TaxTMI 
TaxTMI 
2025 (12) TMI 949
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....the applicant has submitted as under: 1.1.1. M/s Samkwang India Electronic Private Limited is a company incorporated in India, having its registered office at Plot No. 1, Sector-Ecotech-10, Greater Noida, Gautam buddha Nagar, Uttar Pradesh, 203202. Samkwang India is a subsidiary of Samkwang Wintech Co. Ltd. located in Republic of Korea, which is a precision injection company that provides solutions for mobile, automotive and electronic equipment manufacturing. 1.1.2. M/s Samkwang India is involved in the manufacturing, testing and sale of a product named 'Assy Case Front or Front Cover' ('the Product') which is an external protective panel that primarily focusing on the aesthetic and protective aspects on the front-facing surface. It protects key components like display screen, front-facing camera, sensors, and speaker grilles of a mobile phone. 1.1.3 To undertake manufacturing activity of the applicant procures inputs/parts from Samsung India Private Limited ('Samsung India'). These inputs/parts are imported by Samsung India from Vietnam, Korea and China. 1.1.4. Samsung India imports various components and inputs from Vietnam, Korea and China. T....
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....n Note 2(b) to Section XVI of First Schedule and Part B (ii) of General Notes to Chapter 85 under the WCO HSN Explanatory Notes. 1.3 Following key inputs (critical components) contribute to manufacturing of the Product: * Metal case * SIM tray ejector pin * Vapor chamber * Power key * Volume key Printed circuit board ('PCB') for side key * Body for finger sensor * Antenna pad/ NI metal sheet 1.4. Around ninety percent (approx.) of the inputs used in the manufacturing of the Product are non-electrical in nature. The inputs used in the Product are critical and essential to lay down the functional framework for a mobile phone. 1.5. The Bill of Material of the Product consists of fifty-two parts in toto containing twenty-eight unique categories of inputs. Image of the Product labelling all twenty-eight types of inputs is enclosed. 1.6 Each and every component and part used in the manufacturing of the Product are independently significant and when put together using a specialized manufacturing process, performs a distinct function in the manufacturing of the end product, i.e., a mobile phone. Absence of a....
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....facturing process of the Product. Any lapse or miscue in the manufacturing process while processing of any inputs may lead to redundancy of the Product and it may not pass the final quality test. 1.11. Manufacturing process undertaken by the Applicant 1.11.1 There are ninety-nine distinct steps in the manufacturing operations undertaken by the Applicant. 1.11.2. These ninety-nine steps can broadly be categorized into the following processes: * Quality inspection and testing of inputs at various stages of manufacturing operation * Embedding and stationing of inputs on the metal case * Welding and emplacement of inputs on the metal case * Pressing of inputs by applying force of 5kgf/cm2 * Cleaning of Product before packing * The above-mentioned steps are elaborated below in detail for an exhaustive understanding of the complete manufacturing process and steps involved: 1.12. Quality inspection and testing of inputs 1.12.1. As a first step, quality inspection of all twenty-eight types of inputs is carried out. 1.12.2. In the event, any of the inputs fail the first stage of quality inspection, the cause for the sam....
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.... Vapor Chamber, Tape Insulation VC Octa, etc., are pressed on to the metal base of the Product. This is done by applying a force of 5kgf/cm2 through a machine. 1.15.2. Through this process, the force applied on the inputs helps in permanent placement of the inputs on the metal base such that it cannot be disassembled without causing damage to the concerned inputs. 1.15.3.Out of ninety-nine stages in the manufacturing process, pressing process is undertaken at twenty-seven stages. 1.16. Cleaning of Product 1.16.1. Post completion of the manufacturing process described above, the Product is thoroughly cleaned before being packaged for supply to the Applicant's customer. 1.16.2. The cleaning process is essential to ensure that any debris, residue, foreign particles that may be present on the Product in the course of manufacturing process are removed prior to supply to the customer. Presence of any foreign particles on the Product can pose an obstacle in the next layer of manufacturing undertaken by the customer and may ultimately result in malfunction of the end product, i.e., mobile phone. 1.17. Irreversible nature of operations 1.17.1. It is highlighted that....
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....oncessional Rate of Duty) Rules, 2017, superseded by Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022. ('IGCR'). 1.22. Through Union Budget 2025, SI. No. 6D of Notification 57 was amended through Notification No. 10/2025-Customs dated 01.02.2025. The amendment was made with an intention to promote manufacturing of electronic products and mobile phones in India. This amendment clearly indicates Government's Vision to turn India into a mobile manufacturing hub. This is also aligned with Government's flagship program of "Make in India" and "Phased Manufacturing Program" ('PMP'). Consequent to this amendment, goods specified in SI. No. 6D which are classifiable in any chapter are now eligible for concessional duty rate under SI. No. 6D of Notification 57. 1.23. As highlighted above, the Product in question is a front cover or back cover classifiable under Chapter 85 of the First Schedule. Accordingly, by virtue of the recent amendment to SI. No. 6D of Notification 57, the Product finds coverage in SI. No. 6D of Notification 57. 1.24. Given the above, the Applicant is of the view that for the inputs imported for....
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....lely or principally with cellular mobile phones. 1.32. By the virtue of Notification No. 10/2025-Customs dated 01.02.2025 issued through Union Budget 2025, SI. No. 6D of Notification 57 has been amended to include "all chapters" within its purview. Accordingly, the Product under question, which is a front cover that is classifiable under Chapter 85 (tariff item 8517 7990) is now covered under SI. No. 6D of Notification 57. 1.33. Consequently, the inputs/parts used in manufacture of the Product, i.e., front cover or back cover, merit duty exemption under SI. No. 6E of Notification 57, provided that they fulfil the applicable import conditions (IGCR). These imported inputs including metal cases, SIM tray and others are critical components in making of the Product since they provide structural integrity, support and protection to the mobile phone's structure. 1.34. Given that the duty benefit offered by SI. No. 6E is linked to the condition that the imported inputs should be used in manufacturing goods covered in SI. No. 6D, it becomes pertinent to examine whether the post import process undertaken by the Applicant qualifies as manufacture of the Product. Meaning....
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....ge, positioning of the inputs, cutting of the inputs through a wide array of specialized machinery ✓ As a last step, the Product is thoroughly cleaned to remove any residue/ foreign particles that may be deposited on the Product during the course of manufacturing. 1.39. Reference in this regard is made to the decision of the Hon'ble High Court of Bombay in Commissioner of Income Tax, Bombay City I Vs. Tata Locomotive & Engineering Co. Ltd. (1968) 68 ITR 325 (Bom.) wherein the Court has categorically stated that assembling of parts into the finished product amounts to manufacture of the finished product. The relevant extract of the case is reproduced hereunder for reference: "Thus looked at from any point of view and whether one takes into account the wider or narrower meaning of the word "manufacture", it is clear that assembling of automotive bus/truck chassis from imported parts in a knocked down condition would give rise to an article which is totally different from the parts. This so even though the component parts from which the automotive chassis is made, retain their individual identity in the whole article which is thus manufactured or produc....
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....re used by the public at large for different purposes and is commercially known differently, therefore, it amounts to manufacturing. The resultant end product is outcome of combination of efforts with the help of men and machine .. 1.42. It is also crucial to note that barring the quality inspection and testing conducted by the Applicant, all the other processes undertaken during the manufacturing process are irreversible in nature. This is due to the fact that each such process once carried out cannot be undone to bring the input back to its original pristine form. All the twenty-eight types of inputs have been attached to the metal base in a permanent manner that disassembly of the inputs is not possible without causing damage to them. 1.43. Emergence of a new product The Applicant submits that the afore-described process culminates in creation of a new product, i.e., 'Assy Case Front' or 'Front Cover'. The Product under consideration, is the front metal case of a cellular mobile phone containing key components such as power key, volume key, PCB for side key, vapor chamber, etc., assembled on it. On the other hand, the inputs used in the manufacturing pro....
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....nufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct Article that a manufacture can be said to take place" 1.45. The imported inputs used in the manufacture of the Product are entitled to avail duty exemption under Notification 57 1.45.1 The Applicant submits that basis the discussion covered in para 1.8 to 1.17 above, it is clearly evident that the Applicant is involved in manufacturing the Product, i.e., front cover of a cellular mobile phone using the twenty-eight types of inputs, out of which fourteen categories of inputs are imported by another Company and procured by the Applicant. Accordingly, the Applicant is involved in the manufacture of goods covered in SI....
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....ailable on record. Ex-parte decision related findings :- 4.1. "As per the sub-rule 19 of the CAAR Regulation 2021 as provided under Notification No.01/2021-Customs (N.T.) dated 04.01.2021 as amended vide Notification No.63/2022-Customs (N.T.) dated 20.07.2022, Hearing of application ex parte. - * Where on the day fixed for hearing or any other day to which the case is adjourned, the applicant or the Principal Commissioner or Commissioner does not appear in person or through an authorised representative when the application is called for hearing, the Authority may dispose of the application ex parte on merit: * Provided that where an application has been disposed of I [under this regulation]and the applicant or the Principal Commissioner or Commissioner, as the case may be, applies within seven days of receipt of a copy of the order or advance ruling and the Authority is satisfied that there was sufficient cause for his non-appearance when the application was called for hearing, the Authority may, after allowing the opposite party a reasonable opportunity of being heard, make an order setting aside the ex parte order or advance ruling and restore the applicat....
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....uct, i.e. a mobile phone. Absence of any of these inputs/parts from the Product or oversight in the manufacturing process may potentially result in the ultimate product, i.e., mobile phone, becoming a redundant electrical device, which cannot be sold into an open market. Further the end product i.e., a mobile phone is made up of forty-two (approx.) types of inputs. Out of the forty-two types, twenty-eight types of inputs are used in manufacturing the Product. The remaining fourteen types of inputs are used in the next phase of manufacturing at the customer location where the output product is a mobile phone. Thus, the Product when put to use for manufacturing of mobile phone contributes to seventy percent (approx.) of total components which are used in the manufacturing of mobile phone. The list of key inputs (critical components) contribute to manufacturing of the Product: * Metal case * SIM tray ejector pin * Vapor chamber * Power key * Volume key * Printed circuit board ('PCB') for side key * Body for finger sensor * Antenna pad/ NI metal sheet 4.7. The applicant has highlighted that the product i....
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....ls and notifications. Call Volume: Changes the volume during a phone call. Alarm Volume: Sets the volume for alarms. 3 POWER-KEY Power On/Off or Call End key- This is the button that is used to end calls and/or switch the phone off. It is usually red and is frequently on the right-hand side of the phone. 4 TAPE WATERPROOF-SPO NGE-MIC BTM It serves a very vital function. The sponge layer or windscreen protects sponge layer of the microphone from the wind, especially when used outdoors. Without the sponge layer, small sounds which might seem negligible, like breathing or even small gusts of wind, might cause loud pops in the audio signal, instead, the sponge layer of the microphone acts as a protective barrier that breaks up the air interference before in can reach the diaphragm of the microphone. 5 KEY FPCB-SIDE A flexible printed circuit board, also known as a flex PCB or simply flex circuit, is a type of printed circuit board that can bend, fold or flex without damaging the circuitry. Unlike rigid PCBs, FPCBs are made using flexible base materials, allowing them to conform to various shapes and withstand repeated bending or flexing during use. FPCBs c....
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....S, INCLUDING SMARTPHONES AND OTHER TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS; OTHER APPARATUS FOR THE TRANSMISSION OR RECEPTION OF VOICE, 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 8528 - Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks: 8517 11 -- Line telephone sets with cordless handsets: 8517 11 10 - Push button type 8517 11 90 -- Other 8517 13 00 -- Smartphones 8517 14 00 -- Other telephones for cellular networks or for other wireless networks 8517 18 -- Other: 8517 18 10 --- Push button type 8517 18 90 -- Other - Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517 61 00 -- Base stations 8517 62 -- Machines for the reception, conversion and transmission or regeneration o....
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....lly, the applicant has informed that each of the processes undertaken on the inputs are irreversible in nature i.e. the inputs once attached to the metal case can not be disassembled without any damage thereto and these goods are specifically designed for mobile phones, and are engineered for integration into mobile phone assemblies. Images of assemblies indicating inputs/parts to be imported are produced below: 4.12. I observe that the expression "parts" has not been defined in the Tariff, but has been interpreted judicially in several rulings. In CCE v. Insulation Electrical (India) Pvt. Ltd. [(2008) 12 SCC 421], the Hon'ble Supreme Court held that a part is an element or component without which the main article is incomplete. In CTO v. Prasoon Enterprises [(2019) 3 SCC 700], it was reiterated that an item qualifies as a part if it is essential to the functioning or structure of the finished article. In the context of mobile phones, the Hon'ble CESTAT in Samsung India Electronics Pvt. Ltd. v. PCC, Air Cargo (2023), affirmed by the Hon'ble Supreme Court in 2024, held that back covers, middle plates, and front frames designed for mobile phones were correctly classifi....
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....ction of intermediate front covers for mobile phones, and considering the relevant provisions of the First Schedule to the Customs Tariff Act, 1975, along with the Interpretative Rules and judicial precedents, it is evident that the goods are classifiable under Tariff Item 8517 79 90, as "other parts" of telecommunication apparatus. Issue of notification exemption: 4.17. In view of above discussions, I find that in light of the classification of the impugned goods under Tariff Item 8517 79 90, the applicant is eligible to claim exemption under SI. No. 6E of Notification No. 57/2017-Customs dated 30.06.2017, as amended, which exempts all inputs or parts used for the manufacture of goods specified under SI. No. 6D (such as Front Cover), subject to the conditions prescribed therein. S. No. Chapter or Heading or Sub-Heading or Tariff Item Description of Goods Standard Rate 6D Any Chapter The following goods are for use in the manufacture of cellular mobile phones :- (i) Battery cover (ii) Front cover (iii) Middle cover (iv) Main lens (v) Back cover (vi) GSM Antenna/Antenna of any technology (vii) ....