyres which were more than six years old. It was considered as hazardous waste and the Hon’ble Division Bench directed the importers to re-export the same. This decision was followed in Universal Trading Co. vs. The Commissioner of Customs, Kandla, 2014 (313) E.L.T 164 (Tri-Ahmd.,). The learned counsel drew my attention to the decision reported in 2015 (329) E.L.T 489 (Tri-Delhi), 2017 (347) E.L.T 4 (All.,), 2013 (297) E.L.T 184 (Mad.,) and 2012 (275) E.L.T 528 (Bom.,). Since the learned counsel for the petitioners placed heavy reliance on the decision of the Hon’ble Supreme Court reported in 2019 (365) E.L.T 465 (S.C) (Commissioner of Customs vs. Atul Automations Pvt., Ltd.), the learned standing counsel drew my attention to the decision of the Hon’ble Division Bench reported in 2019 (367) E.L.T 920 (Mad) (Commissioner of Customs, Chennai – II vs. City Office Equipment) in which Atul Automations Pvt., Ltd, case has been distinguished. The learned standing counsel called upon this Court to dismiss the writ petitions.

7. I carefully considered the rival contentions and went through the materials on record. I must straight away observe that the respondents are not adopting a consistent stand. Their case is that the petitioners had misdeclared the imported goods. The relevant Chapter heading is as follows :

While the petitioners would claim that the import is free, the original stand of the respondents was that it is restricted. In other words, when the seizure took place, the debate centered on the question whether the import is restricted or free and nothing else. A mere look at the seizure mahazar would indicate that it was not the stand of the respondents that the import of the goods in question is prohibited. In the written arguments filed by the learned standing counsel, it has been mentioned that though the petitioners claim that the imported used tyres are with two cuts in the bead wires, an inspection by the authorities, it was found that the said imported usedtyres are without any cuts. The contention that the imports have been made without authorisation/license from DGFT has been reiterated in the written arguments. If that be so, the question is whether the request for provisional release of the goods can be opposed. The decision of the Hon’ble Supreme Court reported in 2019 (365) E.L.T 465 (S.C) (Commissioner of Customs vs. Atul Automations Pvt., Ltd.) is directly on the point. The Hon’ble Supreme Court held as follows :

“8.Clause 2.01 of the Foreign Trade Policy provides for prohibition and restriction of imports and exports. The export or import of restricted goods can be made under Clause 2.08only in accordance with an  authorisation/permission to be obtained under Clause 2.11. Photocopier machines/Digital multifunction Print and Copying Machines are restricted items importable against authorisation under Clause 2.31. Indisputably, the Respondents did not possess the necessary authorisation for their import. The customs authorities therefore prima facie cannot be said to be unjustified in detaining the consignment. Merely because earlier on more than one occasion, similar consignments of the Respondent or others may have been cleared by the customs authorities at the Calcutta, Chennai or Cochin ports on payment of redemption fine cannot be a justification simpliciter to demand parity of treatment for the present consignment also. The defence that the DGFT had declined to issue such authorisation does not appeal to the Court.

9. Unfortunately, both the Commissioner and the Tribunal did not advert to the provisions of the Foreign Trade Act. The High Court dealing with the same has aptly noticed that Section 11(8) and (9) read with Rule 17(2) of the Foreign Trade (Regulation) Rules, 1993 provides for confiscation of goods in the event of contravention of the Act, Rules or Orders but which may be released on payment of redemption charges equivalent to the market value of the goods. Section 3(3) of the Foreign Trade Act provides that any order of prohibition made under the Act shall apply mutatis mutandis as deemed to have been made Under Section 11 of the Customs Act also. Section 18A of the Foreign Trade Act reads that it is in addition to and not in derogation of other laws. Section 125 of the Customs Act vests discretion in the authority to levy fine in lieu of confiscation. The MFDs were not prohibited but restricted items for import. A harmonious reading of the statutoryprovisions of the Foreign Trade Act and Section 125 of the Customs Act will therefore not detract from the redemption of such restricted goods imported without authorisation upon payment of the market value. There will exist a fundamental distinction between what is prohibited and what is restricted. We therefore find no error with the conclusion of the Tribunal affirmed by the High Court that the Respondent was entitled to redemption of the consignment on payment of the market price at the reassessed value by the customs authorities with fine Under Section 112(a) of the Customs Act, 1962.

10. The Central Government had permitted the import of used MFDs with utility for at least five years keeping in mind that they were not being manufactured in the country. The Chartered Engineer commissioned by the customs authorities had certified that the MFDs were capable of utility for the next 5 to 7 years without any major repairs. Considering that at import they had utility, the High Court rightly classified them as “other wastes” Under Rule 3(1)(23) of the Waste Management Rules, which reads as follows:

“Other wastes means wastes specified in Part B and Part D of Schedule III for import or export and includes all such waste generated indigenously within the country.”

11. Rule 13(2) provides the procedure for import of other wastes listed in Part D Schedule III. Item B1110 of the Schedule mentions used Multifunction Print and Copying Machines (MFDs). Entry 4(j) lists out five documents required for import of used MFDs. The Respondents have been found to be substantially compliant in this regard and the requirement for the country of origin certificate has been found to be vague by the High Court. Form 6 has rightly been held to be not applicable to the subject goods.

12. Rule 15 of the Waste Management Rules dealing with illegal traffic, provides that import of “other wastes” shall be deemed illegal if it is without permission from the Central Government under the Rules and is required to be reexported. Significantly the Customs Act does not provide for re-export. The Central Government under the Foreign Trade Policy has not prohibited but restricted the import subject to authorisation. The High Court therefore rightly held that the MFDs having a utility period, the Extended Producer Responsibility would arise only after the utility period was over. In any event, the E-waste Rules 2016 certificate had since been issued to the Respondents by the Central Pollution Control Board before the goods have been cleared.”

After such reasoning, the appeals filed by the Commissioner of Customs were dismissed by the Hon’ble Supreme Court.

8. It is true that this decision was distinguished by the Hon’ble Division Bench of the Madras High Court in the decision reported in 2019 (367) E.L.T 920 (Mad) (Commissioner of Customs, Chennai – II vs. City Office Equipment). But, on a careful perusal of the factual matrix obtaining in the said case, I am of the view of that the Division Bench decision is clearly distinguishable. The Division Bench noted that the import of the second hand machines are allowed for clearance subject to fulfillment of certain conditions which included registration with BIS and that the said condition was not fulfilled. This is evident from the discussion found at Paragraph No.26 of the said order which reads as under :

“26.Considering the factual position, the respondent would not be entitled to make a prayer for provisional clearance, as there is non compliance of the vital requirement regarding BIS certificate as required under Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order 2012 dated 07.09.2012 and subsequent orders dated 25.06.2013 and 07.11.2014 issued by MeitY. We find that this issue did not arise in the case of Athul Automations Private Limited (supra) and the only common feature was non production of advance authorisation/import licence. Thus, in our considered view, the decision in the case of Athul Automations Private Limited (supra) is factually distinguishable apart from the fact that the said case arose out of an adjudicatory process in which the factual position was threadbare analysed by two fact finding authorities. That apart, the Hon’ble Supreme Court left the ultimate decision to be taken by DGFT.”

As rightly pointed out by the learned counsel for the petitioner, both Atul Automations Pvt.Ltd., decision as well as the aforesaid decision of the Hon’ble Division Bench were considered by a subsequent Division Bench in the order dated 10.09.2019 in WP Nos.16126 of 2019 etc batch. That was also a case dealing with provisional release of the goods. When the said order was challenged before the Hon’ble Supreme Court in SLP (Civil) Diary No.3412 of 2020, the SLP was dismissed on 17.02.2020.

9. The 2016 Rules contain as many as 8 schedules. Schedule 3 is in two parts. Part A contains a list of hazardous wastes applicable for import and export with prior informed consent. Part B contains the list of other wastes applicable for import and export and not requiring prior informed consent. Schedule VI sets out hazardous and other wastes prohibited for import. It is not the case of the respondents that the imported goods in the case on hand fall under Schedule VI. Once the application of the Schedule VI of the 2016 Rules is ruled out, the only question is whether the import of the goods is free or restricted. Under either case, in view of the decision of the Hon’ble Supreme Court in Atul Automations, provisional release is very much permissible. The respondents have seized the goods under Section 110 of the Customs Act, 1962. Therefore, Section 110A of the Customs Act, 1962 will automatically kick in. Section 110A of the Act reads as under :

“110A.Provisional release of goods, documents and things seized pending adjudication

Any goods, documents or things seized under Section 110, may, pending the order of the adjudicating authority be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.”

10. Of course, the contention urged by the learned standing counsel with reference to Rule 12 (4) r/w.Rule 15 has to be answered. Interestingly, this point has also been considered in Atul Automations decision. The Hon’ble Supreme Court after referring to Rule 15 points out that the Customs Act, 1962 does not provide for re-export. There is another decision reported in 2015 (316) E.L.T 199 (Mad) (City Office Equipments vs. Commissioner of Customs) in favour of the petitioners. The learned Judge after elaborate discussion of the statutory scheme obtaining in the Customs Act, 1962, the Foreign Trade Development and Regulation Act, 1992, Foreign Trade (Regulation) Rules, 1993 and the earlier Hazardous Wastes Rules concluded that despite the fact that the goods, whose import is restricted in terms of the Foreign Trade Policy, should be construed to be prohibited goods, there is no bar for the release of the goods. The learned Judge also noted that it is not open to the customs authorities to insist on re-export. This was to be done only by the authorities specified in Schedule VII of the Hazardous and Other Wastes (Management and Transboundary) Rules, 2016. As in that case, in the present case also, no proceedings have been initiated by the authorities in terms of the Hazardous Wastes Rules for directing the petitioners to re-export the goods. This decision of the learned single Judge was also confirmed by the Hon’ble Division Bench in the decision reported in 2016 (336) E.L.T 199 (Mad) (Commissioner of Customs (Sea Port-Import), Chennai vs. City Office Equipments).

11. I am therefore of the view that the petitioners are entitled to provisional release of the goods under Section 110A of the Customs Act, 1962. Since several decisions have been cited on either side, I make it clear that I have chosen to follow the decision of the Madras High Court reported in 2015 (316) E.L.T 199 (Mad) (City Office Equipments vs. Commissioner of Customs) which was confirmed by the Hon’ble Division Bench in the decision reported in 2016 (336) E.L.T 199 (Mad) (Commissioner of Customs (Sea Port-Import), Chennai vs. City Office Equipments) and the decision of the Hon’ble Supreme Court in Atul Automations case. Of course, the adjudication proceedings will go on. The respondents 2 and 3 are directed to provisionally release the goods of the petitioners by taking a bond from them in proper form with such security and conditions as the adjudicating authority may require. The petitioners’ counsel also prayed that they should not be levied with any demurrage and container detention charges. The learned counsel for the petitioners pointed out that they are entitled to waiver in view of the Handling of Cargo in Customs Areas Regulations 2009. They would also point out that the Union Government has also instructed that in view of the lock down declared by the Government of India, demurrage and detention charges ought not to be levied.

12. The learned counsel for the petitioners placed reliance on the decision reported in 2018 (361) E.L.T 463 (Mad) (Giridhari Homes Pvt. ltd vs. Principal Commissioner of Customs, Chennai-III) and 2019 (367) E.L.T 972 (Mad.) (Agro 1 Stop vs. Commissioner of Customs, Chennai-II). The said decisions are squarely applicable to the case on hand. Therefore, the respondents are directed to assess and permit the provisional release of the goods in question upon payment of applicable duties of customs subject however to the eventual adjudication. The respondents shall release the goods after assessing and collecting the customs duty and other charges provisionally within a period of three weeks from the date of receipt of a copy of this order. The adjudication proceedings can go on. The respondents will bear in mind the usual approach adopted in the case of provisional release of goods in terms of 110A of the Customs Act. It is further declared that the petitioners are entitled to waiver in view of the handling of cargo in Customs Areas Regulations 2009. No demurrage and detention charges shall be levied on the petitioners herein.

13.These writ petitions stand allowed. No costs.

Consequently, connected miscellaneous petitions are closed.