Provisional assessment bars penalty and confiscation where duty is regularised only on finalisation

Duty demand remained undisputed, but penalties could not be sustained because the record did not show a completed final assessment for the relevant period. The department's own reliance on cost-data verification supported the position that the assessments were provisional and were regularised only on finalisation. In that setting, short payment arising during provisional assessment did not justify penalty on the assessee or the executive director. For the same reason, confiscation of land, building and goods also lacked a surviving basis once the assessments were treated as provisional.

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Issues: (i) Whether penalty could be sustained when the duty liability was finalised on the basis of provisional assessments; (ii) whether confiscation of land, building and goods could be ordered where the assessments were provisional.

Issue (i): Whether penalty could be sustained when the duty liability was finalised on the basis of provisional assessments.

Analysis: The duty demand was not disputed, but the controversy was confined to penalties. The record did not establish that the assessments had already been finalised during the material period. On the contrary, the department itself relied upon examination of the assessee's cost data by the Assistant Director (Costs), which supported the assessee's case that the assessments remained provisional and were completed only after verification of revised data. In the absence of evidence of a final assessment order for the relevant period, the benefit of doubt was given to the assessee. Penalty could not be sustained when the short payment arose during provisional assessment and was regularised at finalisation.

Conclusion: Penalty on the assessee and on the executive director was not sustainable and was set aside.

Issue (ii): Whether confiscation of land, building and goods could be ordered where the assessments were provisional.

Analysis: The proposed confiscation was linked to the same foundation as the penalty, namely the alleged short payment during the assessment period. Once the assessments were treated as provisional, the basis for confiscation did not survive.

Conclusion: Confiscation of land, building and goods was not called for.

Final Conclusion: The demand was maintained, but the penal consequences and confiscation-related proposals failed; the assessee succeeded on the penalty aspect, while the Revenue's appeal was rejected.

Ratio Decidendi: Where duty liability is determined on finalisation of a genuinely provisional assessment, penalty and confiscatory consequences are not sustainable in the absence of proof of a completed final assessment during the relevant period.

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