Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 02.11.2026
Telangana High Court Quashes Customs Confiscation of Used MFD Imports
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Telangana High Court has ruled that a later amendment imposing a 100-unit-per-model annual threshold could not be used to confiscate Arka Business Solutionsโ consignment of used multi-function devices (MFDs) imported before that amendment took effect.
Background of the dispute
Arka Business Solutions, an importer and seller of used digital multi-function devices, imported 73 used MFDs from the United States. The company filed its Bill of Entry on 4 June 2026 at ICD Thimmapur.
Customs examined the consignment on 19 June 2026. A Chartered Engineer appointed at Customsโ instance found that the machines were functional second-hand capital goods, had more than six years of residual life, were neither hazardous waste nor electronic waste, and each weighed more than 80 kg.
Those findings were significant because the weight criterion placed the devices within the exemption for Highly Specialised Equipment (HSE) under the Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2021 (CRO 2021).
Customsโ decision to confiscate the goods
Despite the technical certification, Customs issued a show-cause notice alleging that the importer required DGFT authorisation under the Foreign Trade Policy, 2023, and had not met BIS registration requirements. The adjudicating authority subsequently divided the 73 machines into two categories:
- 36 units were treated as prohibited goods because their models allegedly exceeded a 100-unit annual threshold when imports by all importers across India were counted. These units could be redeemed only for re-export, subject to a redemption fine of Rs. 1,33,257.
- 37 units were treated as restricted goods. Customs allowed redemption for home consumption on payment of a Rs. 3,95,021 redemption fine.
The order was based on the view that the 100-unit threshold under the amended Paragraph 8 of CRO 2021 applied nationally and across unrelated importers.
Courtโs findings: the amendment could not operate retrospectively
The High Court set aside the confiscation order, holding that the amendment adding the quantitative limit came into force only on 15 June 2026. Since Arka Business Solutions had filed its Bill of Entry on 4 June 2026, the amended provision did not govern the import.
The Court emphasized that subordinate legislation is presumed to operate prospectively unless it clearly states otherwise. The notification did not contain language giving it retrospective effect.
Under Section 15 of the Customs Act, the relevant legal position for goods entered for home consumption is determined on the date the Bill of Entry is presented. Accordingly, later events, including the Customs examination, show-cause notice, and adjudication order, could not subject the earlier import to a restriction that was not in force at the relevant time.
Why the 100-unit interpretation was also flawed
The Court found additional defects in Customsโ reasoning. The language of the amended provision referred to equipment โmanufactured/imported in less than 100 units per model per year,โ but did not expressly create an industry-wide cap shared by all importers.
The Court observed that Customs had not explained why one importer should lose an exemption because unrelated importers had brought in the same model. A restrictive interpretation that limits an exemption on the basis of third-party imports required clear statutory language, which was absent.
The Court also noted that the show-cause notice did not tell the importer that eligibility would be tested using all-India import data from other importers. Deciding the case on a basis not disclosed in the notice violated the principle that a noticee must know the case it has to answer.
HSE exemption meant the devices were freely importable
The Court reaffirmed its earlier interpretation of the relationship between CRO 2021 and the Foreign Trade Policy. Where used MFDs satisfy the HSE exemption, the compulsory registration requirement does not apply. As a result, the import cannot be treated as restricted under the provision dealing with second-hand goods subject to CRO compliance.
Instead, qualifying goods fall within the category of freely importable second-hand capital goods. Since the Chartered Engineer had confirmed the devices met the weight threshold and were functional capital goods rather than e-waste, there was no basis to classify them as prohibited or restricted.
The Court therefore found no basis for confiscation under Section 111(d) of the Customs Act. It also held that the record did not support allegations of misdeclaration under Section 111(m) or a penalty under Section 112.
Outcome and release conditions
The High Court allowed the writ petition and quashed the Customs order to the extent it:
- classified the goods as prohibited or restricted;
- confiscated them under Section 111(d);
- imposed redemption fines; and
- imposed any related penalty.
Customs was directed to release the goods covered by the Bill of Entry, subject to conditions adopted from an earlier Arka Business Solutions decision. These conditions require the importer to deposit the enhanced duty amount after Customs quantifies it, while preserving the partiesโ rights to pursue valuation issues separately. The Court also stated that any demurrage-waiver request must be considered objectively.
Key legal takeaway
The ruling confirms that import restrictions and exemption conditions must be assessed under the law in force when the Bill of Entry is filed. Customs cannot apply a later quantitative restriction retrospectively, expand an exemption limitation through an unclear all-India interpretation, or rely on grounds that were not put to the importer in the show-cause notice.
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Source: Telangana High Court
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