Akash Gupta | AI Generalist & Content Specialist, Sunshine Cargo Services, Kolkata, India — December 04, 2025

Imagine paying lakhs in customs duty, never receiving your goods, and then being told you can’t get your money back. That’s the nightmare many Indian importers face. But a landmark November 2025 verdict from the Bombay High Court has changed the game. If you haven’t cleared goods for home consumption, the government cannot keep your money.

Quick Outline:

• The Verdict: What the Bombay HC ruled.

• The Law: Section 23 vs. Section 13 explained.

• The Fix: How to claim your refund (+ 9% interest).

In November 2025, the Bombay High Court delivered a crushing blow to bureaucratic red tape in the case of Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs.

The court ruled that customs authorities cannot retain duty paid on goods that were never cleared for “home consumption.” The authorities had tried to reject a refund claim of ₹35.37 Lakhs because of a dispute with the Port Authority. The court called this unacceptable.

“The obligation to refund such duty… cannot be delayed or avoided. If the customs authorities are confident in their legal and factual position, they can, at most, proceed against the Port authorities.” — Bombay High Court Division Bench

In short: If you don’t take the goods home, the government can’t keep the tax. The “taxable event” is the clearance, not just the landing.

Understanding Section 23: Remission of Duty

This verdict relies heavily on Section 23 of the Customs Act, 1962.

This section deals with “Remission of duty on lost, destroyed or abandoned goods.” It states that if goods are lost or destroyed before they are cleared for home consumption, the importer doesn’t have to pay duty.

If you have already paid the duty in advance (anticipatory payment), it becomes a “refundable deposit.” It is no longer a tax because the taxable event (clearance) never happened.

In short: Section 23 is your safety net. It ensures you don’t pay taxes on goods that effectively ceased to exist for you before clearance.

The “Blame Game” Scenario: Customs vs. Ports

A major highlight of this judgment was the court’s criticism of the “blame game.”

Often, goods vanish or are short-landed at the port.

1. The Port Authority claims the goods were “short-landed” (never arrived).

2. Customs claims the goods arrived but were “pilfered” (stolen) while in the Port’s custody.

3. The Importer is stuck in the middle, having paid duty but receiving nothing.

The High Court clarified: This is not the importer’s problem. Whether pilfered or short-landed, if the importer didn’t get the goods, the duty must be returned.

In short: Internal government fights cannot block your refund. The court ruled that “procedural technicalities” cannot be barriers to justice.

Mini-Case: The Stalled PVC Resin

Let’s look at the facts of the Ajay Industrial case to understand the real-world application.

• The Import: The company imported 100 metric tons of PVC Resin.

• The Payment: They paid ₹35.37 Lakhs in customs duty in advance to speed up clearance.

• The Problem: The goods never reached the importer. The Port said they didn’t land; Customs said they were stolen at the port.

• The Standstill: For three years, Customs refused to refund the money, demanding a “Closure Letter” that the Port wouldn’t issue.

• The Ruling: The High Court ordered the immediate refund plus 9% interest (higher than the standard 6%), citing the harassment caused to the taxpayer.

In short: Even if you pay in advance, that money remains yours until the goods are actually cleared. If they aren’t, demand it back with interest.

Common Mistakes When Claiming Refunds

• Waiting Too Long: You must file under Section 27 within one year.

• Missing the “Out of Charge”: Ensure no “Out of Charge” order exists. If it does, Section 23 might not apply.

• Ignoring Interest: Always claim interest under Section 27A if the refund is delayed beyond 3 months. The court awarded 9% here.

• Accepting Oral Rejections: Never accept a verbal “no.” Force the department to give a written order so you can appeal it.

FAQs

1. Can I get a refund if I voluntarily abandon the goods? Yes. Under Section 23(2), if you relinquish title to the goods before clearance, you are not liable to pay duty.

2. What if I already paid the duty but the goods were stolen at the port? You can claim a refund under Section 13. Duty is not payable on pilfered goods, provided the pilferage happened before the order for clearance was made.

3. Does this judgment apply to goods damaged by fire in the warehouse? Yes, partially. Section 23 covers goods destroyed before clearance. If they were in a bonded warehouse, remission is possible if they were destroyed before home consumption clearance.

4. How much interest can I claim on delayed refunds? Standard interest is 6%. However, in the Ajay Industrial case, the court awarded 9% due to the unreasonable delay by authorities.

5. Do I need a “Short Landing Certificate” to claim a refund? Ideally, yes. However, this judgment clarifies that if the Port and Customs fight over the certificate, the importer cannot be denied a refund due to their lack of coordination.

Conclusion

The Bombay High Court has sent a clear message: Taxation requires the authority of law, not the inertia of bureaucracy. If you haven’t cleared your goods, the state has no legal right to retain your customs duty.

This verdict is a powerful tool for importers. If your money is stuck due to “short landing” or “pilferage” disputes, use this precedent to demand your refund—with interest.

Sources & Backlinks

1. Bombay High Court Orders Customs to Refund Duty — CourtKutchehry — Dec 2025 — Link

2. Ajay Industrial Corporation Ltd. v. Assistant Commissioner of Customs (Refund) — Bombay High Court — Nov 19, 2025 — Official Judgment PDF

3. Section 23 Customs Act 1962 — India Code — Link