Provisional assessment may be inferred from conduct and records; notices based on final assessment cannot survive.

Clearances may be treated as provisional assessment under Rule 7 where duty liability cannot be finally determined at the time of removal and the assessee's conduct, prior practice, bond, bank guarantee, and written intimation to the department show that provisional assessment was being followed. The absence of a formal order is not decisive on these facts. Once the assessments are provisional, show-cause notices premised on final assessment cannot stand; the proper course is finalisation of assessment by the competent officer in accordance with law and natural justice. The notices and consequential proceedings were therefore quashed and the matter remanded for final assessment.

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Issues: (i) Whether the assessee's clearances for 2001-02 and 2002-03 were to be treated as provisional assessments under Rule 7 of the Central Excise Rules, 2001/2002. (ii) Whether the show-cause notices and consequent proceedings could survive once the assessments were held to be provisional.

Issue (i): Whether the assessee's clearances for 2001-02 and 2002-03 were to be treated as provisional assessments under Rule 7 of the Central Excise Rules, 2001/2002.

Analysis: The amounts claimed for exclusion from assessable value, namely equalized freight, free service charges and turnover tax, were not ascertainable at the time of clearance. The assessee had already been following provisional assessment under the earlier Rule 9B of the Central Excise Rules, 1944, and the bond and bank guarantee were continued. The assessee had also informed the department that the assessments were provisional and had sought permission in writing. Rule 7 was treated as materially similar to Rule 9B, and the absence of a formal order was held not decisive in the facts of the case. The court applied the principle that provisional assessment may be inferred from the conduct of the assessee and the departmental record where the duty liability could not be finally determined at clearance.

Conclusion: The assessments for 2001-02 and 2002-03 were provisional under Rule 7 of the Central Excise Rules, 2001/2002, in favour of the assessee.

Issue (ii): Whether the show-cause notices and consequent proceedings could survive once the assessments were held to be provisional.

Analysis: The notices proceeded on the footing that the assessments were final. Once the assessments were held to be provisional, the foundation of the notices disappeared. The assessment had therefore to be finalized by the proper officer in accordance with law and after observing the principles of natural justice.

Conclusion: The show-cause notices and the proceedings pursuant thereto were quashed and the matters were remanded for finalization of assessment, in favour of the assessee.

Final Conclusion: The dispute was resolved by recognizing the assessments as provisional and directing the department to complete final assessment in accordance with law.

Ratio Decidendi: Where the duty liability cannot be finally determined at the time of clearance and the assessee's conduct and departmental record show that assessment was being treated as provisional, strict insistence on a formal order will not defeat provisional assessment if the statutory scheme is otherwise satisfied.

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