The Telangana High Court has set aside the confiscation of 73 used digital multi-function devices (MFDs), holding that a quantitative restriction introduced through an amendment could not be applied to an import covered by a Bill of Entry filed before the amendment became effective.
The Bench of Acting Chief Justice P. Sam Koshy and Justice Narsing Rao Nandikonda held that the amended Paragraph 8 of the Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2021, effective from June 15, 2026, did not apply to the consignment for which the Bill of Entry was presented on June 4, 2026.
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The Court directed release of the machines subject to payment of enhanced duty under specified conditions. It left the valuation dispute open for the parties to pursue through appropriate remedies.
The petitioner/assessee imported 73 used digital MFDs from a supplier in the United States. After their arrival at ICD Thimmapur, the importer filed Bill of Entry No. 9677159 on June 4, 2026.
Customs examined the goods on June 19, 2026, and found that they corresponded substantially with the declaration.
A Chartered Engineer appointed at the instance of Customs certified that the machines were functional second-hand capital goods with a residual life exceeding six years. They were neither hazardous waste nor electronic waste.
The engineer also confirmed that each machine weighed substantially more than 80 kilograms, satisfying the weight criterion for Highly Specialised Equipment under Paragraph 8(d) of the 2021 Order.
Nevertheless, Customs issued a show cause notice alleging absence of DGFT authorisation and BIS registration. It proposed confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, together with enhancement of the assessable value.
Through its adjudication order dated July 15, 2026, Customs divided the consignment into two categories.
It treated 36 machines as prohibited goods, reasoning that imports of the relevant models had allegedly crossed 100 units during calendar year 2025 across India through various importers. Redemption was permitted only for re-export against a fine of ₹1,33,257.
The order further contemplated rendering these machines unusable and disposing of them as scrap if the re-export option was not exercised within the prescribed period.
The remaining 37 machines were treated as restricted goods and confiscated, with redemption for home consumption permitted on payment of ₹3,95,021, representing 25% of their redetermined assessable value.
The importer challenged the application of the quantitative ceiling, aggregation of imports by unrelated businesses, and insistence on DGFT authorisation despite the equipment qualifying for exemption.
The Department argued that the importer should pursue the statutory appeal available under Section 128 of the Customs Act.
The High Court accepted that merely describing an order as arbitrary or without jurisdiction does not justify bypassing an appellate remedy. However, it explained that the alternative-remedy rule is discretionary and does not exclude writ jurisdiction.
In this case, the controversy involved the operation of a notification over time and required no examination of disputed facts. The adjudication order also conflicted with binding High Court precedents.
The Court noted that the goods had remained detained since June 2026, attracting recurring demurrage and detention charges. An earlier direction required the adjudicating authority to consider the Court’s decisions concerning second-hand MFD imports.
Relegating the importer to an appeal would prolong detention and defeat that direction. The preliminary objection was therefore rejected.
The principal issue concerned notification S.O. 1246(E), dated March 10, 2026, which amended Paragraph 8 of the 2021 Order with effect from June 15, 2026.
The amended provision introduced a condition concerning equipment manufactured or imported in fewer than 100 units per model per year.
The Bench held that the notification expressly fixed its commencement date and contained no language giving it retrospective operation. It explained that delegated legislation cannot impose a new restriction retrospectively without the necessary statutory authority and clear language exercising that power.
Referring to Section 15 of the Customs Act, the Court treated the date of presentation of the Bill of Entry as the reference point for determining the applicable exemption and import-policy requirements in this case.
Since the Bill of Entry was filed on June 4, 2026—11 days before the amendment took effect—the earlier legal position governed. On that date, Paragraph 8 contained no numerical ceiling.
The later examination, show cause notice and adjudication could not bring the earlier import within the subsequent amendment. Otherwise, an importer’s rights would depend on the speed of departmental proceedings.
Although the finding on the amendment’s commencement resolved the quantitative-limit issue, the Court also identified defects in the Department’s aggregation approach.
The provision referred to units manufactured or imported per model per year. It did not expressly establish an industry-wide ceiling shared by unrelated importers.
The Court reasoned that describing the provision as model-specific, or observing that the Foreign Trade Policy operated nationally, did not explain why one importer’s entitlement should be exhausted by another importer’s transactions.
A restrictive interpretation depriving an importer of an exemption because of imports made by unrelated businesses required clear statutory language.
The Court also found an independent violation of natural justice.
The show cause notice of alleged absence of DGFT authorisation and BIS registration. It did not disclose that exemption eligibility would be tested against imports made by other businesses across all ports.
The importer had therefore not been informed of the case it was required to answer. The adjudicating authority could not sustain its findings on a basis outside the notice.
The Bench held that this defect would undermine the findings concerning the 36 machines even if the quantitative ceiling had applied.
Following its earlier decisions, the Court held that when imported MFDs satisfied Paragraph 8, the compulsory-registration requirement ceased to apply.
Consequently, the machines could not be treated as restricted under Entry 1(b) of Paragraph 2.31 of the Foreign Trade Policy, 2023. They fell within Entry 1(d), concerning freely importable second-hand capital goods.
The Department’s own expert had confirmed the machines’ weight, functionality and residual life. Their compliance with the relevant equipment criterion was undisputed.
The Court found no basis for confiscation under Section 111(d). It further held that no case had been made out under Section 111(m), and that there was no foundation for penalty under Section 112.
The High Court set aside the adjudication order insofar as it classified the goods as prohibited or restricted, confiscated them under Section 111(d), and imposed redemption fines and penalty, if any.
For release, it adopted conditions from an earlier decision in Arka Business Solutions v. Superintendent of Customs, reported at (2026) 166 GSTR 286.
Under those conditions, Customs must quantify the enhanced duty within one week of receiving the order. The importer must promptly pay or deposit that amount, following which the goods must be released within an outer limit of four weeks.
The adopted conditions preserve further proceedings in accordance with law. Any application for waiver of demurrage must be considered objectively; the judgment does not itself grant a waiver.
The Court expressly left the valuation dispute open. The writ petition was allowed, with no order as to costs.
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