Concessional customs duty for manufacturing inputs extends even to goods used and later scrapped during production.

Concessional customs duty under Notification No. 50/2017-Customs was held available for lithium-ion cells, inputs and parts imported for use in manufacturing battery packs for cellular mobile phones. The notification's end-use condition was treated as satisfied where the goods fell within the specified descriptions and were imported for actual use in manufacture. The benefit also extended to goods that were used in the manufacturing process but later damaged and scrapped, because "for use" covers intended and actual use in manufacture even if the goods do not remain in the finished product. Rule 10 on unutilized or defective goods was held inapplicable to such consumed inputs.

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Issues: (i) whether the concessional rate of customs duty under Sr. No. 512 and Sr. No. 527A of Notification No. 50/2017-Customs is available on import of lithium-ion cells, inputs and parts for use in the manufacture of battery packs of cellular mobile phones; (ii) whether the same benefit remains available where such imported goods are used in manufacture but are subsequently damaged and scrapped during the manufacturing process.

Issue (i): whether the concessional rate of customs duty under Sr. No. 512 and Sr. No. 527A of Notification No. 50/2017-Customs is available on import of lithium-ion cells, inputs and parts for use in the manufacture of battery packs of cellular mobile phones.

Analysis: The notification grants concessional duty where the specified goods are imported for use in the manufacture of battery packs of cellular mobile phones. The applicant's imports fell within the descriptions in the notification, and the end-use condition was supported by the importer's manufacturing activity and compliance with the concessional-rate procedure.

Conclusion: Yes. The concessional rate is available.

Issue (ii): whether the same benefit remains available where such imported goods are used in manufacture but are subsequently damaged and scrapped during the manufacturing process.

Analysis: The expression "for use" was treated as covering goods intended to be used in manufacture and actually put to use in the manufacturing process, even if they do not survive as part of the finished product. Rule 10 dealing with unutilized or defective goods was held inapplicable to goods already used in manufacture and later damaged or scrapped. The reasoning drew support from the end-use scheme under the concessional import rules and the principle that manufacturing loss does not by itself defeat the exemption once the end-use condition is satisfied.

Conclusion: Yes. The concessional rate is available even for goods subsequently scrapped during manufacture.

Final Conclusion: The applicant was held entitled to the concessional customs duty benefit under both tariff entries for the relevant imports, including goods that were consumed in the manufacturing process but later scrapped, and no reversal of duty was required on that account.

Ratio Decidendi: Where an exemption notification grants concessional duty to goods imported "for use" in manufacture, the benefit extends to goods intended for and actually put to use in the manufacturing process, even if they are lost, damaged, or scrapped before forming part of the finished product, provided the end-use condition is satisfied.

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