Importer cannot Reopen Issue after Requesting Closure of DRI Investigation by Paying Differential Duty Voluntarily: Madras HC [Read Order]

The Madras High Court has ruled that an importer who voluntarily pays differential customs duty during a Directorate of Revenue Intelligence (DRI) investigation and requests the closure of proceedings is barred from later seeking a refund.

Justice Abdul Quddhose held that such actions trigger the doctrine of “estoppel by conduct,” as the importer’s representation induced authorities to terminate the investigation.

A petition was filed by Virbac Animal Health India Pvt. Ltd. against the rejection of a ₹3.01 crore refund claim. The DRI had alleged the company misdeclared imported Shrimp Larvae Feed to avail a 5% concessional duty rate meant for pellet-form feed, while the authorities maintained the goods were non-pellet and liable for 30% duty.

During the investigation, the petitioner deposited ₹3.16 crore and, via a March 2019 letter, requested the DRI to close the matter. The DRI complied under Section 28(2) of the Customs Act, 1962.

Subsequently, the importer sought a refund under Section 27, arguing the payment was made "under protest" and citing the Finance Bill 2019 and Notification No. 25/2019-Customs to suggest that both pellet and non-pellet feed should attract the lower rate.

The Court rejected these arguments, observing that no communication between March and July 2019 showed the payment was disputed; rather, the request to conclude the investigation proved the payment was voluntary.

With regards to the notifications cited, the Court held that Notification No. 25/2019 was a prospective amendment and could not apply to imports made between 2014 and 2017.

Furthermore, the specific clarification in the Finance Bill 2019 was never enacted into the final Finance Act, stripping it of legal force.

Finally, the petitioner failed to prove they had not passed the duty burden onto customers, a requirement under Section 27 to prevent "unjust enrichment."

Consequently, the Court dismissed the writ petition. It confirmed that the importer could not reopen a settled investigation for a refund upon their own request.

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