Goods Never Cleared for Home Consumption: Bombay HC Orders Refund of ₹35.37 Lakh Customs Duty u/s 23 to Importer [Read Order]

The Bombay High Court, in a recent case, has ordered the Customs Department to refund ₹35.37 lakh to the petitioner, an importer, ruling that duty cannot be retained when imported g goods were lost or rendered unavailable before clearance for home consumption.

The petitioner, M/s Ajay Industrial Corporation Ltd, a Delhi‑based manufacturer of PVC/CPVC pipes, had imported 100 metric tons of Polyvinyl Chloride Resin SG‑5 Erdos in April 2022. Customs duty of ₹35.37 lakh was paid through bank transfer and SCRIP licenses.

However, despite payment, the consignment was never delivered. Joint surveys conducted in June and September 2022 confirmed that the goods were untraceable, and the Mumbai Port Authority later issued a Short Landing Certificate in April 2023.

Caught between conflicting claims of Customs and the Port Authority, the importer approached the High Court. Customs maintained that the goods were pilfered after landing and that liability lay with the Port Authority under Section 13, read with Section 45.

The Port Authority, however, asserted that the goods had short‑landed and never arrived at Mumbai Port, thereby placing the refund obligation squarely on Customs under Section 23. The police investigation also concluded that there was no evidence of pilferage, treating the matter as civil in nature.

The Court noted that the petitioner had neither received the goods nor was responsible for their loss. It refused to enter into the blame game between Customs and the Port Authority, observing that the importer was the only sufferer in the dispute between two public authorities.

The Bench opined that the statutory scheme of the Customs Act distinguishes between pilferage (Section 13) and loss or destruction before clearance (Section 23). In either case, the importer is not liable to pay duty.

Specifically, the Court observed that Section 13 protects importers where goods are pilfered before clearance, shifting liability to the custodian. Section 23 mandates remission of duty where goods are lost, destroyed, or short‑landed before clearance for home consumption. Section 27 provides the mechanism for refund claims, ensuring that amounts paid without legal demand are returned to the importer.

The court observed that whether the non-receipt of goods is regarded as a case of short landing or as loss after unloading but before clearance, the legal consequence remains the same: the importer cannot be held liable to pay customs duty on goods that were never cleared for home consumption.

The Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna held that since the goods were never cleared for home consumption, Section 23 squarely applied, and Customs was bound to remit the duty. It also criticised the insistence on a “closure letter” for the Bill of Entry, noting that such closure could only be issued by Customs itself and that the requirement was used to delay the refund.

The court opined that the Petitioner has been pursuing the matter for nearly three years without any effective redress, caught between Respondent No. 1 and Respondent No. 2, each of whom disclaims liability.

Accordingly, the Court directed Customs to refund the entire duty amount of ₹35.37 lakh to the petitioner, along with applicable interest.

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