Original customs assessment must be challenged before interest demand and penalty can be sustained under the Customs Act.

Interest and consequential penalty under the Customs Act, 1962 were held unsustainable where the original assessment order, based on the bills of entry, had not been challenged. The Tribunal reasoned that a show cause notice invoking interest under Section 61(2) read with Section 28 could not stand unless the assessment itself was first disturbed. On that basis, the assessee's challenge succeeded and the Tribunal's view was upheld.

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Issues: Whether interest could be demanded and penalty imposed under the Customs Act, 1962 without first challenging the original assessment order based on which the goods were cleared under warehouse facilities.

Analysis: The respondent had availed warehouse facilities under Chapter IX of the Customs Act, 1962, and interest was sought under Section 61(2) read with a notice invoking Section 28. The Tribunal found that the assessment order was founded on the bills of entry and had not been challenged. On that basis, it held that a show cause notice demanding interest could not be sustained without disturbing the original assessment, and accepted the assessee's case.

Conclusion: The demand of interest and the consequential penalty were not sustainable in the absence of any challenge to the original assessment order, and the Tribunal's view was upheld.

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