TaxTMI 
TaxTMI 
2025 (7) TMI 229
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....IGST Rate Notification] as claimed by the manufacturers of mobile phones, or @ 28% under Serial No. 139 of Schedule IV to the IGST Rate Notification for the period from 01.04.2018 to 26.07.2018, and @ 18% under Serial No. 376AA of Schedule III to the IGST Rate Notification w.e.f. 27.07.2018 as claimed by the department. 2. To appreciate this issue, it would be appropriate to refer to the facts of Customs Appeal No. 50727 of 2021 that has been filed by M/s. Samsung India Electronics Pvt. Ltd. [Samsung India]. 3. Samsung India is in the business of manufacture of mobile phones in India. Lithium-ion batteries are used in portable electronics, such as mobile phones and tablets. They are specifically designed as per the requirements of each model of mobile phone and are said to be lightweight and long lasting. They are capable of having a very high voltage and charge storage per unit mass and volume. Samsung India imported lithium-ion batteries for use in the manufacture of mobile phones. It classified them under Customs Tariff Item [CTI] 8507 60 00 of the First Schedule to the Customs Tariff Act, 1975 [the Customs Tariff] and discharged IGST @ 12% in terms of ....
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....e show cause notice are: (i) Samsung India imported lithium-ion batteries classifying them under CTI 8507 60 00 and cleared the goods on payment of IGST @ 12% by availing the benefit of Serial No. 203 of Schedule II to the IGST Rate Notification, though it appeared that Serial No. 139 of Schedule IV to the IGST Rate Notification attracting IGST @ 28% was applicable. Further, an amendment was made on 27.07.2018 by including a more specific entry under Serial No. 376AA of Schedule III to the IGST Rate Notification under which lithium-ion batteries would attract IGST @ 18%; (ii) In view of Explanation (iv) to the IGST Rate Notification, the rules for the interpretation of the First Schedule to the Customs Tariff, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of the Rate Notification; (iii) On application of Note 2(a) of Section XVI, parts which are goods included in any of the headings of Chapter 84 or 85 are in all cases to be classified in their respective headings. The mobile phones are classifiable under Customs Tariff Heading [CTH] 8517 of the Cus....
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.... alleged that lithium-ion battery would fall under entry No. 139 of Schedule IV or 376AA of Schedule III to the IGST Rate Notification without providing any reason as to why lithium-ion battery would be outside the purview of entry 203 of Schedule II, despite the fact that the said entry specifically mentions the criterion of import being undertaken 'for manufacture of telephones for cellular networks', as opposed to Entries 139 of Schedule IV and 376AA of Schedule III which merely mention electric accumulator/ lithium battery, respectively. 9. The Principal Commissioner, by order dated 31.03.2021, confirmed the demand of IGST for the following reasons: (i) The General Rules of Interpretation [GRI] read with Section and Chapter Notes are used for determining the classification under the Customs Tariff. Explanation (iv) to the IGST Rate Notification provides that the principles of classification, as are followed under the Customs laws, are to be followed under the IGST laws as well. They are, therefore, equally applicable for interpreting IGST Rate Notification. Hence, specific entries at Serial No. 139 of Schedule IV covering 'Electronic accumulators' and Seri....
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....spectively, passed by the Additional Commissioner confirming the demand of IGST have been set aside and the appeals have been allowed. 12. Shri B.L. Narasimhan, learned counsel assisted by Ms. Nupur Maheshwari, Shri Siddhant Indrajit and Shri Ashwin Sundaram made submissions on behalf of the appellants in Customs Appeal No's. 50727 of 2021; 50751 of 2021; 50798 of 2021; 51732 of 2021; 50072 of 2022; 52188 of 2022 and on behalf of the respondents in Customs Appeal No's. 54678 of 2023 and 55076 of 2023 filed by the department. 13. Shri Kishore Kunal, learned counsel assisted by Ms. Runjhun Pare and Shri Jayesh, made submissions on behalf of the appellants in Customs Appeal Nos. 51769 of 2021; 51780 of 2021; 51790 of 2021 and 51791 of 2021. 14. Shri Srinivas Kotni, learned counsel assisted by Shri Akshay Kumar, made submissions on behalf of the appellant in Customs Appeal No. 50027 of 2022. 15. Ms. Madhumita Singh, learned counsel made submissions on behalf of the appellant in Customs Appeal No. 50274 of 2022. 16. Shri B.L. Narasimhan, learned counsel made the following submissions: (i) Lithium-ion batteries imported by Samsung India for the purpose of man....
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.... in a manner not to make any entry redundant; (vii) A perusal of the Agenda for 31st GST Council Meeting dated 22.12.2018 at Serial No. 16 shows that it clarifies that the GST on lithium ion battery falling under CTI 8507 60 00 shall be 12% when used for the manufacture of mobile phones. In fact, in the Agenda for 39th GST Council Meeting dated 14.03.2020, it was clarified that the 'parts' falling under Chapter 85 used in the manufacture of mobile phones attract 12% GST. It was this duty structure that was recommended to be increased from 12% to 18%. In other words, till the 39th GST Council meeting, the intention was always to charge 12% GST for 'parts' used in the manufacture of cellular mobile phones. Therefore, Samsung India rightly discharged the IGST @12% under Serial No. 203 of Schedule II to the IGST Rate Notification; (viii) Lithium-ion batteries cannot be held liable for confiscation under section 111(m) of the Customs Act. Thus, redemption fine and penalty cannot be imposed; (ix) No penalty or interest or redemption fine is leviable on the Samsung India in the absence of machinery provisions; and (x) The Commissioner (Appeals) com....
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....he manufacturers of mobile phones ought to have been applied to the imported goods; (vii) The entire demand of IGST is Revenue neutral; (viii) Demand of IGST cannot be raised under section 28 of the Act; (ix) As the goods not liable to confiscation, no redemption fine or penalty should be imposed; and (x) The Commissioner (Appeals) committed no error in holding that lithium-ion batteries imported for the manufacture of mobile phones are covered under entry at Serial No. 203 of Schedule II to IGST Rate Notification. 18. Shri Srinivas Kotni and Ms. Madhumita Singh also made submissions which are covered by the submissions advanced by Shri B.L. Narasimhan and Shri Kishor Kunal. 19. Shri S.K. Rahman, learned authorized representative appearing for the department, however, made the following submissions: (i) Lithium-ion batteries imported by the manufacturers of mobile phones are chargeable to IGST @ 28% under Serial No. 139 of Schedule IV to the IGST Rate Notification upto 26.07.2018 and thereafter chargeable to IGST @ 18% under Serial No. 376AA of Schedule III to IGST Rate Notification; (ii) Explanation (iv) to the IGST Rate ....
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.... the IGST Rate Notification, while according to the department, the manufacturers of mobile phones should have discharged IGST @ 28% under Serial No. 139 of Schedule IV to the IGST Rate Notification for the period upto 26.07.2018, and thereafter @ 18% under Serial No. 376AA of Schedule III to the IGST Rate Notification. 23. It would, therefore, be appropriate to examine the entries at Serial No. 203 of Schedule II, Serial No. 139 of Schedule IV and Serial No. 376AA of Schedule III. 24. The Chapter mentioned for goods at Serial No. 203 is Chapter 85 and the description of goods is 'parts for manufacture of Telephones for cellular networks or for other wireless networks'. The Heading of goods at Serial No. 139 is CTH 8507 and the description of goods is 'Electric accumulators, including separators thereof whether or not rectangular (including square)'. The Customs Tariff Item of goods at Serial No. 376AA is CTI 8507 60 00 and the description of goods is 'lithium-ion battery'. 25. It is not in dispute that lithium-ion batteries were imported into India for use in the manufacture of mobile phones by classifying them under CTI 8507 60 00 and IGST was discharged by the manufactu....
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....o IGST @ 12%. 3. As per Sl. No. 203 Schedule-II, IGST @ 12% is applicable only for Parts for manufacture of Telephones for cellular networks or for other wireless networks. *****" 27. A perusal of the aforesaid clarification provided by the Commissioner of Customs clearly shows that battery packs are charged to IGST @ 28% if they are imported as spares. On the other hand, if they are imported for manufacture of mobile phones, they are charged IGST @ 12%. The communication further clarifies that as per Serial No. 203 of Schedule II, IGST @ 12% is applicable only for parts for the manufacture of telephones for cellular networks or for other wireless network. 28. The manufacturer of mobile phones involved in these appeals have, therefore, justified the payment of IGST @ 12% on the imports of lithium-ion batteries on the basis of the aforesaid clarification issued by the Commissioner of Customs ACC-Import, New Delhi. 29. It would also be useful to examine the Agenda for the 31st GST Council Meeting held on 22.12.2018 and the Agenda for the 39th GST Council Meeting held on 14.03.2020. 30. The relevant portion of the Agenda of the 31st GST Council Meeting he....
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.... and @ 18% under Serial No. 376AA from 27.07.2018 to 31.03.2020. 36. Learned counsel for the mobile manufacturers of mobile phones also submitted that Serial No. 203 of Schedule II to the IGST Rate Notification is a unique entry because though IGST Rate Notification is majorly aligned with the Customs Tariff, but Serial No. 203 and some other entries are special and unique which demonstrate non alignment between the two. The submission, therefore, is that Serial No. 203 must be interpreted purely in terms of the language used in the said entry. 37. A perusal to the IGST Rate Notification shows that in the introductory paragraph it provides that IGST shall be levied on inter-State supplies of goods, the description of which is specified in the corresponding entry in column (3) of the said Schedule, falling under the Tariff Item, Sub-Heading, Heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedule. 38. Essentially, therefore, two conditions are required to be satisfied for attracting IGST as per the specific entries in the IGST Rate Notification. They are that the imported goods have to be of Chapter 85 and the ....
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....ction XVI and it is as follows: "2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules : (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517; (c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548." 43. A perusa....
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....act that the IGST Rate Notification is not completely aligned to the Customs Tariff is also clear from the following entries: Customs Tariff IGST Rate Notification CTH Description IGST Schedule and Rate Sl. No. CTH Description 0406 Cheese and Curd Schedule I - 5% 11 0406 Chena or paneer, pre-packaged and labelled Schedule II - 12% 13 0406 Cheese 2103 Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard Schedule II - 12% 44 2103 All goods, including sauces and preparations therefor, mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard, curry paste, mayonnaise and salad dressings 2809 Diphosphorus pentaoxide; phosphoric acid; polyphosphoric acids whether or not chemically defined Schedule I - 5% 170A 2809 Fertilizer grade phosphoric acid 2845 Isotopes other than those of Heading 2844; compounds, inorganic or organic of such isotopes whether or not chemically defined Schedule I - 5% 171 2845 Heavy water and other nuclear fuels 0805 Citrus fruit, fresh or dried ....
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....ional duty of customs was issued, through Notification No. 93/2008-Cus., dated, 1-8-2008, amending Para 2(c) of the 2007 Notification. The net effect of these was that a one year period was insisted upon for refund applications. That period was calculable from date of payment of duty (SAD) : Dr. Partap Singh & Anr. v. Director of Enforcement, Foreign Exchange Regulation Act & Ors., 1985 (3) SCC 72 is an authority for the proposition that the use of the phrase "so far as may be" in a later statute, with reference to provisions in an earlier statute, means that the provisions of the referred (earlier) statute are to be followed "to the extent possible". The Supreme Court, in that case turned down the argument that the letter and content of Section 165 of the Code of Criminal Procedure was to be followed in Foreign Exchange Regulation Act proceedings, by virtue of Section 37(2) of that Act. It was held, crucially that: "The submission that Section 165(1) has been incorporated by pen and ink in Section 37(2) has to be negative in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under Se....
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....propriate to take the aid of Explanation (iv) to the IGST Rate Notification. The entry at Serial No. 203 of Schedule II to the IGST Rate Notification has to be interpreted on its own language. 60. Learned counsel for the manufacturers of mobile phones have placed reliance on the ruling rendered by the Authority for Advance Ruling in reference to Epcos India Pvt. Ltd.- 2018 (15) G.S.T.L. 117 (A.A.R.-GST) to support the contention that lithium-ion batteries would fall under Serial No. 203 of the IGST Rate Notification. The Authority first examined under which CTI lithium-ion batteries would fall and concluded that they would fall under CTI 8517 70 90. The Authority then examined whether lithium-ion batteries are included in the description 'parts for manufacture of telephones for cellular networks or for other wireless networks'. The Authority observed that though mobile phones are classifiable under Chapter Heading 8517 and parts of mobile phones would also be classifiable under Chapter Heading 8517, but it is not necessary that a part is to be classified in the same Heading in which the main item is covered. The Authority then considered whether lithium-ion batteries used i....
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...., INCLUDING SEPARATORS THEREFOR WHETHER OR NOT RECTANGULAR (INCLUDING SQUARE) 8507 60 00 - Lithium-ion 8517 TELEPHONE SETS, INCLUDING TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS: OTHER APPARATUS FOR THE TRANSMISSION OR RECEPTION OF VICE, IMAGES OR OTHER DATA, INCLUDING APPARATUS FOR COMMUNICATION IN A WIRED OR WIRELESS NETWORK (SUCH AS A LOCAL OR WIDE AREA NETWORK), OTHER THAN TRANSMISSION OR RECEPTION APPARATUS OF HEADING 8443, 8525, 8527 OR 8517 12 -- Telephones for cellular networks or for other wireless networks : 8517 70 - Parts : 8517 70 10 -- Populated, loaded or stuffed printed circuit boards 8517 70 90 -- Other Out of the above two, sub-heading 8507 60 00, meant for lithium-ion battery, is more specific classification for the product under consideration and Heading 8517 70 90 is a general heading for parts of mobile phone. Hence, mobile phone batteries are covered under Chapter Heading 8507. 4.3 After this conclusion that lithium-ion battery is classifiable under Heading 8507. The next question arises is as to whether it is included in the description "parts for manufacture of telephones for cellular....
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....llular networks or for other wireless networks. Battery of mobile handsets are indeed covered under Chapter 85 and they are parts of mobile phones, as already discussed in the preceding paras. Accordingly, when they are used for manufacture of mobile phone handsets, they qualify to be covered vide S. No. 203 of schedule II. *****" (emphasis supplied) 62. Though, the aforesaid decision of the Authority for Advance Ruling under GST is not binding on this Tribunal, but it does give weight to the submission advanced by learned counsel for the appellant that lithium-ion batteries when used in the manufacture of mobile phones would attract IGST @ 12% under entry at Serial No. 203 of Schedule II to the IGST Rate Notification. 63. It would also be useful to refer to the two orders passed by the Commissioner (Appeals) that hold that lithium-ion batteries imported by the manufacturers of mobile phones would fall under Serial No. 203 of Schedule II to the IGST Rate Notification. Both the orders are identical and have placed reliance on the aforesaid decision of the Authority for Advance Ruling in Epcso India. The relevant portion of the order dated 16.01.2023, passed by to the C....
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....fit of exemption Notification No. 320 cannot be denied as the benefit is available to parts and components of mobile hand sets falling under Chapter Heading 852990.90 or any other chapter. Thus it is available to parts and components irrespective of the fact under which chapter heading they fall." 65. The Supreme Court in Camlin Ltd. vs. Commissioner of Central Excise, Mumbai-2008 (230) E.L.T. 193 (S.C.) excluded the applicability of HSN Explanatory Notes to interpret tariff in a situation where entries in HSN and tariff were not aligned. The relevant portion of the judgment of the Supreme Court is reproduced below: "17. From the reading of the extract of Chapter Heading 32.15 of the HSN, it is evident that the scheme and entry of HSN is completely different from Indian Tariff Entry. It is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods under the said Tariff." (emphasis supplied) 66. The aforesaid decision of the Supreme Court in Camlin was followed by the Tribunal in A.B. Mauri India Pvt. Ltd. vs. Commissioner of C.Ex., Pune-II-2010 (260) E.L.T. 42....
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....s Private Ltd. & Ors. - Civil Appeal No. 2948 of 2023 decided on 03.10.2024 laid down the rules for interpretation of taxing statues and the relevant portion of the judgment is as follows: "25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows: a. A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise; b. If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity; c. While dealing with a taxing provision, the principle of strict interpretation should be applied; d. If two interpretations of a statutory provision are possible, the Court ordinarily would interpret the provision in favour of a taxpayer and against the revenue; *****" (emphasis supplied) 73. The Principal C....
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....the Explanation that was being considered by the Supreme Court in BPL Display. 77. Learned authorized representative appearing for the department also submitted that the judgment of the Supreme Court in BPL Display was distinguished by the Tribunal in Arisht Spinning Mills vs. Commissioner of C.Ex., Chandigarh-2010 (261) E.L.T. 417 (Tri.-Del.). Paragraph 7, on which reliance has been placed, is reproduced below: "7. The reliance placed by the learned advocate on the decision of the Hon'ble Supreme Court in the case of BPL Display Devices Ltd. is misplaced. The said decision dealt with the Notification No. 13/97-Cus. as amended by Notification No. 25/99 granting exemption to goods imported into India "for use" in the manufacture of other items specified in the said notification. The said decision relate to the interpretation of the condition "for use" as stipulated in the notification. In the said case, the goods imported were subject to end-use condition; the imported goods can be used only later on in the manufacture of the goods specified in the said notification. The present case is totally on a different footing. It involves the interpretation as to the relevant dat....