• Dated 27^th February, 2026

Demand under Section 28 Not Maintainable During Provisional Assessment under Section 18 - CESTAT Chennai

BRIEF FACTS:

The Appellants, The Appellants imported Recycled LDPE Granules through various Bills of Entry and cleared the consignments on provisional assessment under Section 18 of the Customs Act, 1962. The assessments were kept provisional pending receipt of test reports and final determination of assessable value. Subsequently, the Directorate of Revenue Intelligence (DRI) initiated an investigation alleging undervaluation of the imported goods. During search proceedings, certain documents, including an alleged "actual invoice," were recovered. Relying upon the said documents, a Show Cause Notice was issued proposing rejection of the declared transaction value in respect of 27 Bills of Entry, re-determination of value, demand of differential duty under Section 28(4) of the Customs Act, confiscation of goods under Section 111, and imposition of penalties under Sections 114A and 114AA of the Act. After adjudication, the Learned Adjudicating Authority rejected the declared value, confirmed the demand of differential duty, ordered confiscation of the goods with an option to redeem the same on payment of redemption fine, appropriated the deposits already made, and imposed penalties upon the Appellants. Aggrieved by the said Order-in-Original, the Appellants preferred an appeal before the Commissioner (Appeals), who upheld the findings of the Adjudicating Authority. Being dissatisfied with the impugned Order-in-Appeal, the Appellants have filed the present Appeal before the Hon'ble CESTAT.

ASSESSEE'S CONTENTION:

The Appellants contended that the demand raised under Section 28(4) of the Customs Act is premature and without jurisdiction, as the goods were cleared on provisional assessment under Section 18 and the assessments had not been finalized. In the absence of final assessment, no duty can be said to have been short-levied, and therefore invocation of Section 28 is legally unsustainable. The Appellants further submitted that the proceedings are vitiated due to violation of principles of natural justice, since the relied-upon documents, including the alleged "actual invoice," were not supplied despite repeated requests. The rejection of the declared transaction value was also arbitrary and contrary to the Customs Valuation Rules, 2007. Accordingly, the demand, confiscation, and penalties are liable to be set aside.

DEPARTMENT'S CONTENTION:

The Department contended that the Appellants had deliberately undervalued the imported goods by submitting fabricated invoices at the time of filing the Bills of Entry, as evidenced by the "actual invoice" and other incriminating documents recovered during the DRI investigation. It was argued that the declared transaction value was rightly rejected under Rule 12 of the Customs Valuation Rules, 2007, and that the value was correctly re-determined by applying the residual method. The Department further maintained that the demand of differential duty under Section 28(4), along with confiscation and imposition of penalties, was justified in view of the willful misdeclaration and intention to evade payment of customs duty.

DECISION:

The Hon'ble Tribunal held that the demand raised under Section 28(4) of the Customs Act was not sustainable, as the goods had been cleared on provisional assessment under Section 18 and the assessments were yet to be finalized. The Tribunal observed that in the absence of final assessment, no duty could be said to have been short-levied, and therefore invocation of Section 28 was premature and without jurisdiction. It was further noted that non-supply of relied-upon documents amounted to violation of principles of natural justice. Accordingly, the impugned order was set aside, and the demand, confiscation, appropriation of deposits, and penalties were quashed with consequential relief to the Appellants.

BTA's COMMENT:

This decision clearly reiterates that Section 28 of the Customs Act can be invoked only after final assessment. Where goods are cleared provisionally, the department must first finalize the assessment before alleging short levy. The ruling also reinforces that failure to supply relied upon documents strikes at the root of natural justice and can invalidate the entire proceedings.

Case Reference: Ankit Impex v. Principal Commissioner of Customs, Chennai – Final Order Nos. 40179-40180/2026 in Appeal Nos. C/40346 & 40449/2025, decided on 04.02.2026.

Author- Shristy Pathak

Edited by- Madhurima Bose