Revenue cannot treat investigative letters as demand notices; mandatory Section 28 adjudication must precede appropriation of duties.

The Petitioner, a mobile phone manufacturer, imported components including "Screw Washer/Gaskets" for Printed Circuit Board Assembly under the Customs Act, 1962

The Customs Department initiated an investigation alleging misclassification of these goods. During the investigation, the Petitioner’s representative expressed a willingness to pay differential duty and requested a duty demand letter

Consequently, the Respondent issued communications dated 12.12.2025 (demanding ₹3,20,87,688) and 14.01.2026 (demanding ₹3,57,95,501)

The Petitioner paid ₹3.2 crores "under protest" but subsequently challenged these communications via a writ petition, alleging they were issued without a formal Show Cause Notice and by an officer lacking pecuniary jurisdiction

1. Whether the impugned communications constitute valid demand notices under the scheme of Section 28 of the Customs Act, 1962.

2. Whether the Petitioner is entitled to a refund of the amount deposited under protest during the investigation phase.

The court examined Section 28 of the Customs Act, 1962, which mandates a formal adjudicatory process (Show Cause Notice) before fastening tax liability

The court referenced Radhika Agarwal v Union of India (2025) 6 SCC 545 and Suretex Prophylactics (India) P Ltd v Union of India (2023) 8 CENTAX 19 (Kar), which establish that recoveries made under coercion or without an order of adjudication are jurisdictional errors

It also noted the principle that amounts paid during investigation may be appropriated toward final liability only upon the passing of a formal adjudicatory order

The Court rejected the Petitioner’s argument that the communications were formal demand notices, characterizing them instead as follow-up letters issued at the Petitioner’s own request during investigation

The Court observed that the Petitioner had admitted to a calculation error and voluntarily recomputed and paid the differential duty

However, the Court emphasized that such an admission does not waive the Petitioner’s right to a statutory adjudication process. It determined that while a refund was not immediately warranted due to the Petitioner's voluntary payment and admission, the Department could not retain or appropriate the funds permanently without following the Section 28 procedure

It directed the Respondents to issue a formal Show Cause Notice within four weeks to adjudicate the Petitioner’s liability. The Court declined to order a refund at this stage, holding that the deposited amount of approximately ₹3.2 Crore would be appropriated toward any demand eventually raised in the final adjudicatory order. No further demands or recovery actions are to be made against the Petitioner in the interregnum