TaxTMI 
TaxTMI 
2024 (11) TMI 1621
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....516000361. As per the application, the Applicant is presently engaged in the business of manufacture of lithium-ion battery packs of cellular mobile phones and imports lithium-ion cells, and other various inputs and parts for manufacturing of battery packs of cellular mobile phones. 1.1. In relation to the imported lithium-ion cells, and other inputs and parts, the Applicant is currently availing benefit under Notification No. 50/2017-Customs dated 30th June 2017 (as amended) ('NN 50/2017') which provides for concessional basic customs duty ('BCD') rate on import of lithium-ion cells, parts and inputs for use in manufacture of battery packs of cellular mobile phones. 1.2 The manufacturing process of battery pack is subject to certain amount of process loss. The inputs and parts damaged during the manufacturing process are scrapped by the Applicant. Presently, the Applicant is discharging duty on the imported value of the scrapped inputs and parts. The Applicant, however, believes that benefit under NN 50/2017 should be available in relation to the import of lithium-ion cells, inputs and parts for manufacture of battery packs of cellular mobile phones and also ....
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....nder S. No. 512 of the NN 50/2017, which provides for '2.5' rate of duty on parts, components, and accessories [except Lithium-ion cell and Printed Circuit Board Assembly (PCBA)] imported for use in manufacture of Lithium-ion battery and battery pack. 1.5 Further, in relation to the import of Lithium-ion cells for use in the manufacture of battery or battery pack of cellular mobile phone, the Applicant avails benefit under S. No. 527A of the NN 50/2017 which provides for '5%' rate of duty on Lithium-ion cell for use in the manufacture of battery or battery pack of cellular mobile phone. Relevant entry of the exemption notification is furnished below for ease of reference: S. No. Chapter or Heading or Sub- heading or tariff item Description of goods Standard rate Condition No. 512. 85 or any other Chapter. Parts, components and accessories except Lithium-ion cell and Printed Circuit Board Assembly (PCBA), for use in manufacture of Lithium-ion battery and battery pack; Sub-parts for use in manufacture of items mentioned at (a) above. 2.5% 9 527A 8507 60 00 Lithium ion cell for use in the manufacture of battery or battery pa....
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.... or (iii) with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under section 28H;" (Emphasis supplied) 1.9 The Applicant is a company registered in India and is holding a valid Importer-Exporter Code ('IEC') Number 0516000361. Copy of the IEC certificate is enclosed herewith as Appendix 2. Thus, the Applicant is rightly covered under the definition of 'applicant' as provided under Section 28E(c)(i) of the Customs Act for making this application. Question raised in the application for advance ruling by the Applicant squarely falls within the ambit of Section 28H(2)(a) of the Customs Act 1.10 Section 28H of the Customs Act provides for the questions in respect of which an advance ruling may be sought by an applicant. Section 28H of the Customs Act reads as under: "28H. Application for advance ruling - (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and in such manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on ....
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....ding in the applicant's case before any officer of customs, the Appellate Tribunal or any Court, (b) the same as in a matter already decided by the Appellate Tribunal or any Court." (Emphasis supplied) 1.13 The Applicant submits that questions raised in the Application (as in Annexure II) are not already pending before any officer of Customs, the Appellate Tribunal, or any court in relation to the Applicant. Further, the questions raised in the present case, have not already been decided by the Appellate Tribunal or any court in the Applicant's case. 1.14 Accordingly, the present application should not be considered as pending before any Court as neither the show cause notice has been issued nor the bill of entries have been provisionally assessed. 1.15 Thus, relying on the above the facts of the current case, Applicant submits that in its case, the application should be accepted for hearing on merits by the Hon'ble CAAR. 1.16 The Applicant wishes to obtain the advance ruling on the questions listed down in form CAAR -1 (as also appearing in Annexure II). Hence, the Applicant has proceeded to file this application before the Hon'ble CAAR, New....
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.... 85 or any other Chapter. Parts, components and accessories except Lithium-ion cell and Printed Circuit Board Assembly (PCBA), for use in manufacture of Lithium-ion battery and battery pack; Sub-parts for use in manufacture of items mentioned at (a) above. 2.5% 9 527 A. 8507 60 00 Lithium-ion cell for use in the manufacture of battery or battery pack of cellular mobile phone. Provided that nothing contained in this S. No. shall have effect after the 31st March, 2026. 5% g. Condition no. 9 of the above notification is furnished below for ease of reference: Condition No. Conditions 9. If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. h. 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 ('IGCR Rules'). i. Rule 5 of the IGCR Rules provides for the procedure to be followed. The procedure specifie....
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....pes (Cut to size) 85079090 Any chapter - Vide Notification No. 57/2017 - Customs, dated 30th June 2017 3. Tapes(in Rolls) 39191000 4. SICPA GREY-INK- MR-997793 32151990 5. AUSTROMELT 39089000 m. In view of above, in relation to the inputs and parts proposed to be imported by the Applicant for the purpose of use in manufacturing of battery packs of cellular mobile phones, the Applicant understands that exemption under entry No. 512 and entry No. 527A of NN 50/2017 should be available irrespective of the classification under Customs Tariff Act of such inputs and parts. QUESTION I: WHETHER BENEFIT OF SL. NO. 527A and SL NO. 512 OF NN 50/2017 SHALL BE AVAILABLE - (B) IN RESPECT OF LITHIUM-ION CELLS, AND OTHER INPUTS & PARTS IMPORTED FOR USE IN MANUFACTURE OF BATTERY PACKS OF CELLULAR MOBILE PHONES WHICH GET SCRAPPED DURING THE MANUFACTURING PROCESS? n. As discussed above, the Applicant imports lithium-ion cells, and other inputs & parts for use in manufacture of battery packs of cellular mobile phones. Further, as discussed in Annexure I, the inputs and parts imported by the Applicant are put on the manufacturing line....
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....attery packs of cellular mobile phones and not in respect of inputs and parts 'used' in the manufacture of battery packs of cellular mobile phones. s. 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. t. 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. u. To corroborate the above understanding reliance is placed on the following submissions. Intent of the NN 50/2017 to provide concessional benefit where the goods have been used during the manufacture process is supported by IGCR Rules i. NN 50/2017 has been issued by the Central Government as per the power conferred under Section 25 of the Customs Act. This notification provides exemption benef....
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.... "10 ..... 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". .... 13. We are, therefore, of the view that the real question which we are called upon to determine is whether, in the present case, the cement supplied was intended for use directly in the generation or distribution of electrical energy. If it was so intended, the exemption was attracted but not otherwise. The certificates which we have referred to earlier issued by the Board clearly show that the intention of the Board was that the cement should be used for a purpose directly connected with the generation or distribution of electrical energy. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion ....
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.... 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) y. In view of the above, it is the submitted that the inputs and parts which are damaged during the manufacturing process should be considered as used for manufacturing of battery packs of cellular mobile phones and accordingly, benefit under NN 50/2017 should be available. z. The Applicant would further like to submit that exemption available to inputs and parts for use in manufacturing of a good should also be available in respect of inputs and parts which get scrapped during the manufacturing process, as these are used in the manufacturing of the goods. aa. The above view has also been upheld by various courts in numerous cases, few of which has been referred by the Applicant in the ensuing paragraphs. The Hon'ble Supreme Court in the case of BPL Display Devices Ltd. V/s Commissioner of Central Excise, Gh....
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....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 ultimately found part of the finished product. It is the duty paid on the input material that is relevant and not the duty referable to the ultimate component of the final product. So far as the manufacturer is concerned he has used copper and copper alloys of a particular quantity in the manufacture of pipes and tubes. The 'manufacturing loss' forms part of the raw material "used" in the manufacture though not reflected in the final product. The relief, as we understand the Notification, that has to be given to the manufacturer was 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." bb. In view of the....
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.... get scrapped during the manufacturing process. ee. Therefore, in view of the above submissions in toto, it is humbly requested by the Applicant that benefit under entry no. 527A and entry no. 512 of the NN 50/2017 should be made available in respect of lithium-ion cells, and other inputs & parts which are damaged during the manufacturing process of battery packs of cellular mobile phones and are subsequently scrapped by the Applicant. QUESTION WHETHER II: THE IF THE ANSWER TO THE QUESTION NO. I(B) AВOVE IS NEGATIVE, PROPORTION TO AVAILED CUSTOMS DUTY EXEMPTION IS TO BE REVERSED IN THE SALES VALUES OF SCRAP, SO GENERATED? ff. In light of the submissions made in relation to question I(a) & I(b) above, the Applicant understand that benefit under entry no. 527A and entry no. 512 of NN. 50/2017 should be available in respect of lithium-ion cells, and other inputs & parts respectively which are damaged during the manufacturing process and are subsequently scrapped by the Applicant. However, if the answer to the question no. I(b) above is negative, authority may clarify if the availed customs duty exemption is to be reversed in proportion to the sales val....
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....2. The applicant has raised two following questions in respect of which advance ruling has been sought: Whether benefit of concessional rate of duty under S. No. 527A and S. No. 512 of NN 50/2017 shall be available: (a) in case of import of lithium ion cells, and other inputs & parts respectively for use in the manufacture of battery pack of cellular mobile phones? (b) in respect of import of lithium ion cells, and other inputs & parts respectively for use in the manufacture of battery pack of cellular mobile phones which get subsequently scrapped during the manufacturing process? 2.3. Comment for point (a) following goods are eligible for concession rate of duty under Notification no. 50/2017 S. No. Chapter or Heading or Subheading or tariff item Description of goods Standard rate IGST Condition No. 512 85 or any other chapter a) parts, components and accessories except Lithium- ion cell and Printed Circuit Board Assembly (PCBA) for use in manufacture of Lithium- ion battery and battery pack 2.5% - 9 527A 85076000 Lithium ion cell for use in the manufacture of battery or battery pack or cellular mobile phone. ....
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....nt that the importer has been given an option to either re-export unutilized or defective goods or clear such goods for home consumption on voluntary payment of duty along with interest. However, the goods which are either scrapped or damaged during the manufacturing process appear to not fall under the category of defective/scrapped goods. Hence rule 10 may not be applicable in this case. 2.8. Further, from the plain reading of the subject Notification it is evident that the Notification only covers those import of goods that shall be put to use for manufacture of goods or in this case which shall be put to use for the manufacture of Mobile Battery Pack and the said notification not explicitly covers damaged/scrapped goods during manufacturing process therefore it is clear that the benefit of concessional rate of duty cannot be extended to such scrapped/damaged goods as claimed by the applicant being not covered in the notification itself. 2.9. The same view stands corroborated in catena of Hon'ble Supreme Court Judgments and further for reference two such relevant judgments by the Hon'ble Supreme Court are reproduced below: In Assistant Commissioner, Gadag Sub-Di....
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.... b) in case where such imports get subsequently scrapped during the manufacturing process. 4.3 The Applicant filed rejoinder to the comments received from the Assistant Commissioner of Customs, Noida Customs Commissionerate ('Ld. Assistant Commissioner') vide letter dated 16.10.2024, from Deputy Commissioner of Customs, Group-VA, ACC Import, New Delhi ('Ld. Deputy Commissioner') vide letter dated 4.11.2024, and from Assistant Commissioner of Customs, Group - VA, NS-V, JNCH vide letter dated 12.11.2024 (collectively referred to as 'Port Comments'). BACKGROUND OF THE PORT COMMENTS 4.4 The Applicant understands that the port authorities of ICD Dadri, ACC, Delhi and Nhava Sheva are aligned with the Applicant on the following points: Eligibility of the applicant - Comments specifically provided by ICD Dadri and ACC, Delhi a) The Applicant holds a valid IEC and therefore is eligible for seeking an advance ruling within the meaning of Section 28E (c) of the Customs Act, 1962 ('Customs Act'). b) The question raised in the application is not pending before any officer of Customs, the Appellate Tribunal or any Court as ....
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....ently scrapped during the manufacturing process, as outlined in the following paragraphs. APPLICANT'S REJOINDER TO THE PORT'S COMMENTS 4.8 Applicant's response to the port comments on eligibility of benefit under NN 50/2017 in respect of imports which get scrapped during the manufacturing process is as under - Submissions with respect to Rule 10 of the IGCR 4.9 The Applicant submits that it is rightly opined by the Ld. Assistant Commissioner, ICD Dadri, in its letter dated 16.10.2024 that the goods which are either scrapped or damaged during the manufacturing process appear to not fall under the category of unutilized or defective goods as per Rule 10 of the IGCR. Hence, Rule 10 may not be applicable in the instant matter. 4.10 In this regard the Applicant submits that Rule 10 of the IGCR deals specifically with 'unutilized or defective goods' i.e., goods that are not utilized in the manufacturing process or the goods which are defective since the time of its import. The intent of Rule 10 is to provide an option to the importers to re-export within the prescribed time limit the goods that were unutilized or defective at the time of import. Hence, ....
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....the manufactured good. 4.15 Further, what amounts to 'for use' or 'inputs being used in the manufacture of goods' has been analyzed by various courts in numerous judgements as relied on by the Applicant in its Application made before your good office. Hon'ble CAAR, New Delhi has passed a favorable ruling on the same issue in another matter 4.16 Your good office has issued a similar Ruling No. CAAR/ Del/ Samsung Display/ 22/ 2024/ 928 to 933 dated 04.06.2024 in the matter of M/s. Samsung Display Noida Private Limited wherein it was held that the importer Company is 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. Reliance placed by ICD Dadri on Assistant Commissioner, Gadag Sub-Division, Gadag Vs. Mathapathi Basavannewwa [1995 (8) TMI 304 - SC] ('Mathapathi Case') and Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company & Ors. [2018 (7) TMI 1826 - SC] ('Dilip Kumar Case') is unfounded 4.17 The Ld. Assistant ....
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....ent in Dilip Kumar Case relied on by the Ld. Assistant Commissioner. 4.20 Applying the rule laid down in Wood Papers Case (as followed in Dilip Kumar Case) to the instant matter. Since the Applicant is eligible to avail the exemption benefit on lithium-ion cells, and other inputs & parts for use in manufacture of battery packs of cellular mobile phones under the NN 50/2017, then as per liberal construction of the exemption notification it can be said that such imports which are for use in manufacturing of battery packs for, if they are damaged/ scrapped during the manufacturing process, will be eligible for exemption benefit. 4.21 In view of the above, the Applicant humbly submits that the Hon'ble Authority may kindly issue the advance ruling as prayed. Findings, Discussion and Conclusion 5. I have taken into consideration of all the materials placed on record in respect of the subject goods, comments of the customs Port Commissionerate and additional submissions made by the representative of the applicant. 5.1 As it has been observed, M/s. Sunwoda Electronic India Private Limited ('Applicant') is presently engaged in the business of manufacturing of batt....
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....022 ('IGCR'), making Rule 10 inapplicable in this case. Further, the Notfn. 50/2017 only covers those import of goods that shall be put to use for manufacture of goods and the said notification does not explicitly cover damaged/scrapped goods during manufacturing process. B. As per ACC Delhi, it has been opined that goods wherein the importer has taken benefit of NN 50/ 2017 and that are not consumed for the battery or battery pack of cellular mobile phones are liable for re-export within six months from the date of import. Accordingly, the benefit under NN 50/2017 on imports which are subsequently scrapped during the manufacturing process cannot be given. 5.5 As regards port authorities at JNCH Nhava Sheva, Mumbai, it is not clear with the comments as it seems that the authorities at one place is allowing the benefit of concessional rate of duty under the NN 50/2017 and at the same time referring to Rule 10 of IGCR which has been mentioned in a different context by the ICD Dadri and ACC Delhi, as mentioned in para above. 5.6 The applicant during the hearing also has clarified that the goods imported first has to go through stringent quality check and if anyt....
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....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". ... 13. We are, therefore, of the view that the real question which we are called upon to determine is whether, in the present case, the cement supplied was intended for use directly in the generation or distribution of electrical energy. If it was so intended, the exemption was attracted but not otherwise. The certificates which we have referred to earlier issued by the Board clearly show that the intention of the Board was that the cement should be used for a purpose directly connected with the generation or distribution of electrical energy. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion with the Board. ....
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....(SC)] held that 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. The 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." V. Similarly in the case of Steel Authority 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....
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....er Sr. No. 527A and 512 of NN 50/2017 is available to lithium-ion cells, and other inputs & parts used in the manufacture of battery packs of cellular mobile phones irrespective of whether the same get incorporated in the manufactured battery packs or are damaged or scrapped during manufacturing. 5.9 This office has issued a similar Ruling No. CAAR/ Del/ Samsung Display/ 22/ 2024/ 928 to 933 dated 04.06.2024 in the matter of M/s. Samsung Display Noida Private Limited wherein it was held that the importer Company is 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. 5.10 Reliance placed by ICD Dadri on Assistant Commissioner, Gadag Sub-Division. Gadag Vs. Mathapathi Basavannewwa [1995 (8) TMI 304 - SC] ('Mathapathi Case') and Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company & Ors. [2018 (7) TMI 1826 - SC] ('Dilip Kumar Case') is unfounded. The Assistant Commissioner has erred in quoting the extract the Mathapathi Case in its letter dated 16....