ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 24.11.2025
CESTAT Chandigarh Sets Aside Time-Barred Provisional Assessment and Demand Under Section 28
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a significant judgment in the case of M/s S.K. Petrochem vs. Commissioner of Customs, Ludhiana (Customs Appeal No. β 60956 of 2019). This case revolved around the classification and valuation of imported goods and the procedural adherence to the Customs Act, 1962, particularly Sections 18 and 28. β
Case Background
M/s S.K. β Petrochem imported consignments of ‘Rubber Processing Oil’ (RPO) between September 2011 and September 2012, classifying them under CTH 2710.1990. The goods were provisionally assessed under Section 18(1)(b) of the Customs Act, 1962. β However, test reports from Punjab Test House and CRCL indicated that the aromatic compounds in the goods exceeded 50%, suggesting that the goods should be classified under CTH 27079900 instead. β This led to a Show Cause Notice (SCN) being issued in February 2016, followed by a corrigendum in October 2016. β Subsequently, an Order-in-Original was passed in December 2017, confirming a differential duty of Rs. β 45 lakhs. β The Commissioner of Customs (Appeals) upheld this order in March 2019, prompting the appellant to challenge the decision before CESTAT. β
Key Issues Raised β
The case raised several critical legal and procedural issues, including:
- Time-Barred Finalisation of Provisional Assessment: The appellant argued that the finalisation of the provisional assessment was delayed beyond the reasonable time frame of six months prescribed in the CBEC Customs Manual. β The final assessment was made after five years, which the appellant claimed was time-barred. β
- Violation of Principles of Natural Justice: The appellant contended that the demand for differential duty under Section 28 was confirmed without issuing a proper SCN, which is a violation of the Principles of Natural Justice. β
- Lack of Evidence for Value Enhancement: The appellant argued that the enhancement of the value of imported goods was arbitrary, as there was no evidence of contemporaneous imports or suppressed transaction value. β
- Legal Authority to Finalise Provisional Assessments: The appellant questioned the legal basis for finalising provisional assessments under Section 18, arguing that the provision for finalisation was introduced only in 2018 and could not be applied retrospectively. β
Tribunal’s Observations and Decision β
After hearing both sides, the Tribunal made the following observations:
- Time Frame for Finalisation: While Section 18 does not prescribe a specific time limit for finalising provisional assessments, the CBEC Customs Manual recommends a six-month period, with exceptions for complex cases. β The Tribunal held that the inordinate delay of five years in finalising the assessment was unjustified and violated the principles of reasonable time. β
- Violation of Principles of Natural Justice: The Tribunal found that the demand under Section 28 was not maintainable as the provisional assessment had not been finalised, and no SCN was issued. β This was deemed a clear violation of the Principles of Natural Justice. β
- Legal Precedents: The Tribunal referred to several landmark judgments, including ITC Ltd (2006) and Gupta Smelters Pvt Ltd (2019), which established that finalisation of provisional assessment is a prerequisite for issuing a demand under Section 28. β The Tribunal emphasized that the absence of a final assessment order and SCN rendered the proceedings invalid.
Final Verdict
The Tribunal concluded that the proceedings initiated by the Revenue were vitiated due to the inordinate delay in finalising the provisional assessment and the lack of adherence to procedural requirements under Section 28. β Consequently, the impugned orders were set aside, and the appeal was allowed. β
Key Takeaways
This judgment underscores the importance of adhering to statutory timelines and procedural requirements under the Customs Act, 1962. β It reiterates that:
- Provisional assessments must be finalised within a reasonable time frame, as per CBEC guidelines. β
- Issuance of a Show Cause Notice is mandatory under Section 28 for recovery of differential duty after finalisation of provisional assessments. β
- The Principles of Natural Justice must be upheld in all proceedings, including the right to cross-examination.
The case serves as a reminder to both importers and the Revenue to ensure compliance with legal provisions and procedural fairness in customs assessments and disputes. It also highlights the role of judicial precedents in shaping the interpretation and application of statutory provisions.
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Source: CESTAT Chandigarh
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