Gujarat High Court Strikes Down Ministry Directive and Affirms Customs Jurisdiction u/s 27 of the Customs Act

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 25.05.2026

Gujarat High Court Strikes Down Ministry Directive and Affirms Customs Jurisdiction u/s 27 of the Customs Act

Special Economic Zones (SEZs) in India are designed to promote exports by offering various incentives, including streamlined customs procedures. However, a legal impasse arose when SEZ units, such as M/s. Anita Exports, faced difficulties in claiming refunds for excess customs duty, fines, or penalties paid during import transactions. This issue stemmed from conflicting directives between the Ministry of Finance and the absence of clear statutory provisions under SEZ laws for processing such refunds.

The Dispute

M/s. Anita Exports, an SEZ unit in Kandla, imported raw materials and was accused by Customs authorities of undervaluing goods and misdeclaring their nature. The Commissioner of Customs revalued the goods, imposed heavy fines and penalties, and appropriated a deposit of Rs. 25 lakhs from the company. When the Customs Excise & Service Tax Appellate Tribunal (CESTAT) partially overturned the Commissioner’s order, Anita Exports sought a refund of the appropriated amount.

However, both the Customs authorities and SEZ officials refused to process the refund, each citing lack of jurisdiction due to a Ministry of Finance directive (dated 1.11.2012) and the absence of explicit refund provisions in SEZ laws. This left SEZ units in a legal limbo, unable to recover amounts rightfully due to them.

The Legal Challenge

Anita Exports and other SEZ units filed petitions before the Gujarat High Court, seeking a declaration that Customs authorities under the Customs Act, 1962, were the proper authority to process their refund claims. The government’s position, based on the Ministry’s directive, was that such claims should be handled by the Department of Commerce, even though no legal mechanism existed for this under SEZ laws.

The High Court’s Analysis

The Court, led by Justices, identified several critical issues:

1. Statutory Duty Cannot Be Suspended by Executive Order: The Ministry of Finance’s letter could not override statutory provisions of the Customs Act. Only legislative amendments could shift refund processing authority from Customs to SEZ officials.
2. Absence of SEZ Mechanism: Since SEZ laws lacked provisions for refunds, appeals, or reviews, the Customs Commissionerate retained authority under Section 27 of the Customs Act, 1962.
3. Right to Refund: If duty, fine, or penalty collected by Customs is later found to be illegal, the payer has a statutory right to seek a refund under the Customs Act.
4. Legal Precedent: The Court cited the Supreme Court’s decision in Mafatlal Industries Ltd. v. Union of India, which held that refund claims must be processed under the relevant statutory provisions.

The Judgment

The Gujarat High Court declared the Ministry of Finance’s directive invalid and restored the authority of Customs officials to process refund claims from SEZ units. The Court directed that:

• All refund applications previously returned to SEZ units should be resubmitted to Customs authorities.
• Such applications would be treated as if filed on their original dates, preserving rights regarding limitation periods and interest.
• Unless and until SEZ laws are amended to provide a new mechanism, Customs authorities must continue to process these claims.

Implications

This judgment is a significant victory for SEZ units, ensuring they are not deprived of statutory refund rights due to administrative confusion or lack of legislative clarity. It reinforces the principle that executive instructions cannot override statutory duties and provides a clear path for SEZ units to recover excess payments.

Conclusion

The Gujarat High Court’s decision resolves a critical gap in the administration of customs law for SEZ units, upholding the rule of law and protecting the rights of exporters. Until SEZ laws are amended, Customs authorities remain responsible for processing refund claims, ensuring fairness and legal certainty for businesses operating in India’s SEZs.

Source: Gujarat High Court

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