2025 (12) TMI 1681 - AAR - Customs

Imported OLED display parts for laptop/tablet screens qualify for Sl. No. 39 customs exemption, AAR allows benefit with conditions.

The dominant issue was whether imported inputs/parts, including OLED cells, used to manufacture OLED displays for laptops and tablets qualify for customs ... Benefit of exemption - SI. No. 39 of the NN 24/2005 - import of inputs or parts including OLED cells for the manufacture of OLED displays which in turn will be used for the manufacture of laptops and tablets - HELD THAT:- OLED displays are a critical and essential component of laptops and tablets, without which such devices cannot be commercially functional. Accordingly, the manufacturing of OLED displays, which are used solely or principally in laptops and tablets, forms an integral part of the overall manufacturing process of such final products - the recent ruling of the Hon'ble Authority in Re: Shriprop Aerospace Pvt. Ltd. [2024 (3) TMI 1515 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI], has affirmed the applicability of exemption in similar circumstances, wherein parts of parts (turbo jet engine components) were held to be eligible for exemption as 'parts of aircraft' under Notification No. 50/2017-Customs. The subject Notification was issued in pursuance of India's obligations under the Information Technology Agreement (ITA), 1996, and is an ITA-bound notification. As per Attachment B of the ITA, flat panel displays and parts thereof for IT products such as laptops and tablets are covered within the scope of exemption. Though OLED technology is a recent advancement not expressly named in the original ITA text, Iit is found that the expression 'other technologies' is broad enough to include OLED flat panel displays and their parts. Accordingly, import of parts for OLED displays used in laptops and tablets is consistent with the policy intent and scope of the ITA. The Applicant is eligible to avail the benefit under Sr. No. 39 of Notification No. 24/2005- Customs dated 01.03.2005, as amended, in respect of import of inputs and parts including OLED cells, subject to the fulfilment of conditions imposed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the exemption under Sr. No. 39 of Notification No. 24/2005-Customs applies to import of inputs/parts (including OLED cells) used to manufacture OLED displays that are supplied for use in manufacture of laptops and tablets covered under Sr. No. 8 (heading 8471). (ii) Whether the exemption under Sr. No. 39 is available subject to satisfaction of the notification exclusions (Chapter 74 and specified solar tempered glass) and compliance with IGCR Rules, 2022, including ensuring no diversion to non-qualifying end use/retail sale. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Coverage of inputs/parts used to manufacture OLED displays supplied for laptops/tablets under Sr. No. 39 Legal framework: The Court examined Sr. No. 8 (heading 8471 covering laptops and tablets) and Sr. No. 39 of Notification No. 24/2005-Customs, treating Sr. No. 39 as an end-use based residuary exemption for 'all goods' (subject to exclusions) imported 'for the manufacture of' goods covered by Sr. Nos. 1 to 38, including Sr. No. 8. The Court framed three cumulative conditions: (i) goods not under Chapter 74; (ii) goods used for manufacture of items at Sr. Nos. 1-38; and (iii) compliance with IGCR 2022. Interpretation and reasoning: On the central question-whether imports used to manufacture OLED displays (a component) qualify as being 'for the manufacture of' laptops/tablets-the Court found OLED displays to be a critical and essential component without which laptops and tablets cannot be commercially functional. The Court applied the principle 'a part of a part is a part of the whole' to treat inputs used to manufacture OLED displays (parts) as also used for manufacture of laptops and tablets (the whole). The Court further applied the reasoning of a CBIC circular (regarding eligibility of intermediate/component manufacturers for end-use exemptions) to hold that the importer need not be the final-product manufacturer, provided the imported goods are used in manufacturing goods that ultimately go into the specified final products. The Court also accepted that the proposed coding/segregation mechanism supports restricting benefit only to eligible end use. Conclusions: The Court conclusively held that inputs and parts (including OLED cells) imported to manufacture OLED displays that are supplied for manufacture of laptops and tablets are eligible for exemption under Sr. No. 39, subject to the stated conditions and non-diversion safeguards. Issue (ii): Satisfaction of exclusions and procedural/end-use conditions (Chapter 74/solar tempered glass; IGCR 2022; non-diversion) Legal framework: The Court construed Sr. No. 39 as conditional upon: (a) exclusion of goods classified under Chapter 74 and solar tempered/anti-reflective coated solar tempered glass; and (b) compliance with the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022, including procedure under Rule 5 (IIN/continuity bond and related automated debits/record flow). Interpretation and reasoning: Based on the record and classifications provided, the Court found that none of the listed proposed imports fell under Chapter 74, and the applicant undertook not to claim benefit on excluded glass or Chapter 74 items. The Court accepted the applicant's confirmation to comply with IGCR 2022 procedures (including continuity bond, maintenance of records and end-use details), noting no departmental objection on this aspect. The Court also expressly required that exemption not be availed for non-qualifying end use, including diversion for retail sale or other purposes. Conclusions: The Court held the exemption is available only if (i) imports are not Chapter 74 goods and not the excluded solar tempered glass categories, (ii) imports are used to manufacture OLED displays supplied for manufacture of laptops/tablets under Sr. No. 8, (iii) IGCR 2022 is complied with, and (iv) there is no diversion to non-qualifying end use/retail sale.