Customs Duty Liability Arises On Warehouse Clearance Date: Supreme Court

The Supreme Court has said that an assessee’s liability to pay customs duty arises at the time the goods are cleared from the warehouse, meaning the actual date on which the goods are removed.

A Bench of Justices Manmohan and Vipul M Pancholi dismissed an appeal filed by M/s Bangalore Mono Filaments Pvt Ltd. Court was examining whether the high court was right in denying the benefit of Customs Notification No. 31/1997 on the ground that the Duty Exemption Entitlement Certificate (DEEC) licence had expired by the time the goods were cleared from the Customs House.

Court also considered whether, to claim exemption under the notification, the advance licence must be valid on the date when the goods are actually taken out of the bonded warehouse.

As per the facts, the appellant imported 10,800 kg of HDPE granules on January 11, 2000 under an Open General Licence, and the goods were stored in a bonded warehouse. An inbound bill of entry was filed on February 9, 2000.

Later, on May 26, 2000, the appellant obtained an Advance Licence under the DEEC Scheme, originally issued in the name of Indco Remedies Ltd, Bombay. This licence was valid for two years and was set to expire on November 18, 2000.

Court noted that the appellant filed the ex-bond bill of entry to take delivery of the goods only on December 8, 2000. The relevant provisions considered were Sections 15 and 68 of the Customs Act, 1962.

Referring to General Exemption No. 84-I, which deals with materials imported against Advance Licences issued after April 1, 1997, the Bench said that the law makes it clear that customs duty becomes payable when the goods are cleared from the warehouse.

Relying on its earlier judgment in Pratibha Processors and Ors Vs Union of India and Ors, (1996), the Court said that “clearance from the warehouse” refers to the actual date when the goods are removed.

In this case, the goods were removed on December 8, 2000. By that date, the Advance Licence under the DEEC Scheme had already expired.

Court held that the High Court was right in concluding that on the date when duty became payable, the appellant was no longer entitled to claim exemption under the DEEC licence.

The appeal was accordingly dismissed as devoid of merit.

Case Title: M/s Bangalore Mono Filaments P Ltd Vs Commr of Cus (Exports) Chennai & Anr

Bench: Justices Manmohan and Vipul M Pancholi

Date of Judgment: February 5, 2026