Provisional assessment and mandatory show cause notice requirements govern customs duty demands and clearance on interim terms

Provisional assessment requires a statutory provisional assessment order; mere clearance of imported goods during pending proceedings, or release pursuant to an interim judicial direction with bond and bank guarantee, does not by itself make the assessment provisional. A demand for countervailing duty must also be preceded by a show cause notice in the manner required under the Customs Act. Where duty is demanded without that mandatory notice, the demand is procedurally invalid and liable to be set aside.

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Issues: (i) Whether the assessment of the imported goods could be treated as provisional on the basis of the High Court's interim order and the bond and bank guarantee furnished by the importer; (ii) Whether the demand of countervailing duty could be sustained without issuance of show cause notice under the Customs Act.

Issue (i): Whether the assessment of the imported goods could be treated as provisional on the basis of the High Court's interim order and the bond and bank guarantee furnished by the importer.

Analysis: A provisional assessment must rest on a statutory basis and an order permitting clearance on provisional terms. Mere pendency of proceedings or clearance pursuant to judicial directions, without a valid provisional assessment order, does not by itself convert the assessment into a provisional one. The condition for provisionality was not satisfied in this case.

Conclusion: The assessment could not be treated as provisional.

Issue (ii): Whether the demand of countervailing duty could be sustained without issuance of show cause notice under the Customs Act.

Analysis: Recovery of duty requires issuance of a show cause notice in the prescribed manner. Since the countervailing duty was demanded without such notice under the Customs Act, the demand was contrary to the mandatory procedural requirement.

Conclusion: The demand of countervailing duty could not be sustained without show cause notice and was liable to be set aside.

Final Conclusion: The impugned demand was annulled and the assessee succeeded in the appeal.

Ratio Decidendi: Clearance of goods during pending proceedings does not make the assessment provisional unless there is a statutory provisional assessment order, and duty demand must be preceded by a mandatory show cause notice.

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