The solid-state synthesized dense ceramic composite, consisting of M-type hexaferrite Ba0.5Sr0.5Fe12O19 and inverse spinel ferrite Ni0.3Co0.2Zn0.5Fe2O4 (NCZFO) with varying concentrations, demonstrates the presence of apparent colossal permittivity along with dielectric relaxation behaviors at the higher frequency regions for all the composites. This phenomenon manifests as a giant dielectric permittivity of approximately 105 at 1 kHz, gradually decreasing to around 103 at 1 MHz at room temperature. It can be attributed to the Maxwell–Wagner interfacial polarization, which arises from the presence of different conductivity regions within the microstructures of the composite. The dielectric permittivity and the activation energy are also increased with higher NCZFO content, indicating an intricate microstructure influencing the electrical response by impacting charge carrier movement and ion migration. The presence of both Fe and Co cation defects and oxygen vacancies enhanced non-uniformity in the microstructure with different conductivity regions. The appearance of relaxation peaks in the higher frequency region can be attributed to inhomogeneity in the microstructure. In conjunction with the equivalent circuit analysis, the Nyquist plot confirmed that the electrical response at a lower frequency primarily arises from grain boundaries. The departure from ideal Debye-type relaxation behavior in the electrical response is also confirmed by impedance analysis. Furthermore, the step-like increase in AC conductivity with frequency suggests that the electrical response observed at a lower frequency is not intrinsic. Rather, it indicates the depletion of insulating grain boundaries due to diffusive ion motions resulting from defects. This observation reinforces that the high dielectric permittivity observed in the composite is not an inherent characteristic of the constituent materials. Instead, it arises from the microstructure and the influence of defects within the material.