Importer’s Right to Refund of Customs Duty When Goods Are Never Received, Irrespective of Inter‑Departmental Disputes or Bill of Entry Closure

1. Introduction

This judgment establishes an important principle in customs law: when an importer has paid customs duty for goods that are never received and never cleared for home consumption, the customs authorities are obliged to refund that duty (with interest), and they cannot rely on internal procedural disputes or lack of “Bill of Entry closure” to deny or delay refund.

The case arises from an unfortunate situation where an importer, despite paying customs duty in full and taking all reasonable steps, never received its consignment of Polyvinyl Chloride (PVC) resin. A prolonged dispute then erupted between:

• Respondent No. 1: Assistant Commissioner of Customs (Refund), Mumbai; and
• Respondent No. 2: Mumbai Port Authority, the port/custodian authority.

Each public authority tried to shift blame onto the other—whether the incident should be treated as “short landing” (goods never actually discharged at the port) or “pilferage/theft” from port premises. Meanwhile, the importer remained without goods and without refund for nearly three years.

The Bombay High Court intervened in writ jurisdiction under Article 226 of the Constitution, holding that the importer’s statutory right to refund under Sections 23, 27, and 27A of the Customs Act, 1962 cannot be neutralised by an inter‑departmental deadlock, insistence on a “closure letter” of the Bill of Entry, or pendency of a police investigation.

2. Factual Background and Procedural History

2.1 The Import Transaction

• The petitioner, M/s Ajay Industrial Corporation Ltd, manufactures and trades in PVC/CPVC pipes and water management products.
• It imported 100 metric tons of Polyvinyl Chloride Resin Suspension Grade 5 (PVC SG‑5 Erdos), a raw material.
• For this, it filed Bill of Entry No. 8441729 dated 27 April 2022 with Mumbai Customs.
• The petitioner paid a total customs duty of ₹ 35,37,358, comprising:
  • ₹ 23,95,538 via ICICI Bank (27.04.2022)
  • ₹ 7,22,657.88 debited under Scrip Licence No. 2112032025 (29.12.2021)
  • ₹ 4,19,162.21 debited under Scrip Licence No. 2112032029 (29.12.2021)
• Shipping Agent: M/s Mitsutor Shipping Agency Pvt. Ltd.
• Vessel: M.V. Alby Happy, carrying multiple consignments including the petitioner’s 100 jumbo bags.

2.2 Non‑Delivery of Goods and Surveys

• On 10 May 2022, the Shipping Agent issued a Delivery Order recording arrival of the petitioner’s consignment at Mumbai Port.
• However, Mumbai Port Authority (Respondent No. 2) did not issue a landing/discharge certificate for these goods.
• A joint survey on 8 June 2022 by:
  • M/s Wilson Surveyor and Adjusters Pvt. Ltd. (for the importer), and
  • M/s Zebec Marine Services Pvt. Ltd. (for the vessel/agent)
  concluded that they were “unable to trace the above subject 100 big bags”.
• A further joint survey on 24 August 2022 found certain damaged/re‑bagged polymer material, which the importer explicitly disowned as not being its consignment.
• On 7 September 2022, the Port reported that the goods were short landed (never received at the port).

2.3 Criminal Proceedings

• The importer lodged a complaint at Yellow Gate Police Station on 4 July 2022 when it could not trace the goods.
• On inaction, it approached the Magistrate in Misc. Complaint No. 156/Misc/2022.
• This led to registration of FIR No. 0034 of 2022 on 23 September 2022.
• The police eventually filed a Final Report on 13 March 2024, concluding:
  • there was no evidence the goods had been discharged at Mumbai Port and then misappropriated, and
  • the dispute was essentially civil/commercial.

2.4 Short Landing Certificate

• On 25 April 2023, the Mumbai Port Authority issued a Short Landing Certificate, later corrected on 27 April 2023, recording the petitioner’s consignment as short landed in the landing account.
• The Port’s case: the tally records and joint surveys showed that the 100 jumbo bags were never received by the Port for delivery.

2.5 Refund Claim and Customs’ Response

• The petitioner filed a refund application dated 24 September 2022 before the Assistant Commissioner (Refund), seeking refund of the full duty amount because it never received the goods.
• On 28 December 2022, Respondent No. 1:
  • returned the refund application,
  • citing “deficiencies”,
  • and demanded a “closure letter” of the Bill of Entry as a precondition to process the claim.
• Crucially, this “closure letter” could only be issued by Customs itself, typically after:
  • amendment of the Import General Manifest (IGM) by the shipping line, and
  • confirmation by the Port Authority.
• The IGM was not amended because the shipping line maintained that the entire cargo had been discharged, contrary to the Port’s short landing record.

2.6 Petitioner’s Grievances and Writ Petition

• The petitioner lodged a grievance on the CPGRAMS portal on 25 November 2023, complaining that the Customs Department was not issuing a closure letter. It was rejected on 16 December 2023.
• A further representation dated 6 March 2024 to issue the closure letter went unanswered.
• Finding itself caught in a “blame game” between Customs and the Port, the petitioner approached the Bombay High Court by Writ Petition No. 11118 of 2025.

3. Issues Before the Court

The central issues were:

1. Entitlement to Refund: Whether an importer who has never received the imported goods and whose goods were never cleared for home consumption, is entitled to refund of the customs duty paid under the Customs Act, 1962.
2. Effect of Inter‑Departmental Disputes: Can Customs deny or delay refund because of its disputes with the Port Authority and shipping line over whether the goods were “short landed” or “pilfered”?
3. Procedural Obstacle – Closure of Bill of Entry: Can Customs insist on a “closure letter” of the Bill of Entry, which the importer is powerless to secure, as a condition precedent for considering the refund?
4. Maintainability and Alternate Remedy: Was the writ petition barred because the petitioner had not filed an appeal under Section 128 of the Customs Act against the communication dated 28 December 2022?
5. Liability of Port Authority: Could the Port Authority be made liable for the duty or for refund, particularly if the case involved pilferage while goods were in port custody?

4. Summary of the Judgment

4.1 Core Findings

• It was undisputed that:
  • the petitioner never received the imported goods; and
  • no “Out of Charge” order under Section 47 was ever passed for clearance.
• The Court held that the case squarely falls under Section 23 of the Customs Act: goods lost or rendered unavailable before clearance for home consumption.
• Accordingly, the petitioner is entitled to refund of the entire customs duty (₹ 35,37,358). The Court further held that:
  “…the amount paid by the Petitioner was not in response to a valid demand but in anticipation of the clearance of goods that never materialised. Such payment…partakes the character of a deposit rather than a duty and must, in equity and under the statutory scheme, be refunded.”
• The requirement of a “closure letter” for the Bill of Entry was held to be an unreasonable and unsustainable procedural barrier in these peculiar facts.
• The Court refused to:
  • decide whether it was a case of short landing or pilferage, and
  • adjudicate the inter se liability between Customs and the Port Authority.
  But it emphasised that these disputes cannot prejudice the importer’s refund right.
• The communication dated 28 December 2022 was held not to be an appealable “order” under Section 128; thus, the alternative remedy objection failed, and the writ was maintainable.

4.2 Directions Issued

1. Refund: Respondent No. 1 (Assistant Commissioner of Customs – Refund) was directed to refund ₹ 35,37,358 to the petitioner.
2. Interest: Refund to carry interest at 9% per annum from the date of payment of duty until the actual date of refund.
3. Timeline: Refund to be made within four weeks from the date of uploading of the judgment.
4. Compliance Report: Assistant Commissioner (Refund) to file a compliance report by 8 January 2026, to avoid forcing the petitioner to initiate further litigation.
5. Inter se Rights Reserved: Customs and the Port Authority were left free to litigate their mutual liability separately. The judgment neither decides nor prejudices their rights against each other.

5. Statutory Framework and the Court’s Legal Reasoning

5.1 Key Provisions Considered

The Court closely examined the following sections of the Customs Act, 1962:

• Section 13 – Duty on pilfered goods
• Section 23 – Remission of duty on lost, destroyed or abandoned goods
• Section 27 – Claim for refund of duty
• Section 27A – Interest on delayed refunds
• Section 45 – Restrictions on custody and removal of imported goods (custodian’s responsibilities)
• Section 46 – Entry of goods on importation (Bill of Entry)
• Section 47 – Clearance of goods for home consumption

5.2 Scheme of the Act: Stages of an Import

The Court emphasised that the Act contemplates four distinct stages for imported goods:

1. Unloading at the customs station;
2. Custody in the customs area under an approved “custodian” (Section 45);
3. Assessment & payment of duty upon filing the Bill of Entry (Section 46);
4. Clearance for home consumption when “Out of Charge” is granted (Section 47).

Until an order under Section 47 (“Out of Charge”) is made, the goods remain in:

• the legal custody of the approved custodian under Section 45; and
• the importer’s liability for duty has not crystallised in the sense of being finalised by clearance.

5.3 Section 13 vs Section 23: Pilferage vs Loss/Destruction

Section	Situation Covered	Consequence for Importer	Consequence for Custodian/Port
Section 13	Goods are pilfered (stolen) after unloading, before clearance/warehousing.	Importer not liable to pay duty on such goods (unless goods are restored).	Under Section 45(3), the custodian becomes liable to pay duty to Customs.
Section 23(1)	Goods are lost or destroyed (otherwise than as a result of pilferage) at any time before clearance for home consumption.	Assistant/Deputy Commissioner shall remit the duty – duty is effectively cancelled/refunded.	Any loss allocation is between Customs, custodian, insurer, etc.; importer is not to suffer duty burden.

The Court noted that in the present case:

• the petitioner never received the goods;
• no clearance under Section 47 was ever given;
• there is ongoing disagreement as to whether it is short landing or pilferage; and
• the police Final Report suggests absence of evidence of pilferage at the port.

To avoid entering into contested factual territory, the Court held that the case falls under Section 23 as one of loss of goods before clearance. Accordingly, the importer’s duty must be remitted and refunded.

5.4 Section 45: Custodian’s Role (Port Authority)

Section 45(1) provides that all imported goods unloaded in a customs area shall remain in the custody of a person approved by the Commissioner of Customs (often a port trust, container terminal, or other facility) until:

• they are cleared for home consumption, or
• warehoused, or
• transhipped.

Under Section 45(2), this custodian:

• must maintain records of goods, and
• must not permit removal except with written permission of the proper officer.

Section 45(3) provides that if goods are pilfered while in such custody, the custodian becomes liable to pay duty on such goods. This is a provision designed to protect the revenue and shift risk of loss while in customs area from the importer to the approved custodian.

In this case, the Port authority’s stand was:

• it never actually received the petitioner’s goods (short landing); therefore,
• Section 45(3) liability does not arise.

The Court consciously declined to resolve whether the Port is a Section 45 custodian for this consignment or whether Section 45(3) is engaged. It held that:

The focus remained squarely on the importer’s refund entitlement, regardless of which public body is ultimately financially responsible.

5.5 Section 27: Refund Mechanism and Limitation

Section 27 gives any person claiming refund of duty or interest a right to apply for refund within:

• one year from the date of payment, unless the duty was paid under protest (in which case the time limit does not apply).

The Court treated the petitioner’s payment as:

The Court thus harmonised Section 23 (remission of duty on lost goods) with Section 27 (refund procedure), holding that duty remitted under Section 23 must be refunded via Section 27, and if not refunded in a timely manner, Section 27A interest applies.

5.6 Section 27A: Interest on Delayed Refunds

Section 27A provides that if duty ordered to be refunded is not refunded within three months from the date of receipt of the refund application, interest becomes payable at a notified rate.

While Section 27A measures interest from three months after the refund application, the Court, given the prolonged and egregious delay, ordered:

• interest at 9% per annum from the date of payment of the customs duty until the date of refund.

This is a strong remedial stance, signalling that:

• when the State unlawfully retains amounts that in substance are “deposits”, courts may grant equitable interest beyond the bare statutory minimum.

5.7 Sections 46 & 47: Bill of Entry and Clearance; Rejection of “Closure Letter” Objection

The statutory sequence is:

1. Section 46: Importer files a Bill of Entry with all details and documents.
2. Section 47: After satisfying itself that goods are not prohibited and that duty is paid, the proper officer passes an order permitting clearance for home consumption (often referred to as “Out of Charge”).

In this case:

• No Out of Charge order was ever passed;
• Thus, as a matter of law, the goods remained in the “customs area” stage.

Customs insisted that the petitioner first obtain a “closure letter” for the Bill of Entry, which would only issue upon amendment of the Import General Manifest (IGM) by the shipping line, and confirmation by the Port.

The Court found this insistence untenable and unfair:

Further:

The judgment thus clearly prioritises substantive rights over procedural hurdles that the importer cannot overcome.

5.8 Alternate Remedy under Section 128 and Writ Maintainability

Customs argued that the writ petition was not maintainable because the petitioner had an alternative remedy of appeal under Section 128 of the Customs Act against the letter dated 28 December 2022.

The Court rejected this argument on two grounds:

1. The 28 December 2022 communication merely returned the refund application citing deficiencies. It did not adjudicate the refund claim or decide any rights. Hence, it was not an “order” appealable under Section 128.
2. To insist on an appeal in such circumstances would be unfair and artificial:
   “There is no fairness in the contention that the Petitioner should resort to an alternate remedy without the first respondent even bothering to pass an order rejecting the refund application. Such a contention is perhaps raised only to prolong the Petitioner’s misery.”

Thus, where authorities evade their statutory duty by not passing any appealable order, writ jurisdiction can and will be invoked to prevent “bureaucratic deadlock” from defeating substantive rights.

6. Precedents Cited and Their Influence

6.1 Board of Mumbai Port Authority v. State of Maharashtra & Anr. (Criminal Application No. 416 of 2023)

This case was referenced by the petitioner’s counsel to highlight an inconsistent stance by the Port Authority:

• In the criminal matter, the Port reportedly accepted that the petitioner’s goods had gone missing from its custody.
• In the present proceedings, the Port claimed the goods had short landed and never came into its custody.

The present Bench did not use this precedent to develop any legal principle. It was primarily used to:

• illustrate that the Port’s positions were contradictory, and
• reinforce that the importer could not be blamed or burdened with this inconsistency.

6.2 Board of Trustees of the Port of Bombay v. Union of India & Ors., 2009 SCC OnLine Bom 1108

The Port Authority relied heavily on this judgment to contend:

• that it is not a custodian within the meaning of Section 45 of the Customs Act, and
• consequently, even if goods were pilfered from the Port premises, the Port would not be liable to pay duty or refund duty to Customs.

The present Bench noted:

• this 2009 decision creates difficulties for Customs in trying to hold the Port financially responsible under Section 45(3);
• Customs had challenged that decision before the Supreme Court and the appeal is pending.

Crucially, however, the Court stated that, irrespective of this inter se dispute between Customs and Port:

Thus, while this precedent affects the recovery rights of Customs against Port Authorities, the Court made clear that:

• it has no bearing on the importer’s entitlement to refund, and
• the importer cannot be forced to wait until the Supreme Court resolves that controversy.

7. Impact and Significance

7.1 Strengthening Importer Protection

The ruling significantly strengthens the protection available to importers in situations where:

• duty has been paid, but
• goods are never received, and
• there is no clearance under Section 47.

Key takeaways for importers:

• The State cannot hold on to duty paid for goods that never reach the importer.
• Such amounts are treated effectively as a deposit, refundable in full, with interest.
• Importers are not required to resolve or litigate inter‑departmental disputes between Customs, Port Authorities, and Shipping Lines.
• Authorities cannot hide behind self‑created procedural obstacles like “closure letters” that importers themselves cannot secure.

7.2 Administrative Law and “Ease of Doing Business”

The Court’s tone is critical of administrative conduct. It describes the situation as:

• “blame game” between Customs and Port;
• a “bureaucratic deadlock” lasting nearly three years; and
• public authorities “utilising taxpayers’ money or public funds” to raise “largely frivolous defences”.

The decision reinforces the principle that:

• Statutory duties of public authorities (e.g., to process refund claims) cannot be avoided by inter‑agency disputes.
• Courts will intervene in writ jurisdiction when procedural excuses are used to defeat substantive entitlements, especially in a commercial context that directly affects “ease of doing business”.

7.3 Clarification on Alternate Remedy Doctrine

The judgment adds nuance to the doctrine that writ petitions should not be entertained where alternative statutory remedies exist:

• If authorities issue only communications returning or deferring applications, without any adjudication, they cannot then insist that the aggrieved party must file an appeal.
• Inaction or non‑speaking communications are not “orders” capable of appeal.
• This prevents authorities from evading judicial scrutiny by deliberately avoiding passing appealable orders.

7.4 Financial and Operational Implications for Customs and Ports

The judgment effectively tells Customs:

• Refund the importer first, then resolve responsibility (if any) with the Port, Shipping Line, or custodian later.
• You cannot hold the importer hostage to your internal coordination failures.

For Port Authorities and other custodians:

• Even if they are ultimately held not to be “custodians” for Section 45 purposes, that does not shield Customs from its own refund obligations to importers.
• They may still face separate proceedings by Customs or others to allocate liability for the underlying loss, but that battle is distinct from the importer’s refund claim.

7.5 Judicial Approach to Interest and Unlawful Retention of Money

By awarding 9% interest from the date of duty payment, the Court:

• signals judicial intolerance for prolonged unlawful retention of money by the State; and
• sets a practical deterrent against similar future conduct by revenue authorities.

8. Complex Concepts Simplified

8.1 Key Terms Explained

Term	Meaning
Bill of Entry	A detailed document filed by an importer under Section 46 declaring description, quantity, value, etc., of imported goods. This triggers assessment of duty. No goods can be cleared without a Bill of Entry.
Out of Charge	The order under Section 47 by which the Customs officer, after assessing duty and ensuring payment, authorises clearance of goods for home consumption. Until this order is made, goods remain in customs custody.
Custodian	A person/authority approved by Customs (e.g., Port Trust, Container Freight Station) under Section 45 to hold imported goods in the customs area until they are cleared, warehoused, or transhipped.
Pilferage	Theft or stealing of goods after unloading in the customs area but before clearance. Under Section 13, the importer is not liable for duty on pilfered goods; under Section 45(3), the custodian may become liable.
Short Landing	When the actual quantity of goods that arrives at the port is less than what was declared in the shipping documents (e.g., IGM). In simple terms, the ship did not actually bring or unload the full manifested quantity.
Import General Manifest (IGM)	A comprehensive statement filed by the vessel/aircraft operator listing all cargo on board. It is the basis for tracking what goods were supposed to land at the port.
Closure of Bill of Entry	Administrative step where a Bill of Entry is formally closed in customs records, often in cases where goods are not cleared (e.g., lost, short landed). Customs insisted on such a closure letter here, which the Court found unreasonable as a precondition for refund.
Remission of Duty	Cancellation of the duty payable (or already paid) when goods are lost, destroyed, or abandoned before clearance for home consumption, under Section 23.
Deposit vs Duty	Where money is paid in anticipation of a transaction that never materialises (e.g., clearance of goods that are never received), courts often treat the amount as a “deposit” rather than a “tax/duty” validly levied, making it fully refundable with interest.
Alternative Remedy	A statutory appellate or revisional procedure (like appeal under Section 128) which normally should be used instead of writs. However, when there is no real “order” to appeal against, or when fundamental rights or clear statutory duties are at stake, courts may still entertain writs.

9. Conclusion: Key Takeaways

• Primary Principle: When imported goods are never received and never cleared for home consumption, customs duty paid in anticipation of such clearance must be refunded with interest. Inter‑departmental disputes cannot defeat this right.
• Section 23 Applied Broadly: The case was positioned under Section 23 as “loss of goods before clearance”, leading to remission and refund of duty, irrespective of whether the loss was via short landing or pilferage.
• Procedural Bars Rejected: Insistence on a “closure letter” of the Bill of Entry, amendment of IGM, or conclusion of a criminal investigation, cannot be used as barriers where the importer has done everything reasonably possible.
• Deposit Characterisation: Duty paid for goods that never materialised is treated as a deposit, not a validly imposed tax, strengthening the case for full refund with interest.
• Writ Jurisdiction Affirmed: When authorities avoid passing appealable orders and delay statutory duties, the High Court will intervene directly under Article 226, despite the existence of nominal alternative remedies.
• Inter se Disputes Left Open: The judgment carefully refrains from deciding liability between Customs and the Port, allowing them to litigate separately while ensuring the importer is not kept waiting for that resolution.
• Signal to Revenue Authorities: The direction to pay 9% interest from the date of duty payment, and to file a compliance report, underscores that prolonged unlawful retention of money and shifting of responsibility between public authorities will attract judicial censure and financial consequences.

In sum, M/s Ajay Industrial Corporation Ltd v. Assistant Commissioner of Customs is a significant precedent clarifying that the importer’s statutory right to refund of customs duty is autonomous and cannot be subordinated to the internal disagreements or procedural deficiencies of public authorities. For customs law and administrative law alike, it reaffirms the courts’ role in ensuring that the State does not retain money without legal authority and that commercial actors are not punished for governmental disarray.