“Full-Copy Rule” for Departmental Test Reports & Strict Provisional-Assessment Protocol under Rule 9B

Commentary on M/s Oswal Petrochemicals Ltd. v. Commissioner of Central Excise, Mumbai-II (2025 INSC 578)

1. Introduction

The Supreme Court’s decision in Oswal Petrochemicals Ltd. v. Commissioner of Central Excise, Mumbai-II (Civil Appeals 129-131 of 2011, judgment dated 28 April 2025) settles two frequently litigated controversies under the Central Excise regime:

1. Whether communicating only the “gist” of chemical test reports satisfies the Department’s duty under Rule 56 of the Central Excise Rules, 1944 and the principles of natural justice.
2. What constitutes a valid provisional assessment under Rule 9B, especially where the Department relies upon RT-12 endorsements without a formal provisional assessment order or bond.

Both issues arose out of the Central Excise Department’s attempt to re-classify Benzene and Toluene cleared by Oswal between 1990-1993 from CETH 2902 to CETH 2707, thereby raising a substantial differential duty demand. The appeals reached the Supreme Court after conflicting rulings by the Commissioner (Appeals) and CESTAT.

2. Summary of the Judgment

The Court (Abhay S. Oka J. and Ujjal Bhuyan J.) allowed Oswal’s appeals and:

• Quashed the re-classification of Benzene and Toluene because complete test reports were never supplied; furnishing only the “gist” breached Rule 56(2) & (4) and violated natural justice.
• Held that assessments for Jan-Feb 1993 were not provisional; no Rule 9B order, no B-13 bond, and endorsements on RT-12 returns were inadequate.
• Set aside differential duty demands of Rs 1.97 crore (1990-92) and Rs 18.16 lakh (Jan-Feb 1993) plus penalty and interest.
• Declared that retrospective provisionalisation through a 1993 order was impermissible.

3. Analysis

3.1 Precedents Cited & Their Influence

1. Coastal Gases & Chemicals Pvt. Ltd. v. Asst. Collector, Visakhapatnam (1997 7 SCC 223) – Established that a valid provisional assessment requires both a Rule 9B order and payment of duty on a provisional basis.
2. Metal Forgings v. Union of India (2003 2 SCC 36) – Reaffirmed that absence of a Rule 9B order nullifies any claim of provisional assessment; limitation under Section 11A is then fully applicable.
3. CCE v. Hindustan National Glass & Industries Ltd. (2005 3 SCC 489) – Clarified that retrospective orders cannot convert regular assessments into provisional ones.

The Court adopted and extended these principles: mere RT-12 notations or later departmental directions cannot substitute the mandatory Rule 9B framework.

3.2 Court’s Legal Reasoning

1. On Communication of Test Reports
   • Rule 56(2) uses the imperative “shall communicate”.
   • Without the full report, the manufacturer cannot exercise the 90-day right to seek a re-test under Rule 56(4).
   • Supplying only a “gist” therefore undermines both statutory rights and audi alteram partem.
   • Consequently, the re-classification founded exclusively on undisclosed reports is void.
2. On Provisional Assessment
   • The assessee must request—or the proper officer must direct—provisional assessment through a written order.
   • A bond in Form B-13 is indispensable; absent a bond, assessments remain final.
   • The Assistant Commissioner’s order dated 18 Oct 1993 could not retro-operate to Jan-Feb 1993; retrospective provisionalisation is barred.
   • Endorsements on RT-12 returns are administrative annotations, insufficient to satisfy Rule 9B.
   • Therefore, the limitation clock was never suspended; demands raised in 2004 for 1990-93 clearances were hopelessly time-barred.

3.3 Potential Impact

• “Full-Copy Rule” Institutionalised – Departments must now serve the entire laboratory report whenever they rely on in-house or referral tests; otherwise, the assessment or demand collapses.
• Higher Compliance Burden on Excise / GST Officers – Officers can no longer assume that gist, summary, or ‘intimation’ suffices; full disclosure becomes litigation-determinative.
• Re-classification Litigation – The judgment discourages ex-post sampling to upset approved classification lists without strict procedural adherence.
• Provisional Assessment Doctrine Clarified – Businesses can resist retrospective demands where Rule 9B prerequisites are missing; GST practitioners may analogously invoke it under Section 60 of the CGST Act (which mirrors Rule 9B).
• Administrative Accountability – Expect more writs/appeals challenging demands premised on provisional assessments unless bonds & orders are traceable.

4. Complex Concepts Simplified

Classification List (Rule 173B)

The document in which a manufacturer declares the tariff headings, descriptions, and duty rates for every product. Once approved, it governs assessments unless modified in accordance with law.

Rule 56 Test

The Department can draw product samples. Rule 56(2) mandates supplying the test results to the manufacturer; Rule 56(4) gives the right to seek a re-test within 90 days.

Provisional Assessment (Rule 9B)

A mechanism allowing duty payment on a tentative basis when value or classification is uncertain. Requires (i) a written order by the proper officer and (ii) execution of a bond securing differential duty.

RT-12 Return

Monthly duty-payment return filed under Central Excise. A remark “Provisional” on RT-12 is merely notional unless backed by a Rule 9B order.

5. Conclusion

Oswal Petrochemicals lays down two bright-line rules:

1. The Department must furnish the complete laboratory test report—“gist” or summary is inadequate—failing which any consequential re-classification or duty demand is vitiated.
2. An assessment is provisional only if all constituents of Rule 9B are satisfied: written order + bond + contemporaneous implementation. Retrospective or partial provisionalisation is legally untenable.

The ruling not only protects assessees from surprise demands based on undisclosed evidence but also codifies procedural rigour for revenue authorities. In the emerging GST landscape, where similar procedural safeguards exist, this judgment will likely resonate beyond Central Excise, reinforcing transparency and due process as non-negotiable pillars of indirect tax administration.