Final Assessment Pending on Provisionally Assessed Bills of Entry: CESTAT Sets Aside Customs Duty Demand [Read Order]

The Chennai Bench of the Customs, Excise andService Tax Appellate Tribunal (CESTAT) has set aside the customs demand with consequent penalty and confiscation, observing that no demand can be sustained where the Bills of Entry are provisionally assessed and the final assessment is pending.

The appellants, M/s Ankit Impex and M/s S.B.B. International, imported Recycled LDPE Granules under multiple Bills of Entry during July 2009. These imports have been subjected to provisional assessment under Section 18 of the Customs Act 1962 pending test report and further verification. These have been released upon execution of bonds and providing security.

However, the Department after conducting an investigation by the Directorate of Revenue Intelligence (DRI) raised an allegation of undervaluation of imported goods and issued a SCN suggesting rejection of the declared transaction value and determination of value under the residual method, demand of differential duty, confiscation of goods and imposition of penalties under the Customs Act.The demand and penalties imposed by the adjudicating authority have been upheld by the Commissioner of Customs. Hence, the appellants have approached the Tribunal.

The appellant argued that the entire demand was without jurisdiction, as the Bills of Entry were only provisionally assessed and the final assessment had not been completed. It was contended that Section 28 of the Customs Act cannot be invoked unless a final assessment is made determining the short levy.

The appellants also contended that the Relied Upon Documents (RUDs) were not furnished despite repeated requests which is a violation of the principle of natural justice. It was also contended that once the primary demand fails the penalties and confiscation also fail.

The Revenue argued that the investigations revealed undervaluation, and there was enough evidence to justify the demand and penalties.

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The Tribunal observed that the assessment under provisional assessment is incomplete and the liability gets fixed only upon finalization. It held that raising the demand without finalizing the assessment under provisional assessment is legally impermissible.

The Bench observed that the issuance of the show cause notice and confirmation of the demand in the present scenario are premature and unsustainable in law. It also held that penalties, confiscation and appropriation of the deposit would automatically follow if the very basis of the demand is invalid.

The Tribunal comprising Sulekha Beevi C.S[Judicial Member] and Vasa Seshagiri Rao[Technical Member] set aside the impugned orders in their entirety and allowed the appeals with consequential relief.

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