By TIOL News Service

NEW DELHI, JAN 24, 2019:

Background:

Respondents during October-November, 2016 imported certain consignments of used Multi Function Devices (Digital Photocopiers and Printers) (MFDs).

Commissioner of Customs held that the imports were in violation of the Foreign Trade Policy framed under the Foreign Trade (Development and Regulation) Act, 1992 and Rule 15(1)(2) of the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016.

Redemption fine was imposed u/s 125 of the Customs Act, 1962 and the consignment was released for re-export only. Penalty was also imposed u/s 112(a) along with penalty u/s 114AA of the Customs Act as also penalty was imposed on the Directors.

The CESTAT held that the MFDs did not constitute "waste" under Rule 3(1)(23) of the Waste Management Rules and had a utility life of 5 to 7 years, as certified by the Chartered Engineer.

Accordingly, release of the consignment was directed u/s 125 of the Customs Act as the respondents were held to have substantially complied with the requirements of Rule 13 of the Waste Management Rules read with Schedule VIII Entry 4(j) except for the country of origin certificate. The Tribunal further noticed that earlier also similar consignments of the respondent and others had been released at the Calcutta, Chennai and Cochin ports upon payment of redemption fine. Therefore, redemption fine was reduced as also the penalty u/s 112(a) including that on the Director also. Penalty imposed u/s 114AA was done away with.

Revenue appealed before the Kerala High Court. The High Court held that the MFDs correctly fell in the category of "other wastes" under Rule 3(1)(23) of the Waste Management Rules read with Part B and Part D of Schedule III Item B-1110 dealing with used Multi-Function Printer and Copying Machines. It was held that the MFDs were not prohibited but restricted items for import. Furthermore, section 11(8) and (9) of the Foreign Trade Act provided for confiscation and redemption of goods imported without authorisation upon payment of market value. The order for release of the goods was upheld subject to execution of a simple bond without sureties for 90% of the enhanced assessed value, with further liberty to the Director General of Foreign Trade along with directions. Please see - 2017-TIOL-2726-HC-KERALA-CUS.

Aggrieved, Revenue is in appeal before Supreme Court.

The Apex Court Larger Bench considered the submissions and held thus -

+ 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 2.08 only 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.

+ Both the Commissioner and the Tribunal did not advert to the provisions of the Foreign Trade Act.

+ 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 statutory provisions 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.

+ 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…

+ 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 re-exported. Significantly the Customs Act does not provide for reexport. 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.

Concluding that it did not find any reason to interfere with the impugned orders, the Apex Court dismissed the Revenue appeals.

(See 2019-TIOL-35-SC-CUS-LB)