Toronto police have dropped charges against a man in connection with Monday's evacuation scare in the city's northeast.

Earlier, police said they were going to charge Shawn Morris, 27, with possession of an explosive, failure to comply with probation and mischief. But police and prosecutors appeared to back off a short while later when it turned out the device that prompted a large-scale evacuation may have been a "tool for alternative fuel."

Morris is a student at Centennial College where he is taking an automotive course.

"After consultation with the Crown attorney, we believe that … he had no intention of causing any harm to people," Const. Tony Vella said.

"And as well, there [are] psychological issues with the person," he told CBC News, adding it is best that he be treated for those issues in a hospital instead of being charged.

Morris is in custody under the Mental Health Act and is awaiting a psychiatric assessment.

Van reported stolen

Monday afternoon's evacuation was prompted after Morris reported his van had been stolen from an area near Centennial College's Ashtonbee campus on Eglinton Avenue East.

"He immediately called 911 who tried to do something about it because he was, you know, worried," said Rose Cavallaro, a spokeswoman for the college.

The van had been taken to an impound lot on Markham Road where it was discovered that the back of the vehicle was packed with pipes and wires. Police and fire officials were called and, suspecting an explosive device, they issued an evacuation order at about 1:30 p.m. ET.

Everyone within about 1.6 square kilometres was ordered to leave the area bounded by Steeles Avenue East, Morningside Avenue, Finch Avenue East and Middlefield Road.

Police said they took extra precautions because the impound lot sits near a large industrial propane tank and CPR tracks.

The scare caused a major headache for thousands of residents and workers at nearby companies who were told to leave. Traffic was halted in the cordoned-off area.

Order lifted

The evacuation order was lifted by early evening after police bomb squad officers said they had managed to defuse the device.

"The safety to the public has been restored," Toronto police Insp. Howie Page told reporters at about 6:45 p.m. "The Emergency Task Force bomb squad have successfully dismantled the device in the vehicle."

Drummond said there was heightened concern but "at no time throughout this investigation have we had any allegations of threats of violence towards anybody — nothing political or religious in relation to what we found in the vehicle."

Police said later that the operation had been a smooth one and that they had used lessons learned from the 2008 explosion at the Sunrise Propane facility in Downsview to evacuate the area.

Morris was taken into custody where police discovered he had installed a "possible tool for alternative fuel" in his van. The device, Drummond said, "was not part of the curriculum at all — not connected at all to the school."