Customs Duty Cannot Be Retained when Goods are Not Cleared: Bombay HC Equates Short Landing with Pre-Clearance Loss [Read Order]
The Court made it clear that any inter-departmental dispute between Customs and the Port Authority “cannot deprive the importer of its dues” and that the authorities remain free to pursue each other separately
The Bombay High Court has held that Customs cannot retain duty when imported goods are never cleared, observing that both short landing and loss before clearance trigger statutory remission under Section 23 of the Customs Act, 1962.
The Court noted that duty paid in advance becomes refundable if the goods are never received, and the importer cannot be penalised for disputes between Customs and Port authorities regarding where the loss occurred.
M/s Ajay Industrial Corporation Ltd., the importer-petitioner, which imported 100 MT of PVC resin and paid ₹35.37 lakh in customs duty. Despite duty payment and filing of the Bill of Entry, the consignment never reached the importer.
A joint survey in June 2022 confirmed that none of the 100 bags could be traced, and the Mumbai Port Authority later issued a Short Landing Certificate, affirming that the goods had not arrived at the port. Meanwhile, Customs blamed the Port, the Port blamed the Shipping Line, and the importer remained stuck for nearly three years without goods or refund.
The Court held that Sections 13, 23 and 27 clearly protect importers when goods are pilfered, lost, destroyed, or short-landed before clearance for home consumption. Since no “Out of Charge” order had ever been granted, the importer’s liability for duty had not crystallised. Thus, Customs could not insist on an unachievable “closure letter” or ask the importer to compel the shipping line to amend the Import General Manifest.
Also, the Court ruled that short landing is legally indistinguishable from pre-clearance loss, in both situations, the importer never receives the goods and cannot be made to bear the duty burden.
The Court made it clear that any inter-departmental dispute between Customs and the Port Authority “cannot deprive the importer of its dues” and that the authorities remain free to pursue each other separately.
The High Court, while allowing the writ petition, directed the Customs Department to refund the entire duty amount along with 9% interest, within four weeks and file a compliance report by 8 January 2026.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
