Provisional Assessment [Rule 7] :

Cases where provisional assessment can be resorted to : Provisional assessment can be resorted to in the following cases:-

(a) Where the assessee is unable to determine the value of excisable goods

(b) Where the assessee is unable to determine the rate of duty applicable thereto .

Procedure for provisional assessment: Rule 7, read with the guidelines issued by the Board, sets out the procedure for provisional assessment as follows:

(i) Request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise: Wherever an assessee finds that final assessment is not possible at the point of removal, he will make a detailed request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise, indicating:-

a. specific grounds/reasons, and the documents or information, for want of which final assessment cannot be made.

b. period for which provisional assessment is required.

c. the rate of duty or the value or both, as the case may be, proposed to be applied by the assessee, for Provisional Assessment; and

d. that he undertakes to appear before the Assistant/Deputy Commissioner of Central Excise within 7 days or such date fixed by him, and furnish all relevant information and documents within the time specified by the Assistant/Deputy Commissioner of Central Excise in his order, so as to enable the proper officer to finalise the provisional assessment.

(ii) Order of provisional assessment: On receipt of the request, the Deputy/Assistant Commissioner of Central Excise will examine it, if necessary, in consultation with the concerned Range Officer, to ascertain whether provisional assessment is necessary at all.

A. Order rejecting provisional assessment: If the reasons/ grounds are not sufficient, he may ask the assessee to appear before him on an appointed day and time, and if he is satisfied that provisional assessment is not necessary, he may pass a reasoned order rejecting the same and also ordering the rate of duty or the value, to be applied by the assessee.

B. Order directing provisional assessment: Where the Deputy/Assistant Commissioner of Central Excise is satisfied with the genuineness of the assessee‘s request he will issue a specific order directing provisional assessment clearly stating: –

(a) The grounds on which provisional assessment has been ordered.

(b) The rate and /or value, as the case may be, at which duty has to be provisionally paid.

(c) The amount of differential duty for which bond is to be executed covering the period, if any, during which assessee paid duty provisionally under the deeming provisions, after applying the rate and/ or value specified in (b) above.

(d) The amount of security or surety as may be fixed by Assistant Commissioner keeping in view the instructions issued by the Board from time to time.

(iii) Furnishing of bonds: As mentioned earlier, provisional payment of duty is allowed if the assessee executes a bond in the prescribed form with such surety or security in such amount as the Assistant/ Deputy Commissioner may order. Such bond shall bind the assessee for payment of the difference between the amount of duty finally assessed and the amount of duty paid provisionally.

Though it is incumbent upon the assessee to ensure that the bond amount and corresponding securities are sufficient, the Divisional as well as the Range Officer will also keep a strict vigil on such cases with the help of ‘Provisional Assessment Register’.

The Assistant/Deputy Commissioner of Central Excise will be held responsible to ensure that bonds for proper amount i.e., 3 times of the estimated differential duty are taken, in case of general bonds and that these are backed by proper (25%) security/ bank guarantee of the bond amount.

The format of bond for provisional assessment has been specified in Notification No. 56/2001-Central Excise (N.T.) dated 3.7.2001.

(iv) Marking the documents and return as “PROVISIONALLY ASSESSED” vide Order No………. dated …………..”: The assessee is required to mark the E.R.1 (monthly/quarterly return) and documents covered under Provisional Assessment as “PROVISIONALLY ASSESSED” vide Order No………. dated …………..” . There is a declaration in E.R.1 where assessees have to mention the goods under ‘provisional assessment‘.

(v) Finalization of provisional assessment (Order of final assessment)

A. Meaning of Finalisation of provisional assessment: Finalisation of provisional assessment means finalisation of an issue/ground and thereafter finalization of each E.R.1s.

B. Time limit for finalisation of provisional assessment : Notwithstanding ‘selfassessment‘, all cases of provisional assessment have to be finalised by the Deputy/Assistant Commissioner of Central Excise, within a maximum period of 6 months from the date of communicating the order of provisional assessment.

Extension of time-limit of finalization of provisional assessment cases

(i) The Commissioner can extend the period of 6 months if sufficient cause is shown which is recorded in writing.

(ii) If the period of extension is beyond 6 months, then the permission of Chief Commissioner is required.

C. Communication of amount of duty to the assessee: The amount of duty finalized will be communicated to the assessee at the earliest.

D. Interest payable on differential amount: The amount of each differential duty shall be paid along with interest at the rate notified under section 11AA of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.

Ascertainment of the duty by the assessee himself In the event the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case, he will not have to incur interest on account of time taken by the Department to finalise assessment and communicate the amount.

(vi) Refund after finalization of assessment 

A. Refund order: Where any refund becomes due to the assessee, order shall be passed for such refund, but disbursement shall be subject to further verification about incidence of such duty.

B. Refund subject to provision of unjust enrichment: The assessee will be required to submit proof to the Assistant/Deputy Commissioner of Central Excise that the duty incidence was borne by him (assessee). If the assessee fails to produce such proof/evidence, the Assistant/Deputy Commissioner of Central Excise will pass an order for depositing the amount in Consumer Welfare Fund in the prescribed manner.

C. Interest payable on refund: The refund will be given along with interest as provided under section 11BB of the Act. Therefore, interest @ 6% will be computed from the date immediately after the expiry of three months from the date of receipt of refund application till the date of refund of such duty.

Department, suo motu, cannot issue directions for provisional assessment: It is important to note that rule 7 of the said Rules does not provide for the Department, suo motu, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self -assessment is not in order the assessee may be asked for all necessary documents, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, ‘Best Judgement‘ method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty, if any.

Prospective application of provisions of provisional assessment relating to interest clause and statutory time limit: As per the general law, the provisions of provisional assessment relating to interest clause and statutory time limit can only be prospective. Therefore, the provisions of interest and statutory time limit shall be applicable only to those cases of provisional assessment, which are ordered on or after 1st July, 2001.