When Imported Goods Are Lost: Understanding Remission of Customs Duty

By Denise Chipare Custom Duty Articles September 23, 2026

Summary: Section 23 of the Customs Act, 1962 deals with remission of customs duty where imported goods are lost, otherwise than as a result of pilferage, or destroyed before clearance for home consumption. It also provides, subject to statutory limitations, for relinquishment of title to imported goods before the relevant clearance or warehousing order. The provision must be distinguished from Section 13, which separately deals with pilfered goods, and Section 22, which provides for abatement of duty where imported goods remain in existence but are damaged or deteriorated. The distinction between loss, destruction, pilferage and damage is therefore important in determining the appropriate statutory remedy. The article explains these provisions through the practical example of imported machinery destroyed by fire while still under customs control and emphasises the importance of documentary evidence, including bills of entry, invoices, packing lists, warehouse records, fire reports, insurance surveys, photographs and inventory records. It also discusses the CESTAT Ahmedabad decision concerning P.I. Industries Ltd., involving duty-free goods in an SEZ destroyed by fire, and the evidentiary importance of establishing the actual quantity of goods destroyed. The article concludes with practical suggestions for importers regarding record preservation, warehouse safety, immediate documentation of accidents and timely communication with customs authorities.Assigned syllabus topic: Remission of Customs Duty on Lost Goods

Introduction
Legal Framework
Section 23(2): Relinquishment of title
Section 13 and pilferage
Section 22 and damaged goods
Contemporary and Practical Analysis
The recent development, judicial: P.I. Industries Ltd.
Critical Discussion
Verification of genuine loss
Distinguishing between loss and pilferage
Time of the loss
Detecting the amount actually destroyed
Insurance and customs duty
Suggestions
Conclusion
References
Statutes
Judicial Decisions
Official and Research Sources

Introduction

Merchandise may also be subjected to customs duty which is a major source of income to the government and is also an instrument of control on international trade in India. As a matter of rule, imported goods are leviable to customs duty as per provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. While still being under transit, the imported goods may turn out to be totally or partly lost by fire accident plundered damaged in store or otherwise lost before being cleared for home consumption.

This has yet to be addressed, of course, and a further legal question arises as to whether the importer should have to pay customs duty in respect of the goods that have been lost or destroyed before they actually reached the territory of the country?

Such situation is recognised by the Customs Act, 1962 by way of Section 23 which offers for remission of duty on lost, destroyed or abandoned goods. Where, upon the imported goods, other than as a consequence of pilferage, are lost or destroyed and not cleared for home consumption, the law offers that the officers have power to remit duty, if conditions prescribed therein, are satisfied.

The provision is also good because it balances competing interests. The government has a valid interest in protecting customs revenue and false remission, but the importer should not normally have to pay customs duty on goods that are in fact no longer in existence at the time they are imported into the home market.

This blog looks at the statutory provisions for remission under s 23, their relationship with the other customs provisions, the court’s interpretation, practical issues and recent updates for goods destroyed by fire.

Legal Framework

Rules and Statutories Custom Act, 1962. Section 23.

Remitting duties has become a topic of discussion for a long time since the law dealing with it was introduced as a new statutory provision. In our context, the relevant one is Section 23 of the Customs Act, 1962. Paragraph 1 of Section 23 brings in effect that the Assistant Commissioner of Customs/Deputy Commissioner of Customs shall remit the duty on goods if, from showing that imported goods have been lost (not pilferage) or destroyed at any time before clearance for home consumption, they are satisfied.

It is prudent to note that due to this, the law as drafted has various components.

1. Goods must be imported goods.

2. The goods must be lost or damaged

3. Damage or loss is not a result of pilferage since section 13 of the law addresses pilferage separately.

4 Loss or destruction has to be done before clearance for home consumption. The phrase “shall remit” is of importance. The law is a contemplation to remit the duties once the competent customs officer is satisfied through the statutory proof given by the party.

Section 23(2): Relinquishment of title

Another remedy is also given in s. 23. Section 23(2) says that if the owner of imported goods will waive his title to the goods before any order to clear the goods for home consumption is made under s. 47 or any order for allowing the deposit of any goods in a warehouse is made under s. 60, he is not liable to pay duty thereon.

Moreover,there is a limitation to this right. Owner is not allowed to give up ownership if any offence seems to have been committed under the Customs Act or any other law in force in respect of the said goods.

Henceforth, in other words, Section 23 definition encompasses physical loss or destruction and situation recognized by law in which ‘the title to the goods has been voluntarily relinquished’ by an importer before a relevant customs order.

Section 13 and pilferage

It must be taken to account that one must not confuse the actions of s 23 with the section 13 of the Customs Act, which is the section on pilfered goods.

Pilferage also typically refers to goods lost between the time of unloading and the time of a relevant customs clearance of warehousing order. Section 23 though states that loss due to pilferage is not regarded as a loss. That means an importer would first need to determine what type of loss had occurred to know the particular provision under which to claim.

This is important as not all illegal containment of imported goods is dealt with equally. Information about the manner and the time and place where the goods were gone missing may be significant.

Section 22 and damaged goods

Section 22 allows for reduction of duty if the goods have been damaged or become deteriorated in exceptional circumstances.

What is worth noting for the Sections 22 and 23 is the distinction. Section 22 will have the effect where the goods are still in existence yet their value or condition has been affected adversely. Section 23 relates to goods that have either been lost or totally destroyed.

For instance, imported machinery that gets damaged in transit but is still present for Customs evaluation (or is not available for determined inspection) may be subject to abatement about Sec 22. There could be case where imported machinery gets destroyed by fire in a gust full before it is cleared for home consumption by Customs, in such situation Sec 23 could be attracted.The legal treatment is that means depends upon the facts of the case.

Contemporary and Practical Analysis

The practical implications of Section 23 can be understood through a plain example.

Lets say an Indian company buys an expensive specialised machinery worth 50 lakh. The machine comes to India, though is still under customs control when the importer completes the clearance procedures. Before the goods are allowed for home consumption, a big fire breaks out in the warehouse destroying completely the machinery.

The importer has suffered a significant commercial loss and what is more from a customs angle, the imported machinery has never been allowed to entered domestic consumption as it destroyed before clearance.

Provided the importer proves to the content satisfaction of the customs authority that the good were destroyed, Section 23 gives him a legal way of getting the customs duties paid on the destroyed goods refunded.

In such cases, the importance of documentary evidence is enormous. To establish the facts of destruction an importer may need to provide documents supporting what comes next:

Identity and quantity of the goods;

Date and place of import;

Import status from customs;

Occurrence of the fire or other event;

Exact quantity that was destroyed; and

The destruction occurred before home consumption clearance.

Bills of entry invoices packing lists, warehouse records, customs records, fire brigade reports, insurance survey reports, photographs and inventories may also be helpful.

Recent customs litigation involving fire damaged goods has illustrated the significance of accurate evidence.

The recent development, judicial: P.I. Industries Ltd.

One important recent ruling is P.I. Industries Ltd. v. Commissioner of Customs, Ahmedabadbefore the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad 19 April 2024.

This is a case of duty free goods being introduced into the Special Economic Zone which were destroyed by fire. The issue which was before the Tribunal was whether remission of customs duty can be granted under Section 23 of the Customs Act?

Tribunal ruled out the possibilities put forward that for goods in SEZ, Section 23 could not be applicable. Tribunal held that determination of customs duty was governed by Customs Act and remission provision could, because of this, be applicable andit observed that Stand applied.Section 23 did not.

The decision is of particular significance as it reveals how the provision works in a contemporary commercial environment where companies use SEZs and special customs procedures.

The Tribunal also took notice of the insurance evidence. The insurance company did the inspection survey and accepted the fire loss which was considered by the Tribunal as evidence of fire-loss occurrence.

This case indicates an importer cannot simply testify that goods were lost. The facts and quantum of loss must be substantiated with proper evidence.

Critical Discussion

Although Section 23 serves the purpose of offering adequate protection to importers, it is still subject to certain difficulties in its implementation.

Verification of genuine loss

The first major challenge is to prove that the goods have been actually lost or destroyed. Customs authorities are bound by the duty of protecting the public revenue. Because of this, they cannot just take every claim of loss at face value.

This becomes all the more critical when a very large volume of goods is at stake. The imported goods are not considered for a customs duty reduction unless the exact number of goods that got lost has been substantiated against all goods remaining on hand.

In P.I. Industries Ltd. the Tribunal took into account the evidence about the quantity of goods that had been destroyed. The case reveals that having up-to-date inventory records and a proof of loss is the best way to deal with the customs authorities.

Distinguishing between loss and pilferage

The next hurdle is the need to differentiate accidental loss from pilferage.

The Section 23, in fact, expressly gives for the losses caused by pilferage being excluded. In the event that a large consignment in a warehouse is completely stolen, it is the nature of pilferage that would decide the legal consequences of this loss.

Therefore, the importer must be able to provide sufficient investigation into and documentation of the theft incident. Police report, warehouse records, customs form etc. might prove to be essential in establishing what happened actually.

Time of the loss

One major issue is also the time at which the incident took place.

Based on Section 23, the loss of goods is recognized when the goods are destroyed or lost before being admitted to home consumption. So, it is also necessary to find out whether and to what extent it was the loss of goods and on the exact time it occurred.

In case, the destruction takes place after the goods have been cleared for home consumption then Section 23 will not apply merely because the goods were once imported the stage at which the loss happened under the Act should be taken up for resolution.

Detecting the amount actually destroyed

It is not uncommon that disagreements can arise at the level at which the quantity of goods that have been lost was.

Suppose if there is a warehouse with a stock of 10,000 units and a fire took place, it should not at all be assumed that all 5000 units of these goods were destroyed in this catastrophe. It might happen in practice that customs officers will ask for a supporting paper as to the quantity that has been burned in the fire.

This point came under consideration in the litigation for P.I. Company, Ltd. where the Tribunal, in reference to the quantum of goods destroyed by fire, noted a discrepancy and disapproved a claim that was based on the entire inventory as it did not produce any proof that the goods had been destroyed in their entirety.

Insurance and customs duty

In practice, if someone has a damaged merchandise they turn to the insurance company for getting the replacement value of these goods. But, customs remiss and claims of insurance payment are two separate issues.

A receipt of funds from the insurance company might act as a piece of evidence that the goods have Yes been lost, but determination of customs duty has to be following the Customs Act.

That means, it is vital that businesses should not believe Really an insurance claim means they are legally free of duty.

In the first place, the importer of goods should store them in premises that do not lack the appropriate fire protection and security devices.

Secondly, the importer should document and safeguard the evidence of such incident occurring at a moment that it is necessary for example, that of fire, accident or destruction.

Last but not least, the customs departments should be informed of the incidents immediately when it is the right thing to do.

Suggestions

How can companies avoid or limit disputes related to remission? Companies importing into India should consider these steps:

First, the good owners shall keep complete documentation on imported goods such as purchase invoices, documents of bills of entry, quantities and stock location for management purposes.

Second, merchandise needs to be placed in warehouses with adequate fire-protection and safety measures.

Third, in case of a fire, an accident or damage or any event of a similar nature, the importer should register the fact and take all possible evidence.

Fourth, Customs and other competent authorities shall also be notified as soon as possible where appropriate;

Fifth, importers should keep electronic copies of important documents, as physical files could be destroyed in an accident as well.

Finally, professional legal or customs advice should be sought by the business when a significant loss occurs as the deduction for loss from pilgrage or damage or destruction is dependent upon whether the loss is classified as simple loss or not.

Conclusion

The remission of customs duty on lost goods forms part of a significant safeguard by Indian customs law. The Indian Customs Act, 1962 under Section 23 acknowledges that an importer should not ordinarily be liable to pay any customs duty on imported goods which are genuinely lost or destroyed before clearance for home consumption.

Remission holds under the statutory terms. The importer will have to show that the loss, or destruction, was to the reasonable satisfaction of the proper officer and the loss is not attributable to pilferage. The time of loss matters because Section 23 relates to a period before clearance for home use.

This provision will also need to be distinguished from the pilferage provisions under Section 13 and the abatement provisions for damaged or deteriorated stock under Section 22.

This can be seen from the recent ruling in P. I. Industries Ltd. v. Commissioner of Customs, Ahmedabad under which certain cases involving fire and goods held in the Special Economic Zone continued to be relevantbecause of this reaffirming the seriousness of sec. 23. The ruling emphasizes role played by documentary evidence in establishing the actual occurrence and extent of loss.

The overall effect of Section 23 is so to reconcile the principle to secure revenue for the government with the principle to treat truly importing business fairly. While it is expected that customs duty continues to be payable on the import of taxable goods, the legislation creates a system whereby this charge can be bypassed if the substance of the goods has vanished or been destroyed before there has been any consumption within New Zealand. On this, caring records and accurate timely reporting with supporting evidence is an absolute necessity to a business which needs to access this statutory protection.