2025 (3) TMI 76 - HC - Customs

Concessional rate of duty - import of Cement - import of cement in bags of 50 kgs retail packing and not in bulk - failure to fulfill the conditions stipulated in the N/N. 4/2006-CE - HELD THAT - Based on the Bills of Entry and admission of the importer the Adjudication Authority in his Order in Original dated 16.01.2015 held that the importer is not eligible for concessional rate of duty. The violation of the concession condition amounts to misdeclaration to evade duty. Whereas the CESTAT by a common final order had set aside the order in original without adverting to the factual aspects of the individual case. The reasoning given by CESTAT to interefere the well considered order of the Adjudicating Authority of the face of it suffers patent infirmity. 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 a high sea purchase from a non-manufacturer/trader. No doubt the Bill of Entry contains details of the manufacturer but that is not sufficient to claim concessional rate of duty. The concessional rule not only specifically mandates that the purchase must be from the manufacturer directly it 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. 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 Hollow bricks and sold to its customers. Therefore it is evident that the cement was not used for institutional/industrial purposes. Hence the CESTAT order which is apparently against the terms of the notification and the evidence by way of Bills of Entry and Statement of importer is liable to be set aside. Conclusion - The CESTAT erred in allowing the benefit of concessional rate of counter veiling Duty (CVD) to the respondent M/s A-1 Hallow Bricks and Manufacturer despite gross violation of the concession condition. Hence the question of law is answered in negative favouring the Department. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the CESTAT was correct in allowing the benefit of a concessional rate of Countervailing Duty (CVD) on imports where the importers failed to fulfill the conditions stipulated in Notification No. 4/2006-CE as amended.

2. Whether the import of cement by M/s A-1, Hollow Bricks and Construction violated the terms of the Notification No. 4/2006-CE, given the misdeclaration of the Retail Sale Price (RSP) and the nature of the import as being from a trader rather than directly from a manufacturer.

3. Whether the CESTAT erred in setting aside the Order-in-Original which had imposed penalties and demanded differential duty based on alleged misdeclaration and misuse of concessional duty provisions.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compliance with Notification No. 4/2006-CE

- Relevant legal framework and precedents: Notification No. 4/2006-CE provides concessional rates of duty under specific conditions, including the requirement that the cement must be purchased directly from the manufacturer and used for institutional or industrial purposes.

- Court's interpretation and reasoning: The Court emphasized that the conditions for concessional duty are strict and must be adhered to. The importer's admission that the cement was purchased through High Sea Sales from a trader, rather than directly from a manufacturer, disqualified them from the concessional rate.

- Key evidence and findings: The Bills of Entry and the importer's own admission were critical in establishing that the cement was not purchased directly from a manufacturer. The RSP was also found to be misdeclared, exceeding the stipulated Rs. 190/- per 50 kg bag.

- Application of law to facts: The Court applied the conditions of the notification to the facts, noting that the importer's actions did not meet the criteria for concessional duty. The purchase from a trader and the use of cement for manufacturing hollow bricks further violated the conditions.

- Treatment of competing arguments: The importer's argument that the CESTAT's decision was justified due to the lack of provisional assessment and the absence of evidence of misuse was rejected. The Court noted that the CESTAT failed to consider the factual admissions and the clear terms of the notification.

- Conclusions: The Court concluded that the CESTAT erred in allowing the concessional rate of duty, given the clear violations of the notification's conditions.

Issue 2: Misdeclaration and Penalties

- Relevant legal framework and precedents: Sections 111(m), 111(o), 114A, and 125 of the Customs Act relate to misdeclaration, confiscation, penalties, and fines.

- Court's interpretation and reasoning: The Court found that the importer's misdeclaration of the RSP and the nature of the import justified the penalties and the demand for differential duty as imposed in the Order-in-Original.

- Key evidence and findings: The admission of the importer regarding the use of cement for manufacturing hollow bricks, rather than for institutional or industrial purposes, was pivotal. The lack of direct purchase from a manufacturer was also significant.

- Application of law to facts: The Court applied the relevant sections of the Customs Act to uphold the penalties and fines, emphasizing that the importer's actions constituted a clear case of misdeclaration and misuse of concessional duty provisions.

- Treatment of competing arguments: The argument that the CESTAT's decision was based on a lack of evidence of misuse was countered by the Court's reliance on the importer's admissions and the documentary evidence.

- Conclusions: The Court upheld the Order-in-Original, confirming the penalties and the demand for differential duty.

SIGNIFICANT HOLDINGS

- Preserve verbatim quotes of crucial legal reasoning: "The CESTAT failed to understand that cement is manufactured by one or other factory. The condition imposed in the Notification is threefold. First, the purchase must be directly from the manufacturer. Secondly, the said manufacturer/factory must use only the rotary kiln with installing capacity of not more than 900 Tonnes per day. Thirdly, the cement produced by the Factory must not exceed 3,00,000 Tonnes per financial year."

- Core principles established: The judgment reinforces the principle that compliance with the specific conditions of a notification is mandatory to avail concessional rates of duty. Misdeclaration and failure to adhere to these conditions justify penalties and the withdrawal of concessions.

- Final determinations on each issue: The Court determined that the CESTAT erred in allowing the concessional rate of duty and set aside its order. The Order-in-Original was upheld, confirming the penalties and the demand for differential duty based on the importer's violations.