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of <h1>Imported parts in bonded MOOWR mobile-phone manufacturing: IGCR exemption with duty deferment allowed, but only with strict IGCR compliance</h1> Whether imported inputs used in a MOOWR bonded warehouse for manufacturing mobile phones can simultaneously claim exemption under N/N. 57/2017-Cus (IGCR) ... Manufacture in Bonded Warehouse - Applicability of N/N. 57/2017-Customs, dated 30th June, 2017 - inputs or parts imported for the manufacture of cellular mobile phones, which get scrapped during the manufacturing process, under the Manufacture and Other Operations in Warehouse (MOOWR) Scheme - HELD THAT:- Based on the provisions of sub-section (2) of Section 65 of the Customs Act, it is evident that if the finished goods manufactured using imported inputs are exported, and the scrap or refuse generated during the manufacturing process that is directly linked to the exported goods, is either destroyed or cleared on payment of applicable duty, then the entire process remains duty-neutral. However, if the finished goods are cleared for home consumption, customs duty becomes payable not only on the finished goods but also on the portion of the imported inputs contained in the waste or refuse generated during their manufacture. Under the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 importers are generally required to utilize imported goods within six months of import and have the option to re-export or clear them for home consumption if they are unutilized or defective. If the goods are not used for the intended purpose, the importer is responsible for ensuring proper disposal, which may involve re-export or clearance for home consumption. In the present case, the applicant is currently availing the benefit under the MOOWR Scheme on inputs or parts imported for the manufacture of mobile phones, and now seeks to extend the benefit of the IGCRD Rules to the waste generated during such manufacturing - the benefits under the MOOWR and IGCR schemes can be availed simultaneously, provided the conditions prescribed under each scheme are duly complied with. The disposal of waste generated within a MOOWR unit is, however, governed specifically by Section 65(2) of the Customs Act, 1962. Therefore, any waste or refuse arising in the course of manufacturing in a MOOWR unit must be disposed of strictly in accordance with the provisions of Section 65(2). Thus, it is clear that the waste generated during the manufacture of mobiles phones under MOOWR scheme and IGCRD Scheme, the procedure for disposal of such waste has to be complied as per guidelines prescribed under Section 65(2) of the Customs Act, 1962 which read as MOOWR Regulation. The inputs or parts imported for the manufacture of cellular mobile phones under the Manufacture and Other Operations in Warehouse (MOOWR) Scheme, are eligible to avail the benefit of exemption under N/N. 57/2017-Customs, dated 30th June, 2017 (IGCR Notification), simultaneously with duty deferment under the MOOWR Scheme, subject to strict compliance with the additional conditions prescribed in the Concessional Notification and the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR Rules) therein including time-limit etc., in addition to fulfilling the requirements of the MOOWR Scheme - Further, the disposal of waste or refuse generated during the manufacturing process in a MOOWR unit availing benefits under both the MOOWR Scheme and the IGCRD Scheme shall be governed strictly in accordance with the provisions of Section 65(2) of the Customs Act, 1962 read with the MOOWR Regulations. Issues: Whether benefit of Notification No. 57/2017-Customs dated 30th June, 2017 (as amended) is available in respect of inputs or parts imported for use in manufacturing of cellular mobile phones which are scrapped during the manufacturing process in a unit operating under the MOOWR scheme.Analysis: The issue concerns interaction between (i) Notification No. 57/2017-Customs (IGCR Notification) issued under Section 25(1) of the Customs Act, 1962 and the procedural IGCR Rules (now IGCR Rules, 2022) governing concessional import for specified end-use, and (ii) the MOOWR scheme established under Section 65 of the Customs Act, 1962 and MOOWR Regulations, 2019 which provide for deferment of duty and specific treatment of waste/refuse under Section 65(2). CBIC clarifications (FAQ and Circular No. 26/2024) confirm that units operating under Section 65 are not per se disqualified from availing IGCR benefits; simultaneous availment is permissible provided the conditions of both schemes are independently complied with. The IGCR Rules, 2022 address disposal of unutilised or defective imported goods (including options to re-export or clear for home consumption with voluntary payment of duty) but do not displace the statutory mechanism in Section 65(2) for waste/refuse generated during MOOWR operations. Exemption notifications must be strictly construed; consequently, entitlement to concessional duty depends on satisfying the conditions of the IGCR Notification and Rules alongside MOOWR requirements. Where finished goods are exported, waste directly linked to such exported goods may be dealt with under Section 65(2)(a) (destruction under customs supervision or payment of duty on such waste); where goods are cleared for home consumption, Section 65(2)(b) requires charge of import duty on the portion of warehoused goods contained in the waste/refuse.Conclusion: Inputs or parts imported for use in manufacturing cellular mobile phones in a MOOWR unit that become scrap during the manufacturing process are eligible to avail the concessional benefit under Notification No. 57/2017-Customs simultaneously with duty deferment under the MOOWR scheme, subject to strict compliance with the conditions of the IGCR Notification and the IGCR Rules (including procedural and time-limit conditions) and fulfillment of MOOWR requirements. Disposal of waste or refuse generated during such manufacturing shall be governed by Section 65(2) of the Customs Act, 1962 read with MOOWR Regulations, and where cleared for home consumption the applicable duties on such waste must be discharged as prescribed.
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