More Stories

Informist, Wednesday, Nov. 19, 2025

 

NEW DELHI – The Bombay High Court Wednesday ruled that once it was established that the importers never received imported goods and the proper officer never granted it clearance, the customs department cannot retain the importers' customs duty. The duty collected in anticipation of clearance becomes refundable as it was paid without the corresponding receipt of goods, said the court. To hold otherwise would be contrary to both the letter and spirit of the statute and would result in collecting and retaining duty without the authority of the law, not to mention unjust enrichment of the revenue at the cost of the importer, the court added.

 

The court said that importers cannot be held liable to pay customs duty on goods that were never cleared for home consumption. In these cases, the obligation on the customs department to refund the customs duty along with statutory interest cannot be delayed or avoided, said the high court.

 

The high court noted that the petitioner Ajay Industrial Corp. Ltd.'s goods were lost or rendered unavailable before clearance for home consumption. Consequently, the petitioner was entitled to a refund of the customs duty amounting to INR 3.5 million, together with interest at 9% from the date of payment of the custom duty.

 

In this case, the amount paid by Ajay Industrial Corp. was not in response to a valid demand but in anticipation of the clearance of goods that never materialised, said the court. Such payment, therefore, partakes the character of a deposit rather than a duty and must, in equity and under the statutory scheme, be refunded, said the court. "The refund of such duty is a statutory entitlement, not a discretionary relief. The customs department, being the authority which collects the duty, cannot indefinitely withhold it on the pretext of unresolved internal coordination with the port authority," the court added.

 

Ajay Industrial Corp. had placed an order for importing 100 tonnes of polyvinyl chloride resin suspension Grade 5 Erdos, filing a bill of entry with the customs department and paying customs duty on the same. The shipping agent of the carrier had noted that 100 packages had arrived at the port managed by Mumbai Port Authority. However, the petitioner's custom house agent requested a joint survey in which it was found that surveyors were "unable to trace the above subject 100 big bags" at the Mumbai Port Authority's premises. The Mumbai Port Authority concluded that the petitioner's goods were short landed.

 

Thereafter, the petitioner filed a refund application with the customs department. The department maintained that it was a case of pilferage of the goods after they landed. The port authorities argued that this is a short landing, for which they have issued a certificate, and that the customs department should refund the customs duty collected from the petitioner.

 

"The present petition, therefore, exemplifies a situation in which an innocent importer has suffered and continues to suffer due to administrative inaction and inter-departmental discord," said the court. These authorities have erected barriers of procedural technicalities and largely frivolous defences, again utilising public monies, which include the petitioner's funds unlawfully retained by them for the past three years, the court added.  End

 

Reported by Surya Tripathi

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.