2025 (11) TMI 1229 - HC - Customs

Customs Duty on Short-Landed PVC Resin Treated as Refundable Deposit under Sections 13, 23, 27, 27A

HC held that the importer never received the consignment of 100 MT PVC resin covered by the relevant Bill of Entry, as confirmed by the short landing ... Rejection of refund of customs duty - short landing/pilferage of the goods - absence of a duly closed Bill of Entry - The Port Authorities argue that this is a short landing, for which they have issued a certificate, and that the Customs should refund the customs duty collected from the Petitioner. In this dispute between the two public authorities, the Petitioner is the only sufferer. HELD THAT:- It is abundantly clear and indeed an undisputed position that the Petitioner has never received the goods imported under the Bill of Entry No. 8441729 dated 27 April 2022. The Short Landing Certificate dated 25 April 2023, issued by the Respondent No. 2, coupled with the joint survey reports dated 8 June 2022 and 7 September 2022, fortify the position that the consignment of 100 metric tons of Polyvinyl Chloride Resin was never delivered to the Petitioner. Neither authority has, nor could it dispute, this position - This Court does not wish to go into the issue to determine where or under whose custody the loss occurred. The admitted position is that the Petitioner has not received the goods and is not responsible for them. There is a blame game between Customs and the port authorities over liability to pay the Petitioner. Therefore, the limited issue for consideration is whether, in such circumstances, the Petitioner is entitled to a refund of the customs duty paid under the provisions of the Customs Act, 1962. Once it is established that the imported goods were never received and that the proper officer never granted clearance, the customs duty cannot be retained. The duty collected in anticipation of clearance becomes refundable as it was paid without the corresponding receipt of goods. To hold otherwise would be contrary to both the letter and spirit of the statute and would result in collecting and retaining duty without the authority of the law, not to mention unjust enrichment of the revenue at the cost of the importer - Moreover, in the present case, 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, therefore, partakes the character of a deposit rather than a duty and must, in equity and under the statutory scheme, be refunded. The refund of such duty is a statutory entitlement, not a discretionary relief. The Customs Department, being the authority which collects the duty, cannot indefinitely withhold it on the pretext of unresolved internal coordination with the Port Authority. It stands established on record and is an admitted position between all parties that the Petitioner has never received the imported goods covered under Bill of Entry No. 8441729 dated 27 April 2022. The Petitioner has been pursuing the matter for nearly three years without any effective redress, caught between Respondent No. 1 and Respondent No. 2, each of whom disclaims liability. The Court finds that, considering the undisputed facts and the statutory scheme under Sections 13, 23, 27, and 27A of the Customs Act, 1962, the Petitioner cannot be made to suffer for reasons beyond its control. The Petitioner’s case squarely falls within the ambit of Section 23 of the Customs Act, 1962, since the goods were lost or rendered unavailable before clearance for home consumption. Consequently, the Petitioner is entitled to a refund of the customs duty amounting to Rs. 35,37,358/-, together with interest at 9% from the date of payment of the Custom Duty - the Respondent No. 1, the Assistant Commissioner of Customs (Refund), is directed to process and refund the said amount to the Petitioner, along with interest at 9%, within a period of four weeks from the date of uploading of this order. Petition allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an importer who has paid customs duty but never received the imported goods, due to short landing/pilferage before clearance, is entitled to refund of the duty under Sections 13, 23 and 27 of the Customs Act, 1962, notwithstanding inter-departmental disputes between Customs and Port authorities. 2. Whether the Customs Department can withhold refund on the ground that the Bill of Entry is not 'closed' or 'out of charge', or pending amendment of the Import General Manifest (IGM) or shipping line confirmations. 3. Whether the pendency of a criminal investigation (FIR) or existence of an alternative statutory remedy (Section 128) renders a writ under Article 226 premature or non-maintainable in the circumstances where the refund application was returned without adjudication. 4. Whether the Port Authority can be directed to refund or whether inter se liability between Customs and Port Authority affects the importer's right to refund and interest under Section 27A. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Right to refund where goods not received (Sections 13, 23, 27) Legal framework: Sections 13, 23 and 27 (with Section 27A) of the Customs Act, 1962: Section 13 relieves importer of duty where goods are pilfered after unloading and before clearance; Section 23 mandates remission of duty where imported goods are lost or destroyed before clearance (other than pilferage); Section 27 provides the procedure and substantive right to claim refund; Section 27A prescribes interest on delayed refunds. Precedent treatment: The Court referred to earlier decisions (noting Board of Trustees of the Port of Bombay v. Union of India & Ors. as raising difficulties for Customs in recovering duty from Port authorities) as relevant to inter se apportionment but did not overrule or depart from statutory scheme. Precedent was used to illustrate practical difficulty for Customs, not to displace statutory entitlement of importer. Interpretation and reasoning: The statute draws a clear sequence-unloading, custody, clearance, removal for home consumption-so that liability for duty crystallises only upon clearance (Section 47) and custodian liability exists while goods remain in custody (Section 45). Where goods are not delivered and no order for clearance is passed, the payment of duty in anticipation of clearance is in substance a deposit. The admitted fact that the importer never received goods and the absence of clearance triggers entitlement to refund under Sections 23 and 27 irrespective of whether the cause is short landing or pilferage. The Court declined to determine where loss occurred or who is ultimately liable inter se; the statutory right to refund accrues to the importer on the admitted factual matrix. Ratio vs. Obiter: Ratio - An importer who has paid customs duty but has not received the goods and for whom no order permitting clearance was made is entitled to refund of duty under Sections 23 and 27 (with interest under Section 27A). Obiter - Observations that Customs may pursue recovery from Port authorities and comments on practical unfairness and 'blame game' between authorities are ancillary, preserving inter se remedies of authorities. Conclusions: The Court held that the petitioner's case falls within Section 23 (goods lost or rendered unavailable before clearance) and that the importer is entitled to refund of the duty paid together with interest at 9% from the date of payment until actual refund. Issue 2 - Validity of withholding refund for absence of closure of Bill of Entry, IGM amendment or shipping line confirmation Legal framework: Sections 46-47 and Section 45 provide for presentation of bill of entry, custody, and clearance; Section 27 prescribes refund procedure; administrative documents like 'closure letter' or IGM amendment are procedural adjuncts to reflect factual position in records. Precedent treatment: The Court treated statutory provisions as paramount to administrative procedural prerequisites; reliance on administrative or third-party actions (shipping line/IGM amendment) cannot be allowed to defeat statutory refund entitlement where facts are admitted. Interpretation and reasoning: The insistence on a 'closure letter' from Customs or amendment of IGM by shipping line was held to be unreasonable where such closure is rendered impossible by unresolved disputes between public authorities. The petitioner had done all reasonably expected; procedural lacunae due to inter-agency stalemate cannot be used to deprive a statutory right. Refund is not discretionary in such factual matrix; the departmental requirement to produce closure before processing refund cannot stand as a bar when the refund claim is otherwise established. Ratio vs. Obiter: Ratio - Administrative insistence on closure of Bill of Entry or IGM amendment cannot defeat statutory refund where goods are not received and clearance was never granted. Obiter - Critique of bureaucratic deadlock and exhortation that authorities should resolve inter se claims later. Conclusions: The Court held that requirement of a 'closure letter' or IGM amendment could not be sustained to deny refund; the Customs Department must process and refund the duty with interest within the specified timeframe. Issue 3 - Effect of pending criminal investigation and alternative statutory remedy (Section 128) on maintainability of writ Legal framework: Section 128 provides appellate remedy to Commissioner (Appeals); general principles on writ jurisdiction and availability of alternative remedy; distinction between appealable orders and administrative communications. Precedent treatment: The Court applied settled principles that availability of alternative remedy may not oust writ jurisdiction where the impugned communication is not an appealable adjudicatory order or where invocation of alternate remedy would be futile or unfair. Interpretation and reasoning: The communication dated 28.12.2022 merely returned the refund application as deficient and sought closure letter rather than an adjudication rejecting refund; such a returned application does not amount to an appealable order under Section 128. Further, pendency of FIR and police investigation relates to determination of cause (criminal vs. civil) and does not negate the importer's statutory entitlement to refund where goods were not received. Requiring the petitioner to await the outcome of criminal investigation or to exhaust an ineffective remedy would be unfair and cause further prejudice. Ratio vs. Obiter: Ratio - A returned refund application without adjudication is not an appealable order under Section 128 and does not preclude writ jurisdiction; pendency of criminal investigation does not preclude grant of refund where statutory entitlement is established. Obiter - Observations on propriety of forcing importer to litigate against shipping lines or agents to amend IGM. Conclusions: The writ petition was maintainable; the bar of alternative remedy and prematurity due to FIR were held inapposite in the circumstances. Issue 4 - Liability of Port Authority and scope of relief against Port Authority Legal framework: Section 45(3) imposes custodian liability to pay duty where goods are pilfered while in custody; Sections 13 and 23 distinguish pilferage from other loss; Sections 27/27A govern refund by Customs. Precedent treatment: The Court noted precedents that complicate Customs' ability to recover from Port Authority but declined to resolve inter se liability, keeping such matters open for appropriate proceedings between authorities. Interpretation and reasoning: The Port Authority's Short Landing Certificate and survey reports admitted non-delivery; however, Port Authority denied monetary liability and contended it was not custodian for purposes of Section 45. The Court refrained from adjudicating custodian liability or inter se obligations, reasoning that the immediate statutory right of the importer to refund cannot be made contingent upon resolution of such inter se disputes. Customs, if aggrieved, may pursue recovery from Port Authority later in appropriate proceedings. The relief granted is confined to refund to importer with interest; it does not adjudicate or preclude authorities' rights to pursue inter se claims. Ratio vs. Obiter: Ratio - Relief to importer for refund does not adjudicate inter se liability; authorities may pursue recovery among themselves. Obiter - Comments that Port Authority's certificate is factual and not an admission of monetary liability; reiteration that inter se issues remain open. Conclusions: The Court directed Customs to refund the duty with interest and expressly left open the question of inter se liability between Customs and Port Authority for later resolution by the authorities or appropriate forums. Final Disposition (statutory relief and directions) The Court directed the Customs authority to process and refund the duty amounting to Rs. 35,37,358/-, with interest at 9% from date of payment until date of refund, within four weeks of uploading of the order; a compliance report to be filed by the Assistant Commissioner (Refund) by a specified date. The Court declined to order costs and clarified that its directions do not preclude Customs from recovering refunded amounts from the Port Authority or otherwise pursuing inter se claims in accordance with law.