Manufacturing-use exemption extends to imported inputs scrapped during production if originally brought for the specified end use.

Where an exemption notification covers goods imported "for use in manufacture", the ative test is whether the inputs and parts were imported for the specified manufacturing purpose, not whether every item physically remains in the finished product. The AAR held that inputs and parts imported for manufacture of mobile phone covers continue to qualify for the concessional import benefit even if some are damaged, scrapped, or lost during the manufacturing process. Manufacturing loss does not by itself take the goods outside the exemption when the original import was for the intended end use, so no reversal of benefit is required on that basis.

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Issues: Whether the benefit of S. No. 6E of Notification No. 57/2017-Customs dated 30.06.2017 is available to inputs and parts imported for use in manufacture of mobile phone covers even when such inputs or parts are subsequently damaged and scrapped during the manufacturing process.

Analysis: The ruling turns on the meaning of the expression "for use in manufacture" in the exemption entry. The Authority held that the phrase covers goods imported with the intention of being used in the manufacture of the specified final product, and does not require that every imported item must physically survive to become part of the finished product. The condition in the notification requiring compliance with the concessional import procedure supports the same understanding, because the governing rules speak of goods that are to be "put to use" in manufacture. The Authority also relied on the accepted principle that manufacturing loss, process loss, or damage occurring during the manufacturing stream does not by itself take the goods outside the scope of the exemption when the original import was for the specified manufacturing use.

Conclusion: The benefit under S. No. 6E is available to inputs and parts imported for use in manufacture of mobile phone covers even if they are subsequently scrapped during manufacture.

Final Conclusion: The applicant remains entitled to the concessional import benefit for the relevant inputs and parts, and no reversal is required on the footing that the goods were scrapped during the manufacturing process.

Ratio Decidendi: Where an exemption notification uses the expression "for use in manufacture", the decisive test is the intended and actual use in the manufacturing process, not whether the imported goods ultimately form part of the finished product; manufacturing loss does not defeat the exemption when the goods were imported for the specified end use.

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