Transferable DFIA exemption for lithium-ion cells turns on authorised description and capability of use, not identical tariff nomenclature.

Under a transferable DFIA, customs exemption was considered available where imported lithium-ion cells fell within the authorised description "Automotive Battery" and were capable of use in the export product. The absence of identical nomenclature or a matching ITC(HS) heading was treated as non-decisive if the description and quantity requirements were otherwise met. The material relied on, including technical literature and expert opinion, supported the view that lithium-ion cells can form part of automotive batteries and may be used in electric agricultural tractors. A strict actual-use objection was rejected in this DFIA context.

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Issues: Whether lithium ion cells imported under a transferable DFIA issued against the export description "Automotive Battery" were entitled to exemption under Notification No. 19/2015-Cus. despite the absence of identical nomenclature, the tariff-heading mismatch, and the objection that the goods were not shown to have been actually used in the export product.

Analysis: The DFIA scheme and the governing FTP provisions were read as turning on whether the imported goods answer the description permitted by the authorization and are capable of use in the resultant product, rather than on a rigid one-to-one identity between the imported item and the exported item. The material placed, including technical literature and expert opinion, showed that lithium-ion cells can form part of automotive batteries and may be used in electric agricultural tractors. The absence of a matching ITC(HS) code was held not to be decisive where the description and quantity were otherwise satisfied. The objection based on actual use was rejected in the context of a transferable DFIA, and the reliance on a strict-exemption approach was not accepted in the facts of the case.

Conclusion: The imported lithium ion cells were held to be covered by the DFIA description "Automotive Battery", and the assessee was held entitled to the customs duty exemption.

Ratio Decidendi: Under a transferable DFIA, exemption cannot be denied merely because the imported goods are not identically named in the authorization or bear a different tariff heading, so long as they fall within the permitted description and are capable of use in the export product, without any requirement of proving actual use.

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