Why Bombay HC found that Patanjali Foods is entitled to Rs 62 lakh in customs duty refund

The court granted relief to Patanjali Foods and held that levying the enhanced duty was against the law.

What brought Patanjali Foods to court?

Patanjali Foods had imported over 12,000 metric tonnes of crude palm oil from the Singapore-based company Just Oil and Grain. The shipment arrived at Nhava Sheva-Jawaharlal Nehru Port Trust (JNPT) on May 10, 2021, where the goods were warehoused till the customs duty was paid.

The custom duty imposed on the goods is calculated based on the ‘tariff value’ or the transaction value of the goods imported. Once the requisite customs duty is paid, the customs department presents an ex-bond Bill of Entry (BoE) for releasing goods from the warehouse for domestic consumption.

Out of the 12,127.577 metric tonnes stored in the warehouse, Patanjali Foods was aggrieved by the revised duty on 3,465.024 mts of oil. On May 13, 2021, the Imports Department of Customs presented four ex-bond BoEs to Patanjali Foods on the 3,465.024 mts shipment.

Patanjali conducted a self-assessment under the Customs Act of 1962 as per the existing tariff value of $1,163 per metric tonne (PMT), amounting to Rs 12,81,35,398 (over Rs 12 crores). The ex-bond Bills of Entry were issued between 8.15 pm to 8.59 pm. However, at 9.24 pm, the Central Board of Indirect Taxes and Customs issued a notification where the tariff value was increased to $1,219 PMT.

Citing the revised tariff value, the designated customs officer disagreed with Patanjali’s self-assessment and reassessed the customs duty between June 4 and 9, 2021. The department imposed an additional amount of Rs 61,69,890, which Patanjali paid.

However, aggrieved by the imposition of enhanced duty, Patanjali approached the HC. The following shows the amounts levied on each ex-bond Bill of Entry before and after the notification:

How did the customs department respond?

The customs department, under the Department of Revenue of the Union Finance Ministry, argued that Patanjali Foods had an alternate remedy of challenging the reassessment order before an appellate authority under the Customs Act.

It also said that Patanjali should have applied for a refund of any additional amount within a year of such imposition, which it failed to do.

What did the Bombay HC hold?

The High Court relied on section 15 of the Customs Act, which specifies the date for the determination of rate of duty and tariff valuation of imported goods. The court said that the tariff duty value applicable in such cases will exist on the date and time when the Bills of Entry are presented to the importer.

In the present case, the tariff duty value of $1,163 PMT was in force when the four ex-bond BoEs were presented, the High Court observed.

“In the present case, the customs authorities have sought to exercise the power of reassessment on the grounds of the subsequent notification enhancing the rate of duty. The fact is that self-assessment was carried out on the basis of the rate of duty which prevailed at the time of presentation of the bill of entry”, the court stated while quashing the reassessment orders.

The division bench also rejected the Ministry’s argument that Patanjali had an alternate remedy of appeal after finding that the company had no reasoned order to challenge before the appellate authority.

The HC then allowed Patanjali to make an application for a refund of the additional amount it already paid. It directed the customs department to consider the application within 12 weeks while ensuring a personal hearing was given.