Pre-2012 Imports Must Follow 1.416 Hoppus-Ton: Kerala HC Orders Full Customs Duty Refund to Timber Importers [Read Order]

The Kerala High Court has held that timber consignments imported prior to 11.05.2012 must be assessed using the conversion factor of 1 Hoppus ton equal to 1.416 cubic metres, directing Customs authorities to grant full refunds of additional customs duty collected by applying a higher conversion ratio.

The writ petitions were filed by M/s National Timbers, represented by its managing partner, Shyad, alongside other timber importers including Surabhi Woods, The Woodind, and the Kerala Timber Importers Association. The dispute arose from imports of timber from Myanmar and other countries, where the importers consistently declared the volume using the long-accepted conversion factor of 1 Hoppus ton = 1.416 cubic metres.

However, during the refund process under Notification No. 102/2007-Customs, the Customs Department recalculated the timber volume using a substantially higher conversion factor of 1 Hoppus ton = 1.8027 cubic metres, resulting in only partial refund of additional customs duty. The first appellate authority in several cases had accepted the importers’ position, but the Department filed appeals before the Customs, Excise and Service Tax Appellate Tribunal. Meanwhile, in many consignments, Customs insisted on provisional duty bonds citing pendency of the issue, prompting the present writ petitions.

Also Read:Gujarat HC Quashes S. 153C Income Tax Notices for Lack of Incriminating Material Linking Petitioner to Search [Read Order]

The appellants, through T.M. Abdul Latiff submitted that the conversion factor of 1 Hoppus ton = 1.416 cubic metres had been historically accepted across multiple customs houses and had also been validated through prior Orders-in-Original, physical verification reports and commercial documents. They argued that Public Notice No. 21/2012 introducing the higher factor of 1.8027 cubic metres could operate only prospectively.

He contended that, in the absence of uniform practice before 2012, they could not be penalised for adopting a widely recognised and accurate conversion ratio and were therefore entitled to full refund of the additional customs duty collected from them.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

The respondents, through P.R. Sreejith and Sreelal Warrier submitted that the revised conversion factor notified through Public Notice No. 21/2012 was issued pursuant to directions of the High Court and had to be uniformly applied by all Customs formations, including while finalising earlier refund claims.

The bench of Justice Ziyad Rahman A.A. rejected the Department’s position and accepted the petitioners’ contentions. The Court observed that the CESTAT’s order, which had examined both the interim directions of the High Court and the effect of Public Notice No. 21/2012, had conclusively held that the revised conversion factor applied only to imports made on or after 11.05.2012.

Also Read:Sale Was Conducted with Borrower's Consent and Complied with SARFAESI Act: DRAT Restores Property to Auction

Since that order had attained finality with no appeal filed by the Department for over a decade, the same benefit was required to be extended to the petitioners, who were similarly situated. The Court further found that the divergent conversion practices followed by different customs houses justified the petitioners' reliance on the 1.416 factor, particularly when earlier Orders-in-Original and physical verification reports supported its correctness.

Therefore, the Court quashed all impugned orders and directed the Customs authorities to grant refunds by applying the conversion factor of one Hoppus ton equal to 1.416 cubic metres for all imports made before 11 May 2012. It also directed that the necessary orders be passed within three months from the date of receipt of the judgment, with the refund to be effected within one month thereafter.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates