TaxTMI 
TaxTMI 
2024 (12) TMI 1763
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....arious inputs and parts. The inputs and parts are currently imported at Delhi Air Cargo (INDEL 4). The said activity is duly stated in the object clause of Memorandum of Association of the Applicant. 1.1 The relevant excerpt of the Memorandum of Association is reproduced below: "To carry on the business of manufacturing, assembling and sale of Precision mobile phone plastic parts, injection molding, Precision mobile phone plastic parts, Precision mold development, the phone's shell and structural parts assembly production.........." 1.2 The mobile phone covers, manufactured by the Applicant using the imported inputs and raw materials are dispatched to the mobile phone manufacturers (either direct supply or an indirect supply through an intermediary). The ultimate use of mobile phone covers is in manufacturing of mobile phones, and the Applicant does not cater to the after-sale segment. 1.3 In relation to the imported inputs and parts, the Applicant had sought advance ruling from your good office to seek clarification whether the Applicant is entitled to avail exemption benefit under S. No. 6E of the NN 57/2017 on such inputs and parts for use in manufacture of....
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....or disposed. In such cases, the Applicant pays the applicable customs duty on the imported value of inputs or parts to the extent such items are disposed. b. Loss during manufacturing process - After the inward quality check, once the inputs and parts are approved as fit for assembly line, such inputs and parts are moved to the assembly line for the purposes of manufacture of mobile phone cover. The process of manufacturing mobile phone covers is subject to a certain amount of process loss on account of modification of parts for the purpose of assembling, process failure, etc. At present, Applicant pays the applicable customs duty on the imported value of inputs and parts damaged during the manufacturing process and exemption benefit is not being currently availed on such damaged inputs and parts. 1.8 It is imperative to highlight that the Applicant imports these inputs and parts only for the purpose of use in the manufacturing mobile phone covers. The Applicant does not import any inputs or parts for any purpose other than manufacturing of mobile phones covers. The Applicant qualifies as an 'applicant' under Section 28E(c) of the Customs Act, 1962 ('Cust....
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....otification, specify." (Emphasis supplied) 1.12 The Applicant wishes to obtain the advance ruling on questions relating to applicability of exemption notification issued under subsection (1) of Section 25 of the Customs Act on import of inputs and parts as detailed out in Annexure II. 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. 1.13 Hence, the application for advance ruling is being filed in conformity with the provisions of Section 28H of the Customs Act. Question raised under the present advance ruling application is not before any officer of customs, the Appellate Tribunal or any Court. 1.14 As per Section 28I (2)(a) of the Customs Act regarding procedure on advance ruling application, no application for advance ruling will be accepted if the question raised in the application is already pending before any forum. Relevant extracts of the provision are reproduced below: "28I. Procedure on receipt of application. - 1. ..... 2. The Authority may, after examining the application and the records called for, by order, either allow or ....
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....phone manufacturers and the ultimate use of the mobile covers is in manufacturing of mobile phones. 1.22 For manufacturing of mobile phone covers, the Applicant inter alia imports various inputs and parts. Based on the clarification issued by your good office vide the Ruling No. CAAR/ Dell/Winone/26/2024/996 dated 24.06.2024, the Applicant started availing the benefit under S. No. 6E of the NN 57/2017, which provides for 'nil' rate of duty on import of inputs and parts for use in manufacturing of mobile phone covers which in turn are used in manufacture of cellular mobile phones. 1.23 The manufacturing process for mobile phone covers is subject to certain 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 57/2017 should also be available in relation to the inputs and parts which gets damaged during the manufacturing process and are scrapped by the Applicant. 1.24 Therefore, in furtherance to the earlier CAAR ruling dated 24.06.2024 issued by your good offic....
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....xure I above, the inputs and parts imported by the Applicant are put on the assembly line where these are put through various processes for the purpose of manufacturing of mobile phone covers. The process of manufacturing mobile phone cover is subject to a certain amount of process loss on account of modification of parts for the purpose of assembling, process failure, etc. 1.28 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 scrapped items like adhesives and tapes) or sold to the Government authorised plastic waste/ metal waste vendors (for scrapped items of plastic or metal) who are empanelled with the Applicant. Such vendor collects the scrap and disposes off as per the authorised Government norms. 1.29 The question under the present application 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 mobile phone cover shall be available in respect of inputs ....
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....for use in manufacture' indicates that benefit is available in respect of all inputs and parts which have been used for manufacturing the mobile phone cover and not only in respect of inputs and parts which form part of the finished mobile phone cover. 1.35 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. 1.36 To corroborate the above understanding reliance is placed on the following submissions. Intent of the NN 57/2017 to provide concessional benefit where the goods have been used during the manufacture process is supported by IGCR Rules 1.37 Notification No. 57/2017 has been issued by the Central Government as per the power conferred under Section 25 of the Customs Act. This notification provides exemption benefits to importers for import of certain electronic product used in the manufacture of cellular mobile phones. 1.38 The exemption benefit under the Notification No. 57/2017 is subject to Cond....
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....old 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. The mere fact that some of the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any ....
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....he inputs of such products in entirety." 1.46 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 mobile phone cover and accordingly, benefit under S. No. 6E of the NN 57/2017 should be available. 1.47 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. 1.48 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. 1.49 The Hon'ble Supreme Court in the case of BPL Display Devices Ltd. V/s Commissioner of Central Excise, Ghaziabad 2004 (10) TMI 92 - SUPREME COURT 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 dis....
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....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." 1.52 In view of the above discussion, the Applicant hereby submits that it has been settled beyond doubt by numerous judgements few of which are referred above 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.....
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....USTOMS DUTY EXEMPTION TO BE REVERSED IN PROPORTION TO THE SALES VALUE OF SCRAP SO GENERATED? 1.56 In light of the submissions made in relation to question I above, the Applicant understand that benefit under entry no. 6E of NN 57/2017 should be available in respect of inputs and parts which are damaged during the manufacturing process and are subsequently scrapped by the Applicant. However, if the answer to the question no. I above is negative, authority may clarify that the availed customs duty exemption is to be reversed in proportion to the sales value of scrap, so generated. 1.57 In view of the above, the Applicant humbly submits that the Hon'ble Authority may kindly issue the advance ruling as prayed at an early date. PRAYER 1.58 In the light of the above, a ruling is sought from the Hon'ble CAAR as follows - i. The Applicant is eligible to avail exemption under entry no. 6E of Notification No. 57/2017 Customs, dated 30th June, 2017 in relation to inputs and parts which are subsequently scrapped during the manufacturing process of mobile phone covers. ii: The Applicant craves leave to alter, amend or modify any of the aforesaid grounds or ....
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....ible to avail exemption under Sr. No. 6E of Notfn No. 57/2017 dated 30.06.2017 in relation to mobile phone cover for use in manufacture of cellular mobile phone which are subsequently scrapped during the manufacturing process. Comments: In this regard, please refer to the para. 10 of Customs Notification no. 74/2022 which is produced as below: 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 importer shall have an option to either re-export or clear the same for home consumption, within the said period, namely - b. within the period specified in the notification; c. within six months from the date of import, where the time period is not specified in the notification: Provided that, the said period of six months can be further extended by the Jurisdictional Commissioner for a period not exceeding three months, if sufficient reason is shown that the causes for not conforming....
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..... Commissioner of Customs, ACC (Import). Personal Hearing 3. Personal hearing in the matter could not be conducted as the comments were received late after one personal hearing on the similar application for another Port was held on 27.11.2024. The applicant did not want any hearing, however, they have submitted the additional submission on the comments of the Port Commissionerate. Additional Comments of the Applicant 4. M/s. Winone Precision Technology India Private Limited ('Applicant') presently engaged in the business of manufacturing of mobile phone covers which are in turn used in the manufacturing of mobile phones. For manufacturing of mobile phone covers, the Applicant imports various inputs and parts. The Applicant imports the inputs and parts from the following 2 ports for which it has filed the application before your good office- * Air Cargo Complex, (Import), Delhi ('ACC Delhi'), and * Noida Customs Commissionerate, ICD Dadri ('ICD Dadri') 4.1 This submission is in furtherance to the Application dated 04.09.2024 (filed on 05.09.2024) for seeking clarity on whether benefit of concessional rate of duty 6E of Notifi....
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....ore, the Applicant wishes to put forth its submissions justifying its eligibility for the benefit of concessional rate of duty under NN 57/2017 on imports which get subsequently scrapped during the manufacturing process, as outlined in the following paragraphs. Applicant's response to the port comments on eligibility of benefit under NN 57/2017 in respect of imports which get scrapped during the manufacturing process is as under - Submissions with respect to Rule 10 of the IGCR 4.5.1 The Applicant submits that it is rightly opined by the Ld. Assistant Commissioner, ICD Dadri, in its letter dated 13.11.2024 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. 4.5.2 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-ex....
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....ods have been used during the manufacture process and not necessarily the goods which form part of the manufactured good. 4.5.8 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 other matters 4.5.9 Recently your good office has issued a similar Ruling No. CAAR/Del/Sunwoda/88/2024/dated 020.11.2024 in the matter of M/s. Sunwoda Electronic India Private Limited wherein it was held that the importer Company is eligible to avail the exemption benefit under S.No. 527A and S.No. 512 of the NN 50/2017 in respect of lithium-ion cells and other inputs and parts for use in manufacture of battery packs of cellular mobile phones even when such inputs and parts get scrapped during the manufacturing process. 4.5.10 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 impo....
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....e condition and should be able to avail the concessional benefit under Notification No. 57/2017. 4.5.14 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.)] ('Woof Papers Case') which was also followed by the Hon'ble Supreme Court in Para 45 and 46 of the judgement in Dilip Kumar Case relied on by the Ld. Assistant Commissioner. 4.5.15 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 inputs & parts for use in manufacture of mobile covers of cellular mobile phones under the NN 57/2017, then as per liberal construction of the exemption notification it can be said that such imports which are for use in manufacturing of mobile covers, if they are damaged/ scrapped during the manufacturing process, will be e....
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....icant. 5.1 M/s. Winone Precision Technology India Private Limited presently engaged in the business of manufacturing of mobile phone covers which are in turn used in the manufacturing of mobile phones. For manufacturing of mobile phone covers, the Applicant imports various inputs and parts. The applicant is seeking clarity on whether benefit of concessional rate of duty 6E of Notification No. 57/2017- Customs dated 30th June 2017 ('NN 57/2017') shall be available inputs or parts imported for use in manufacture of mobile phone covers which get scrapped during the manufacturing process. 5.2 As per the Applicant's understanding that the port authority of ICD Dadri is aligned with the Applicant on the following points: Eligibility of the applicant: (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 per proviso of 28I (2) of the Customs Act; (c) Advance ruling is sought for the future im....
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....importers to re-export within the prescribed time limit the goods that were unutilized or defective at the time of import. Hence, the Rule is not applicable to goods that were put to use in the manufacturing process or the goods that were subsequently damaged during the manufacturing process. 5.6 Coming to analyse the intent of the Notification 57/2017 to provide concessional benefit where the goods have been used during the manufacture process being supported by IGCR, the benefit appears to be available in respect inputs & parts 'for use' in the manufacture of cellular mobile phone covers. 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 mobile covers and not only in respect of inputs and parts which form part of the finished mobile covers. 5.7 Further, it is pertinent to highlight that even the IGCR uses the language that the imported goods shall be "put to use" for manufacture of goods. Therefore, the intent of the Rules appears to provide concessional benefit where the goods have been used during the manufacture process and not necessarily the....
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....cess 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. III. 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 the process of manufacture. The expression 'inputs of s....
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....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." VI. 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 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 c....
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....t result and hardship to the assessee. On the contrary, the port authorities have misconstrued this judgment to conclude that "any hardship and inconvenience caused cannot be the basis to alter the meaning to the language employed by the legislation". To this extent reliance on this judgment by ICD Dadri is erred and unfounded, as this judgment rather supports the proposition of the Applicant. 5.10 With respect to the Dilip Kumar Case, the port authorities have emphasized on the fact that "statute cannot be interpreted on any presumption/assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed". 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. 5.11 Further, it is submitted that the Applicant agrees that it is trite law laid i....