TaxTMI 
TaxTMI 
2024 (10) TMI 911
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.... batteries other than the batteries of mobile handsets including cellular phones. The department formed an opinion that the appellants are manufacturing power banks as different from the Lithium-ion batteries hence the imported part and components are not eligible to the exemption benefit alleging that the appellant has used the imported goods (parts, components, accessories etc.) received on concessional rate of customs duty in terms of Notification No. 50/2017 dated 30.06.2017 not for the manufacture of Lithium-ion battery but for manufacturing the power bank. Resultantly, vide Show Cause Notice No. 19/2019 dated 31.07.2019, the differential duty (duty foregone) collectively amounting to Rs.6,66,86,244/- was proposed to be recovered from the appellants along with the proportionate interest in terms of Section 28 AA of Customs Act, 1962. Penalty was also proposed to be imposed under Section 114 A and 117 of the Customs Act, 1962. This proposal has been confirmed vide Order-in-Original No. 02/2020-21 dated 30.06.2020. Being aggrieved, the appellant is before this Tribunal. 2. We have heard Shri Rajesh Rawal, learned Advocate for the appellant and Shri Ajay Jain, learned Special ....
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....d above for seeking clearance of the imported goods. The said Bills of Entries have regularly been cleared by the department after proper scrutiny and without any adverse remarks while permitting duty free clearances of the imported goods as was being claimed by the appellant in terms of the said Notification No. 50/2017. The copies of import documents are also impressed upon. The entire manufacturing process is mentioned to have been conducted in the appellants premises only which was under the jurisdiction and supervision of Goods and Service Tax, Central Tax, Division, Sonipat. 3.3 Learned counsel further brought to the notice that after change of the jurisdiction, the appellant also shifted its premises with due intimation thereof to the department vide letter dated 01.07.2019 which was duly received and acknowledged by the department on the same date. Despite this, the notices of personal hearing were served on the old address. Resultantly, the appellant did not receive the same and could not have the opportunity to raise his defense before the departmental adjudicating authority. However, the reply to the show cause notice since has been discussed in the order under challe....
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....battery for the power bank. Seen from this aspect also, the learned counsel has endorsed that the benefit of concessional rate of customs duty of Notification No. 50/2017 has wrongly been denied to the appellant. 3.5 Finally, it is submitted by the learned counsel for the appellant that show cause notice has wrongly invoked the extended period of limitation. The appellant was following the concessional rules in compliance of condition no. 9 to Notification 50/2017. According to those rules proper intimation was regularly been given to the appellant about using the imported products in the manufacture of Lithium-ion battery/power banks. The manufacture procedure was duly been scrutinized and supervised by the department's competent officers. It becomes clear that there is no suppression on part of the appellant. The same is wrongly alleged for wrongly invoking the extended period of limitation. The show cause notice is liable to be set aside for being barred by time. With these submissions, learned counsel has prayed for the order under challenge to be set aside and appeal is prayed to be allowed. To support his submissions learned counsel has relied upon the following decisions:....
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.... power bank are two distinct products as is clear from S.No. 376 AA and 376 AAA of the Notification No. 1/2017-IT(Rate) dated 28.06.2017. Also the department issued concessional rate of duty for power bank vide customs Notification No.02/2019 dated 29.01.2919 wherein duty benefits for power bank and battery packs are defined separately. The appellant therefore has not only violated the clearcut provisions of exemption Notification No. 50/17 to have wrongly availed the exemption benefits but have also contravened the provisions of IGCR Rules, 2017 by wrongly submitting before Jurisdictional Assistant Commissioner/Deputy Commissioner that they have been manufacturing Lithium Ion Battery Pack and by never intimating that they have been manufacturing power banks. The submission of the appellant-importer that as per TRU letter dated 26.04.2017 both the items merit classification under CTH 8507 and both are one and the same is without any application of mind. It is impressed upon that since the notification is specific about such parts and components as to be used in manufacture of lithium Ion Battery, the TRU letter is misinterpreted by the appellant. It is mentioned that this Tribunal ....
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.... of parts required for manufacture of Lithium-ion batteries, subject to fulfillment of certain conditions as specified in Condition No. 9 of the said notification. Relevant portion thereof (entry at Sr. No. 512) is reproduced below for ready reference : Sr. No. Chapter of Heading or sub- heading of tariff item Description of goods Standard rate of duty IGST Tax Condition No. 512 85 or any other chapter (a) Parts, components and accessories except populated printed circuit boards for use in manufacture of lithium- ion batteries other than batteries of mobile handsets including cellular phones falling under tariff item 8507 6000; (b) Sub- parts for use in manufacture of items mentioned at (a) above. Nil - 9 8. The perusal makes it clear that exemption to the imported parts, components and accessories under the Notification No. 50/2017-CUS dated 30.06.2017 issued under Section 25 of the Customs Act, 1962 is based on post-importation conditions:- a) Use and utilization of such goods. b) There has to be 'manufacture' of specified type of Lithium Ion Battery by use of such componentsas specified, in accordance with IGCR Rul....
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.... it has been held that exemption notification should be interpreted strictly. The burden of proving applicability would be on the assessee to show that his case comes within the parameter of exemption clause or exemption notification and in case of any ambiguity the benefit shall go to the state though the benefit of ambiguity in taxing statute, the benefit thereof shall go to the assessee. In a prior decision in the case of Tata Iron & Steel Co. Ltd. Vs. State of Jharkhand reported as (2005) 4 SCC 272 the two judge bench of Hon'ble Supreme Court laid down that eligibility clause in relation to exemption notification must be given a strict meaning. While following Novopan India Ltd. Vs. Collector of C. Ex. and Customs, Hyderabad reported as 1994 (73) ELT 769 (SC) it was held "the principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such case it is for the SSC to show that he comes within the purview of the exemption." This view has recently been again affirmed by the Honourable Apex Court itself in the case of L.R. Brothers Indo ....
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....product having a distinct name, character and use.The above procedure is sufficient for us to hold that the imported parts and components have been used by the appellant in such manner that Lithium Ion Battery emerges as a new product having a distinct name and use. The manufacture has to be read in terms of Rule 3 (e) of IGCR Rules, 2017 as already quoted above. 15. The term cell and battery are used inter changeably, however both are quite different. Cell is a single unit device which convert chemical energy into electrical energy whereas battery is a group of such cells. Depending upon the type of electro lights used in the cell. The cell is either wet or dry. Whereas battery is either a primary battery or a secondary battery i.e. a chargeable or nonchargeable battery. Cell is a single unit and battery is a combination of those single units. This physical/scientific explanation about the meaning of cell and battery is sufficient for us to hold that the appellant has imported cells as single units with various other components and combined the single unit cells with the help of the other imported components to be converted into a battery.The above discussion is sufficient for ....
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....enefit has to be given to the Revenue in case there is ambiguity in the exemption clause of the statute. The word 'plain meaning' has also been elaborated by the Hon'ble Apex Court as follows: i) 19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanal Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. ii) 20. in applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain lan....
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....one has to utilize strict interpretation in the event of ambiguity is self-contradictory. Similarly the word strict interpretation has also been described: v) Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text's authors or ratifiers, and no more. Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatiostricta; interpretatio restricta; interp retatio verbalis. 3. The philosophy underlying strict interpretation of statutes. Also termed as close interpretation; interpretation restrictive. vi) See strict constructionism under constructionism. Cg. Large interpretation; liberal interpretation (2). 17. As already observed above the exemption entry has simply talked about manufacture out of imported parts and components that too in compliance of IGCR Rules, 2017 which defined term manufacture also and the entry is silent for su....
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....s in dispute. Admitedly the relevant entry in HSN code is 8507 which reads as follows: 85.07 Electric accumulators, including separators therefore, whether or not rectangular (including square). 8507.10 - Lead-acid, of a kind used for starting piston engines 8507.20 - Other lead-acid accumulators 8507.30 - Nickel-cadmium 8507.40 - Nickel-iron 8507.50 - Nickel-metal hydride 8507.60 - Lithium-ion 8507.80 - Other accumulators 8507.90 - Parts 21. The notes to this chapter clarifies that electric accumulators are nothing but the storage batteries or secondary batteries which are characterized by the fact that the electro chemical action is reversible so that the accumulator may be recharged which are used just like battery to store the electricity and to supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging): when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations, charging and discharging, can....
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....ote 3 of Chapter 85 of the CTH, the crux, is that so long as the product manufactured from components imported at Concessional Rate of Duty have the character of storage and supply of Electrical Energy and can be recharged, will remain as Secondary Battery or Storage Battery of Chapter Heading 85.07. It is also an undisputed fact that the appellant has sold its product as Lithium Ion Battery Pack only, the product was never sold as power bank. 26. From the entire above discussion it is clear that the power bank performs the same function of storing and transfering electrical energy, it being a Lithium Ion Battery that is a combination of Lithium Ion Cells,however, connected to a printed circuit board which is meant for converting the 3.7 volt stored energy to 5 volt energy as is required by the gadget to be charged through the said power bank working on Lithium Ion Battery. It also stands established that it is only the printed circuit board(PCBA) which distinguishes a generic Lithium Ion Battery from power bank. Appellant is admittedly paying Customs Duty on the import of said PCBA. 27. The captive use of the manufactured 'Lithium Ion Battery' by the appellants to be used as....
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....No. 02/2019 dated 29.01.2019 has used word "Power Bank of Lithium-ion" for the first time and the imports in question are till January 2019 only, we hold that benefit of TRU clarification vide circular dated 26.04.2017 was available to the appellant. Irrespective before PCB gets connected and placed in the imported component i.e. housing, battery is being manufactured from the rest of the imported parts and components. 30. We also observe that the show cause notice itself defines power bank as a composition of one or more rechargeable Lithium- ion cells. Para 12 reads as follows : 12. A Power bank consists of one or more rechargeable Li-ion cells including circuit for protection/charging, installed in a protective casing. These cells function in a similar manner as normal rechargeable batteries are charged through a USB.connection or through an adapter/cable which can be later used for charging other equipment by transferring energy stored into it. a) The power bank contains a housing in which either one or more than one battery is connected in series are packed inside a housing and it has one or more output USB slots for giving output power through PC connecti....
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....ules, 2017). Since Lithium ion Battery has been manufactured by use of imported lithium ion Cells, utilization of the same in the 'Power Bank', cannot be the basis for denying the benefit of exemption granted to the imported Parts and components so used under Notification No. 50/2017-Cus. dated 30.06.2017. 34. Though the Final Order No. 50039/2019 dated 14.01.2019 of this Hon'ble Tribunal in the case of S B Industries (supra) has been challenged by the department before the Hon'ble Supreme Court on the issue of classification of Power Bank under Chapter Heading No. 85044030 or 85.07, however no stay has been granted of the operation of the aforesaid order dated 14.01.2019. Matter is pending adjudication before the Hon'ble Apex Court. Copy of the order dated 20.09.2019 passed in the aforesaid appeal filed by the department before the Hon'ble Sureme Court being Civil Appeal Diary No. 25607 of 2019 is at page 252 of aforesaid Misc. Application. In this appeal the department has taken a contrary view to what has been taken in the present case. 35. Coming to the issue of invocation of extended period of limitation : We observe that the IGCR Rules,as are mandatorily required to ....
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....tion under clause (b) of sub-rule (1), the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs at the Custom Station of importation shall allow the benefit of the exemption notification to the importer who intends to avail the benefit of exemption notification. 36. As per this Rule 5 IGCR Rules, 2017 utilization of such components through step by step process has to be under taken under the watchful Eyes of the jurisdictional Assistant Commissioner of Customs.With obvious approval by the jurisdictional Assistant Commissioner of Customs on each step/act undertaken by the importer/ manufacturer starting from providing of 'Information' under Rule 4, of said Rules and intimation about receipt in the factory of components imported at Concessional Rate of Duty. Quarterly Returns on utilization of components that such importer/ manufacture makes compliance of IGCR Rules, 2017 have also been admittedly filed by the appellants. It is observed that filing the records for each step, as referred above, before the jurisdictional Assistant Commissioner of Customs is not a mere paper formality under IGCR Rules 2017, but requires intervention and con....