In a significant Bombay High Court judgment on customs duty refund for lost imported goods, the division bench mandated the refund of ₹35,37,358/- plus 9% interest to an importer whose consignment vanished at Mumbai Port. Pronounced on November 19, 2025, in Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs (Refund) & Anr. (WP No. 11118 of 2025), this ruling addresses key issues like pilferage of imported goods, short landing certificate in customs, Sections 13 and 23 of the Customs Act 1962, and interest on delayed refunds under Section 27A. For legal professionals, importers, and businesses searching for "customs duty refund process India," "importer rights in pilferage cases," or "writ petition for customs refund," this case provides essential insights into administrative delays, inter-departmental disputes, and judicial intervention under Article 226 to promote ease of doing business in India.

Case Background: Import of PVC Resin and the Disappearing Consignment

Ajay Industrial Corporation Ltd., a New Delhi-based manufacturer specializing in PVC/CPVC pipes and water management products, relies on imported Polyvinyl Chloride (PVC) Resin Suspension Grade 5 as a key raw material. This material attracts customs duty under the Customs Tariff Act, 1975, and the Customs Act, 1962.

In April 2022, the petitioner ordered 100 metric tons of PVC Resin from Vietnam, valued at USD 148,000. They filed Bill of Entry No. 8441729 on April 27, 2022, and preemptively paid ₹35,37,358/- in customs duty: ₹23,95,538/- via bank transfer and the rest through SCRIP licenses (duty credit scrips under India's foreign trade policy). The vessel docked at Mumbai Port (managed by Mumbai Port Authority, Respondent No. 2) on April 22, 2022, and the shipping agent confirmed the consignment's arrival.

However, the goods were untraceable. Joint surveys in June and August 2022 confirmed the loss, leading to a Short Landing Certificate from the Port Authority on April 25, 2023. The petitioner filed a police complaint, resulting in FIR No. 0034/2022 for theft. Despite this, the Assistant Commissioner of Customs (Refund) (Respondent No. 1) rejected the refund application on December 28, 2022, citing the need for a Bill of Entry closure letter—which Customs itself failed to issue despite repeated requests.

Trapped in a blame game—Customs claiming pilferage post-landing (liability on Port under Section 45), and Port insisting on short landing—the petitioner approached the Bombay High Court via writ petition under Article 226, seeking mandamus for refund with interest. This case highlights common challenges in customs duty refund for lost goods, administrative inaction, and inter-departmental discord affecting importer rights in India.

Key Legal Provisions in Customs Duty Refund Cases

Understanding this Bombay High Court customs refund judgment requires a brief overview of relevant Customs Act, 1962, provisions, crucial for handling pilferage of imported goods or short landing disputes:

1. Section 13: Duty on Pilfered Goods – Importers are exempt from duty if goods are pilfered after unloading but before clearance order (Section 47). Liability shifts to the custodian (e.g., port authority) under Section 45(3). "Pilferage" refers to minor theft, requiring proof to customs' satisfaction.
2. Section 23: Remission of Duty on Lost or Destroyed Goods – Duty must be remitted if goods are lost (non-pilferage) or destroyed before home consumption clearance. This covers short landing in customs, allowing importers to relinquish title. The commissioner remits duty upon verification, without custodian liability.
3. Section 27: Refund of Duty – Allows claims for overpaid duty or deposits within one year (extendable). Refunds go to the Consumer Welfare Fund unless exceptions apply. In anticipatory payments without clearance, it's treated as a refundable deposit.
4. Section 27A: Interest on Delayed Refunds – Interest at 6% per annum (as notified) if refund delays beyond three months. Courts may award higher rates for egregious delays.
5. Section 45: Custody of Imported Goods – Goods remain in custodian's care until cleared; custodian liable for pilferage duty.

These sections ensure importer protection in loss cases, but procedural hurdles like IGM amendments or NOC requirements often delay refunds, as seen in this PVC resin import case.

Parties' Arguments in the Writ Petition for Customs Refund

Petitioner's Submissions on Importer Rights and Statutory Entitlements

Mr. Rajiv Jaipal argued that the undisputed non-receipt of goods (evidenced by surveys and Short Landing Certificate) entitles the petitioner to refund under Sections 13 (pilferage) or 23 (loss). The payment was a deposit, not duty, since no "Out of Charge" order issued. Customs' refusal to issue the closure letter was arbitrary, violating natural justice, and the Port's contradictory stance in related proceedings (admitting custody loss) exposed evasion. He emphasized interest from payment date under Section 27A, criticizing delays that hinder ease of doing business in India.

Customs Authorities' Defense on Procedural Requirements

Mr. Jitendra B. Mishra contended the petition was premature due to pending IGM amendment, NOC from Delhi Customs, and police investigation. Claiming pilferage, they shifted liability to the Port under Sections 13 and 45. The Short Landing Certificate was disputed by the shipping line's discharge confirmation. An alternate appeal under Section 128 was available, making the writ non-maintainable.

Port Authorities' Contentions on Short Landing Liability

Mr. Mohammed Oomar Shaikh did not oppose the refund but argued it was short landing (Section 23), obligating Customs to remit duty. Citing Board of Trustees of the Port of Bombay v. Union of India (2009), they denied duty liability for pilferage, urging resolution of inter se disputes separately.

Court's Reasoning, Findings, and Observations in the Judgment

The bench, comprising Justices M.S. Sonak and Advait M. Sethna, slammed the "blame game" between public authorities, noting how taxpayers' funds fuel frivolous defenses and delays. Key findings in this landmark Bombay High Court judgment on customs duty refund:

1. Undisputed Non-Clearance and Loss: It was irrefutable that no goods were received or cleared (no Out of Charge order). Exact cause (pilferage vs. short landing) was irrelevant for the importer's refund claim.
2. Applicability of Section 23: The case qualified as "loss before clearance," mandating duty remission. Anticipatory payment was a refundable deposit, not leviable duty.
3. Rejection of Procedural Defenses: Demands for closure letter, IGM amendment, or NOC were unreasonable, as these were authorities' responsibilities. The impugned communication wasn't an appealable "order" under Section 128, justifying writ jurisdiction amid extraordinary delays.
4. Criticism of Administrative Inaction: The court highlighted how inter-departmental discord deprives innocent importers of dues, erecting "barriers of procedural technicalities." This undermines ease of doing business and fair administration.
5. Interest Award: Under Section 27A, 9% interest (higher than standard 6%) was awarded from the payment date to compensate for three-year delays.
6. Inter Se Liability: The ruling left disputes between Customs and Port open for separate resolution, without affecting the importer.

Referencing precedents like Board of Trustees (under appeal) and emphasizing statutory importer rights, the court exercised Article 226 powers to prevent injustice.

Final Order and Directions in WP No. 11118 of 2025

The petition was allowed. Respondent No. 1 was directed to refund ₹35,37,358/- with 9% simple interest from April 27, 2022 (payment date) within four weeks. A compliance report is due by January 8, 2026. No costs were awarded.

Implications for Customs Duty Refund Disputes in India

This judgment strengthens importer rights in pilferage or short landing cases, prioritizing refunds over bureaucratic hurdles. For businesses facing similar issues:

1. Importers: File writ petitions if refunds are delayed without valid orders; prove non-clearance for remission under Section 23.
2. Authorities: Coordinate to avoid delays; resolve inter se liabilities independently.
3. Broader Impact: Reinforces that customs duty on uncleared goods is refundable, potentially influencing GST refund cases or excise disputes. It promotes accountability in Mumbai Port Authority liability and customs processes.

Conclusion

The Bombay High Court's judgment in Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs (2025) is a victory for fair trade practices, ensuring importers aren't penalized for systemic failures. By applying Sections 13, 23, 27, and 27A of the Customs Act, 1962, the court not only granted relief but also highlighted the need for administrative efficiency.