HC Orders Full Customs Duty Refund to Timber Importers; Holds 1.416 Conversion Factor Applicable for Pre-2012 Imports

A series of writ petitions were filed by timber importers, primarily National Timbers and other allied entities, challenging the denial of a full refund of additional customs duty under the Notification. The central dispute revolved around the conversion factor used to translate Hoppus Ton into cubic meters used in India. While the petitioners consistently applied the factor of 1 Hoppus Ton = 1.416 cubic meters, Customs authorities insisted that the correct factor was 1 Hoppus Ton = 1.8027 cubic meters, resulting in reduced refunds and demands for provisional duty bonds at the time of clearance.

During the pendency of these petitions, this Court had in 2011 directed the Central Board of Excise and Customs to issue a uniform clarification, leading to Public Notice No. 21/2012 specifying the higher 1.8027 conversion factor.

Appeal before CESTAT: The CESTAT, in a batch of 136 appeals, examined the issue in detail and concluded that the revised conversion factor could apply only to imports made after 11 May 2012, the date of the public notice. Importers before that date were entitled to rely on the earlier, widely followed 1.416 ratio.

Issue Raised: Whether timber importers were entitled to refund of additional customs duty by applying the conversion factor for imports made before 11 May 2012.

HC Held: The Hon’ble High Court held that once the CESTAT had conclusively decided that the higher conversion ratio in Public Notice No.21/2012 applied only to imports after its date of issue, similarly situated importers before that date could not be denied the benefit. The Court also placed weight on the earlier physical verification ordered in a connected case of National Timbers, where actual measurements of timber stock confirmed that the Department’s higher factor of 1.802 would produce inflated and unrealistic volumes. This empirical assessment reinforced the correctness of the 1.416 factor historically used across several customs houses.

The Court quashed the impugned orders in all connected writ petitions. It directed Customs authorities to recompute and grant the refunds using the 1.416 conversion factor. The court said that necessary speaking orders must be issued within three months of receiving the judgment, and the resulting refunds are to be released within one month thereafter.

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