End-use exemption for imported inputs survives scrapping during manufacture of mobile phone covers under concessional customs rules.

The exemption under Sl. No. 6E of Notification No. 57/2017-Customs was interpreted to cover inputs or parts imported for use in manufacturing mobile phone covers, even where those items were later scrapped during the process. The expression "for use" was read as referring to intended and actual use in manufacture, not to goods that must physically remain in the finished product. Manufacturing loss, process loss, and goods consumed in production were treated as consistent with the concessional import procedure, and the rule concerning unutilized or defective goods was held inapplicable to inputs actually used and then scrapped. On that basis, exemption was not required to be reversed.

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Issues: Whether the benefit of Sl. No. 6E of Notification No. 57/2017-Customs dated 30th June 2017 is available in respect of inputs or parts imported for use in the manufacture of mobile phone covers which are subsequently scrapped during the manufacturing process.

Analysis: The exemption under Sl. No. 6E applies to inputs or parts for use in the manufacture of the specified goods, subject to compliance with the concessional import procedure. The expression "for use" was treated as covering goods intended to be used in the manufacturing process and not confined only to materials that physically remain in the finished product. The relevant concession procedure under the concessional duty rules uses the same end-use concept by requiring the imported goods to be put to use for manufacture, while the rule dealing with unutilized or defective goods was held not to govern inputs that were actually used and later scrapped during manufacture. The reasoning adopted was that manufacturing loss, process loss, and goods consumed in manufacture do not take the imports outside the exemption merely because they do not form part of the finished product.

Conclusion: The benefit of Sl. No. 6E remains available to such inputs and parts even if they are subsequently scrapped during the manufacturing process, and no reversal of exemption was called for on the contingent question.

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