CUSTOMS AUTHORITY FOR ADVANCE RULINGS

O/o THE CHIEF COMMISSIONER OF CUSTOMS

NEW CUSTOM HOUSE, NEAR IGI AIRPORT, NEW DELHI-110037

[Email :cus-advrulings.del@gov.in]

Present

Samar Nanda (Customs Authority for Advance Rulings, New Delhi)

F. No. VIII/CAAR/Delhi/ Samsung Display/16/2024

In Application No. 11/2024 dated 11.03.2024

Ruling

1. The application is being preferred by M/s. Samsung Display Noida Private Limited ('Applicant'), holding IEC ABCCS3215K, is a company incorporated in India under the provisions of the Companies Act, 2017 and having its registered head office located at Block B1-D. Sector 81, Phase - II, Noida. Uttar Pradesh 201305.

2. The Applicant is presently engaged in the business of manufacturing of display assemblies used in the manufacturing of mobile phones (hereinafter referred to as 'display assemblies') at its manufacturing facility at Noida. For manufacturing of display assemblies, the Applicant imports various inputs and parts. Applicant also procures packing material for finished goods locally. The inputs and parts are currently imported at Delhi Air Cargo (INDEL 4).

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 manufacturing, assembling, processing, marketing or sales of displays......................"

4. In relation to the imported inputs and parts, the Applicant is currently availing the benefit under Notification No. 57/2017 - Customs, dated. 30th June. 2017 (hereinafter referred to as 'exemption notification'), which provides for 'nil' rate of duty on import of inputs and parts for use in manufacturing of Display Assembly for use in manufacture of cellular mobile phones. Relevant entry of the exemption notification is furnished below for ease of reference:

5. The benefit under exemption notification being presently availed by the Applicant has not been disputed by authorities at any point in time till date.

6. The Applicant for the purpose of manufacturing of display assemblies imports various inputs and parts. These inputs and parts are put on the assembly line where these are put through various assembly and testing processes. The final product produced from the assembly line is the display assembly for use in manufacturing of cellular mobile phones.

7. The inputs and parts, after importation as a process goes through below mentioned stages -

a. Inputs & parts quality inspection - After arrival of inputs and parts inside the Applicant factory, inputs and parts are thoroughly tested and any defective input or part is exported back to the original supplier.

b. Loss during manufacturing process - Once the inputs and parts are approved during the quality inspection such inputs and parts are moved to the assembly line for the purposes of manufacture of display assemblies. The process of manufacturing display assemblies 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 duly on the imported value of inputs and parts damaged during the manufacturing process.

8. It is imperative to highlight that the Applicant imports these inputs and parts only for the purpose of use in the manufacturing display assemblies. I he Applicant docs not import any inputs or parts for any purpose other than manufacturing of display assemblies.

The Applicant qualifies as an 'applicant' under Section 28E(c) of the Customs Act, 1962 ('Customs Act')

9. Section 28E(c) of the Customs Act reads as under:

"(c). "applicant" means any person -

(i) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Ad, 1992; or

(ii) exporting any goods to India; or

(iii) with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under section 28H; "

10. The Applicant is a company registered in India and is holding a valid Importer-Exporter Code ('IEC') Number ABCCS32I5K. 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

11. 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 which the advance ruling is sought shall he in respect of -

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975):

(b) applicability of a notification issued under sub-section (1) of section 25, having a hearing on the rate of duty;

(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)

12. The Applicant wishes to obtain the advance ruling on questions relating to applicability of exemption notification issued under the Customs Act or Customs Tariff Act. 1975 ('Tariff Act') on import of inputs and parts and principles to be adopted for the purposes of valuation of goods as detailed out in Annexure 11. Therefore, the questions raised by the Applicant falls within the purview of the provisions of Section 28H(2)(b) of the Customs Act.

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.

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 reject the application:

Provided that the Authority shall not allow the application where the question raised in the application is -

(a) already pending 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)

15. The Applicant submits that questions raised in the Application (as in Annexure ll) 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 ahead) been decided by the Appellate Tribunal or any court in the Applicant's case.

16. 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 has been provisionally assessed.

17. Thus, relying on the above the facts of the current case. Applicant submits that in its case, the application shall be accepted for hearing on merits by the Hon'bIe CAAR.

18. The Applicant wishes to obtain the advance ruling on the questions listed down in form CAAR - I (as also appearing in Annexure II). Hence, the Applicant has proceeded to file this application before the Hon'ble CAAR. New Delhi for kind consideration.

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 ON THE BASIS OF THE FACTS SUBMITTED IN ANNEXURE I, THE APPLICANT RESPECTFULLY SUBMITS AS UNDER

1. The Applicant is presently engaged in the business of manufacturing of display assemblies used in the manufacturing of mobile phones (hereinafter referred to as 'display assemblies'). For manufacturing of display assemblies, the Applicant inter alia imports various inputs and parts. For the present application, the proposed activity pertains to the import of inputs and parts from its overseas Group Companies.

2. The questions in respect of which an advance ruling has been sought by the Applicant are:

i) Whether benefit of SI. No. 5D (b) of Notification No. 57/2017- Customs dated 30th June 2017 (As amended) shall be available:

a. In case of import of inputs or parts for use in manufacturing of display assembly which in turn will be used for manufacturing of cellular mobile phones?

b. In respect of inputs or parts imported for use in manufacturing of display assembly which get scrapped during the manufacturing process?

ii) If the answer to the Question No. 1(b) above is in negative, whether the availed customs duly exemption to be fully reversed or to be reversed in proportion to the values of scrap, so generated?

QUESTION I: WHETHER BENEFIT OF SL. NO. 5D (B) OF NOTIFICATION NO, 57/2017-CUSTOMS DATED 30TH JUNE 2017 (AS AMENDED) SHALL BE AVAILABLE -

(A) IN CASE OF IMPORT OF INPUTS OR PARTS FOR USE IN MANUFACTURING OF DISPLAY ASSEMBLY WHICH IN TURN WILL BE USED FOR MANUFACTURING OF CELLULAR MOBILE PHONES?

3. For the import of inputs and parts for manufacturing of display assembly and Applicant's interpretation regarding availability of benefit under Notification No. 57/2017 - Customs, dated, 30th June, 2017 (hereinafter referred to as 'exemption notification') is discussed in the ensuing paragraphs.

4. The import and export of goods into and out of India is regulated by the Customs Act, 1962 ('Customs Act'). Section 12 of the Customs Act is the charging section which stipulates that duties of customs shall be levied on all goods imported into India or exported out of India at such rates as may be specified under the Customs Tariff Act. 1975 ('Tariff Act').

5. Section 2 of the Tariff Act provides that the rates at which Basic Customs Duty ('BCD') shall be levied under the Customs Act are specified in two schedules, namely, the First Schedule and the Second Schedule. First Schedule of the Tariff Act deals with the applicable duty structure on import of goods and the Second Schedule deals with the applicable duty structure on export of goods.

6. Section 2 (23) of the Customs Act defines imports in the following manner:

"(23). "import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India: "

7. Section 25 of the Customs Act contains provisions regarding power to grant exemption from duty. Section 25 (I) of the Customs Act reads as under:

"(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may he specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. "

8. In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, Central Government vide Notification No. 57/2017 - Customs, dated 30th June, 2017 ('exemption notification') provided exemption from duty of Customs on import of certain goods, as mentioned therein, subject to the conditions specified in the said notification.

9. Entry no. 5D of the exemption notification reads as under:

10. Condition no. 1 of the above notification is furnished below for ease of reference:

11. 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 Duly) Rules, 2017 notified the Customs (Import of Goods al Concessional Rate of Duty or for Specified End Use) Rules, 2022.

12. Rule 5 of the Customs (Import of Goods al Concessional Rate of Duly or for Specified End Use) Rules, 2022 provides for the procedure to be followed. The procedure specified in Rule 5 is furnished below for ease of reference:

(1) The importer who intends to avail the benefit of a notification shall be required to mention the UN (referred to in sub-rule (2) of Rule 4) and continuity bond number and details while filing the Bill of Entry.

(2) The Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs at the custom station of importation shall allow the benefit of the notification to the importer.

(3) Where a BUI of Entry is cleared for home consumption, the bond submitted by the importer gels debited automatically in the customs automated system and the details shall be made available electronically to the jurisdictional Customs Officer. "

13. For the purpose of this application, the Applicant hereby submits that it will duly comply with the procedure laid down in Rule 5 of the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022.

14. It is evident from S. No. 5D (b) of the exemption notification furnished above that exemption from duty of Customs have been provided on import of inputs or parts for use in manufacture of such display assemblies which are in turn used in manufacturing of cellular mobile phones.

15. The Applicant hereby submits that it currently only manufactures display assemblies which are in turn used in manufacturing of cellular mobile phones. A reference in this regard can be drawn to the object clause of the Memorandum of Association (Appendix I) of the Applicant which specifies the main objects of the Applicant and the activities that it is authorized to carry out.

16. Considering the Applicant is only engaged in manufacturing of display assemblies which are in turn used in manufacturing of cellular mobile phones, the Applicant submits that it will imports inputs and parts only for the purpose of use in the manufacturing display assemblies. The Applicant will not import any inputs or parts for any purpose other than manufacturing of display assemblies. Illustrative list of inputs and parts which will be imported for manufacturing of display assembly are as under:

1 7. 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 display assemblies which in turn will be used in manufacturing of cellular mobile phones, the Applicant understands that exemption under entry no. 5D (b) of Notification No. 57/2017 -Customs, dated 30,h June. 201 7 should be available irrespective of the classification under Tariff Act of the such inputs and parts.

QUESTION I: WHETHER BENEFIT OF SL. NO. 5D (B) OF NOTIFICATION NO. 57/2017-CUSTOMS DATED 30TH JUNE 2017 (AS AMENDED) SHALL BE AVAILABLE -

(B) IN RESPECT OF INPUTS OR PARTS IMPORTED FOR USE IN MANUFACTURING OF DISPLAY ASSEMBLY WHICH GET SCRAPPED DURING THE MANUFACTURING PROCESS?

18. As discussed above, the Applicant imports inputs and parts for use in manufacturing of display assemblies which in turn are used in manufacturing of cellular mobile phones. Further as discussed in Annexure 1, the inputs and parts imported by the Applicant are put on the assembly line where these are put through various assembling processes for the purpose of manufacturing of display assemblies.

19. The process of manufacturing display assemblies is subject to a certain amount of process loss on account of modification of parts for the purpose of assembling, process failure, etc.

20. The inputs and parts damaged during the manufacturing process are scrapped by the Applicant. The scrap generated during the manufacturing process are sold to the Government authorised e-waste vendors who are empanelled with the Applicant. The e-waste vendor collects the scrap and disposes off as per the authorised Government norms.

21. 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 display assembly shall be available in respect of inputs or parts which were imported for use in manufacture of display assembly but get damaged in the manufacturing process and thereby do not form part of a finished display assembly.

22. To answer the above question, it is imperative to analyse the scope of benefit provided under entry no. 5D (b) of the exemption notification.

23. The benefit is provided on import of inputs and parts/br use in manufacture of display assembly. 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 display assemblies but get damaged during the manufacturing process and do not form part of the finished display assembly can be said to be imported for use in manufacture of display assembly.

24. At this juncture, the Applicant would like to highlight that benefit under the exemption notification is available in respect of inputs and parts for use' in the manufacture of display assembly and not in respect of inputs and parts used' in the manufacture of display assembly.

25. The usage of words for use in manufacture' indicates that benefit is available in respect of all inputs and parts which have been used for manufacturing the display assembly and not only in respect of inputs and parts which form part of the finished display assembly.

26. 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.

27. 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 ensuing paragraphs.

28. The Hon'ble Supreme Court while examining the phrase 'inputs being used in the manufacture of goods' in light of Section 8(3)(b) of the Central Sales Tax. 1956 in the case of J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. The Sales Tax 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. Copy of the judgement is enclosed herewith as Appendix - 3.

29. 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 CEN VAT 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 such finished product' contained in finished products' cannot he looked at theoretically with its semantics. Il has to he 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. "

Copy of the judgement is enclosed herewith as Appendix - 4.

30. 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 display assemblies and accordingly, benefit under notification no. 57/2017 - Customs, dated 30th June. 2017 should be available.

31. 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.

32. 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.

33. The Hon'ble Supreme Court in the case of BPL Display Devices Ltd. V/s Commissioner of Centred 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 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. Dahnia Dadri Cement Ltd.. [1987 (11) TMI 94 -SUPREME COURT OE 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. "

Copy of the judgement is enclosed herewith as Appendix - 5.

34. Similarly in the case of Steel Authority of India Ltd. V/s Collector of Central Excise 1996 (7) TMI 147 -SUPREME COURT 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 he 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 (he manufacture of fertiliser but had, at the interim stage of reformed gas, to be vented out. "

Copy of the judgement is enclosed herewith as Appendix - 6.

35. 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 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."

Copy of the judgement is enclosed herewith as Appendix - 7.

36. 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.

37. Therefore, it is the submission of the Applicant that benefit under entry no. 5D (b) of Notification No. 57/2017 - Customs, dated 30,h 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.

QUESTION II: IF THE ANSWER TO THE QUESTION NO. 1(B) ABOVE IS NEGATIVE, WHETHER THE AVAILED CUSTOMS DUTY EXEMPTION TO BE FULLY REVERSED OR TO BE REVERSED IN PROPORTION TO THE VALUES OF SCRAP SO GENERATED?

38. In light of the submissions made in relation to question 1(a) & 1(b) above, the Applicant understand that benefit under entry no. 5D (b) of 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. However, if the answer to the question no. 1(b) above is negative, authority may clarify that the availed customs duty exemption is to be reversed in proportion to the values of scrap, so generated.

39. 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.

It is submitted that the application for advance ruling in Form No. CAAR -I along with the relevant annexures and documents as per the provisions of Section 28H of the Customs Act, 1962 has been filed before the Customs Authority for Advance Rulings, New Delhi (CAAR. in short). The said application was received in the secretariat of the CAAR, New Delhi on 1 1.03.2024 along with their enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The enclosed application is submitted to seek confirmation whether

2. The Comments of the Air Cargo Complex (Import) Customs New Delhi Commissionerate w ith regard to points raised in the application are furnished as under:

2.1 In this context, the point wise comments to para 3 (i) to (iii) of the aforementioned letter issued by the CAAR. New Delhi is as under:

(i) Para 3 (i) Eligibility of the applicant, in terms of Section 28E(c) of the Customs Act, 1962 to seek such advance ruling:

Yes, Samsung Display Noida Pvt. Ltd. is a valid applicant within the meaning of Section 28E(c) (i) of the Customs Act, 1962, having IEC Code ABCCS3215K.

(ii) Para 3 (ii) Applicability of proviso (1) of section 28-1 (2) of the Customs Act, 1962 regarding the question raised in the application:

As per records available in the Section, no application for the advance ruling of the applicant is pending with any officer of the Customs, other Appellate Tribunal or any Court as per proviso of Section 28(1 )(2) of Customs Act, 1962.

(iii) Para3 (iii) Specify whether the claim of the applicant regarding the nature of activity, i.e. it is ongoing/proposed is correct:

As per Section 28E (b) "advance ruling" means a written decision on any of the questions referred to in Section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation."

2.2 It is clear from the plain reading of the above that there should be a written decision of "advance ruling" on the questions referred by the applicant in respect of any goods prior to its importation. However, the applicant in its application has already submitted that they are already involved in importation of the referred goods i.e. "Imports of inputs and parts for use in manufacturing of display assemblies which will in turn be used in manufacturing of cellular mobile phones", and has self-assessed the goods and availed the benefit of BCD @ NIL in terms of notification No. 57/2017 SI. No. 5D (b).

2.3 Therefore, the applicant is seeking advance ruling for the availment of benefit on BCD in terms of notification No. 57/2017 SI. No. 5D (b) in which they are already importing the same product i.e. inputs and parts for use in manufacturing of display assemblies. It appears that the applicant does not fulfil the provisions of Section 28E(b) of the Customs Act. 1962 to seek advance ruling in respect of the goods which are already being imported by them in commercial quantity before any written decision of the authority. In view of the above, it appears that the application filed by M/s Samsung Display Noida Pvt. Ltd. (hereinafter referred to as the 'importer') merits rejection in terms of Section 28E (b) of the Customs Act. 1962.

2.4 The point wise comments to para 3 (iv) of the aforementioned letter issued by the CAAR. New Delhi is as under:

i. The matter is examined and it is found that the basic issue as involved in the said application for advance ruling under Section 28H of the Customs Act, 1962 as filed by M/s Samsung Display Noida Pvt. Ltd. pertains to the Question of Law/fact that whether the benefit of BCD @ NIL in terms of notification No. 57/2017 SI. No. 5D (b) on the "Imports of inputs and parts for use in manufacturing of display assemblies which will in turn be used in manufacturing of cellular mobile phones" is maintainable or otherwise.

ii. in this regard, it is pertinent to mention that as per the available records and the statement as submitted by the importer that they are already involved in the import of said goods wherein they are claiming the said notification benefit and further that the notification itself provides for the benefit on the said goods as mentioned above to the importers in terms of IGCR rules.

2.5 Further, the importer, has also seek the clarification on the matter that the said notification benefit is whether available on the input or parts that get scrapped during the manufacturing process, and if not whether the availed customs duty exemption is to be fully reversed or reversed in proportion to the value. In this regard, the said matter is examined with the provisions of Notification No.57/2017 SI. No. 5D (b) which reads as follows:

2.6 As such from the reading of the provisions of the notification as amended, it is evident that there is no motif in the claim of the importer pertaining to the clarification as sought under SI. No. 8. para- (b) as mentioned under Form CAAR-1 as submitted by the importer. Further, entry at SI. No. 5D (b) of the Notification No. 57/2017 is silent on the aspect whether, notification benefit is available on the input or parts that get scrapped during the manufacturing process, and if. the availed customs duty exemption has to be fully reversed or reversed in proportion to the value, therefore, it may be not be possible for this office to comment on the same.

3. A personal hearing in the matter was conducted on 30.05.2024. During the personal hearing, the authorized representative of the applicant reiterated the submissions already made in their application for advance ruling on the issue of applicability of advance ruling in case of imports already made and also provided additional submission to establish the applicability of the benefit of the said notification and the treatment of scrap generated during the process of manufacture of "display assembly'.

4. ADDITIONAL SUBMISSIONS ON BEHALF OF THE APPLICANT

A. This submission is in furtherance to the Application dated 08.03.2024 (filed on 11.03.2024) for Customs Advance Ruling under Section 28H of the Customs Act. 1962 ('Customs Act') filed by M/s. Samsung Display Noida Private Limited ('Applicant') for seeking clarity inter alia on the issue regarding eligibility of the Applicant to avail benefit of Sr. No. 5D (b) of Notification No. 5717- Customs dated 30.06.201 7 (as amended) ('Notification No. 57/2017') for import of inputs or parts for use in manufacturing of display assembly which get scrapped during the manufacturing process.

B. At the outset, the Applicant would sincerely like to thank your good office for providing it with an opportunity for a personal hearing on 30.05.2024 in relation to the Customs Advance Ruling application filed by it. The Applicant hereunder is filing its rejoinder to the response received from the Assistant Commissioner of Customs, Air Cargo Complex (Import), NCH, New Delhi ('Ld. Assistant Commissioner'), vide letter dated 21.05.2024. a copy of which had been forwarded to us by your good office.

I. BACKGROUND OF THE LETTER DATED 21.05.2024:

C. The Applicant has perused the letter dated 21.05.2024 and the Applicant understands that the Ld. Assistant Commissioner has opined the following:

a) The Applicant is a valid applicant within the meaning of Section 28E(c) (i) of the Customs Act. 1962 ( Customs Act').

b) As per records available with the Ld. Assistant Commissioner, no application for the advance ruling of the Applicant is pending with any officer of the Customs, other Appellate Tribunal or any Court as per proviso of Section 28( 1 )(2) of the Customs Act.

c) Since the Applicant is already involved in the activity of importing inputs and parts used in the manufacture of cellular mobile phone in commercial quantity and is availing the benefit of Sr. No. 5D(b) of Notification No. 57/2017, the Applicant is not eligible to file an Advance Ruling Application in terms of Section 28 E (b) of the Customs Act.

d) The entry at Sr. No. 5D (b) of Notification No. 57/2017 itself provides for the exemption from Basic Customs Duty ('BCD') for import of inputs and parts used in the manufacture of display assembly.

e) The entry at Sr. No. 5D (b) of Notification No. 57/2017 is silent on the aspect of extension of the exemption of duty on the import of the input or parts that get scrapped during the manufacturing process, and if, the availed exemption has to be fully reversed or reversed in proportion to the value of the scrapped inputs.

D. In this regard, the Applicant submits that it agrees with the Ld. Assistant Commissioner in relation to the findings summarized in para 3 (a). 3 (b) and 3 (d) above. However, the Applicant does not agree with the findings of the Ld. Assistant Commissioner as summarized in para 3 (c) and 3 (e) above. Therefore, the Applicant wishes to put forth its point-wise submissions justifying as to why the Advance Ruling Hied by the Applicant merits consideration by your good office on merits. The submissions have been discussed in brief in the ensuing paragraphs.

II. APPLICANT'S RESPONSE TO THE LETTER DATED 21.05.2024:

A. Eligibility under Section 28 E (b) of the Customs Act:

E. Section 28 E (b) provides the definition of 'advance ruling' as "a written decision on any of the questions referred to in Section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation. "

F. The Applicant understands that the Ld. Assistant Commissioner has interpreted the phrase "in respect of any goods prior to its importation or exportation" to mean that an Advance Ruling Application can only be filed for any goods prior to its first importation or exportation. Accordingly, since in the present case the Applicant is already involved in the importation of inputs and parts used in the manufacture of mobile phones, an advance ruling in respect of these goods is not permissible, as interpreted by the Ld. Assistant Commissioner.

G. In view of the above, the Applicant wishes to submit that the interpretation of the definition of term "advance rulings" as adopted by the Ld. Assistant Commissioner does not seem to be correct.

Scope of Customs Advance Ruling over the years:

H. Advance Ruling under the Customs Law was introduced in the year 1999¹ with an aim to create an avenue for the importers and exporters to seek correct understanding of lax positions and to prevent any unwarranted tax litigations. Since its inception, the mechanism of Advance Ruling under Customs Law has undergone various changes.

I. Up until the year 2013², an advance ruling could be sought only in relation to proposed activity of import and export. Advance Rulings Applications for an existing activity of the importer or exporter were precluded from the purview of Customs Advance Rulings. Vide the ruling dated 13.05.201 1 in the case of Oracle India Pvt. Ltd. [2012 (277) E.L.T. 128 (A.A.R.)], Customs Authority for Advance Ruling ('CAAR'), Delhi took the restrictive approach and limited the scope of advance ruling and stated that advance ruling is confined to an activity which is proposed to be undertaken and when an existing activity is sought to be expanded, the applicant was not held eligible to seek an advance ruling on the new line of business it proposed to start during its existing import trade. However, it was clarified that an existing entity, which is not in the import-export business but proposes to start the business of import and export, would not be precluded from approaching CAAR for an advance ruling.

J. Thereafter during the period 2013 to 2018, there was a gradual shift and Advance Rulings could also be sought in relation to new business of import or export³ proposed to be undertaken by the existing importer or exporter. Consequentially, advance ruling could also be sought in relation to new business of import or export proposed to be undertaken by the existing importer or exporter. For instance, an existing entity engaged in import of Model A mobile phone could now approach CAAR for an advance ruling on the proposed import of Model B mobile phone.

K. Thus, up until 2018, an Advance Ruling under Customs Law could only be filed for a particular goods before its first import or export. Hence, the interpretation adopted by the Ld. Assistant Commissioner in relation to eligibility of obtaining advance ruling could only hold good up unit the year 2018.

Amendment in law relating to Customs Advance Rulings vide Finance Act, 2018:

L. In the year 2018, major amendments were carried out to the scheme of advance rulings vide the Finance Act, 2018, including the amendment of the definition of "advance ruling". As per the amended definition, "advance ruling" now meant to be "a written decision on any of the questions referred to in section 2811 raised by the applicant in his application in respect of any goods prior to its importation or exportation.

M. Thus, in view of the amendment vide the Finance Act, 2018. there was a shift in the scope of advance ruling under the Customs law. Now an applicant could now seek an advance ruling on -

a. any of the questions referred to in Section 28H of the Customs Act (for instance, issues like classification, valuation, exemption interpretation, etc.), and

b. in respect of any goods prior to its importation or exportation.

N. Hence, it becomes important to discuss the scope of advance ruling under the revised (and prevailing) Customs law. Upon perusal of the above it is clear that the importer intending to seek an advance ruling, could only seek one prior to importation of goods which become the subject matter of the application. Thus, advance ruling cannot be sought in relation to imports already concluded.

O. However, we also need to understand the meaning of the term "its" used in the definition of advance ruling under Section 28 E(b) of Customs Act. This is because the term "its" does not clarify whether advance ruling can only be sought prior to first importation of a particular good which has never been imported or it can also be sought before importation of a good which is being imported by the Applicant.

P. To interpret the term "its" used in Section 28 E (b), reference is to be placed on Section 28 1 (2) of Customs Act which bars the CAAR authorities from entertaining any application for an advance ruling where the question raised in the application is already pending before any officer of Customs, the Appellate Tribunal, or any Court. From the provision, it can be deduced that any importer shall be eligible to make an advance ruling application for the same goods which have been imported before or in respect of which investigation is initiated except for any case where any Mis' is pending before any officer of customs or appellate authority in relation to the same subject matter.

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¹ Chapter VB of the Customs Act pertaining to Customs Advance Rulings was introduced vide Finance Act, 1999.

². Prior to amendment vide Finance Act, 2013, the term "activity" was defined as "activity" means import or export;"

³ Section 28E (a) of Customs Act (up to 01.04.2018) defined the term "activity" as "import or export and includes any new business of import or export proposed to be undertaken by the existing importer or exporter, as se may be."

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Q. Further, it is trite law that principle of harmonious construction must be kept in mind while construing any statute. This principle enunciates that while interpreting any law, the statute must be read as a whole, and all the legal provisions must be read harmoniously to give effect to each word of the statute. Accordingly, to correctly interpret the intention of the legislation at hand. Section 28E (b) and Section 281 (2) should be read together.

R. It is also pertinent to mention that it is a settled law that each import is a separate event as held in the matter of Jain Exports Pvt. Ltd. Kv. Union of India, [1987 (29) E.L.T. 753 (Del.)[ approved in [1992 (61) ELT 173 (Supreme Court)/. Thus, usage of 'its' only further clarifies that for seeking an advance ruling every import of goods is to be treated as a separate event.

S. Accordingly, upon application of principle of harmonious construction and the fact that each import is a separate event, the Applicant is of the considered opinion that an advance ruling can also be sought prior to importation of a good which is being imported by the Applicant (but before the importation in question takes place).

T. In order to buttress its stand, the Applicant places reliance on the Judgment dated 1 1.01.2023 of the Hon'ble Delhi High Court in the matter of Directorate of Revenue Intelligence (IIQRS.) Us. M/s. Spraytec India Ltd. 2023-TIOL-184-HC-DEL-CUS. In this case, the question involved was whether CAAR could pass a ruling on the subject matter under investigation by DRI in terms of Section 28 I (2). Herein, the Hon'ble Delhi High Court affirmed the eligibility of the CAAR to pass a ruling on the subject matter under investigation. This judgment indirectly proves that upon conjoint reading of Section 28 E(b) and Section 28 I (2). even the courts have accepted this position of law that any importer shall be eligible to make an advance ruling application for the same goods which have been imported before or in respect of which investigation is initiated, however no 'lis' is pending.

U. The above view is a settled principle and has been consistently adopted by CAAR in various rulings. Reliance in this regard is being placed on the Advance Ruling issued by CAAR Mumbai in the case of Amazon Seller Services Pvt. Ltd., [(2023) 5 Centax 186 (A.A.R. - Cus. - Mum.)/, whereby the CAAR authority in para 8 has stated the following:

"8 In so far as the issue of advance ridings in respect of an ongoing activity is concerned, with due regard to the definition of advance riding in law, it is my considered opinion that operation of advance rulings do not get extinguished just because an activity of import/export has taken place earlier, irrespective of the frequency of such activity. Drawing strength from the provisions of law reproduced earlier in this paragraph, a correct interpretation would be that advance rulings can he sought and given even for ongoing activities, so long as such activities, in respect of the same applicant, are not involved in any dispute; or already settled by an order of any competent tribunal/court. However, the application of such an advance ruling, in respect of an ongoing activity, shall be prospective and would not have any implication for activities, which stand concluded. " (Emphasis supplied)

V. Similarly, in the case of Sick India Private Limited (Riding no. CAAR/Mum/ARC/47/2022) dated 27.12.2022. the CAAR authorities have held that the past SVB and DRI related investigation had no bearing for valuation methodology to be adopted for future imports and hence the application had been correctly filed. Thus, when an advance ruling application can be considered when the issue at hand is pending investigation, this ipso facto means that an advance ruling application is eligible lor consideration even if the Applicant is already involved in the activity for which the advance ruling is being sought.

W. Hence, in view of the above discussion, the Applicant submits that it is eligible to make an application even in cases of on-going activity of imports, where the goods under consideration have already been imported. The ruling in such cases will have prospective effect i.e., it will be applicable on imports made after applicant moved an application for seeking an advance ruling and not on the imports aIready concluded.

X. Accordingly, the contention of the Ld. Assistant Commissioner to state that the present Advance Application Ruling filed by the Applicant is not eligible in terms of Section 28E(b) and merits rejection since the Applicant is already involved in the importation of inputs and parts of mobile phone, is completely untenable. Thus, the Advance Ruling Application ought to be considered by your good office and an applicable ruling should be issued.

B. Extension of exemption under Sr. No. 5D(b) of Notification No. 57/2017 on inputs and parts which net scrapped during manufacturing of mobile phones:

Y. Further, the Ld. Assistant Commissioner in the letter dated 21.05.2024 has also stated that the entry at Sr. No. 5D (b) of Notification No. 57/2017 is silent on the aspect of extension of the benefit of concessional rate of duty on the import of the input or pails that get scrapped during the manufacturing process. In our view, this interpretation of the Ld. Assistant Commissioner is completely incorrect.

Z. 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.

AA. The exemption benefit under the Notification No. 57/2017 is subject to Condition No. I, which mandates that "If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duly) Rules. 2017'. 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"). IGCR Rules 2022 has clarified (in Rule 13) that any reference made to IGCR Rules 2017 shall be construed as reference to IGCR Rules 2022.

BB. Sr. No. 5 D (b) of the Notification provides for "NIL" rale of BCD for import of inputs and parts for use in the manufacture of Display Assembly for use in the manufacture of cellular mobile phones. For ease of reference, the aforesaid entry has been extracted as follows:

CC.Upon perusal of the entry extracted above, it is clear that the exemption benefit is available to "Inputs or parts for use in manufacture of Display Assembly of cellular mobile phones".

DD. The term, "for use" mentioned in Sr. No. 5 D (b) has not been defined in the Customs Act and Notification No. 57/2017. However, the Hon'ble Supreme Court and various High Courts in a catena of cases have interpreted the term "for use" to mean "intended for use" or "inputs being used in the manufacture of goods". In such a case, the courts have consistently held that damaged goods or scrapped goods are to be considered as goods used in the manufacture of the finished goods. A few of the judgments have been provided as follows:

Detailed discussion in this regard has been done in Annexure-II to the Advance Ruling Application which for the sake of brevity is not being reproduced herein.

EE. Further, reliance may also be placed on the case of State of Haryana Us. Dahnia Dadri Cement Ltd., (2004 (178) E.L.T. 13 (S.C.)f wherein the Hon'ble Supreme Court has interpreted the term "for use" mentioned in an exemption notification to mean "intended for use". The relevant excerpt of the judgment has been extracted as follows:

" 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 Io determine is whether, in the present case, the cement supplied was intended for use directly in (he 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 Hoard clearly show that (he 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 fad 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 difference regarding the availability of the exemption.

(Emphasis supplied)

FF. Hence, in view of the above, the Applicant is of the opinion that the exemption from BCD under Sr. No. 5D(b) of Notification No. 57/2017 is available to all inputs and pails used in the manufacture of Display Assembly irrespective of whether the same get incorporated in the manufactured Display. Assembly or are damaged or scrapped during manufacturing.

GG. Further, it is trite law that an exemption notification ought to be construed strictly in order to determine the applicability of the exemption provision. However, once the exemption becomes applicable then the provisions must be construed liberally [Union of India Us. Wood Papers Ltd., [1990 (47) E.L. T. 500 (S.C.)J, In the present case, the Ed. Assistant Commissioner has itself agreed that the benefit of exemption under Sr. No. 5 D (b) of the Notification No. 57/201 7 is available for input and parts imported by the Applicant which are thereafter used in the manufacturing of Display Assembly of mobile phones. Hence, based on liberal construction of the exemption provision it can be said that all the imported inputs and parts which are used in the manufacture of Display Assembly, even if they are scrapped during the manufacturing process, will be eligible for exemption under the aforesaid entry.

HH. In order to substantiate the interpretation of the Applicant, support is borrowed from the IGCR Rules 2022 wherein as per Rule 4(3), the importer who intends to avail the benefit of a notification shall submit a continuity bond that the 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.

II. 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 Notification No. 57/2017) i.e., to provide concessional benefit Where the goods have been consumed during the consumed during the manufacture process and not necessarily the goods which form part of the manufactured good.

JJ. The above discussion clearly corroborates the understanding put forth by the Applicant i.e., 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 manufactured Display Assembly or are damaged or scrapped during manufacturing.

KK. Therefore, the understanding of the Ld. Assistant Commissioner that the entry at Sr. No. 5D (b) of Notification No. 57/2017 is silent on the aspect of extension of the benefit of concessional rate of duty on the import of the input or parts that get scrapped during the manufacturing process, is not correct. Upon strict interpretation of the exemption provision and application of the ratio of the judgments, the Applicant is of the view 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.

LL. Further, the Applicant is of the view that your good office is a competent authority to conclusively determine the interpretation of the exemption provision as provided under Sr. No. 5D (b) of Notification No. 57/201 7. Thus, the Applicant humbly requests your good office to kindly consider the Advance Ruling Application filed by us along with its submissions made vide this letter and accordingly provide a suitable ruling.

5. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. 1 have gone through the response from the Customs Port Commissionerates of ACC (Imports) Delhi. However, as the matter and questions before the Authority being the same, 1 therefore proceed to decide the present application regarding the eligibility of the advance ruling application, applicability of benefit of Notification, and whether the scrap generated in the process is also eligible to avail the benefit of the said Notification on the basis of the information on record as well as the existing legal framework having bearing on the interpretation of the benefit.

5.1 The Comments of the Air Cargo Complex (Import) Customs New Delhi Commissionerate with regard to points raised in the application are furnished as under:

5.1 In this context, it is important to refer to the comment to para 3 (iii) of the aforementioned letter issued by the CAAR. New Delhi:

(iii) Para3 (iii) Specify whether the claim of the applicant regarding the nature of activity, i.e. it is ongoing/proposed is correct:

As per Section 28E (b) "advance ruling" means a written decision on any of the questions referred to in Section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation. "

5.2 It is clear from the plain reading of the above that there should be a written decision of "advance ruling" on the questions referred by the applicant in respect of any goods prior to its importation. However, the applicant in its application has already submitted that they are already involved in importation of the referred goods i.e. "Imports of inputs and parts for use in manufacturing of display assemblies which will in turn be used in manufacturing of cellular mobile phones" and has self-assessed the goods and availed the benefit of BCD @ NIL in terms of notification No. 57/2017 SI. No. 5D (b).

5.3 Therefore, the applicant is seeking advance ruling for the availment of benefit on BCD in terms of notification No. 57/2017 SI. No. 5D (b) in which they are already importing the same product i.e. inputs and parts for use in manufacturing of display assemblies. It appears that the applicant does not fulfil the provisions of Section 28E(b) of the Customs Act. 1962 to seek advance ruling in respect of the goods which are already being imported by them in commercial quantity before any written decision of the authority. In view of the above, it appears that the application filed by M/s Samsung Display Noida Pvt. Ltd. (hereinafter referred to as the 'importer') merits rejection in terms of Section 28E (b) of the Customs Act, 1962.

5.4 The point wise comments to para 3 (iv) of the aforementioned letter issued by the CAAR. New Delhi is as under:

i. The matter is examined and it is found that the basic issue as involved in the said application for advance ruling under Section 2811 of the Customs Act. 1962 as filed by M/s Samsung Display Noida Pvt. Ltd. pertains to the Question of Law/fact that whether the benefit of BCD @ NIL in terms of notification No. 57/2017 SI. No. 5D(b)on the "Imports of inputs and parts for use in manufacturing of display assemblies which will in turn be used in manufacturing of cellular mobile phones" is maintainable or otherwise.

ii. In this regard, it is pertinent to mention that as per the available records and the statement as submitted by the importer that they are already involved in the import of said goods wherein they are claiming the said notification benefit and further that the notification itself provides for the benefit on the said goods as mentioned above to the importers in terms of IGCR rules.

5.5 Further, the importer, has also seek the clarification on the matter that the said notification benefit is whether available on the input or parts that get scrapped during the manufacturing process, and if not whether the availed customs duty' exemption is to be fully reversed or reversed in proportion to the value. In this regard, the said matter is examined with the provisions of Notification No.57/2017

SI. No. 5D (b) which reads as follows:

5.6 As such from the reading of the provisions of the notification as amended, it is evident that there is no motif in the claim of the importer pertaining to the clarification as sought under SI. No. 8. para- (b) as mentioned under Form CAAR-I as submitted by the importer. Further, entry at SI. No. 5D (b) of the Notification No. 57/201 7 is silent on the aspect whether, notification benefit is available on the input or parts that get scrapped during the manufacturing process, and if. the availed customs duty exemption has to be fully reversed or reversed in proportion to the value, therefore, it may be not be possible for this office to comment on the same.

6. Having gone through the objections raised by the applicant, let's look at the original submissions made by the applicant and the responses filed additionally with reference to the observations of the Port Commissionerate.

6.1 The Applicant is presently engaged in the business of manufacturing of display assemblies used in the manufacturing of "display assemblies' for mobile phones at its manufacturing facility at Noida. For manufacturing of display assemblies, the Applicant imports various inputs and parts. Applicant also procures packing material for finished goods locally. The said activity is duly slated in the object clause of Memorandum of Association of the Applicant as: "To carry on the business of manufacturing, assembling, processing, marketing or sales of displays........"

6.2 In relation to the imported inputs and parts, the Applicant is currently availing the benefit under Notification No. 57/2017 - Customs, dated, 30th June. 2017 (hereinafter referred to as "exemption notification'), which provides for 'nil' rate of duty on import of inputs and parts for use in manufacturing of Display Assembly for use in manufacture of cellular mobile phones.

6.3 The benefit under exemption notification being presently availed by the Applicant has not been disputed by authorities at any point in time till date. The Applicant for the purpose of manufacturing of display assemblies imports various inputs and parts. These inputs and parts are put on the assembly line where these are put through various assembly and testing processes. The final product produced from the assembly line is the display assembly for use in manufacturing of cellular mobile phones.

6.3.1 The inputs and parts, after importation as a process goes through below mentioned stages -

a. Inputs & parts quality inspection - After arrival of inputs and parts inside the Applicant factory, inputs and parts are thoroughly tested and any defective input or part is exported back to the original supplier.

b. Loss during manufacturing process - Once the inputs and parts are approved during the quality inspection such inputs and parts are moved to the assembly line for the purposes of manufacture of display assemblies. The process of manufacturing display assemblies 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.

6. 3.2 It is imperative to highlight that the Applicant imports these inputs and parts only for the purpose of use in the manufacturing display assemblies. The Applicant does not import any inputs or parts for any purpose other than manufacturing of display assemblies.

6.4 It has been provided that the Applicant qualifies as an 'applicant' under Section 28E(c) of the Customs Act. 1962 ('Customs Act'):

Section 28E(c) of the Customs Act reads as under:-

"(c). "applicant" means any person -

(iv) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992: or

(v) exporting any goods to India: or

(vi) with a justifiable cause to (he satisfaction of the Authority, who makes an application for advance ruling under section 28H: "

6.4.1 The 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. 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 riding -

(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, staling the question on which the advance ruling is sought.

(2) The question on which (he advance ruling is sought shall be in respect of, -

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975):

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) (he principles to he 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 Ad. 1975 (51 of 1975) and matters relating thereto.

(j) any other matter as the Central Government may. by notification, specify. "

(Emphasis supplied)

6.5 The questions in respect of which an advance ruling has been sought by the Applicant are:

Whether benefit of SI. No. 5D (b) of Notification No. 57/2017- Customs dated 30th June 2017 (As amended) shall be available:

a. In case of import of inputs or parts for use in manufacturing of display assembly which in turn will be used for manufacturing of cellular mobile phones?

b. In respect of inputs or parts imported for use in manufacturing of display assembly which get scrapped during the manufacturing process?

c. If the answer to the Question No. 1(b) above is in negative, whether the availed customs duty exemption to be fully reversed or to be reversed in proportion to the values of scrap, so generated?

6.5.1 Vide notification no. 74/2022 - Customs (N. T.). dated. 9lh 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. Rule 5 of the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 provides for the procedure to be followed. The procedure specified in Rule 5 is furnished below for ease of reference:

(1) The importer who intends to avail the benefit of a notification shall be required to mention (he UN (referred to in sub-ride (2) of Ride 4) and continuity bond number and details while filing the BUI of Entry.

(2) The Deputy Commissioner of Customs or. as the case may he. Assistant Commissioner of Customs at the custom station of importation shall allow the benefit of the notification to the importer.

(3) Where a Bill of Entry is cleared for home consumption, the bond submitted by the importer gets debited automatically in the customs automated system and the details shall he made available electronically to the jurisdictional Customs Officer. "

6.5.2 For the purpose of this application, the Applicant hereby submits that it will duly comply with the procedure laid down in Rule 5 of the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules. 2022. It is evident from S. No. 5D (b) of the exemption notification furnished above that exemption from duty of Customs have been provided on import of inputs or parts for use in manufacture of such display assemblies which are in turn used in manufacturing of cellular mobile phones. The Applicant hereby submits that it currently only manufactures display assemblies which are in turn used in manufacturing of cellular mobile phones. Considering the Applicant is only engaged in manufacturing of display assemblies which are in turn used in manufacturing of cellular mobile phones, the Applicant submits that it will imports inputs and parts only for the purpose of use in the manufacturing display assemblies. The Applicant will not import any inputs or parts for any purpose other than manufacturing of display assemblies. Illustrative list of inputs and parts which will be imported for manufacturing of display assembly are as under:

6.5.3 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 display assemblies which in turn will be used in manufacturing of cellular mobile phones, the exemption under entry no. 5D (b) of Notification No. 57/2017 - Customs, dated 30lh June. 2017 may be available irrespective of the classification under Tariff Act of the such inputs and parts.

6.6 On the question of whether the benefit of SI. No. 5d (B) Of Notification No. 57/2017- Customs Dated 30th June 2017 (as amended) shall be available in Respect of inputs or parts imported for use in manufacturing of Display Assembly which get scrapped during the manufacturing process, the Applicant imports inputs and parts for use in manufacturing of display assemblies which in turn are used in manufacturing of cellular mobile phones. Further as discussed earlier, the inputs and parts imported by the Applicant are put on the assembly line where these are put through various assembling processes for the purpose of manufacturing of display assemblies. The process of manufacturing display assemblies is subject to a certain amount of process loss on account of modification of parts for the purpose of assembling, process failure, etc. The inputs and parts damaged during the manufacturing process are scrapped by the Applicant. The scrap generated during the manufacturing process are sold to the Government authorised e-waste vendors who are empanelled with the Applicant. The e-waste vendor collects the scrap and disposes off as per the authorised Government norms.

6.6.1 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 display assembly shall be available in respect of inputs or parts which were imported for use in manufacture of display assembly but get damaged in the manufacturing process and thereby do not form part of a finished display assembly. It is imperative to analyse the scope of benefit provided under entry no. 5D (b) of the exemption notification. The benefit is provided on import of inputs and parts for use in man u fact lire of display assembly. It is analysed that whether inputs and parts which are imported for the purpose and with the intention to use in manufacture of display assemblies but get damaged during the manufacturing process and do not form part of the finished display assembly can be said to be imported for use in manufacture of display assembly. At this juncture, the Applicant would like to highlight that benefit under the exemption notification is available in respect of inputs and parts for use' in the manufacture of display assembly and not in respect of inputs and parts ''used" in the manufacture of display assembly. The usage of words for use in manufacture indicates that benefit is available in respect of all inputs and parts which have been used for manufacturing the display assembly and not only in respect of inputs and parts which form part of the finished display assembly.

6.6.2 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 ensuing paragraphs:

i. the Hon'ble Supreme Court while examining the phrase 'inputs being used in the manufacture of goods' in light of Section 8(3)(b) of the Central Sales Tax, 1956 in the case of J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. The Sales Tax 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.

ii. 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 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. "

6.6.3 In view of the above, the applicant has submitted that the inputs and parts which are damaged during the manufacturing process merits consideration as used for manufacturing of display assemblies and accordingly, benefit under notification no. 57/2017 - Customs, dated 30th June, 2017, should be available.

Further, the applicant has submitted that exemption available to inputs and parts lor use in manufacturing ol 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. 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:

i. The Hon'ble Supreme Court in the case of BPL Display Devices Ltd. V/s Commissioner of Central Excise, Ghaziabad 2004 (10) TMI92 - 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 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. "

ii. Similarly in the case of Steel Authority of India Ltd. V/s Collector of Central Excise 1996 (7) TMI 147 - SUPREME COURT 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 (he 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 (he interim stage of reformed gas, to be vented out. "

iii. 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 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. "

Therefore, the submission of the Applicant that benefit under entry no. 5D (b) of Notification No. 57/2017 -Customs, dated 30"' 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.

6.7 The Applicant has made additional submission in response to the letter dated 21.05.2024 of the Port Commissionerate that since the Applicant is already involved in the activity of importing inputs and parts used in the manufacture of cellular mobile phone in commercial quantity and is availing the benefit of Sr. No. 5D(b) of Notification No. 57/2017, the Applicant is not eligible to file an Advance Ruling Application in terms of Section 28 E (b) of the Customs Act. The Applicant does not agree with this findings of the Port Commissionerate.

6.7.1 The Applicant understands that the Commissioner has interpreted the phrase '"in respect of any goods prior to its importation or exportation " to mean that an Advance Ruling Application can only be filed for any goods prior to its first importation or exportation. In view of the above, the Applicant wishes to submit that the interpretation of the definition of term "advance rulings" as adopted by the Port Commissionerate does not seem to be correct. However, major amendments were carried out to the scheme of advance rulings vide the Finance Act, 2018, including the amendment of the definition of "advance ruling"- "a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation. Thus, there was a clear shift in the scope of advance ruling under the Customs law.

6.7.2 However, the meaning of the term "its" used in the definition of advance ruling under Section 28 E(b) of Customs Act also needs to be looked into. This is because the term "its" does not clarify whether advance ruling can only be sought prior to first importation of a particular good which has never been imported or it can also be sought before importation of a good which is being imported by the Applicant. Further, it is trite law that principle of harmonious construction must be kept in mind while construing any statute. This principle enunciates that while interpreting any law. the statute must be read as a whole, and all the legal provisions must be read harmoniously to give effect to each word of the statute. Accordingly, to correctly interpret the intention of the legislation at hand. Section 28E (b) and Section 281 (2) needs to be read together.

6.7.3 It is also pertinent to mention that it is a settled law that each import is a separate event as held in the matter of Jain Exports Pvt. Ltd. Us. Union of India, [1987 (29) E.L.T. 753 (Del.)]- approved in [1992 (61) ELT 173 (Supreme Court)]. Thus, usage of 'its' only further clarifies that for seeking an advance ruling every import of goods is to be treated as a separate event. Accordingly, upon application of principle of harmonious construction and the fact that each import is a separate event, the Applicant is of the considered opinion that an advance ruling can also be sought prior to importation of a good which is being imported by the Applicant (but before the importation in question takes place). Reliance in this regard is being placed on the Advance Ruling issued by CAAR Mumbai in the case of Amazon Seiler Services Pvt. Ltd., ](2023) 5 Centax 186 (A.A.R. - Cus. - Mum.)], whereby the CAAR authority in para 8 has stated the following:

"8....In so far as the issue of advance rulings in respect of an ongoing activity is concerned, with due regard to the definition of advance ruling in law, it is my considered opinion that operation of advance rulings do not get extinguished just because an activity of import/export has taken place earlier, irrespective of the frequency of such activity. Drawing strength from the provisions of law reproduced earlier in this paragraph, a correct interpretation would be that advance ridings can be sought and given even for ongoing activities, so long as such activities, in respect of the same applicant, are not involved in any dispute; or already settled by an order of any competent tribunal/court. However, the application of such an advance ruling, in respect of an ongoing activity, shall be prospective and would not have any implication for activities, which stand concluded. "

(Emphasis supplied)

6.7.4 In view of the above discussion, the Applicant has correctly submitted that it is eligible to make an application even in cases of on-going activity of imports, where the goods under consideration have already been imported. The ruling in such cases will have prospective effect i.e., it will be applicable on imports made after applicant moved, an application for seeking an advance ruling and not on the imports already concluded. Accordingly, the contention of the Port Commissionerate to state that the present Advance Application Ruling filed by the Applicant is not eligible in terms of Section 28E(b) and merits rejection is completely untenable.

6.8 As far as extension of exemption under Sr. No. 5D(b) of Notification No. 57/2017 on inputs and parts which get scrapped during manufacturing of mobile phones, the Port Commissionerate has stated that the entry at Sr. No. 5D (b) of Notification No. 57/2017 is silent on the aspect of extension of the benefit of concessional rate of duty on the import of the input or parts that get scrapped during the manufacturing process. The applicant feels the interpretation of the Port Commissionerate is completely incorrect. It is reiterated that the exemption benefit under the Notification No. 57/2017 is subject to Condition No. I, which mandates that "If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017'. 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"). IGCR Rules 2022 has clarified (in Rule 13) that any reference made to IGCR Rules 2017 shall be construed as reference to IGCR Rules 2022.

6.8.1 Sr. No. 5 D (b) of the Notification provides for "NIL" rate of BCD for import of inputs and parts for use in the manufacture of Display Assembly for use in the manufacture of cellular mobile phones. For ease of reference, the aforesaid entry has been extracted as follows:

6.8.2 Upon perusal of the entry extracted above, it is clear that the exemption benefit is available to "Inputs or parts for use in manufacture of Display Assembly of cellular mobile phones". The term, "for use" mentioned in Sr. No. 5 D (b) has not been defined in the Customs Act and Notification No. 57/2017. However, the Hon'ble Supreme Court and various High Courts in a catena of cases have interpreted the term "for use" to mean "intended for use" or "inputs being used in the manufacture of goods". In such a case, the courts have consistently held that damaged goods or scrapped goods are to be considered as goods used in the manufacture of the finished goods. A few of the judgments have been provided as follows:

6.8.3 Further, reliance may also be placed on the case of State of Haryana Vs. Dahnia Dadri Cement Ltd., 12004 (178) E.L.T. 13 (S.C.)f wherein the Hon'ble Supreme Court has interpreted the term "for use" mentioned in an exemption notification to mean "intended for use". The relevant excerpt of the judgment has been extracted as follows:

'10 .... On a plain reading of the relevant clause it is dear 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. The mere fact that some of the cement supplied was, in fad, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption. (Emphasis supplied)

6.8.4 Hence, in view of the above, the Applicant is of the opinion that the exemption from BCD under Sr. No. 5D(b) of Notification No. 57/2017 is available to all inputs and parts used in the manufacture of Display Assembly irrespective of whether the same get incorporated in the manufactured Display Assembly or are damaged or scrapped during manufacturing. Further, it is trite law that an exemption notification ought to be construed strictly in order to determine the applicability of the exemption provision. However, once the exemption becomes applicable then the provisions must be construed liberally (Union of India Ks. Wood Papers Ltd., [1990 (47) E.L.T. 500 (S.C.)] In the present case, the Ld. Assistant Commissioner has itself agreed that the benefit of exemption under Sr. No. 5 D (b) of the Notification No. 57/201 7 is available for input and parts imported by the Applicant which are thereafter used in the manufacturing of Display Assembly of mobile phones. Hence, based on liberal construction of the exemption provision it can be said that all the imported inputs and parts which are used in the manufacture of Display Assembly, even if they are scrapped during the manufacturing process, will be eligible for exemption under the aforesaid entry.

6.8.5 In order to substantiate the interpretation of the Applicant, support is borrowed from the IGCR Rules 2022 wherein as per Rule 4(3), the importer who intends to avail the benefit of a notification shall submit a continuity bond that the 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. 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 Notification No. 57/2017) i.e., to provide concessional benefit where the goods have been consumed during the manufacture process and not necessarily the goods which form part of the manufactured good.

6.9 The applicant also submitted two additional documents including one case law [2002 (141) E.L.T.721 (CEGAT-Delhi) in SAPA Electricals Pvt. Ltd. Vs Commr. of Customs. Allahabad]and one copy of Statutory Provisions under Rule 8 of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1966 on 'Recovery of duty in certain case' to strengthen the case and requested to take them on record. First, in the cited Case Law: "3.....the applicants made import of electrical steel sheets and availed the benefit of Notfn. No 20/99-Cus. Which provides concessional rale of duly if the electrical steel sheets are to be used in the manufacture of electrical transformers, some waste and scrap was generated. " Further, in para 6, it was observed that "As the goods imported by the appellants were used in the manufacture of electrical transformers, demand of customs duty in respect of waste and scrap generated during the manufacture of transformers, is not sustainable. Also, under para 7 of the order "In the impugned order. Rule 8 of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1966 was invoked. " It may further be emphasized that, under the said "Rule 8 of Customs (Import of Goods at Concessional Rale of Duty for Manufacture of Excisable Goods) Rules, 1966, the [Asst. Commr of Central Excise or Deputy Commr. of Central Excise] shall ensure that the goods imported are used by the manufacturer for the intended purpose or are re-exported... "

6.10 The case law further strengthens the stand of the applicant 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. Thus the above discussion 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 manufactured Display Assembly or are damaged or scrapped during manufacturing. Therefore, the understanding of the Port Commissionerate that the entry at Sr. No. 5D (b) of Notification No. 57/2017 is silent on the aspect of extension of the benefit of concessional rate of duly on the import of the input or parts that get scrapped during the manufacturing process, appears not to be appropriate. Upon strict interpretation of the exemption provision and application of the ratio of the judgments, it could be viewed 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.

6.11 It is reiterated that the contention of the Port Commissionerate to stale that the present Advance Application Ruling filed by the Applicant is not eligible in terms of Section 28E(b) merits rejection is completely untenable.

The answers to the questions raised by the applicant are as follows:

Whether benefit of SI. No. 5D (b) of Notification No. 57/2017- Customs dated 30th June 2017 (As amended) shall be available:

a. Question 1: In case of import of inputs or parts for use in manufacturing of display assembly which in turn will be used for manufacturing of cellular mobile phones?

Answer: Yes, the benefit shall be available in case of import of inputs or parts for use in manufacturing of display assembly which in turn will be used for manufacturing of cellular mobile phones.

b. Question 2: In respect of inputs or parts imported for use in manufacturing of display assembly which get scrapped during the manufacturing process?

Answer: Yes, the benefit shall be available in respect of inputs or parts imported for use in manufacturing of display assembly which get scrapped during the manufacturing process.

c. Question 3: If the answer to the Question No. 1(b) above is in negative, whether the availed customs duty exemption to be fully reversed or to be reversed in proportion to the values of scrap, so generated?

Answer: Not applicable.

I rule accordingly.

(SAMAR NANDA)

Customs Authority for Advance Rulings New Delhi