Provisional customs assessment cannot sustain premature duty recovery, confiscation, or penalties before finalisation of assessment.

Where bills of entry were only provisionally assessed under Section 18 of the Customs Act, a demand notice under Section 28 for duty recovery, along with confiscation and penalties, was held premature because final assessment had to be completed first before any short-levy or non-levy claim could arise. The Tribunal also held that punitive action could not be sustained at the provisional stage. The ex parte adjudication was further found procedurally unfair because the noticees were not given an adequate opportunity to respond, and the request to explore settlement was not properly considered. The impugned order was therefore set aside and the assessee succeeded.

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Issues: (i) Whether a demand notice under Section 28 of the Customs Act, 1962, together with confiscation and penalties, could be sustained when the bills of entry had only been provisionally assessed under Section 18 of the Customs Act, 1962. (ii) Whether the ex parte adjudication, without adequate opportunity and without considering the request to pursue settlement, vitiated the proceedings for breach of natural justice.

Issue (i): Whether a demand notice under Section 28 of the Customs Act, 1962, together with confiscation and penalties, could be sustained when the bills of entry had only been provisionally assessed under Section 18 of the Customs Act, 1962.

Analysis: Section 28 operates to recover duty not levied, short-levied, or erroneously refunded after assessment, and in the case of provisional assessment the relevant date for notice is linked to the adjustment made on final assessment. The statutory scheme requires finalisation of the provisional assessment first, because only then does the question of short levy or non-levy arise in a legally actionable form. On the facts, the department proceeded directly under Section 28 without first completing final assessment. The Tribunal also noted that confiscation and penalty provisions could not be pressed into service before the assessment was finalised. The authorities relied on allegations of undervaluation and fraud, but those allegations did not cure the basic jurisdictional defect in invoking recovery and punitive provisions prematurely.

Conclusion: The demand notice under Section 28 was not maintainable at the provisional-assessment stage, and the confiscation and penalties could not be sustained. This issue is decided in favour of the assessee.

Issue (ii): Whether the ex parte adjudication, without adequate opportunity and without considering the request to pursue settlement, vitiated the proceedings for breach of natural justice.

Analysis: Procedural fairness required the appellants to be given a meaningful opportunity to respond, particularly because the case depended on statements and documents affecting valuation, confiscation, and penalties. The record showed that the request for time to explore settlement was not dealt with in a reasoned manner, and the conclusion that the appellants were merely delaying the proceedings rested on assumption rather than demonstrated facts. In a matter involving serious civil consequences, natural justice demanded that the noticees be given a fair chance to test the evidence and answer the allegations.

Conclusion: The adjudication suffered from procedural unfairness. This issue is decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed, with the consequential relief flowing from the failure of the demand and the connected punitive actions.

Ratio Decidendi: Where goods are under provisional assessment, recovery proceedings and punitive action under the Customs Act cannot be initiated under Section 28 until the assessment is finally completed.

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