1. Court’s decision
The Bombay High Court has directed the Customs Department to refund ₹35,37,358 with 9% interest to an importer whose goods never reached delivery, holding that the importer cannot be penalised for a prolonged dispute between Customs authorities and the Mumbai Port Authority. The Court sharply criticised both public bodies for causing nearly three years of hardship despite acknowledging that the importer never received the consignment.
Holding that the case squarely falls under Section 23 of the Customs Act — loss of goods before clearance — the Court declared the duty collected to be refundable as a deposit paid without legal authority, and rejected Customs’ objection that refund was impossible without a “closure letter.”
2. Facts
The importer manufactures PVC and water-management products and imported 100 MT of PVC resin, paying a total customs duty of ₹35,37,358 through bank transfer and SCRIP debits. The shipping agent confirmed vessel arrival and discharge, but the importer never received the goods. Joint surveys on 8 June 2022 and 24 August 2022 confirmed that the 100 jumbo bags were “not traceable.”
The importer filed a police complaint, leading to registration of FIR No. 0034/2022, though the final police report later stated that there was no conclusive evidence of theft and suggested a commercial dispute.
The Mumbai Port Authority subsequently issued a Short Landing Certificate on 25 April 2023 confirming the goods had not been received. The importer then sought refund under Sections 13, 23 and 27 of the Act. However, Customs rejected the application on 28 December 2022, insisting on a “closure letter” for the Bill of Entry — a document Customs itself was expected to issue. Despite repeated representations and a CPGRAMS grievance, the importer’s request was not processed.
Caught between the Port Authority asserting short landing and Customs alleging pilferage, the importer approached the High Court after years of non-delivery and non-refund.
3. Issues
The Court examined:
- Whether an importer is entitled to refund of customs duty when the imported goods are never delivered.
- Whether the Customs Department could insist on a closure letter when its issuance became impossible due to disputes with the Port Authority and shipping line.
- Whether the case falls under Section 13 (pilferage) or Section 23 (lost/destroyed/short-landed goods).
- Whether procedural obstacles can deny a substantive statutory right to refund.
- Whether the writ petition is barred by an alternate remedy.
4. Petitioner’s arguments
The importer argued that multiple joint surveys and the Port Authority’s Short Landing Certificate conclusively established non-receipt of goods. It maintained that Customs’ insistence on a closure letter was unreasonable because the letter could only be generated by Customs itself.
Relying on Sections 13 and 23, counsel argued that duty cannot be retained when goods are pilfered, lost or short-landed before clearance. Since the importer never received any goods, the duty payment was effectively a deposit without a valid levy, entitling it to refund with interest from the date of payment.
The importer also highlighted contradictory stands: the Port Authority claimed short landing, while the shipping line claimed discharge; Customs, meanwhile, used this conflict to delay refund.
5. Respondent’s arguments (Customs)
Customs argued the petition was premature and incomplete because:
• the Bill of Entry could not be closed without amendment of the Import General Manifest;
• the refund application was deficient;
• the importer had an alternate appeal remedy;
• the FIR was still pending;
• the Short Landing Certificate was contradicted by the shipping line’s assertion of full delivery.
Customs maintained that until the IGM was amended to reflect short landing, refund could not be granted. It contended that under Section 45, the Port Authority, not Customs, was responsible if pilferage occurred before clearance.
6. Respondent’s arguments (Port Authority)
The Port Authority clarified that it does not oppose refund but denies liability, stating it only performs statutory supervisory functions and does not individually tally NIL-marked goods. It maintained that tally records and joint surveys supported short landing, and that the Short Landing Certificate was issued in good faith.
Even assuming the goods were discharged and later lost, it argued that refund liability lies exclusively with Customs, as only Customs levies and collects duty. The Port Authority stressed that under Sections 13, 23 and 45(3), the custodian’s liability (if any) arises only if pilferage in custody is proven — which the police investigation did not establish.
7. Analysis of the law
The Court undertook a detailed examination of Sections 13, 23, 27, 27A and 45, noting:
• Section 13 relieves the importer from duty when goods are pilfered before clearance.
• Section 23 mandates remission when goods are lost or destroyed before clearance.
• Section 27 gives the importer a right to claim refund of duty not legally due.
• Section 45 places the responsibility of safe custody on the approved custodian until clearance.
The Court held that regardless of whether the incident is classified as short landing or loss after discharge, the effect is identical: the importer never received the goods and never obtained clearance.
Where duty is collected though no goods are received, the payment becomes a deposit, and withholding it amounts to retaining money without authority of law.
The Court rebuked both public authorities for allowing a bureaucratic deadlock to deprive the importer of its statutory rights. Procedural impossibility caused by inter-departmental disputes cannot defeat substantive entitlement under the Act.
8. Precedent analysis
The judgment refers to the precedent on responsibilities of custodians and refund liability, particularly noting the complexity arising from an earlier decision (Board of Trustees of the Port of Bombay v. Union of India), which held that even for pilfered goods, Customs cannot recover duty from Port Authorities — although that ruling is under challenge.
The High Court applied those principles to hold that inter se disputes cannot stand in the way of refund, and that Customs retains primary refund liability under Section 23 regardless of disagreements with the Port Authority.
9. Court’s reasoning
The Court’s core findings included:
• It is undisputed that the importer never received the goods.
• The dispute between Customs, the Port Authority, and the shipping line is irrelevant to the importer’s right to refund.
• Customs’ insistence on a closure letter was artificial and unreasonable because the importer cannot force amendment of the IGM.
• The refund claim is not premature, and alternate remedy is not applicable because Customs never adjudicated the refund claim.
• The importer cannot be left to suffer while the authorities “play a blame game.”
• Retaining duty in absence of goods violates the statute and principles of fairness.
The importer was therefore held entitled to refund under Sections 23, 27, and 27A.
10. Conclusion
The Court concluded that the importer’s case “squarely falls within Section 23,” as the goods were lost or rendered unavailable before clearance. The Court ordered a refund of ₹35,37,358 with 9% interest from the date of duty payment, directing strict compliance within four weeks and mandating a compliance report by the Assistant Commissioner of Customs.
It clarified that nothing in the judgment decides liability between the Port and Customs, leaving that issue open for separate proceedings.
Implications
This ruling reinforces:
• Importers cannot be penalised for missing consignments when goods never reach clearance.
• Duty paid becomes refundable when goods are lost/short-landed.
• Inter-departmental disputes cannot delay statutory refunds.
• “Closure letters” cannot be used as barriers when authorities themselves create procedural impossibility.
• Refund jurisdiction under Section 23 is absolute when non-receipt is undisputed.
The judgment strengthens importer protections and curbs administrative delay in refund processing.
CASE LAW REFERENCE SECTION
Board of Trustees of the Port of Bombay v. Union of India — Held that even for pilfered goods, recovery of duty from port authorities is limited; refund liability primarily rests with Customs. The Court acknowledged difficulties this precedent creates for Customs but held that pending appeals do not negate the importer’s statutory refund right.
Principles applied:
• Custodian liability arises only when pilferage during custody is established.
• Short landing or loss before clearance triggers Section 23 refund jurisdiction.
• Administrative disputes cannot override statutory duty to refund.
FAQs
1. Is an importer entitled to refund of customs duty if goods are never delivered?
Yes. Under Section 23 of the Customs Act, duty must be remitted or refunded when goods are lost, destroyed, or short-landed before clearance.
2. Can Customs withhold refund for want of a closure letter?
No. The High Court held that procedural requirements cannot override statutory refund rights, especially when the closure letter cannot be issued due to departmental disputes.
3. Does the importer have to wait for conclusion of police investigation?
No. Refund entitlement flows from non-receipt of goods, not from the outcome of the FIR or any criminal enquiry.
