2025 (12) TMI 691 - AT - Customs

Concessional duty upheld for imported cement sold to industrial buyers; extended limitation and equal penalty u/ss 28, 114A quashed

CESTAT allowed the appeal, holding that concessional duty under Sl. No. 1C of Notification No. 4/2006-CE applies to imported cement sold exclusively to ... Recovery of differential duty on imported cement on the grounds of alleged disapplication under Sl. No. 1A(ii) of Notification No. 4/2006-CE - cement imported and sold exclusively to industrial/institutional consumers - rejection of benefit of concessional rate under Sl. No. 1C of the said Notification - adoption of contemporaneous RSP of domestic cement to re-fix RSP of imported cement - invocation of extended period under proviso to Section 28 - imposition of equal penalty under Section 114A. HELD THAT:- Sl. No. 1C is specifically applicable to bulk clearances, such as sales to industrial or institutional consumers and the benefit was applicable if the retail sale price (RSP) was not required to be declared on packages under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. This was based on the third proviso to the explanation in Sl. No. 1C. Packages for industrial or institutional consumers are not considered retail sales and are thus exempt from the RSP declaration requirement. The appellant imported cement in 50 kg packaged bags does not disentitle them from the benefit of Sl. No. 1C of Notification No. 4/2006-CE. The essential criterion for Sl. No. 1C is the nature of the buyer (industrial/institutional), not the form of packaging, and this condition is fully satisfied. Accordingly, the lower authorities erred in rejecting the exemption merely because the cement was packaged or had printed MRP. Adoption of indigenous RSP for imported goods has been held impermissible in various Tribunal rulings. Thus, the demand based on enhanced RSP is factually baseless and legally untenable - the appellant is eligible for Sl. No. 1C. Invocation of extended period of limitation - HELD THAT:- The dispute, at best, concerns interpretation of Notification, for which invoking extended period is impermissible - the invocation of extended period is unsustainable. Penalty - HELD THAT:- Once extended period fails, penalty under Section 114A automatically fails. Further, penalty requires mens rea which has not been demonstrated. The appellant acted based on interpretation consistent with earlier Tribunal decisions. Hence, equal penalty under Section 114A cannot survive. There are no hesitation to set aside the impugned Order-in-Appeal on merits as well as on grounds of limitation - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 p Whether cement imported and sold exclusively to industrial or institutional consumers is eligible for concessional CVD under Sl. No. 1C of Notification No. 4/2006-CE, irrespective of packaging in 50 kg bags and printing of RSP. 1.2 p Whether the Revenue is entitled to reject the declared RSP of imported cement and adopt contemporaneous RSP of domestically manufactured cement for determining CVD liability. 1.3 p Whether a show cause notice demanding differential duty was valid when the original assessment was completed by an out-of-charge order under Section 47 of the Customs Act, 1962, without recourse to review or reassessment mechanisms. 1.4 p Whether the extended period of limitation under the proviso to Section 28 of the Customs Act, 1962 was invocable in the facts of the case. 1.5 p Whether the imposition of equal penalty under Section 114A of the Customs Act, 1962 was legally sustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Eligibility for concessional CVD under Sl. No. 1C of Notification No. 4/2006-CE p - Legal framework The Tribunal examined Sl. No. 1A(ii) and Sl. No. 1C of Notification No. 4/2006-CE and the third proviso to the Explanation to Sl. No. 1C, read with the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, particularly the exclusion of packages meant for industrial or institutional consumers from the requirement of RSP declaration. p - Interpretation and reasoning The Tribunal found that the cement was imported in 50 kg bags but was cleared and sold only to industrial/institutional consumers. It held that Sl. No. 1C specifically contemplates bulk clearances to such consumers and that the decisive factor is the nature of the buyer, not the mode of packing or the mere presence of printed MRP. The Tribunal noted the absence of any evidence from the Revenue of (i) any retail sale, (ii) sale through dealer/distributor network, or (iii) any buyer who was not an industrial/institutional consumer. It relied on earlier decisions in identically situated matters where it was held that packaging in 50 kg bags does not defeat eligibility under Sl. No. 1C when all sales are to industrial/institutional consumers and that Notification No. 4/2006-CE does not impose any post-import condition that would justify denying the benefit solely on the ground of packaging or printed MRP. p - Conclusions The Tribunal concluded that the imported cement satisfied the conditions of Sl. No. 1C, that the presence of 50 kg bags and printed MRP did not convert industrial/institutional sales into retail sales, and that denial of the concessional rate under Sl. No. 1C on this ground was erroneous. The appellant was held eligible for the benefit under Sl. No. 1C. Issue 2: Adoption of contemporaneous domestic RSP for imported cement p - Legal framework The Tribunal considered the principles governing RSP-based assessment under Section 4A of the Central Excise Act, 1944 as applied through CVD and the requirement that RSP must relate to the imported goods. p - Interpretation and reasoning The Tribunal noted that the Revenue had rejected the RSP declared for the imported cement and attempted to substitute it with a higher RSP of domestically manufactured cement as a so-called contemporaneous price. It held that RSP for CVD purposes must be the RSP of the imported goods themselves, not of indigenous goods. It also observed that the investigation had not produced any evidence that the importer sold the goods at a higher RSP than declared or that any RSP-based retail sale had taken place. All sales were in bulk to industrial/institutional buyers, negating the premise of retail marketability. Earlier Tribunal rulings, including connected batch matters, had already held that adoption of indigenous RSP for imported goods is impermissible. p - Conclusions The Tribunal held that the substitution of the declared RSP of imported cement with domestic cement RSP was factually unfounded and legally untenable, and therefore the differential duty demand based on enhanced RSP could not be sustained. Issue 3: Validity of SCN in light of existing assessment under Section 47 p - Legal framework The Tribunal referred to the legal position prevailing at the material time when self-assessment was not in force and an out-of-charge order under Section 47 of the Customs Act, 1962 constituted an assessment order. It relied on the principle laid down in the decision in Decor India, as affirmed by the Supreme Court, that a demand of duty or confiscation proceedings cannot be initiated by a simple show cause notice without first reviewing or otherwise lawfully disturbing the assessment made under Section 47. p - Interpretation and reasoning The Tribunal observed that the goods had been assessed and cleared under Section 47 after examination of documents by Customs. The subsequent show cause notice sought to revise that assessment, but there was no evidence of review under Section 129D, no appeal against the assessment, and no reassessment proceedings. Applying the ratio that once an order of assessment under Section 47 is passed, it cannot be reopened merely by an SCN for demand without recourse to statutorily prescribed mechanisms, the Tribunal held that the SCN was issued without jurisdiction. p - Conclusions The Tribunal concluded that the SCN seeking differential duty, without prior review or lawful reopening of the original assessment order under Section 47, was without jurisdiction and the resultant demand was void. Issue 4: Invocation of the extended period under the proviso to Section 28 p - Legal framework The Tribunal applied the proviso to Section 28 of the Customs Act, 1962, which permits invocation of the extended limitation period only on grounds of suppression, fraud, wilful misstatement, or collusion. p - Interpretation and reasoning The Tribunal noted that all relevant import documents had been placed before Customs, the RSP printed on the bags had been disclosed, the buyers were correctly declared, and the out-of-charge order was passed after customs verification. The Revenue had not adduced any material to show deliberate suppression, fraud, or wilful misstatement. The dispute essentially concerned the correct interpretation and applicability of Notification No. 4/2006-CE, which, by itself, could not justify invocation of the extended period. p - Conclusions The Tribunal held that the conditions for invoking the extended period under the proviso to Section 28 were not satisfied and that the invocation of the extended period was unsustainable. Issue 5: Justification for penalty under Section 114A p - Legal framework The Tribunal considered Section 114A of the Customs Act, 1962, which provides for mandatory equal penalty where duty has not been levied or has been short-levied by reason of fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. p - Interpretation and reasoning Having held that the extended period was not invocable due to the absence of suppression or fraud, the Tribunal reasoned that the necessary mens rea for imposition of penalty under Section 114A was also absent. The importer's conduct was based on a plausible interpretation of Notification No. 4/2006-CE, in line with existing Tribunal precedents in similar matters, and there was no evidence of any intent to evade duty. p - Conclusions The Tribunal held that, once the extended period fails and no mens rea is established, penalty under Section 114A cannot survive. The equal penalty imposed under Section 114A was therefore set aside. Overall disposition p On the combined findings that (i) the benefit of Sl. No. 1C of Notification No. 4/2006-CE was rightly available, (ii) the attempt to adopt domestic RSP was impermissible, (iii) the SCN was without jurisdiction in the absence of proper review/reassessment of the Section 47 assessment, and (iv) extended limitation and penalty were unsustainable, the Tribunal set aside the impugned order on merits as well as limitation and allowed the appeal with consequential reliefs in law, following the ratio of earlier batch decisions in identical matters.