Imported Camera Modules Cannot Claim Exemption from SWS of Digital Still Image Video Cameras

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s. lava international limited Versus Principal Commissioner of Customs-Principal Commissioner Customs- New Delhi - 2026 (6) TMI 1018 - CESTAT NEW DELHI held that 'Camera Modules for Mobile Phones' are not eligible for the Social Welfare Surcharge ('SWS') exemption granted to 'Digital Still Image Video Cameras' under Notification No. 11/2018-Cus. The Tribunal clarified that exemption notifications must be strictly interpreted and eligibility should be based on the imported condition.

Facts:

• M/s. Lava International ('the appellant') imported 'camera modules for cellular mobile phones' and claimed exemption from the Basic Custom Duty ('BCD') and Social Welfare Surcharge ('SWS)
• The appellant claimed exemption BCD under serial no 6 (a) of notification number 57/2017-Cusand SWS under entry serial number 30 of Notification No. 11/2018-Cus, respectively. On 02.04.2018, Notification no. 57/2017-cus was amended, thereby making the camera module specifically ineligible for the BCD exemption.
• The department claimed that just because the camera module is ineligible for exemption of BCD through amended notification 57/2017-Cus vide 02.04.2018, the appellant cannot claim exemption from the SWS too. On the other hand, the appellant asserted that entry 30 of Notification No. 11/2018-Cus specifically exempts 'Digital Still Image Video Cameras' falling under CTH 8525.80.20 from SWS, and the legislature has not amended Notification No. 11/2018-Cus, making the goods still eligible for exemption from SWS.
• After being pointed out, the appellant paid the differential BCD but still claimed the SWS exemption. Thereafter, a Show Cause Notice ('SCN') was issued on 15.11.2019 demanding the SWS for the period 2018-2019. The Adjudicating Authority confirmed a customs duty demand of Rs. 2,14,55,011/-, ordered the appropriation of already paid amounts, held the goods liable for confiscation under Section 111(m), and imposed an equal penalty under Section 112(b)(ii) of the Customs Act, 1962.

Issues:

• Whether the appellant is eligible to claim an exemption from the payment of SWS under entry no. 30 of Notification No. 11/2018-Cus?

Held:

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s. lava international limited Versus Principal Commissioner of Customs-Principal Commissioner Customs- New Delhi - 2026 (6) TMI 1018 - CESTAT NEW DELHI held as under:

• noted that to claim the SWS exemption under the notification, two conditions must be met concurrently: the goods must fall under CTH 8525.80.20, and they must match the description of a 'Digital Still Image Video Camera'. While the classification under CTH 85258020 was undisputed, the second condition was not satisfied.
• Relying on the Supreme Court's ruling in Commissioner of Customs (Import) Versus M/s. Welkin Foods. - 2026 (1) TMI 348 - Supreme Court, the Tribunal reiterated that the nature and taxability of goods must be determined at the stage of import. At the time of import, the camera module is merely a part of a mobile phone and cannot function independently.
• Held that a complete 'Digital Still Image Video Camera' operates independently and includes features like an internal storage device, an analogue-to-digital converter, output terminals, and an optical viewfinder or LCD. Whereas the subject goods lacked these features and could only perform camera functions after being integrated into a smartphone assembly.
• By following the judgment of Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai Versus M/s. Dilip Kumar And Company & Ors. - 2018 (7) TMI 1826 - Supreme Court (LB), the Tribunal held that exemption notifications must be interpreted strictly, and the burden lies entirely on the assessee to prove they satisfy all criteria. The appellant's argument that the modules were historically grouped under the same tariff heading was deemed insufficient to claim the specific SWS exemption.

Hence, the invocation of the extended period under Section 28(4) and the imposition of penalties were upheld.

Relevant Notifications & their entries:

• Notification No. 11/2018-Cus (Entry 30): Governs SWS exemptions for specific electronic goods, including Digital Still Image Video Cameras.

• Notification No. 57/2017-Cus & Amending Notification No. 37/2018-Cus: Governs import duty structures and exemptions for mobile phone parts and components.