Customs short-levy demands require disclosed evidence and timely notice; undisclosed enquiries and premature notices invalidate the proceedings.

Reliance on undisclosed market enquiries in customs adjudication breached natural justice because the affected party had no opportunity to test the material, and the assessment could not stand. The demand for short-levy also failed because section 39 of the Sea Customs Act requires an actual, established short-levy and timely notice within the statutory period; a notice issued on mere apprehension before short-levy was proved was premature and ineffective. The assessment and penalty proceedings were quashed, with consequential relief to the petitioner.

---

---

Issues: (i) Whether the adjudication order was vitiated for reliance on undisclosed market enquiries and consequent breach of natural justice; (ii) Whether the demand for short-levy was barred because the notice under section 39 of the Sea Customs Act was premature and beyond limitation.

Issue (i): Whether the adjudication order was vitiated for reliance on undisclosed market enquiries and consequent breach of natural justice.

Analysis: The adjudicating authority relied upon market enquiries whose nature was not disclosed to the petitioner and which the petitioner had no opportunity to controvert. A decision founded on material not made available to the affected party offends the requirement of fair hearing.

Conclusion: Yes. The adjudication order was vitiated for breach of natural justice and could not stand.

Issue (ii): Whether the demand for short-levy was barred because the notice under section 39 of the Sea Customs Act was premature and beyond limitation.

Analysis: Section 39 permits recovery only when short-levy has in fact occurred and notice of demand is issued within three months of the first assessment. A notice issued merely on apprehension, before short-levy is factually established, is premature and ineffective for saving limitation. If the initial notice is ignored, the later show-cause notices fall outside the statutory period.

Conclusion: Yes. The demand was barred and the notices could not sustain the proceedings.

Final Conclusion: The assessment and penalty proceedings were quashed, and the petition succeeded with consequential relief available to the petitioner.

Ratio Decidendi: A customs demand for short-levy must be founded on an actual, established short-levy and a fair adjudication based only on disclosed material; a notice issued on mere apprehension or supported by undisclosed enquiry material is invalid.

---