Security deposit refund under project import is not subject to Section 27 duty-refund limitation

Amounts furnished only as a security deposit for project import are not duty, so the refund claim is not governed by the limitation in Section 27 of the Customs Act, 1962. A bank guarantee or similar security is only a device to safeguard revenue and does not acquire the character of duty merely because provisional clearance was granted or the import was later finalised. On that basis, the Court held that the limitation applicable to refund of duty could not be used to deny refund of the security deposit, and the refusal of refund was unsustainable.

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Issues: Whether refund of an amount paid as security deposit for project import is governed by the limitation under Section 27 of the Customs Act, 1962.

Analysis: The amount sought to be refunded was not duty, but a security deposit furnished in connection with import under the project import scheme. The Court followed the settled position that a bank guarantee or similar security is only a device to protect revenue interests and cannot be treated as payment of duty. Since Section 27 applies to refund of duty, its limitation provisions cannot be used to defeat refund of a security deposit. The Court also relied on the earlier view that provisional clearance and finalisation do not convert such security into duty for the purpose of refund under Section 27.

Conclusion: The limitation under Section 27 of the Customs Act, 1962 did not apply to the claimed refund of security deposit, and the refusal of refund was unsustainable.

Ratio Decidendi: Amounts furnished only as security, including bank guarantees, are not duty and their refund is not governed by the limitation applicable to refund of duty under Section 27 of the Customs Act, 1962.

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