Importer Not Liable To Pay Customs Duty On Goods Not Received By Him: Bombay High Court Grants Refund

The Bombay High Court has held that an importer cannot be made liable to pay customs duty on goods that were never cleared for home consumption and were never received by the importer. The Court observed that, under Sections 13, 23 and 27 of the Customs Act, 1962, duty paid in anticipation of clearance becomes refundable once it is established that the goods were short-landed or lost before clearance.A division bench of Justices M.S. Sonak and Advait M. Sethna was hearing a petition filed by M/s Ajay Industrial Corporation Ltd. challenging the rejection of its refund claim for ₹35,37,358/–, paid as customs duty for 100 metric tons of PVC Resin imported under a Bill of Entry dated 27 April 2022. The petitioner had paid the full duty but never received the consignment. A joint survey conducted on 8 June 2022 concluded that the goods were untraceable, and the Mumbai Port Authority later concluded that the goods of the petitioner were short landed. Despite this, the Customs Department refused to issue the closure letter required for processing the refund. The petitioner made repeated representations, including a grievance filed on the CPGRAMS portal, which was rejected. The Court noted that it is confirmed that the consignment of 100 metric tons of Polyvinyl Chloride Resin was never delivered to the Petitioner, and neither could the authorities dispute this position.The Court held that the statutory scheme clearly absolves the importer of duty liability when goods are pilfered before clearance or are short-landed, and makes remission or refund mandatory. Section 13 applies to pilferage before clearance; Section 23 applies where goods are lost or destroyed before clearance; and Section 27 provides the mechanism for refund. The Court observed that the goods were never cleared, and therefore the importer could not be fastened with any duty liability. It observed: “… once it is established that the imported goods were never received and that the proper officer never granted clearance, the customs duty cannot be retained. The duty collected in anticipation of clearance becomes refundable as it was paid without the corresponding receipt of goods.”The Court criticised the Customs Department for insisting on a “closure letter”, observing that the petitioner could not have been penalised for procedural or administrative lapses beyond its control. The Court further remarked that the question of responsibility between the Customs Department and the Mumbai Port Authority can be resolved later, holding that an innocent importer cannot suffer due to an inter-se dispute.Accordingly, the High Court directed the Assistant Commissioner of Customs (Refund) to process and refund ₹35,37,358/– with 9% interest from the date of payment within four weeks, and to file a compliance report. It clarified that the question of inter se liability between Customs and the Port Authority was left open to be resolved independently. Case Title: M/s Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs (Refund) & Anr. [WRIT PETITION NO. 11118 OF 2025]Click Here To Read/Download Order

Importer Not Liable To Pay Customs Duty On Goods Not Received By Him: Bombay High Court Grants Refund

Saksham Vaishya

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