‘Clear Dereliction of Duty’: Bombay HC Imposes ₹25k Costs on Customs for Failing to Pass Speaking Order even after Payment of Duty ‘Under Protest’ [Read Order]

The Bombay High Court has criticised the Customs Department for a “clear dereliction of statutory duty”, imposing ₹25,000 costs for its failure to pass a speaking order under Section 17(5) of the Customs Act, 1962, even after the importer paid the disputed duty “under protest”.

A writ petition filed by JKC General Trading Company, which had imported consignments of dates through multiple Bills of Entry. During the assessment, Customs authorities enhanced the declared value of the goods and demanded additional duty without providing cogent reasons.

The importer, considering the perishable nature of the goods, paid the enhanced duty amounting to ₹46.01 lakh under protest to secure clearance, while simultaneously challenging the enhancement.

The petitioner’s appeal before the Commissioner (Appeals) succeeded in July 2021, with the appellate authority remanding the matter and specifically directing the proper officer to pass a reasoned speaking order in terms of Section 17(5).

The importer had no choice but to petition the High Court because no speaking order was issued for more than three years in spite of the remand, numerous arguments, grant of a personal hearing, and written submissions.

A Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna held that Customs authorities cannot frustrate an importer’s right to statutoryremedies by indefinitely delaying adjudication. The Court noted that passing a speaking order is not a mere procedural formality but a substantive legal obligation, without which the right to appeal becomes illusory.

In the case of Canon India Private Limited Vs. Union of India, this Court has held that it is the duty of the Customs Authorities to decide the importer’s claim by passing a speaking order. This Court has further held that by not passing such speaking orders or by delaying their passing, the Customs Authorities cannot frustrate the importers’ right of an effective redressal to appeal or other remedies.

The Bench maintained that payment of duty, whether voluntarily or in protest, does not release the appropriate officer from the obligation to issue a reasoned order, recalling its earlier position in Canon India Pvt. Ltd. and the recent Supreme Court decision in ASP Traders. Failing to do so is against Article 265 of the Constitution, which states that taxes may only be imposed or collected by legal authority, as well as natural justice principles and openness.

The High Court called Customs' actions a "gross dereliction" and ordered the relevant officials to hold a new personal hearing if needed and issue speaking directions within two months.

The Court also ordered ₹25,000 in costs to be paid to the petitioner within four weeks in order to guarantee accountability. The Department is free to collect proportionate amounts from accountable staff internally.

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