𝐒 𝐉 𝐄𝐗𝐈𝐌 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬

 “Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 06.03.2025

Delhi High Court ruled that EDD is not a customs duty but a security deposit

The Delhi High Court ruled in favor of Sentec India Company Pvt. Ltd., ordering the refund of ₹10.72 lakhs in Extra Duty Deposit (EDD) paid during provisional assessment. The court clarified that EDD is a security deposit, not customs duty, and thus, the limitation period under Section 27 of the Customs Act, 1962, does not apply. This judgment sets a significant precedent for importers facing similar refund disputes.

Background:

Sentec India Company Pvt. Ltd. imported goods from Taiwan between 2014 and 2017. The Customs Department suspected undervaluation and referred the case to the Special Valuation Branch (SVB), Delhi. While the investigation was ongoing, the imported goods were cleared on a provisional basis upon payment of Extra Duty Deposit (EDD) at rates of 1% or 5%, totaling ₹10,72,986/-.

Investigation & Final Assessment:

• The SVB investigation (2017) concluded that although the petitioner and the exporter were related, there was no undervaluation.
• The Customs Department finalized the assessment in 2019, accepting the declared value, meaning no additional duty was owed.

Refund Claim & Rejection:

• Sentec requested a refund of EDD in 2020 and 2021, but the Customs Department rejected the claim, citing the one-year limitation period under Section 27 of the Customs Act, 1962.

Court’s Ruling:

• The Delhi High Court held that EDD is not a customs duty but a security deposit, meaning Section 27’s limitation period does not apply.
• The court ordered the refund of ₹10.72 lakhs with interest within two weeks.
• This ruling reinforces that importers cannot be denied refunds of EDD if their final assessment proves no undervaluation.

Impact:

This judgment sets a precedent for importers facing similar refund disputes, clarifying that EDD is refundable once customs authorities confirm the correct valuation.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: Delhi High Court

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