2025 (2) TMI 968 - HC - Customs

Importer loses concessional CVD rate after purchasing cement through high sea sales instead of direct manufacturer purchase

The HC reversed CESTAT's decision granting concessional CVD rate to importer. The importer purchased cement through high sea sales from third party rather ... Benefit of concessional rate of Counter Veiling Duty (CVD) on the imports - import of cement bags of 50 kgs retail packing instead of in bulk, not declaring the purpose of import - importers have failed to fulfill the conditions stipulated in the Notification No.4/2006-CE as amended - HELD THAT:- In the instant case, it is an admitted fact by the importer that he did not purchase the cement from the manufacturer directly. It was an high sea purchase from third party. No doubt, the Bill of Entry contain details of the manufacturer, but that is not sufficient to claim concession rate of duty. The concessional rule not only mandates that the purchase must be from the manufacturer directly but also specifies the mode of manufacturing and the capacity of the manufacturer. If the reasoning given by the CESTAT to be accepted, then the condition in Clause IB in the notification which imposes condition about the mode of manufacturing and capacity of the manufacturer will become redundant. To avail concession rate of duty, it should be purchased directly from the manufacturer who had satisfied the conditions mentioned in the notification. In case of High Sea Sales (HSS), it is not the manufacturer who sell the goods contrarily, it is the Middleman or a Trader for commission who sell the goods. Likewise, clearance of goods by the Examiner of Customs Department will not be a ground to set aside the order of withdrawal of duty concession on the ground of mis-declaration if evasion is found subsequently. The end use of the cement imported is one of the condition for granting concession rate of duty as per Clause IC. In fact the importer has to file a end use declaration at the time of clearance and any violation of the declaration will come to knowledge of the Revenue obviously only after the misuse of the goods imported for a purpose other than for which it was allowed to be imported at concession rate. In this case, the records reveals that, by way of show cause notice, the department had sought for explanation about the Post- Importation actual user confirmation. The importer has admitted that the cement imported was used for manufacturing Ash brick and sold in the local market. Therefore, it is evident that the cement was not used for institutional/industrial purposes. Conclusion - The CESTAT erred in allowing the benefit of concessional rate of counter veiling Duty (CVD) to the respondent M/s V.V.Minerals despite gross violation of the concession condition. The Order in Original is upheld - appeal allowed. The Commissioner of Customs, Tuticorin appealed against the Common Final Order passed by the CESTAT, South Zonal Bench, Chennai, regarding the import of Portland cement by M/s V.V Minerals from Pakistan between January 2009 to February 2012. The Customs Department alleged that M/s V.V. Minerals violated the conditions of the concessional rate of duty under Notification No: 04/2006 by availing duty concessions wrongly. The importer admitted to importing cement bags of 50 kgs retail packing instead of in bulk, not declaring the purpose of import, and paying more than the prescribed price. The Adjudicating Authority ordered the payment of differential duty and imposed a penalty, which was upheld by the Appellate Authority.M/s V.V. Minerals appealed to the CESTAT, arguing that they claimed the concession under the notification as actual users and that the department allowed the imports knowing they were purchased on a high seas sales basis. They contended that the delay in issuing the show cause notice and collecting the differential duty and penalty was barred by limitation. They also cited a Supreme Court judgment to support their position. The CESTAT allowed the appeal, setting aside the original order.The Customs Department then filed an appeal raising the question of whether the CESTAT was correct in allowing the benefit of concessional rate of Counter Veiling Duty (CVD) when the importers failed to fulfill the conditions stipulated in the Notification No.4/2006-CE. The Department argued that M/s V.V. Minerals violated the notification terms by misdeclaring the imports and not meeting the eligibility criteria for the concessional rate of duty.The Adjudication Authority and the Appellate Authority found the importer ineligible for the concessional rate of duty due to misdeclaration. However, the CESTAT overturned these decisions, stating that the importer had fulfilled the actual user condition and that the assessing officer had not raised doubts about this fulfillment during assessment. The CESTAT emphasized that the importer's claim of not selling the imported product to others was supported by the lack of evidence to the contrary.The CESTAT's decision was based on the importer's fulfillment of the actual user condition and the lack of evidence of misuse. However, the Customs Department argued that the importer did not purchase the cement directly from the manufacturer, used it for purposes other than institutional/industrial, and did not meet the conditions specified in the notification. The Department contended that the CESTAT erred in allowing the concession despite the importer's violations of the notification terms.Ultimately, the Court allowed the Department's appeal, setting aside the CESTAT's order and upholding the original order imposing the differential duty and penalty on M/s V.V. Minerals.