Provisional excise assessment bars recovery before finalisation, and requested cross-examination is required when witness statements are relied on.

Where excise duty remained under provisional assessment because the classification list had not been finally approved, recovery proceedings under Section 11A could not be initiated before final assessment and adjustment of duty; the show cause notice and consequential demand and penalty action were therefore without jurisdiction. In any fresh proceeding, if the department relies on adverse witness statements, natural justice requires granting the assessee a requested opportunity to cross-examine those witnesses. The Court also treated the deposited differential duty as refundable and directed refund with interest rather than relegating the assessee to a further appellate remedy.

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Issues: (i) Whether the show cause notice and the consequential demand and penalty proceedings were without jurisdiction because duty had only been provisionally assessed and final assessment had not been made under the excise scheme; (ii) whether, in any future proceeding, the assessee was entitled to cross-examine witnesses whose statements were relied upon, and whether refund of the deposited differential duty with interest could be directed.

Issue (i): Whether the show cause notice and the consequential demand and penalty proceedings were without jurisdiction because duty had only been provisionally assessed and final assessment had not been made under the excise scheme.

Analysis: The assessment of excise duty depended upon the classification list and, where the proper officer had not finally approved the classification, the goods stood under provisional assessment. Under the statutory scheme, a notice for recovery of short levy under Section 11A could be issued only after the relevant date, which in a case of provisional assessment arose upon adjustment of duty after final assessment. Since the classification list had not been finally approved, the condition precedent for invoking Section 11A was absent. The proceedings were therefore initiated before the stage at which the statute permitted recovery action.

Conclusion: The show cause notice and all proceedings based on it were without jurisdiction and could not be sustained.

Issue (ii): Whether, in any future proceeding, the assessee was entitled to cross-examine witnesses whose statements were relied upon, and whether refund of the deposited differential duty with interest could be directed.

Analysis: Where reliance is placed on witness statements adverse to the assessee, principles of natural justice require that the assessee be afforded an opportunity to test those statements by cross-examination if such opportunity is sought. The Court also treated the deposit made pursuant to the demand as refundable, and found no reason to relegate the petitioner to an alternative appellate remedy after the writ had been entertained and substantially heard.

Conclusion: The assessee was entitled, if sought, to cross-examine such witnesses in any fresh proceeding, and the deposited amount was directed to be refunded with interest.

Final Conclusion: The impugned notice and all consequential actions were quashed, the department was left free to proceed afresh only after finalisation of the classification list, and the assessee obtained refund of the deposited duty with interest.

Ratio Decidendi: In cases of provisional assessment, the recovery machinery under Section 11A cannot be invoked until final assessment and adjustment of duty have occurred, and adverse witness statements cannot be relied upon without affording a requested opportunity of cross-examination consistent with natural justice.

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