TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1402
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....g process, under the Manufacture and Other Operations in Warehouse (MOOWR) Scheme. 2. The Applicant vide their application has submitted as follows: 2.1 Tata Electronics Private Limited [formerly known as M/s. Wistron Infocomm Manufacturing (India) Pvt. Ltd.] (hereinafter referred as to 'Tata Electronics' or 'the Company' or 'the Applicant') holding IEC No. AACCW1483C is a company incorporated in India under the provisions of the Companies Act, 1956 and is also a Company in terms of the Companies Act 2013, having its registered office at 43/1-3, 111, 112/1-2, 113, 117/1, 117/3, 118/1-2, 120/1-2, 121/1-3, 122, 123, 124, 177/1 KIADB Industrial Area, Achathnahalli Village, Narsapura Hobli, Kolar Taluk - 563 133, Karnataka. 2.2 The Applicant is presently engaged in the business of manufacturing of cellular mobile phones (hereinafter referred to as 'cellular mobile phones of 'the final products') at its manufacturing facility at 43/1-3, 111, 112/1-2, 113, 117/1, 117/3, 118/1-2, 120/1-2, 121/1-3, 122, 123, 124, 177/1 KIADB Industrial Area, Achathnahalli Village, Narsapura Hobli, Kolar Taluk - 563 133, Karnataka (hereinafter referred to as the ....
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....mblies etc. However, at the time of sales of the cellular mobile phones in the domestic tariff area (DTA), the Applicant de-bonds the goods and discharges the Customs duties deferred at the time of import (or procured from other MOOWR registered supplier) of inputs, parts, sub-parts, components, modules, assemblies etc. 2.7 The Applicant states that when the inputs, parts, sub-parts, components, modules, assemblies etc., are procured (either import or local purchases), for use in manufacture of cellular mobile phones, the Applicant performs quality check of the said parts, sub-parts, components, modules, assemblies. Post quality check, the Applicant stores the material in the inventory store. Thereafter, the Applicant issues the required materials to the production floor as and when required. 2.8 The Applicant states that on the production floor, the inputs, parts, sub-parts, components, modules, assemblies etc. undergo the detailed manufacturing process and the underlying quality check points (i.e. after completing defined manufacturing step/process). Post all the processes, checks and tests, the final product i.e. cellular mobile phones get ready for packaging. 2.9 Manuf....
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....acturing process. Modules such as Camera & other sub-assembly modules often get rejected due to inherent machine process variations. When this occurs, the materials can become unusable, leading to generation of process scrap. ✓ Dust & Impurities: Dust and impurities are major concerns in mobile phone assembly, as they can impact device performance, durability, and quality. The dust on the production shop floor causes the units to fail in cosmetic/ functional test stations and in turn leading to process scrap. 2.12 The Applicant states that the inputs and parts damaged during the manufacturing process are scrapped by the Applicant. The scrap generated during the manufacturing process are sold to the Government authorised e-waste vendors who are empanelled with the Applicant. The e-waste vendor collects the scrap and disposes off as per the authorised Government norms. 2.13 The Applicant states that Section 65(2) of the said Act inter alia provides that where in the course of any operations permissible in relation to any warehoused goods, there is any waste or refuse, then the following provisions shall apply - (a) if the whole or any part of the goods ....
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.... the purpose of manufacturing of motor/ringer, display assembly, Printed Circuit Board Assembly (PCBA) of cellular mobile phones, Camera Module, Camera lens, Connectors and all other ancillary parts of cellular mobile phones which in turn shall be used in manufacturing of cellular mobile phones. The Applicant submits that many of the above goods are specified in the IGCR Notification. Applicant's interpretation of Law/Facts 3.1 The Applicant is presently engaged in the business of manufacturing of cellular mobile phones (hereinafter referred to as 'cellular mobile phones'). For manufacturing of mobile phones, the Applicant inter alia imports various inputs and parts which are used in manufacture of mobile phones. For the present application, the activity pertains to the import of inputs and parts for use in manufacture of cellular mobile phones. 3.2 The Applicant states that it imports various inputs and / or parts for use in manufacture of cellular mobile phones and also raw material, parts/sub-parts, components etc. for the purpose of manufacturing of motor/ringer, display assembly, Printed Circuit Board Assembly (PCBA) of cellular mobile phones, Camera Modul....
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....before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon." 3.8 The Applicant further submits that in exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, Central Government vide Notification No. 57/2017-Customs, dated 30th June, 2017 ('IGCR Notification') provided exemption from duty of Customs on import of certain goods, as mentioned therein, subject to the conditions specified in the said notification. 3.9 The Applicant submits that vide Notification No. 74/2022-Customs (N.T.), dated, 9th September 2022 the Central Government in supersession of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 notified the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (hereinafter referred to as the 'IGCR Rules 2022'). In this regard, it is pertinent to note that Rule 13 of the IGCR Rules, 2022 provides that references in any rule, notification, circular, instruction, standing order, trade notice or other order pursuance to the Customs (Import of Goods at Concessional....
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....rd can be drawn to the object clause of the Memorandum of Association of the Applicant which specifies the main objects of the Applicant and the activities that it is authorized to carry out. 3.14 The Applicant submits that considering the Applicant is only engaged in manufacturing of cellular mobile phones and various components / assemblies / sub-assemblies of the cellular mobile phones, the Applicant submits that it imports inputs and parts only for the purpose of use in the manufacturing of cellular mobile phones and the component of the cellular mobile phones which in turn shall be used for manufacturing of mobile phones. The Applicant will not import any inputs or parts for any purpose other than manufacturing of cellular mobile phones the component of the cellular mobile phones. 3.15 The Applicant submits that in view of above, in relation to the inputs and parts to be imported by the Applicant for the purpose of use in manufacturing of cellular mobile phone and the component of the cellular mobile phones, the Applicant understands that exemption under various relevant entries of Notification No. 57/2017 Customs, dated 30th June, 2017, should be available irrespective ....
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....goods taken for manufacturing simultaneously with the duty deferment under MOOWR and being cleared to DTA or removed to SEZ or to another MOOWR unit have been properly addressed. Question No 17 of the said FAQ is relevant in this regard which is reproduced below: "17. Can all export benefits under FTP and Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR) be taken in Bonded warehouse simultaneously? Response: The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the scheme allows, unit operating under Section 65 has no impact on the eligibility. In other words, a unit operating under Section 65 can avail any other benefit, if the benefit scheme allows." 3.21 In this regard, the Applicant further submits that the issue of availment of IGCR exemption along with duty deferment under MOOWR simultaneously has further been clarified vide Circular No 26/2024- Customs, dated 21.11.2024. The relevant extract of the said Circular is reproduced below: "3.3 It is once again re-iterated that, the MOOWR unit may avail IGCR exemption along with duty deferment under MOOWR simultaneously, provided that t....
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....states that in the instant case the question is in relation to the inputs and parts which are damaged during the manufacturing process and are subsequently scrapped by the Applicant. In specific, the question is whether the benefit provided in relation to inputs and parts for use in manufacture of cellular mobile phone shall also be available in respect of inputs or parts which were imported for use in manufacture of cellular mobile phone but get damaged in the manufacturing process and thereby do not form part of a finished cellular mobile phone. 3.27 The Applicant states that the IGCR Notification provides the benefit of concessional rate of duty on import of inputs and parts for use in manufacture of cellular mobile phones and also for use in manufacturing of various components of cellular mobile phones. Hence, the only doubt is whether the inputs and parts which are imported for the purpose and with the intention to use in manufacture of cellular mobile phones but get damaged / scrapped during the manufacturing process and do not form part of the finished cellular mobile phone can be said to be imported for use in manufacture of cellular mobile phone or in manufacture of com....
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....an be said to have been used in the manufacturing of the cellular mobile phones and other parts of the same. 3.32 The Applicant submits that the phrase 'for use in manufacture' has not been defined under the Customs Act, however, various High Courts have time and again analysed what amounts to 'inputs being used in the manufacture of goods'. 3.33 In this regards, the Applicant submits that various Courts have time and again held that if any process is integrally connected with the ultimate production of goods so much so that but for the said process, manufacture of goods would be commercially inexpedient, goods used as inputs in that process would fall within the ambit of the expression 'used in the manufacture of goods' and such inputs will be considered as being part of the final manufactured product irrespective of the fact that they are physically not present in it. Reliance is placed upon the decision of Hon'ble Supreme Court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, reported in 1964 (10) TMI 2. 3.34 The Applicant further submits that similar view was also upheld by the Hon'ble Madras Hig....
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....e for manufacture of the final product but could not be so used due shortage or leakage. In this case, the Hon'ble Apex Court allowed the benefit even in respect of inputs which were damaged in transit considering that the benefit of the Notifications could not be denied in respect of goods which were intended for use for manufacture of the final product but could not be so used due shortage or leakage. In this regard, the Hon'ble Apex Court further held that - "We are of the view that no material distinction can be drawn between the loss on account of leakage and loss on account of damage. The words for use' used in similar exemption Notifications have also been construed by this Court earlier in the State of Haryana v. Dalmia Dadri Cement Ltd. [1987 (11) TMI 94 -SUPREME COURT OF INDIA] to mean 'intended for use'. According to this decision the object of grant of exemption was only to debar those importer/manufacturers from the benefit of the Notifications 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." 3.38 The Applicant further submits that in the ....
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....s in respect of the duty already paid on the raw material used in the manufacture of the final product. That is the relief has to be given to the extent of the duty paid on the input material and not with reference to the quantity which ultimately forms part of the final product." 3.40 In view of the aforesaid judicial decision, the Applicant submits that it has been settled beyond doubt that exemption shall be available to the inputs which are scrapped during the manufacturing process even though the said inputs do not form part of the finished goods. Hence, the Applicant shall be eligible to avail the benefit under Notification No. 57/2017-Customs, dated 30th June, 2017 even in respect of inputs and parts which are damaged during the manufacturing process and are subsequently scrapped by the Applicant. Port of Import and reply from concerned jurisdictional Commissionerate 4.1 The applicant in their CAAR-1 indicated that they intend to import the subject goods i.e. inputs or parts for the manufacture the mobile phones at the jurisdiction of Office of the Commissioner of Customs, Air Cargo Complex, Devanahalli, Bangalore. The application was forwarded to the Office of the ....
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.... manufacturing activity for exported goods provided such waste or refuse is either destroyed or duty is paid on such waste or refuse as if it had been imported into India in that form. However, subsection (b) mandates that import duty is required to be paid for the waste or refuse generated from the manufacturing activity for goods cleared from the warehouse for home consumption. ⮚ Further, as per Notification No. 57/2017, the importer is required to comply with condition no. 1 of Notification No. 57/2017 dated 30.06.2017 for claiming benefit S.No. 1, 1A, 5A, 5B, 5C, 5D, 6A, 6B, 6BA, 6C, 6D, 6E, 6F, 6G, 6H, 61, 6J, 7, 8 and 13B i.e. the importer should follow the procedures set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. Further it is submitted that CBIC has issued IGCR Rules, 2022 in suppression to IGCR Rules 2017 and clarified vide Rule 13 of IGCR Rules, 2022 that any reference in notification, rules, etc. to the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 and any corresponding provisions thereof shall be construed as reference to the Customs (Import of Goods at Concessional Rate of Duty or for Spe....
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....ported which turned out to be defective. So as per Rule 10(3) of IGCR Rules 2022, whenever defective goods are cleared for home consumption, duty has to be paid along with interest. In other words, the benefit of concessional duty which importer enjoy for input goods used in the manufacturing of goods for home consumption is not available for the defective input goods. In view of the above, the benefit of Notification 057/2017 where precondition for claiming the notification is that the importer should follow the procedures set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2022 is not available for the defective/waste/refuse generated during the manufacturing of the goods cleared for home consumption. ⮚ In light of the above, it is submitted wherever the waste or refuse is generated because of activities for manufacturing domestic consumption the benefit of Notification 057/2017 is not available and the importer is required to clear the inputs without the benefit of Notification 057/2017 read with IGCR Rules 2022. Further, wherever the waste or refuse is generated because of activities for manufacturing exported goods the import duty on su....
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.... section 25, having a bearing on the rate of duty. 6.3.1 The Applicant submits that they import and procure various parts, components, modules, and assemblies of mobile phones under the MOOWR, 2019 scheme for manufacturing cellular mobile phones. Inputs may also be sourced from other MOOWR-registered units through bond-to-bond transfers. Finished mobile phones are either exported or supplied in the DTA, with customs duties deferred at the time of import being discharged upon DTA clearance. During the manufacturing process, certain inputs and components become scrap due to quality failures, damage, or test rejections. The Applicant currently pays full customs duty on such waste under Section 65(2) of the Customs Act, 1962. The Applicant refers to Notification No. 57/2017-Customs, which grants concessional duty on inputs used in manufacturing mobile phones or their components, and submits that there is no restriction under Section 65 from availing such benefits. That position is supported by the CBIC FAQs (dated 27.10.2020) and Circular No. 26/2024-Customs, which clarify that IGCR benefits can be availed alongside MOOWR duty deferment. Therefore, the Applicant contends th....
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....d 9th September 2022, which superseded the earlier Customs (Import 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 IGCR 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. In this context, the Central Government, exercising its powers under Section 25(1) of the Customs Act, 1962, has issued Notification No. 57/2017-Customs dated 30.06.2017, which provides exemption or concessional basic customs duty on the import of specified goods used in the manufacture of mobile phones and their parts or sub-parts. The benefit under this notification is subject to co....
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....ility of concessional duty under IGCR Rules, 2022 for MOOWR Scheme. The issues have been examined and the same are clarified as below: Simultaneous availment of IGCR along with MOOWR: 3.1 Doubts have been raised on the availment of IGCR benefit for the warehoused goods taken for manufacturing simultaneously with the duty deferment under MOOWR and being cleared to DTA or removed to SEZ or to another MOOWR unit. 3.2 In this regard, this aspect has already been clarified under Question 17 of FAQs[1] on MOOWR which is reproduced as follows: "The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the scheme allows, units operating under Section 65 has no impact on the eligibility. In other words, a unit operating under Section 65 can avail any other benefit, if the scheme allows." 3.3 It is once again re-iterated that, the MOOWR unit may avail IGCR exemption along with duty deferment under MOOWR simultaneously, provided that the importer undertakes to comply with the additional conditions prescribed in the Concessional Notification and IGCR Rules therein : including time-limit etc., in addition to MOO....
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....ported, and the scrap or refuse generated during the manufacturing process that is directly linked to the exported goods, is either destroyed or cleared on payment of applicable duty, then the entire process remains duty-neutral. However, if the finished goods are cleared for home consumption, customs duty becomes payable not only on the finished goods but also on the portion of the imported inputs contained in the waste or refuse generated during their manufacture. 6.3.7 Under the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 importers are generally required to utilize imported goods within six months of import and have the option to re-export or clear them for home consumption if they are unutilized or defective. If the goods are not used for the intended purpose, the importer is responsible for ensuring proper disposal, which may involve re-export or clearance for home consumption. Under the Customs (Import of Goods at Concessional Rate of Duty or IGCR) Rules, 2022, Rule 10 provides the provisions related to disposal of unutilized or defective goods. The relevant provision is as follows: 10. Re-export or clearance of u....
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....OWR unit must be disposed of strictly in accordance with the provisions of Section 65(2). Furthermore, the applicant intends to claim the benefit of IGCR along with MOOWR Scheme, has to comply all the conditions of MOOWR regulation and additionally conditions prescribed under the IGCR Regulations, 2022. Thus, it is clear that the waste generated during the manufacture of mobiles phones under MOOWR scheme and IGCRD Scheme, the procedure for disposal of such waste has to be complied as per guidelines prescribed under Section 65(2) of the Customs Act, 1962 which read as MOOWR Regulation. 6.3.9 In light of the above, it is clear that if the manufactured goods are exported, then the duty on imported inputs is remitted, if the waste/refuse generated under MOOWR scheme and IGCRD Scheme must either be destroyed under the customs supervision or cleared for home consumption after paying duty as per Clause (a) of Section 65 of the Customs Act, 1962. Further, if the manufactured goods are cleared for home consumption, customs duty becomes payable not only on the finished goods but also on the portion of the imported inputs contained in the waste or refuse generated during their manufa....
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....manufacturing process loss. The reliance placed by the applicant on the decisions of the Hon'ble Supreme Court in J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur [1964 (10) TMI 2] and the Hon'ble Madras High Court in M/s. Rupa & Co. Ltd. v. CESTAT [2015 (9) TMI 293] is misplaced, as both cases were rendered in the context of sales tax law and the CENVAT Credit regime, where the issue was whether inputs integrally connected with the manufacturing process, though not physically present in the final product or partly lost during processing, could still be treated as "used in the manufacture of goods" for the purpose of allowing tax benefits. In contrast, the present matter is governed by Section 65(2) of the Customs Act, 1962 and Notification No. 57/2017-Customs read with the IGCR Rules, 2022, which contain explicit provisions regarding the treatment of waste or refuse generated in a MOOWR unit. 6.5.2 The reliance placed by the applicant on the decision of the Hon'ble Supreme Court in BPL Display Devices Ltd. v. CCE, Ghaziabad [2004 (10) TMI 92] is also inapplicable, as this case dealt with the interpretation of exemption notifications in s....
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.... provide relief to the manufacturer to the extent of duty already paid on inputs, regardless of whether the entirety of the input material was present in the final product. In the present case, however, the issue falls squarely under Section 65(2) of the Customs Act, 1962 read with the MOOWR/IGCR framework, which contains specific statutory provisions governing the treatment of waste or refuse generated in a bonded warehouse. 6.5.5 The applicant has relied upon the different case laws. I have carefully examined the above case laws cited by the applicant and find that the said decisions were rendered in matters arising under different statutory contexts and on facts distinguishable from the present case. I also placed reliance upon the decision of the Hon'ble Supreme Court in the matter of Bhavnagar university Vs. Palitana Sugar Mills Pvt. Ltd. 2003(2) SCC 111, wherein the court observed that: "It is well settled that a little reference in facts or additional facts may make a lot of difference in the precedential value of a decision." The applicant has relied upon the different case laws but the background and the issues involved in the case laws ar....