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 than directly from manufacturer, violating Notification No.4/2006-CE conditions. Additionally, the imported cement was used for manufacturing ash bricks and local market sales instead of institutional/industrial purposes as required. The court held that concessional duty benefits require direct purchase from qualifying manufacturers and compliance with end-use conditions. Customs clearance alone cannot validate duty concession if subsequent evasion is discovered. The original order withdrawing duty concession was upheld.

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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.

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