Bombay High Court Orders Refund of Customs Duty for Unreceived Goods

Court Directs Customs Authorities to Refund Duty with Interest Amidst Inter-Departmental Dispute

In a significant ruling, the Bombay High Court has directed the Assistant Commissioner of Customs to refund the customs duty paid by M/s. Ajay Industrial Corporation Ltd. for goods that were never received. The decision, delivered by Justices M.S. Sonak and Advait M. Sethna, mandates the refund of Rs. 35,37,358/- along with 9% interest from the date of payment, resolving a prolonged bureaucratic standoff between the Customs Department and the Mumbai Port Authority.

The case arose when M/s. Ajay Industrial Corporation Ltd., a company involved in manufacturing PVC pipes, imported Polyvinyl Chloride Resin but never received the consignment. Despite paying the requisite customs duty, the goods could not be traced, leading the company to seek a refund. The Customs Department rejected their refund application citing procedural deficiencies, specifically the absence of a closure letter for the Bill of Entry.

The Court noted that the petitioner had been entangled in a dispute between the Customs and Port Authorities, each shifting responsibility for the goods' disappearance. With both authorities acknowledging that the goods were never delivered, the Court emphasized that procedural hurdles should not prevent the petitioner from receiving a refund.

The judgment highlighted the applicability of Sections 13, 23, and 27 of the Customs Act, 1962, which collectively ensure that importers are not liable for duty on goods lost or not cleared for home consumption. The Court criticized the authorities for their bureaucratic inaction and stressed the need to uphold the substantive rights of the petitioner.

The Customs Department, which initially resisted the refund citing procedural non-compliance, was instructed to refund the amount within four weeks, accompanied by statutory interest. The Court also clarified that the ruling does not determine the inter se liability between the Customs and Port Authorities, leaving room for further legal recourse if necessary.

This judgment underscores the judiciary's role in safeguarding the rights of importers against administrative inertia and highlights the importance of ensuring procedural fairness in customs operations.

Bottom Line:

Customs Act, 1962 - Importer entitled to refund of customs duty paid for goods that were not received due to loss or non-traceability before clearance for home consumption.

Statutory provision(s): Customs Act, 1962 Sections 13, 23, 27, 27A, 45

M/s. Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs (Refund), (Bombay)(DB) : Law Finder Doc Id # 2810528