Concept of Provisional Assessment Under Custom

Provisional assessment in customs refers to a temporary assessment of duties on imported or exported goods when the final assessment cannot be determined immediately due to various reasons, such as the need for further information, tests, or investigations. This process allows for the release of goods while ensuring that the correct duty is eventually paid.

Generally,  the importers or exporters are mandatorily required to self-assess the duty. However,  in cases where an importer or exporter is unable to make a self–assessment, he may request the proper officer in writing for the assessment of the imported goods or export goods.

Situations under which the Provisional Assessment can be done:
The provisional assessment can be done in the following situations:

• where the importer or exporter is unable to make self-assessment and makes a request in writing to the proper officer for assessment;

• where the proper officer of Customs is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or the export goods, as the case may be; or

• where the proper officer of Customs deems it necessary to subject any imported goods or export goods to any chemical or other test for the purpose of assessment of duty thereon; or

• where the importer or the exporter has produced all the necessary documents and furnished full information for the assessment of duty but the proper officer of Customs deems it necessary to make further enquiry for assessing the goods.

Time limit for Final Assessment:
The proper officer shall finalise the duty provisionally assessed, within two years from the date of such provisional assessment. However, the Principal Commissioner of Customs or the Commissioner of Customs may, on sufficient cause being shown and for reasons to be recorded in writing, extend the said period to a further period of one year.

Cases where the time limit of 2 years would not be counted from the date of provisional assessment:
In the below cases the time period of 2 years shall not be counted from the date of the provisional assessment but from the date when such reason ceases to exist.

Where the proper officer is unable to assess the duty finally for the reason that--
(a) An information is being sought from an authority outside India through a legal process or
(b) An appeal in a similar matter of the same person or any other person is pending before the Appellate Tribunal or the High Court or the Supreme Court; or
(c) An interim order of stay has been issued by the Appellate Tribunal or the High Court or the Supreme Court; or
(d) The board has, in a similar matter, issued specific direction or order to keep such matter pending; or
(e) The importer or exporter has a pending application before the Settlement Commission or the Interim Board,

The proper officer shall inform the importer or exporter concerned, the reason for non-finalisation of the provisional assessment.

Furnishing of Bond:
The importer or exporter, has to execute appropriate bond and furnish requisite security to the satisfaction of the officer for payment of the deficiency, if any, between the duty finally assessed and duty provisionally assessed. On final assessment of duty in case of goods cleared for home consumption or exportation, the amount paid provisionally is adjusted against the duty finally assessed. If the amount so paid falls short of the duty finally assessed, the importer or exporter has to pay the deficiency. However, if the amount so paid is in excess of duty finally assessed, the importer or exporter is entitled to a refund. In the case of goods being warehoused, if duty finally assessed is in excess of the duty provisionally assessed, the proper officer of Customs may require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty.

The importer or exporter shall be liable to pay interest, on any amount payable consequent to the final assessment order or re-assessment order at the rate of 15% as per section 28AA of customs Act  from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.

Similarly, if any refundable amount is not refunded by the Government to the importer within three months from the date of final assessment of duty, the interest @ 6% shall be paid to the importer on such unrefunded amount by the Central Government under section 27A till the date of refund of such amount.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.