Customs exemption for inputs used in manufacture can extend to process scrap if the goods were actually put to use.

Concessional customs duty under Notification No. 57/2017-Customs applies to imported inputs and parts intended for use in manufacturing PCBA and cellular mobile phones, even where they are subsequently scrapped during the process. The advance ruling treated the phrase "for use" as covering goods actually put into the manufacturing process, not only items that remain in the finished product. It distinguished process scrap from unutilised or defective goods, and noted the absence of any express exclusion for scrap in the notification or IGCR Rules. Compliance with the IGCR Rules, 2022 remains required, while SION norms and the MOOWR regime were not treated as determinative.

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Issues: Whether concessional rate of duty under Notification No. 57/2017-Customs dated 30 June 2017 is available to inputs and parts imported for use in manufacture of PCBA and cellular mobile phones which are subsequently scrapped during the manufacturing process.

Analysis: The notification grants concessional duty to goods imported "for use" in manufacture, and the IGCR framework requires the imported goods to be put to use for manufacture. The expression "for use" was treated as covering intended use and not only goods that physically remain in the finished product. Scrap generated after the goods have been put to use in the manufacturing process was distinguished from unutilised or defective goods, and the absence of any express exclusion for manufacturing scrap in the notification or the IGCR Rules was treated as significant. The reasoning also rejected reliance on SION norms and on the MOOWR regime under Section 65 of the Customs Act, 1962 as determinative for this notification.

Conclusion: The concessional rate of duty is available to the imported inputs and parts even if they are subsequently scrapped during the manufacturing process, subject to compliance with the IGCR Rules, 2022.

Ratio Decidendi: Where a customs exemption notification grants benefit to goods imported "for use" in manufacture, the exemption extends to inputs actually put to use in the manufacturing process even if they are later lost as process scrap and do not form part of the finished product, unless the notification expressly excludes such scrap.

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