Custom Department cannot retain the duty if goods were never cleared for home consumption: HC

M/s Ajay Industrial Corporation Ltd. imported 100 MT of PVC Resins and paid customs duty of Rs. 35,37,358/- through a combination of cash and SCRIP credits. The carrier’s agent issued a delivery order showing arrival of the cargo at Mumbai Port. However, the importer was never able to trace or take delivery of the goods. A joint survey on 8 June 2022 confirmed that the 100 jumbo bags could not be located. A police complaint was filed, ultimately resulting in an FIR, but the investigation concluded that no evidence existed to show the goods were ever discharged at Mumbai Port. The Port Authority’s own short-landing certificate dated 25 April 2023 recorded that the goods had not been received.

The importer applied for a refund on 24 September 2022 under Sections 13, 23 and 27, but Customs returned the same due to deficiencies and asked for a closure letter for the Bill of Entry, something which Customs itself had to issue. Multiple follow-up representations, including a CPGRAMS grievance, were rejected or ignored. Meanwhile, Customs and the Port Authority blamed each other: Customs alleging pilferage in port custody, the Port insisting on short-landing.

Issue Before HC: Whether an importer, who has never received the imported goods and is caught between conflicting stands of Customs and Port authorities, is entitled to a refund of customs duty under Sections 13, 23, 27 and 27A of the Customs Act.

HC Held: The Court held that it is an admitted fact that the importer never received the goods, and the Bill of Entry was never cleared for home consumption. In such circumstances, duty cannot be retained. Whether the case is one of short landing or loss after discharge is irrelevant, the importer cannot be made liable. The Court found Customs’ insistence on a “closure letter” wholly unjustified, especially when the importer could not secure such a document amid disputes between Customs, Port, and the shipping line. The impugned communication returning the refund claim was not an appealable order, making the alternate-remedy objection unsustainable.

The Court applied section 23 and held that duty paid on goods lost before clearance must be remitted and refunded, with statutory interest. Thus, Customs (Respondent No.1) was directed to refund Rs. 35,37,358/- with 9% interest from the date of payment, within four weeks. A compliance report must be filed by 8 January 2026. The Court expressly left open the inter se liability between Customs and the Port Authority.

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