TaxTMI 
TaxTMI 
2026 (4) TMI 18
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....CTS HAVING A BEARING ON THE QUESTION (S) ON WHICH ADVANCE RULING IS REQUIRED 1.1 The application is being preferred by M/s. vivo Mobile India Private Limited ('Applicant') a company incorporated in India and having its registered head office located at Gurugram. 1.2 The Applicant is presently engaged in the business of manufacturing of cellular mobile phones and Printed Circuit Board Assembly ('PCBA'). For manufacturing of cellular mobile phones and PCBA, the Applicant imports various inputs and parts. The inputs and parts are currently imported at Delhi Air Cargo (INDEL 4). 1.3 The said activity is duly stated in the object clause of Memorandum of Association of the Applicant. The relevant excerpt of the Memorandum of Association is reproduced below: "To carry on the business of manufacturers, sales, merchants, dealers, distributors, importers, exporters, agent and to market, hire, lease, rent out, assemble, alter, install and otherwise deal in any manner in all types of mobiles." Availment of benefit on import of inputs and parts under Notification No. 57/2017-Customs dated 30" June 2017 (as amended) ('NN 57/2017') 1.4 The Applicant....
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....g the logistics. The damaged materials are exported back to supplier or scrapped on the payment of the duty. b. Quality inspection of inputs and parts at assembly line and SMT line - Once the goods are transferred to the production floor in the factory, the inputs and parts get tested by the engineers as per the specifications and standards set by the quality team. Further, if the inputs and parts fail to meet the standards then the goods are either exported back to supplier or scrapped on payment of duty. 1.8 After the aforesaid quality checks, once the inputs and parts are approved as fit for assembly line or SMT line (as the case may be), such inputs and parts are moved to the assembly line or SMT line (as the case may be) for the purposes of manufacture of PCBA and cellular mobile phones. The process of manufacturing PCBA and cellular mobile phone is subject to a certain amount of process loss on account of modification of parts for the purpose of manufacturing, assembling, process failure, etc. At present, Applicant pays the applicable customs duty on the sale as well as disposal of scrap of items damaged during the manufacturing process. It can also be said that t....
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.... (c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act. (d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act; (e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto. (f) any other matter as the Central Government may, by notification, specify." (Emphasis supplied) 1.13 The Applicant wishes to obtain the advance ruling on question relating to applicability of exemption notification issued under subsection (1) of Section 25 of the Customs Act, 1962 ('Customs Act') on import of inputs and parts which subsequently scrapped during the manufacturing process. Therefore, the questions raised by the Applicant falls within the purview of the provisions of Section 28H(2)(b) and Section 28H(2)(d) of the Customs Act. 1.14 Hence, the application for ....
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....ify, withdraw any of the above submissions. The Applicant shall be pleased to provide any additional documents/information in support of the submissions if required by your good office. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED 1.22 The Applicant is presently engaged in the business of manufacturing of Printed Circuit Board Assembly ('PCBA') and cellular mobile phones The Applicant inter alia imports various inputs and parts for manufacturing of PCBA and cellular mobile phones. Further, as discussed in Annexure I, the inputs and parts imported by the Applicant are put on the assembly line/ Surface Mount Technology ('SMT') line where these are put through various manufacturing processes for the purpose of manufacturing of PCBA and cellular mobile phones. 1.23 Additionally, as stated in Annexure I, the manufacturing process for PCBA and cellular mobile phones is subject to certain process loss and at present the Applicant is discharging the applicable custom duty on the imported value of inputs and parts when the same are either sold or dispose....
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.... which were imported for use in manufacture of PCBA and cellular mobile phones shall be available in respect of various inputs and parts which were imported for use in manufacture of PCBA and cellular mobile phones but get damaged in the manufacturing process and thereby do not form part of PCBA and cellular mobile phones. 1.29 To answer the above question, it is imperative to analyse the scope of benefit provided under the NN 57/2017 as applicable in the instant case. 1.30 In this regard, the applicant wishes to submit that the benefit on the import of various inputs and parts for the manufacture of PCBA and cellular mobile phone under NN 57/2017 is provided when such inputs and parts are imported for use in manufacture of PCBA and cellular mobile phones. Relevant extract of the notification is not reproduced below to avoid repetition and the same is given under Para 5 of Annexure I. 1.31 Now what needs to be analysed is whether inputs and parts which are imported for the purpose and with the intention to use in manufacture of PCBA and cellular mobile phones but get damaged during the manufacturing process and do not form part of the finished PCBA and cellular mobile phon....
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....e goods imported shall be put to use for manufacture of goods. Furthermore, Rule 6 requires the importer to maintain accounts and produce before the jurisdictional commissioner indicating the goods imported which shall be put to use for manufacture of goods or for rendering output service. 1.39 Here it is pertinent to highlight that even the IGCR Rules, 2022 uses the language that the imported goods shall be "put to use" for manufacture of goods. Therefore, the intent of the Rules is clear (and in alignment with the NN 57/2017) i.e., to provide concessional benefit where the goods have been used during the manufacture process and not necessarily the goods which form part of the manufactured good. Judicial precedents to support the Applicant's understanding on the present issue. 1.40 The phrase 'for use in manufacture' has not been defined under the Customs Act, however, what amounts to 'for use' or 'inputs being used in the manufacture of goods' has been analysed by various courts in numerous judgements few of which have been relied upon by the Applicant in the ensuing paragraphs. 1.41 Reliance may also be placed on the case of State of Harya....
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....x Officer, Kanpur and Anr. [1965 AIR SC 1310] 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. 1.44 Similar view was also upheld by the Hon'ble Madras High Court in the case of M/s. Rupa & Co. Limited, Tirupur V/s The Customs, Excise and Service Tax Appellate Tribunal, The Commissioner of Central Excise [2015 (324) E.L.T. 295 (Mad.)] wherein the Hon'ble High Court allowed the CENVAT credit against the entire inputs used by the assessee even when there was 5% manufacturing process loss. The Hon'ble High Court observed as under: "13. To say that what is contained in finished product is only a quantity of all the inputs of the same weight as that of the finished product would presuppose that all manufacturing processes would never have an inherent loss in....
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....ority of India Ltd. V/s Collector of Central Excise [1996 (7) TMI 147 (SC)] the Hon'ble Supreme Court dealt with the question whether exemption available to raw naphtha intended for use in the manufacture of fertiliser would be available in respect of raw naphtha consumed for the gases vented out during the interim stages of manufacture due to unavailability of power. The Hon'ble Apex Court held as under: "There can be no doubt that the raw naphtha that was fed by SAIL into its plant was for the purpose and with the intention of manufacturing fertiliser and that it was only because of supervening circumstances, namely, the low, uncertain and fluctuating availability of power, that the reformed gas produced during the interim stage of manufacture had to be vented out. The benefit of the exemption notification is, therefore, available to SAIL in regard to the raw naphtha that it utilised in its plant for the manufacture of fertiliser but which, for reasons over which it had no control, did not, in fact, result in the manufacture of fertiliser but had, at the interim stage of reformed gas, to be vented out." 1.50 The Hon'ble Supreme Court in the case of Multime....
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.... in the said matter had issued a ruling vide No. CAAR/ Del/ Samsung Display/22/2024/ 928 to 933 dated 04.06.2024 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. 1.53 Additionally, in another similar ruling of M/s TXD (India) Technology Private Limited (CAAR/Del/TXD/63/2025/792 to 798 dated 22.09.2025), it has been held by your good office that benefit of SI. No. 5D(b) of Notification No. 57/2017- Customs dated 30.06.2017 shall be available in respect of inputs or parts imported for use in manufacturing of display assembly which get scrapped during the manufacturing process. 1.54 Further, it has also been held in the case of M/s Sunwoda Electronics India Private Limited (CAAR/Del/Sunwoda/81/2024/1787 to 1793 dated 20.11.2024) and and M/s Winone Precision Technology India Private Limited (CAAR/Del/Winone Precision/97/2024/1948 to 1954 dated 11.12.2024) that the inputs and parts that get subsequently scrapped during the manufacturing proc....
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....s provided to the concerned Custom Port, and requested to furnish the requisite comments in the instant matter. The port authority vide their letter dated 16.01.2026 furnished their comments, which are reproduced as under: (i) Eligibility of the applicant, in terms of Section 28E(c) of the Customs Act, 1962 to seek such advance ruling: Yes, M/s Vivo Mobile India Pvt Ltd, is a valid applicant within the meaning of Section 28E(c) (i) of the Customs Act, 1962, having IEC Code 0514053739. (ii) Applicability of proviso (1) of section 28-I (2) of the Customs Act, 1962 regarding the question raised in the application: As per records available in this Section, no such case of the applicant is pending with any officer of the Customs, other Appellate Tribunal or any Court as per proviso of Section 28(I) (2) of Customs Act, 1962. (iii) Specify whether the claim of the applicant regarding the nature of activity, i.e. it is ongoing/proposed is correct: As per available records, it is ongoing issue. (iv) Comments on merit of the question raised in the application, along with all materials in support there of: Question of law....
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....he procedure set out in the Custom (Import of Goods at Concessional Rate of Duty) Rules, 2017. (as amended) 3.2 These rules may be called the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (NOTIFICATION No. 74/2022 - Customs (N. T.) New Delhi, the 9th September, 2022) ............... 2. Application. - (1) These rules shall apply to an importer, who intends to avail the benefit of an exemption notification issued under sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and where the benefit of such exemption is dependent upon the use of imported goods covered by that notification for the manufacture of any commodity or provision of output service. (2) These rules shall apply only in respect of such exemption notifications which provide for the observance of these rules. 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 accordance with the conditions mentioned in the concerned notification within the period and with respect to unutilised or defective goods, so imported, the importe....
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....payment of the duty along with interest, through the common portal and the particulars of such clearance and the duty payment shall be recorded by the importer in the ^4[quarterly] statement. Notification No. 44/2019-Customs (N.T.) New Delhi, the 19th June, 2019 G.S.R. 435 (E) - In exercise or the powers conferred under section 157 read with section 65 of the Customs Act, 1962 (52 of 1962), and in supersession of the Manufacture and other Operations in Warehouse Regulations 1966, except as respects things done or omitted to be done before such supersession, the Central Board of Indirect Taxes and Customs (hereinafter referred as "Board") hereby makes the following regulations, namely: - .......... 1. Short title and commencement. (1) These regulations may be called the Manufacture and Other Operations m Warehouse Regulations,' 2019. (2) They shall come into force on the date of their publication in the Official Gazette. SECTION 65. Manufacture and other operations in relation to goods in a warehouse. - (1) ^1[With the permission of the Principal Commissioner of Customs or Commissioner of Customs or Commissioner of C....
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.... These norms are publicly available: To access existing Standard Input-Output Norms (SION), anyone can follow these steps. the DGFT at Visit website [https://www.dgfi.gov.in/CP/)]. Navigate to the "Regulatory Updates" Select "SION" from the options provided. This will display a list of chapter-wise Choose the relevant chapter By clicking on the chapter notes, exporters can view the existing SION for that particular chapter. These steps provide a straightforward process for exporters to search and access the specific SION norms they require for their export activities D.2 The issue in hand is manufacturing of Mobile Phone and PCB. For mobile phone, recently, Director General of Foreign Trade (DGFT) as per Paragraph 1.03 of the Foreign Trade Policy 2023, (as amended), vide PN Public Notice No. 25/2025-26 dated 10.10.2025 (ANNEXURE-A) notified the new SION norms for mobile phone under "Engineering & Electronic Items" (Product Code 'C'). In the said they have notified an exhaustive list of components that are to be used in manufacturing of mobile phone, upon perusal of the same, it is clear that maximum raw components which are high - cost items (eg. Acce....
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....hnology ('SMT') for manufacturing of finished goods i.e. PCB and Mobile. However, if any good is damaged during manufacturing on the assembly line then it comes under the category of scrap and there are no rules formulated explicitly under said IGCR rules for the said input goods which subsequently becomes scrap. D5 However, in order to offer any comments on the said situation, further analysis/reference from other parallel manufacturing promotional scheme rules are required, accordingly, reference is taken from MOOWR, 2016 scheme read with section 65 of CA, 62 as mentioned supra. In the MOOWR Scheme, the applicability of the imposition of duty on scrap generated during manufacturing is decided on the usage on the final product whether the finished goods are exported or cleared for home consumption. Accordingly, the applicable duty is decided. The details are stipulated in Section 65 of Customs Act. 62. SECTION 65. Manufacture and other operations in relation to goods in a warehouse. - (2) Where in the course of any operations permissible in relation to any warehoused goods under sub-section (I), there is any waste or refuse, the following provisi....
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.... intentional not giving any benefit to the imported input raw material which subsequently converted into scrap while manufacturing of finished goods (like Mobile phone in this case) which is cleared for home consumption. D6. In furtherance, applicant is seeking the benefit of the exemption notification NN57/2017- dated 30.06.2017 which is issued under section 25 of the Customs Act, 1962 (52 of 1962) and it is conditional with observance of all rules of IGCR. In this case, no such provisions are mentioned in IGCR rules for duty benefit for imported input which subsequently converted into scrap even when other scheme like MOOWR are considered, no such benefit is given to imported raw input which converted into scrap during manufacturing. D7. Further, regarding exemption notifications, interpretation has to be strict, reliance is placed on the ratio laid down by the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co. [2018 (361) E.L.T. 577 (S.C.)], wherein it has been held that exemption notifications are to be interpreted strictly, and that any ambiguity must be resolved in favour of the Revenue, with the burden of establishing....
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....ect as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Caroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provision enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided." In the above passage, no doubt this Court observed that "when two views of notification are possible, it should be construed in favor of the subject as notification is part of fiscal document". This observation may appear to support the view that ambiguity in a notification for exemption must be int....
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....pra). 48. The next authority, which needs to be referred is the case in Mangalore Chemicals Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes (1992) Supp. 1 SCC 21 (supra). As we have already made reference to the same earlier, repetition of the same is not necessary. From the above decisions, the following position of law would, therefore, clear. Exemptions from taxation have tendency to increase the burden on the other unexempted class of taxpayers. A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject in case of ambiguity. 49. The ratio in Mangalore Chemicals case (supra) was approved by a three-Judge Bench in Novopan India Ltd. v. Collector of Central Excise and Customs, 1994 Supp (3) SCC 606 - 1994 (73) E.L.T. 769 (S.C.). In this case, probably for the first time, the question was posed as to whether the benefit of an exemption notification should go to the subject/assessee when there is ambiguity. The three-Judge Bench, in the background of English and Indian cases, in para 16, unanimously ....
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....y or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and life considering on exemption notification, the distinction cannot be ignored. 52. To sum up, we answer the reference holding as under- (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. D8. This judgment clarifies that exemption notifications must be interpreted strictly and if me case does not fall within the parameters; the benefit cannot be given. Any benefit of doubt must be given to the Revenue and should be decided against the appellant. Once the threshold applicability of the exemption notification is crossed, it should be construed liberally as held in Parle Exports and reaffirmed in Dilip Kumar E. From the above, it is clear t....
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....the authorized representative of the applicant i.e. Sh. Sudhakar Jha, Sh. Roshan Krishnan, Sh. Gautam Khattar, Sh. Ankit Khadaria attended the same and reiterated the facts which were already submitted with the application of the applicant. Upon being specifically asked to clarify the exact entries under Notification No. 57/2017 in respect of which the benefit is being claimed, they submitted that the benefit is being claimed under SI. Nos. 5A, 6A, 6D and 6J of the said Notification. Further, with particular reference to the products covered under SI. No. 6J of the Notification and in respect of the issue relating to wastage, the representatives sought two weeks' time to furnish a detailed written reply. 4. Additional Submissions: The Applicant vide its email dated 11.02.2026 and 27.02.2026 submitted additional submissions in respect of their Application. Contents of which are as below: Additional Submissions vide email dated 11.02.2026 4.1 We, M/s. vivo Mobile India Private Limited ('Applicant'), holding IEC 0514053739 is presently engaged in the business of manufacturing of cellular mobile phones and Printed Circuit Board Assembly ('PCBA'). F....
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....ommissioner concludes that, overall scrap (considering high-and low-cost inputs), would be less than 0.05% and is "negligible". b) The Ld. Assistant Commissioner notes that the Customs Import of Goods at Concessional Rate of Duty for Specified End Use ('IGCR') Rules, 2022 does not contain an explicit provisions dealing with scrap generated during the manufacturing process, and then, by relying on the Manufacture and Other Operations in Warehouse Regulations, 2019 ('MOOWR') read with Section 65 of Customs Act, 1962 ('Customs Act'), takes the view that, even under a parallel manufacturing promotion scheme, benefit of exemption on imported inputs and parts which become scrap during the manufacturing process is not extendable when the resultant finished goods are cleared for home consumption and therefore, by parity of reasoning, the Ld. Assistant Commissioner concludes that similar treatment should apply under the IGCR Rules, 2022 as well. c) The Ld. Assistant Commissioner places reliance on the Hon'ble Supreme Court judgment in case of Commissioner of Customs (Import), Mumbai vs M/s Dilip Kumar and Company & Ors [2018 (361) E.L.T. 577 (S.....
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.... on the Applicant's imports under NN 57/2017 and IGCR Rules, 2022. 4.11 Moreover, the settled judicial position is that SION norms are indicators/guidelines and cannot by themselves become the sole or conclusive basis for fastening customs duty or denying exemption where there is no allegation of diversion or misuse. These should be treated in nature of guidelines and not a fixed formula. 4.12 In Goodluck Garments Pvt. Ltd. v. Commissioner of Central Excise & Customs, Surat-II, [2019 (365) E.L.T. 893 (Guj.), the High Court categorically held 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 and that Notification 13/81-Cus dated 9.2.1981 is primarily concerned with fulfilment of export obligation from the goods imported into India and the satisfaction required to be recorded by the Assistant Collector is not in the context of wastage generated, but in the context of manufacture of articles for export from the imported goods. Additionally, so far the notifi....
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....xcise, The Joint Commissioner of CGST and Central Excise [2021(4) TMI 72- Madras High Court] b) Gokak Textiles Limited (Formerly Forbes Gokak Limited) Versus Commissioner of Central Excise, Belgaum Commissionerate, Belgaum [2024 (6) TMI 1005 - CESTAT Bangalore] c) J.J. Glastronics Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore [2024 (11) TMI 65 - CESTAT Bangalore] 4.15 Given the above submissions and reliance on the judicial precedents, it is submitted that the SION norms, being part of the FTP framework and serving as guidelines or indicators, cannot be read into NN 57/2017 or IGCR Rules, 2022. Further, both NN 57/2017 and IGCR Rules, 2022 do not contain any reference to SION or any requirement that wastage of inputs must be within SION norms for the exemption to be available. 4.16 In view of the above, the Applicant humbly requests that the benefit of the exemption of the concessional duty as provided by NN 57/2017 read with the IGCR Rules, 2022 should not be denied solely based on SION norms and therefore, the Applicant humbly request Hon'ble CAAR that the reliance placed by the Ld. Assistant Commissioner on SION norms as a ground to deny ....
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....ied goods are imported "for use in manufacture" of PCBA and there is no requirement in either instrument that the goods must invariably be present in the mobile phones and PCBA in order to qualify as "used in manufacture". 4.22 Therefore, neither the IGCR Rules, 2022 nor the NN57/2017 leaves an ambiguity or scope of doubt for allowing the concessional rate of duty benefit to various inputs and parts which subsequently get scrapped during the manufacturing process. 4.23 Further, the Ld. Assistant Commissioner's reasoning that, because IGCR Rules,2022 are "silent" on manufacturing scrap and because MOOWR read with Section 65 of Customs Act contains specific rules for waste/refuse when goods are cleared for home consumption, the Government must have intended not to extend any benefit on inputs that become scrap under IGCR, is respectfully not borne out by the text or structure of the law. 4.24 Section 65 of the Customs Act, which governs manufacture and other operations in a warehouse, is a distinct statutory regime, under which - a) Sub-section (1) permits the owner of warehoused goods, with the permission of the Principal Commissioner/Commissioner and subject t....
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....e capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction. Accordingly, in such cases, the courts are duty bound to give effect to the meaning that can be inferred from a statue, irrespective of the consequences. In the present case, as explained above, both the NN57/2017 and IGCR Rules, 2022 are clear and there is no scope of doubt or ambiguity and hence both the instrument should be read "as it is" and rule of literal construction shall apply. 4.29 Therefore, the contention of Ld. Assistant Commissioner that since the schemes like MOOWR does not allow the concessional rate of duty benefit when the scrap generated during the manufacturing process is cleared for home consumption, the same would denied for the IGCR goes beyond the permissible scope of strict interpretation, which requires adherence to the text of the specific notification and rules, not importation of conditions from external schemes. 4.30 Further, the Ld. Assistant Commissioner in Letter dated 19.01.2026 does not challenge the Applicant's interpretation of terminology "for use" and therefore, it also substantiates that in the view of Ld. Assist....
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.... interpreted strictly and if the case do not fall within the parameters, the benefit cannot be given. Any benefit of doubt must be given to revenue and should be decided against appellant". 4.35 Now, to this extent, the Applicant in its submissions above has substantially established merits of the proposition under consideration. The Applicant is not intending to seek shelter of any presumption/ assumption, rather it has clarified the position of law through other judicial precedents that anything put to use during the process of manufacture is to be considered as material consumed during the manufacturing process. Hence, it satisfies the end use condition and should be able to avail the concessional benefit under NN 57/2017. 4.36 Further, it is submitted that the Applicant agrees that it is trite law laid in the Dilip Kumar case that an exemption notification ought to be construed strictly to determine the applicability of the exemption provision. However, once the exemption becomes applicable then the provisions must be construed liberally as upheld in the Union of India Vs. Wood Papers Ltd., [1990 (47) E.L.T. 500 (S.C.)] ('Wood Papers Case') which was also followed....
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....t had preferred an advance ruling before Hon'ble CAAR, New Delhi (vide application no. 159/2025) to seek whether concessional rate of duty under Notification No. 57/2017- Customs dated 30th June 2017 (as amended) ('NN57/2017'), as relevant, shall be available in respect of import of various input and parts for use in manufacture of PCBA and cellular mobile phone which get subsequently scrapped during the manufacturing process. 4.43 At the outset, we would like to thank you for providing the Applicant an opportunity of the personal hearing dated 11.02.2026 to explain our advance ruling application as well as well as comments received on the advance ruling application from the Ld. Assistant Commissioner under letter dated 19.01.2026 received on 27.01.2026. 4.44 During the personal hearing, there was a discussion on the Standard Input Output Norms ('SION') issued by the DGFT for mobile phones and the related percentage of scrap provided in such norms. Basis the said discussion, The Applicant was asked to furnish the actual percentage of scrap generated during the manufacturing process for mobile phones and PCBA. Furthermore, your good office has also asked us....
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....plicable customs duty on the sale as well as disposal of scrap of items damaged during the manufacturing process. 4.52 Now, the Applicant basis the grounds set out in advance ruling application and additional submission, believes that concessional rate of duty benefit NN57/2017 shall be available in respect of import of various input and parts for use in manufacture of PCBA and cellular mobile phone which get subsequently scrapped during the manufacturing process. 4.53 Therefore, based on the discussions at your good office, we are hereby furnishing the quantum of scrap of inputs and parts generated during the manufacturing process. It may be noted that scrap of inputs and parts generated for both cellular mobile phones and PCBA during the manufacturing process remains below than 1% on an average basis. 4.54 Further, as requested, the percentage of scrap actually generated out of the total inputs and parts put into the manufacturing process during the last three completed months starting from November 2025 to January 2026 is given below - Month Scrap generated during manufacturing of cellular mobile phones Scrap generated during manufacturing of PCBA November 2....
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....ported under SI. No. 6J of NN57/2017 - a) Secure Digital Card Holder b) Battery Cover Component c) Front Cover Component d) Fingerprint Module e) Back Cover Component f) Wave Absorbing Sheet g) Main Board Support Component h) Charging Receiver Module i) Breathing Light Guide Sheet Assembly 4.62 In view of the afore-mentioned submissions, the Applicant humbly prays that Hon'ble Authority may kindly consider the information as requested on record and kindly issue the advance ruling as prayed. 5. Discussion, Findings & Conclusion: 5.1 Having examined the CAAR-I application, the comments received from the jurisdictional Customs Commissionerate, the record of personal hearing held on 11.02.2026, additional submission made by the applicant and the applicable legal framework, I find the application to be valid in terms of the Customs Act, 1962 and the CAAR Regulations, 2021. I therefore allow the application in terms of Customs Act & CAAR regulations and proceed to determine whether concessional rate of duty under Notification No. 57/2017- Customs dated 30th June 2017 (as amended), is available i....
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....The inputs and parts damaged during the manufacturing process are scrapped by the Applicant. The scrap generated during the manufacturing process is either disposed (for key scrapped items like Display Assembly, Vibration Motor, Back Cover Component and PCBA Sub Parts, etc.) or sold to the Government authorised plastic waste/ metal waste/ battery waste vendors who are empanelled with the Applicant. Such vendor collects the scrap and disposes off as per the authorised Government norms. 5.6 As per the application, the Applicant pays the applicable customs duty on the sale as well as disposal of scrap of items damaged during the manufacturing process and exemption benefit is not being currently availed on such damaged inputs and parts. 5.7 I observe that the question under the present application is in relation to various inputs and parts which are damaged during the manufacturing process and are subsequently scrapped by the Applicant. The specific question is whether the benefit provided in relation various inputs and parts which were imported for use in manufacture of PCBA and cellular mobile phones shall be available in respect of various inputs and parts which were imported ....
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.... 10% 1 This afore-mentioned exemptions/concessions are subject to fulfilment of the Condition No. 1 which is as under :- Condition No. Conditions 1. If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. 5.8.1 I observe that this notification provides exemption benefits to importers for import of certain electronic product used in the manufacture of PCBA and cellular mobile phones. I observe that the benefit under the exemption notification is available in respect of various inputs and parts 'for use' in the manufacture of PCBA and cellular mobile phones. 5.9 The benefit is subject to the compliance of procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 ("IGCR Rules 2017") respectively. The said Rules have now been replaced by the Customs (Import of Goods at Concessional rate of Duty or for Specified End Use) Rules, 2022 ("IGCR Rules, 2022"). The relevant provisions of IGCR Rules 2022 are as under :- (3)The importer who intends to avail the benefit of a notification shall submit a continuity bond with such surety or security as deemed....
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.... goods consumed including the quantity used domestically for manufacture, quantity exported, if any, to fulfil the intended purpose and quantity of goods sent to an end use recipient; iv. quantity of goods sent for job work and the nature of job work carried out; v. quantity of goods received after job work; vi. quantity of goods re-exported, if any, under Rule 10; and vii. quantity remaining in stock, according to bills of entry, 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 accordance with the conditions ....
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....d which shall be put to use for manufacture of goods or for rendering output service. 5.9.2 I observe that both the IGCR Rules, 2022 and Notification No. 57/2017- Customs dated 30.06.2017 uses the language that the exemption notification benefit is available in respect of imported goods which shall be "put to use/for use" for manufacture of PCBA and cellular mobile phones and not in respect of inputs and parts 'used' in the manufacture of PCBA and cellular mobile phones. 5.10 Every manufacturing process has some inherent loss which is unavoidable considering the nature of the manufacturing process. The inputs which get consumed during the manufacturing process whether by way of forming part of the final output or by way of the inherent process loss are used in the manufacturing process. The phrase for use in manufacture has not been defined under the Customs Act, however, what amounts to inputs being used in the manufacture of goods has been analysed by various courts in numerous judgements few of which have been relied upon by the Applicant in the subsequent paragraphs. 5.10.1 Hon'ble Supreme Court in the case of State of Haryana Vs. Dalmia Dadri Cement Ltd., ....
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.... of manufacture. The expression 'inputs of such finished product' contained in finished products' cannot be looked at theoretically with its semantics. It has to be understood in the context of what a manufacturing process is. If there is no dispute 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." (Emphasis supplied) 5.10.3 In view of the above, applicant has submitted that the inputs and parts which are damaged during the manufacturing process in the manufacture of PCBA and cellular mobile phones irrespective of whether the same get incorporated in the manufactured PCBA and cellular mobile phones or are damaged or scrapped during manufacturing merits concessional rate of BCD under notification no. 57/2017- Customs, dated 30th June, 2017. 5.11 The above view has also been upheld by various courts in numerous cases, few of which has been referred by the Applicant in the following paragraphs: 5.11.1 The Hon'ble Supreme Court wh....
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....iliser and that it was only because of supervening circumstances, namely, the low, uncertain and fluctuating availability of power, that the reformed gas produced during the interim stage of manufacture had to be vented out. The benefit of the exemption notification is, therefore, available to SAIL in regard to the raw naphtha that it utilised in its plant for the manufacture of fertiliser but which, for reasons over which it had no control, did not, in fact, result in the manufacture of fertiliser but had, at the interim stage of reformed gas, to be vented out." 5.11.4 The Hon'ble Supreme Court in the case of Multimetals Ltd. V/s Assistant Collector, Central Excise [1992 (57) E.L.T. 209 (SC)] dealt with the question whether the duty referable to that portion which is lost also should get rebate while assessing for excise duty on the pipes and tubes of copper and copper alloys held as under: "Rebate is to be equivalent to the duty already paid on copper and copper alloys in its crude form, that is to say on the input. The idea seems to be that to the extent of the duty paid on the raw material used exemption has to be given and that has no reference to what ultimate....
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....a Electronics India Private Limited (CAAR/Del/Sunwoda/81/2024/1787 to 1793 dated 20.11.2024) and M/s Winone Precision Technology India Private Limited (CAAR/Del/Winone Precision/97/2024/1948 to 1954 dated 11.12.2024) it was held that the inputs and parts that get subsequently scrapped during the manufacturing process, exemption benefit cannot be denied in respect of goods that were intended for use in the manufacturing process but could not be so used due to reasons beyond the control of the manufacturer. In view of above, the submissions of the Applicant that benefit under Notification No. 57/2017- Customs, dated 30th June, 2017 should be available in respect of inputs and parts which are damaged during the manufacturing process and are subsequently scrapped by the Applicant appears to be valid. 6. The port Commissionerate in its reply has referred to new Standard Input Output Norms (SION) notified by the Directorate General of Foreign Trade (DGFT) for mobile phones as per Paragraph 1.03 of the Foreign Trade Policy 2023, (as amended), vide PN Public Notice No. 25/2025-26 dated 10.10.2025 under "Engineering & Electronic Items" (Product Code 'C'). An exhaustive list of....
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....ns. Applicant has submitted that the SION norms are policy instruments under the Foreign Trade Policy, designed to operationalize export-linked authorization schemes. They do not constitute independent statutory standards for customs exemptions; their applicability in customs matters arises only where they are expressly incorporated through FTP-based schemes or corresponding exemption notifications. In present case the Applicant is importing various inputs and parts under Notification No. 57/2017 for manufacture of PCBA and mobile phones. The Applicant is not seeking any FTP benefit under any export schemes such as Advance Authorization, against these imports in the present advance ruling. Hence, the SION notified under the FTP framework have no direct legal operation on the Applicant's imports under Notification No. 57/2017 and IGCR Rules, 2022. 7.1.1 In Goodluck Garments Pvt. Ltd. v. Commissioner of Central Excise & Customs, Surat-II, [2019 (365) E.L.T. 893 (Guj.)], the High Court categorically held 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 satisfac....
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....tiate proceedings. The Court referring the Good luck Graments case law (supra) held that SION could at best be treated as an "indicator" and could not, without anything more, constitute a valid and sole basis for initiation of proceedings or for recording a finding of diversion/ misuse. 7.1.3 The applicant has also relied on the following judgments - i. Adsorbent Carbons Private Ltd. Versus Commissioner of CGST and Central Excise, The Joint Commissioner of CGST and Central Excise [2021(4) TMI 72- Madras High Court] ii. Gokak Textiles Limited (Formerly Forbes Gokak Limited) Versus Commissioner of Central Excise, Belgaum Commissionerate, Belgaum [2024 (6) TMI 1005 - CESTAT Bangalore] iii. J.J. Glastronics Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore [2024 (11) TMI 65 - CESTAT Bangalore] 7.2 The reasoning of the port that, because IGCR Rules,2022 are "silent" on manufacturing scrap and because MOOWR read with Section 65 of Customs Act contains specific rules for waste/refuse when goods are cleared for home consumption, the Government must have intended not to extend any benefit on inputs that become scrap under IGCR, is not borne out by t....
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....ds which form part of the manufactured good. 8.2 The case laws cited by the applicant further strengthens the stand that the concessional benefit where the goods have been consumed during the manufacture process and not necessarily the goods which form part of the manufactured good. It clearly corroborates the understanding that the extant exemption is applicable to all the goods which are placed in the assembly line for the purpose of manufacture of display assembly irrespective of whether the same get incorporated in the manufacture of PCBA and cellular mobile phone or are damaged or scrapped during manufacturing. Upon strict interpretation of the exemption provision and application of the ratio of the judgments, it is observed that the Notification No. 57/2017 is clear and provides that the benefit of exemption is available for all inputs and parts used to manufacture mobile phone, irrespective of the fact that the same forms part of the finished goods or are scrapped during the manufacturing process. 8.3 I note that Hon'ble Supreme in case of Kanailal Sur v. Paramnidhis Sadhu Khan [1957 SCC Online SC 8] & Independent Sugar Corporation Limited v Girish Sriram Juneja & ....