Karnataka High Court Upholds Rejection Of CBI Probe Over Delay In Crypto Mining Equipment Clearance

The Karnataka High Court on 15 October dismissed an appeal filed by Bengaluru resident Shivaraj M.S. seeking a Central Bureau of Investigation (CBI) probe into the alleged delay by Customs officials in clearing imported cryptocurrency mining equipment, upholding the Single Judge's order rejecting his plea for an investigation and directions to frame clearance policies.

A Division Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha held that a CBI investigation into the conduct of Customs officials cannot be ordered without material establishing arbitrariness, mala fides or abuse of statutory power. The judges observed:

“The Customs authority determined that the market value of the goods imported by the appellant was approximately of USD 6750 as ascertainable from the internet. However, the declared value of the equipment was USD 300. The appellant appeared in person and did not dispute that the value of the equipment was USD 6750. Thus, prima facie, it appears that the value was misdeclared.”

Shivaraj had ordered an Innosilicon A9 ZMaster, a specialised computing device used for cryptocurrency mining, from an overseas supplier in Hong Kong. He claimed that he purchased the equipment under a promotional pre-booking arrangement and paid 0.9400 Bitcoin as consideration.

The supplier dispatched the equipment from Hong Kong under an invoice dated 3 July 2018, describing it as a “server” and declaring its value as USD 300. The shipment arrived in India on 6 July 2018, following which DHL filed a Courier Bill of Entry with the Customs Department.

The Bill of Entry was flagged under the Risk Management System. Customs officials subsequently asked Shivaraj to produce the purchase order and proof of remittance, suspecting that the shipment's description and declared value were incorrect.

Shivaraj approached the High Court seeking a CBI investigation into alleged corruption and misconduct by Customs officials over the delay in clearing the shipment. He also sought compensation for his alleged financial losses and directions to the authorities to formulate clear policies for importing and clearing cryptocurrency mining equipment.

He contended that DHL had filed the Bill of Entry without his authority. He further alleged that Customs officials had failed to determine the equipment's value and raise a demand for the applicable customs duty promptly, while the prolonged withholding of the goods had rendered them obsolete.

Customs officials determined the equipment's market value at approximately USD 6,750 based on information available on the internet, as against the declared value of USD 300. The Division Bench noted that Shivaraj, who appeared in person, did not dispute the valuation.

The Court also noted that the Single Judge had considered a communication dated 19 July 2018, in which the Customs Department explained why it had not immediately cleared the shipment. The communication pointed out that the description of the equipment as a “server” and its declared value of USD 300 appeared incorrect.

Agreeing with the Single Judge, the Division Bench found no material establishing arbitrariness, mala fides or abuse of statutory power by the Customs authorities. It rejected Shivaraj's request for a CBI investigation as “wholly misconceived”. It said:

“...the learned Single Judge found that there were no grounds to establish any arbitrariness, mala fide or abuse of statutory power. The petitioner's prayer to refer the matter to the CBI was wholly misconceived. We find no infirmity with the said view. We also find there are no grounds for issuing any directive for clearance and handling of goods as sought by the appellant…”

Further, the judges found no grounds to direct the authorities to frame policies for the clearance and handling of cryptocurrency mining equipment.

Accordingly, the Division Bench of the High Court dismissed the appeal as unmerited.

For Appellant: Shivaraj M.S. appeared in person

For Respondent: S. Rajashekar, Advocate