'Extra Duty Deposit' Different From Customs Duty, Limitation For Seeking Refund U/S 27 Of Customs Act Is Inapplicable: Delhi High Court

Section 27 deals with a person/entity's claim for a refund of Customs duty in certain circumstances.

A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed, “A perusal of Section 27 would show that the same deals with refund of customs duty. It is abundantly clear that EDD is not in the nature of customs duty. The deposit of the EDD was itself to secure any customs duty which may have been later on found to be payable, due to the allegation of underdeclaration. However, when the said allegation has been disproved and the Department has taken a view that there was no under-declaration, the substratum of the deposit of EDD itself no longer exists.”

It relied on a Circular dated 9th February 2016 issued by the Customs Department, which expressly clarifies that payment collected after provisional assessment for the release of goods shall be in the form of a 'security deposit' (not duty).

The development comes in a petition filed by Sentec India Private Limited seeking ra efund of ₹10,72,986/- which was deposited with the Customs Department as EDD.

As per the factual matrix of the case, the Petitioner had imported certain goods from Taiwan between 2014 and 2017. The Customs Department had suspected undervaluation of said goods and referred the same to the Special Valuation Branch.

SVB had commenced an investigation in respect of the said imports based on the allegation that the exporter ('Sentec E & E Co. Ltd, Taiwan) and Importer (Petitioner) were related, and the said relationship could have resulted in the undervaluation of the goods imported.

While those proceedings were pending, the goods in question were cleared on a provisional assessment basis on payment of EDD ₹10,72,986/-.

On 6th December 2017, SVB concluded that, though the parties were related, the said relationship had not led to the undervaluation of the imported goods. Based on these findings, the Department on 15th November 2019, accepted the valuation submitted by the Petitioner.

This, according to the Petitioner, had entitled it to claim the refund of EDD. However, the Department refused the claim on the ground that the first claim for refund was received by it only on 18th August, 2020, beyond the one-year limitation period prescribed under Section 27.

Petitioner relied on the Department's Circular to claim that EDD is not a form of customs duty and once the final assessment is done, the amount cannot be withheld by the Department.

At the outset, the Court noted that the Department had acknowledged that the amount of EDD had been deposited over and above the customs duty. It thus held,

“The impugned order holding that the refund application is beyond the limitation is, thus, untenable. Moreover, the impugned order itself acknowledges that the said amount is over and above with duty which was determined by the SVB. The Customs Department could not have rejected the prayer for EDD refund.”

The bench relied on Madras High Court's decision in Nithin India Tech Ltd v. The Deputy Commissioner of Customs (Refund) where it was held that the amount collected by the Assessing Officer therein in view of the SVB proceedings are not a customs duty as is contemplated under Section 12 of the Customs Act, 1962.

Similarly, in Commissioner of Customs v. Hitachi Koki India Pvt. Ltd. (2011), the Karnataka High Court had held that “the refund is not sought for the excise duty paid in excess of what was payable under law. The refund was sought in respect of the additional value insisted upon by the department being the value of technical knowhow and royalty. It was added to the excise duty payable. When the assessee authority held that the customs duty paid by the assessee was proper and no additional duty need be paid, they were under an obligation to refund this additional amount which was collected, which had no basis. In such circumstances, Section 27 is not attracted.”

As such, the High Court directed that the EDD lying deposited with the Customs Department shall be refunded to the Petitioner within two weeks, with interest.

Appearance: Mr. Abhishek Garg, Mr. Yash Gaiha, Mr. Ranesh Singh Mankotia & Mr. Naman Mehta, Advs. for Petitioner; Mr. Atul Tripathi, SSC with Mr. Shubham Mishra, Adv. for Respondent

Case title: Sentec India Company Private Limited v. Assistant Commissioner Of Customs, Delhi & Ors.

Citation: 2025 LiveLaw (Del) 288

Case no.: W.P.(C) 868/2025

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