TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 894
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....electrically operated vehicle or hybrid motor vehicle" in various scenarios or otherwise. 2. The Applicant vide their application has submitted as follows: 2.1 - As part of the business, Tata Auto Comp has joint ventures ('JV') in partnership with leaders of the global auto component industry for the purpose of manufacturing, marketing and export thereof of automotive components and systems which inter alia include engine cooling solutions, automotive batteries, motors, electronic solutions for automobiles, etc. In relation to the above activities, it entered into a Joint Venture with 'Gotion' which is a leading Battery Cell and Battery Pack manufacturer in the Chinese market with multiple facilities in China. 2.2 For manufacture of battery or battery pack, the Applicant imports Lithium-ion cells under the benefit of entry number 527B of the Notification No. 50/2017-Cus dated 30 June 2017 (as amended) which prescribes lower duty rate for import of "Lithium-ion cell for use in the manufacture of battery or battery pack of the electrically operated vehicle or hybrid motor vehicle". The said exemption is subject to a condition that the importer shall comply wi....
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....acture of battery or battery pack of the electrically operated vehicle or hybrid motor vehicle" in below scenarios: (A) Imported cells used in manufacture of battery or battery packs intended for use as * replacements due to defects or under warranty conditions. (Scenario 1) (B) Imported cells that fall obsolete during the manufacturing process and then the said cells are sold as scrap.(Scenario, 2) (C) Imported cells that have been found to be defective post import and hence not . issued to production (Scenario 3) (D) If the answer to the above questions is negative and the Applicant would be required to pay back the benefit availed, from which date interest would be payable? 5. Applicant's interpretation of Law/Facts 5.1 .As per provisions of Customs Act, 1962, any goods imported into India are subject to customs duties which shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 .- 5.2 Section 2 of Customs Tariff Act, 1975 (CTA Act, 1975) provides that the rates at which duties of customs shall be levied under the Customs Act, 1962, are specified in the First and Second Schedules. The rates specified ....
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....t of the aforesaid exemption is to provide concessional benefit where the goods have been used for the manufacture. The ultimate result of the manufacturing process is immaterial. There is no condition that the goods on which exemption has been availed should form part of the end products i.e. battery packs in the present case. The usage of words for use in manufacture' indicates that benefit is available in respect of all inputs and parts which have been put to use for manufacturing the battery packs and not only in respect of inputs and parts which form part of the finished battery packs. 5.5.2 Such exemption benefit under the aforesaid notification is subject to condition no.9, - which mandates the importer to follow the procedure set out in IGCRD Rules. Thus, to substantiate the interpretation of the above, support is borrowed from the IGCRD Rules wherein: Under Rule 4(3), the importer who intends to avail the benefit of a notification shall submit a continuity bond that the goods imported shall be put to use for manufacture of goods. Rule 6 requires the importer to maintain accounts and produce before the jurisdictional commissioner indicating the goods importe....
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....2024, the language used in S. No. 5D(b) of Notification No. 57/2017 is similar to the language used in S. No. 527B of NN 50/2017 as both the notifications use the phrase "for use", wherein it was held that the importer was eligible to avail the exemption benefit under S. No. 5D(b) of the Notification No. 57/2017 in respect of inputs and parts for use in manufacture of mobile display assembly even when such inputs and parts get scrapped during the manufacturing process. 5.5.5 The Applicant further relies on decision of Allahabad High Court in case of M/s Jhunjhunwala Vanaspati Ltd. Jaunpur (U.P.) Versus The CCE, Allahabad [2015 (10) TMI 1532 - Allahabad High Court] wherein the Appellant had availed benefit of concessional rate of duty under notification No. 16/2000-Cus dated 1.3.2000 on import of palm olive oil for manufacture of vanaspati. On deciding whether the benefit of concessional rate of duty should be allowed on the quantity of imported palm olive oil which was lost in transit on account of its having viscous material which sticks to the surface of the containers in which it is kept and it is not possible to take out the entire quantity of palm olive oil from the contain....
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.... the export product. The exemption on inputs may also be allowed even if they are not exactly those used in the export product but provided the inputs are commercially known to be usable in the product exported." 5.5.8 Reliance is further placed on decision of CESTAT, New Delhi in the case of Samtel Colour Ltd vs. CCE [2003 (11) TMI 485 - CESTAT, New Delhi/ wherein it was held in Para 4 that, "We have considered the submissions of both the sides. It has not been disputed by the Revenue that the impugned goods, imported by the appellant at concessional rate of duty, had been taken for use in the manufacture of excisable goods. Once the inputs had been taken for manufacture of intended goods, it cannot be claimed by the Revenue that the inputs had not been used in manufacture of excisable goods as the inputs during such manufacture were destroyed by fire. We observed that the Assistant Commissioner, while dealing with disallowance of Modvat credit of duty paid on inputs, has clearly given his findings that "as soon as the goods are issued for the purpose of manufacture; they become in the nature of work in process and if they are damaged during this process, it is to be t....
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....te about the fact that every manufacturing process would automatically result in some kind of a loss such as evaporation, creation of by-products, etc., the total quantity of inputs that went into the making of the finished product represents the inputs of such products in entirety." 5.5.11 Reliance can be placed on the judgement of Supreme Court in the case of Dalmia Dadri Cement Ltd. [2004 (178) ELT 13(SC)], wherein the SC has observed that the words 'For use' has to be interpretated as 'Intended for use'. The relevant para is quoted as: " ... It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different. as, for example, "goods actually" used or "goods used". " 5.5.12 In view....
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....nted out." 5.6.2 Drawing an analogy from above, it is understood that the Applicant is importing cells 'for use' in the manufacture of battery or battery pack of electrically operated vehicle or hybrid motor vehicles. It was always imported with intent of manufacturing battery pack. As explained above, it has been consistently held that expression 'for use' means 'intended for use'. 5.6.3 Reliance is further placed on decision of Madhya Pradesh High Court in case of Prakash Metal Crafts Industries Vs. CCT', 2016 (337) E.L.T. 342 (MP). Hence the condition 'for use' is duly complied with. It is only post receipt of goods and suitable quality checks thatit is identified that goods are not meeting standard quality requirements and could not be utilised. 5.6.4 Reference is drawn from judgement of Hon'ble Supreme Court in BPL Display Devices Ltd. 2004 (174) E.L.T. 5 (S.C) wherein the Appellant had imported parts of picture tubes for manufacture of colour picture tubes and availed the benefit of Notification No. 13/97-Cus. as amended by Notification No. 25/99-Cus. While allowing the benefit of said notification, Hon'ble Court held as un....
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....o expressed in Circular 10/2021- Customs dated 17 May 2021 (issued in the context of IGCRD Rules 2017 which had similar provisions) wherein para 4.11 was read as under: "Re-Export or clearance for home consumption: An importer shall utilise the imported goods for the intended purpose or re-export the same, within a period of six months from the date of import, failing which the importer is liable to payment of duty with interest, as per the procedure laid out in the said IGCRD Rules. In the case the importer intends to clear the unutilised or defective goods on payment of requisite duty and interest, the import duty payable would be equal to the difference between the duty leviable on such goods but for the exemption availed and that already paid, if any, at the time of importation, along with interest at a rate as fixed by notification under section 28AA. The period for calculation of interest would start from the date of import of such goods and end with the date of actual payment [refer rule 7(2)]" 5.7.4 From the above, the Applicant understands that the cells being imported under IGCRD Rules are to be used for the intended purpose or re-exported. F....
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....omments on 18.08.2025, 29.09.2025 and 16.10.2025. The concerned Commissionerate submitted their comments on 28.10.2025 wherein it is mentioned that: 6.1 From the notification it is evident that the exemption under Serial No. 527B of Notification ibid, shall apply to the import of lithium-ion cells that are intended for use in the manufacture of battery or battery pack of electrically operated vehicles or hybrid motor vehicles, subject to the importer's compliance with the provisions of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2022 (IGCRD Rules). 6.2. As per provisions of the Rule 10(1) of the IGCRD Rules, the Notification benefit of this exemption shall be available only when the imported lithium-ion cells are used or intended to be used in the aforesaid manufacturing process within the prescribed time frame as stipulated under Rule 10(1) of the IGCRD Rules. Any quantity of such imported cells which remains unutilized, found defective prior to use, or not used in manufacture within the specified period shall be liable to duty and interest in accordance with Rule 10(3) and Rule 11 of the said Rules. 6.3 The concessional rate of Basic Customs Dut....
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.....e not used in the manufacturing of the battery or battery pack and hence it will fall under the category of the unutilized goods which will be governed by the provisions of Rule 10(1) of IGCRD, 2022. iii. Whether said benefit would be applicable to the imported cells that have been found to be defective post import and hence not issued to production. Ans :- No, as the defective goods are to be dealt with in accordance with provisions of Rule 10(1) of IGCRD, 2022, where the option either for reexport or clearance for home consumption were given after following due procedure. 6.7 The applicant has submitted the rebuttal vide letter dated 18.11.2025 wherein they have reiterated the contention made in the application. Details of Hearing 7. A hearing was held on 06.11.2025 at 03.30 PM. Shri Ajay Maheshwari and Ms. Ruchi Bhat, representatives appeared online on behalf of the applicant for the hearing and reiterated the contention submitted with the application in as much as they wanted to import Lithium-Ion Cell for use in manufacture of battery or battery pack of electrically operated vehicle. That the entry no. 527B of the notification no. 50/2017-customs da....
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....Form CAAR- 1 is squarely covered under Section 28H(2) of the Customs Act, 1962, being a matter related to classification of goods under the provisions of this Act. 8.1 Before deciding the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/ Section notes along with HSN explanatory notes. As per Rule 1 of GRI, the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. 8.2 . The applicant has sought advance ruling in relation to applicability of entry number 527B of the Notification No. 50/2017-Cus dated 30 June 2017 which prescribed lower duty rate for import of "Lithium-ion cell for use in the manufacture of battery or battery pack of the electrically operated vehicle or hybrid motor vehicle" in below scenarios: i. Imported cells used in manufacture of battery or battery packs intended for use as replacements due to defects or under warranty conditions. (Scenario 1) ii. Imported cells that fall obsolete during the manufacturing process and then the ....
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....of Goods at Concessional Rate of Duty) Rules, 2017. Consequently, any reference to the 2017 Rules in exemption notifications, including their annexures, shall now be construed as a reference to the IGCR Rules, 2022- These Rules primarily lay down the procedural framework for availing concessional customs duty, including requirements such as prior intimation to the jurisdictional customs officer, maintenance of usage records, and filing of quarterly returns to ensure compliance with the end-use conditions. Importantly, the 1GGR Rules, 2022 do not explicitly prohibit the simultaneous availment of other benefits under the Customs Act 1962, provided that the conditions of each applicable scheme or notification are independently met. Relevant potion of the notification is as under: [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PARTII SECTION-3, SUB-SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE NOTIFICATION No. 74/2022 - Customs (N. T.) New Delhi, 9 th September, 2022 G.S.R .. (E). - In exercise of the powers conferred by section 156 of the Customs Act, 1962 (52 of 1962), and in supersession of the Customs (Import o....
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....at the custom station of importation shall allow the benefit of the notification to the importer. (3) Where a Bill of Entry is cleared for home consumption, the bond submitted by the importer gets debited automatically in the customs automated system and the details shall be made available electronically to the jurisdictional Customs Officer. 6. Importer to maintain records .- (1) The importer shall maintain an account so as to clearly indicate and shall produce the said account as and when required by the Deputy Commissioner of Customs, or, as the case may be, the Assistant Commissioner of Customs having jurisdiction over the premises or where the goods imported shall be put to use for manufacture of goods or for rendering output service: Provided that in case of non-receipt or short receipt of goods imported in the relevant premises, the importer shall intimate such non-receipt or short receipt immediately on the common portal in the Form IGCR-2. ----------- ------------ 10. Re-export or clearance of unutilised or defective goods. - (1) The importer who has availed the benefit of a notification shall use the goods imported in ....
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....s laid down in the notification, upto the date of its clearance. 11. Recovery of duty in certain case. - (1) In the event of any failure on the part of the importer to comply with the conditions mentioned in sub-rule (1) of rule 10 or where the payment referred in sub-rules (3) and (4) of rule 10 is not paid or short paid, the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for specified end use or for rendering output service shall take action by invoking the Bond to initiate the recovery proceedings of an amount as under - a. in case of a notification that provides a duty exemption, equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of importation, along with interest, at the rate fixed by notification issued under section 28AA, for the period starting from the date of import of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liabl....
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....use, or not used in manufacture within the specified period shall be liable to duty and interest in accordance with Rule 10(3), 10(4) and Rule 11 of the said Rules. 8.5.2 In scenario 2, the applicant submitted that the imported cells are issued for manufacture and during the manufacturing process, these cells get damaged/ obsolete. It is important to note that every manufacturing process involves certain line rejection/ manufacturing process loss etc. by which certain goods issued for production, are not converted in final products so manufactured. However, in such cases, it can be said that the goods lost in manufacturing process are used in manufacture. The applicant seeks exemption benefit on the imported cells that fall obsolete during the manufacturing process and then the said cells are sold as scrap. The intent of the aforesaid exemption is to provide concessional benefit where the goods have been used for the manufacture. The ultimate result of the manufacturing process is immaterial. There is no condition that the goods on which exemption has been availed should form part of the end products i.e. battery packs in the present case. The usage of words 'for use in m....
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....ance and the duty payment shall be recorded by the importer in the monthly statement. (4) The importer shall have an option to clear the capital goods imported, after having been used for the specified purpose, on payment of duty equal to the difference between the duty leviable on such goods but for the exemption availed and that already paid, if any, at the time of importation, along with interest, at the rate fixed by the notification issued under section 28AA, on the depreciated value allowed in straight line method as under -- i. for every quarter in the first year @ 4%; ii. for every quarter in the second year @ 3%; iii. for every quarter in the third year @ 3. iv. for every quarter in the fourth and fifth year @ 2.5%; v. and thereafter for every quarter @ 2%. Explanation. - (1) For the purpose of computing rate of depreciation under this rule for any part of a quarter, a full quarter shall be taken into account. (2) The depreciation shall be allowed from the date when the capital goods imported have come into use for the purpose as laid down in the notification, upto the date of its clearance. I....
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....fications who had diverted the products imported for other purposes and had no intention to use the same for manufacture of the specified items at any stage" is also inapplicable as this decision was intended to protect bona fide manufacturers frem being denied exemption where inputs never reached the stage of manufacture due to such incidental losses. In the present case, however, the issue is not of inputs lost or damaged before or during use, but of waste or refuse generated in the process of the manufacturing and applicability of procedures governing the same. The applicant relied upon case of Goodluck Garments Pvt. Ltd. Vs. CCE [2019 (365) E.L.T. 893 (Guj.)/ which deals with the wastage is in excess of the input-output norms wherein the Hon'ble Court is of the view that the mere fact that the wastage is in excess of the input- output norms, without anything more, would not be sufficient for the Assistant Collector: to arrive at the satisfaction that the imported fabric has not been used for the manufacture of the articles for export. Condition No. 6 of the Notification No. 13/Customs, dated 9-2-1981, cannot be read in a manner whereby despite the fact that the ass....
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....ption to re-export within time limit or clear the goods for home consumption on payment of duty and interest in accordance with Rule 10(3) & (4) and Rule 11 of the said Rules. Therefore, it can be said that as the obsolete cells are sold as scrap i.e not used in the manufacturing of the battery or battery pack and hence it will fall under the category of the unutilized goods which will be governed by the provisions of Rule 10(1), 10(3), 10(4) and 11 of IGCRD, 2022. 8.5.3 In Scenario 3, there are instances wherein cells are imported, and exemption is availed under SL. No. 527B of Notification No. 50/2017-Customs dated 30 June 2017. However, before issue of these goods for production, it is observed that these cells are not meeting standard quality requirements. Hence, these cells are not issued for production. However, due to various logistic challenges, these cells are not returned to the exporter but are sold to the Government Authorized E-waste agency. In this regard the Applicant submits that the intent of importing the said cells have always been for manufacturing of battery or battery packs. Hence, while importing the goods, the exemption benefit is availed thereon. ....
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....ods in manufacture. Accordingly, in cases where the imported goods are not used in manufacture, it can be said that there is violation of Rule 10 of the IGERD Rules and duty is required to be paid. Further, the unutilized or defective goods shall be re-exported or cleared for home consumption upon voluntary duty payment. Furthermore, I relied on the Circular 10/2021- Customs dated 17 May 2021 (issued in the context of IGCRD Rules 2017 which had similar provisions) wherein para 4.11 was read as under: 4.11 An importer shall utilise the imported goods for the intended purpose or re-export the same, within a period of six months from the date of import, failing which the importer is liable to payment of duty with interest, as per the procedure laid out in the said IGCR Rules. 8.5.4 In scenario 4, the applicant sought clarification, if the applicant would be required to pay back the benefit availed, from which date interest would be payable- Rule 11 of the IGCRD, 2022 provides that- 11. Recovery of duty in certain case. - (1) In the event of any failure on the part of the importer to comply with the conditions mentioned in sub-rule (1) of....