In re Vivo Mobile India Limited (CAAR Delhi)
Concessional Duty Allowed Only for Structural Phone Components Due to Narrow Interpretation of “Mechanical Items”; Exemption Denied for Films, Membranes, and Thermal Parts as They Do Not Qualify as “Mechanical Items”; Mobile Phone Supports and Brackets Held Eligible for Concessional BCD; Optical and Protective Components Excluded; Structural Interpretation of Notification Limits Duty Benefit to Chassis-Like Parts, Not Functional Films
The Authority examined the CAAR-1 application, the submissions of the jurisdictional Customs Commissionerate, the personal hearing record, the applicant’s additional written submissions, and the governing legal provisions. The application was found valid under the Customs Act, 1962 and the CAAR Regulations, 2021. The ruling was therefore admitted, and the issue for determination was the eligibility of the items listed in Table I (para 1.3) for concessional Basic Customs Duty (BCD) of 10% under Serial No. 6D (xi) and (xii) of Notification No. 57/2017-Cus., as amended.
The applicant manufactures mobile phones in Noida and imports various plastic and metal components used in the manufacturing process. The core issue was whether 69 items—comprising plastic and metal supports, brackets, membranes, films, and other parts—qualify as “other mechanical items of plastic” or “other mechanical items of metal” under entries (xi) and (xii) of Serial No. 6D.
The applicant argued for a broad interpretation of “mechanical items,” relying on dictionary meanings describing “mechanical” as relating to machinery, produced by machines, or involving mechanical action. They submitted that the components were produced using mechanical processes such as injection moulding, stamping, and CNC machining. They further argued that the items provided mechanical support, stability, or heat dissipation and therefore had inherent mechanical characteristics. The applicant relied on a CESTAT ruling concerning a pump classified as a mechanical appliance and invoked the principle of ejusdem generis, contending that entries (xi) and (xii) should cover items sharing essential characteristics with the items listed in entries (i) to (x). They also urged that a purposive interpretation should be applied because the goods were essential for mobile phone manufacturing.
The Department opposed classifying all components as mechanical. They stated that the term “mechanical” is a qualifying condition and must be interpreted in the context of customs jurisprudence, particularly Chapter 84, where “mechanical appliances” involve machinery, mechanical action, or moving parts. The Department argued that components serving purely optical, protective, or thermal functions, or those relying on inherent material properties rather than mechanical action, fall outside the scope of “mechanical items.” They analysed the 44 plastic and 25 metal items and categorised several as ineligible, including diffusion films, membranes, protective films, light guides, vapor chambers, and shielding cases, noting that separate notification entries specifically exist for films and protective materials.
The Authority began its analysis with Serial No. 6D of Notification No. 57/2017, which provides concessional BCD for goods used in mobile phone manufacturing. Items (i) to (x) — such as covers, lenses, antennas, gaskets, SIM sockets, and screws — were found to form a genus of structural, fastening, or housing components. The terms “mechanical items” in entries (xi) and (xii) were therefore required to be interpreted ejusdem generis with this group. The Authority held that a “mechanical item” cannot be defined solely by being machine-made or providing passive support. Instead, it must perform a function through mechanical action or be akin to structural, fastening, or interface parts listed earlier in the notification.
The Authority found the Department’s contextual reading persuasive and noted that accepting the applicant’s broad interpretation would render other entries in the notification redundant, contrary to statutory principles requiring each term to have meaning. A purposive interpretation could not override the specific wording and categorisation chosen by the legislature.
Based on this approach, the Authority classified the goods into two categories:
Category A – Items that qualify as “mechanical items”
These include plastic and metal supports, brackets, fixed supports, stoppers, button supports, various module supports, SIM card tray hole pushrod, and gasket/block/baffle (metal) functioning like gasket items. Their functions were found analogous to structural and housing components listed in entries (i) to (x). Accordingly, items numbered 1–43, 45–46, and 57–58 in Table I qualify for the exemption.
Category B – Items that do not qualify as “mechanical items”
These include diffusion films, photosensitive diffusion films, waterproof breathable membranes, protective films, light pipes, light guides, flash lamp cover, steel vapor chambers, and shielding cases. These components primarily serve optical, protective (non-structural), moisture-control, or thermodynamic functions and therefore do not fall within the genus of mechanical components. Items numbered 44, 47–56, and 59–69 are thus ineligible.
The Authority concluded that Category A items are eligible for concessional BCD under Serial No. 6D (xi) and (xii) of Notification No. 57/2017, while Category B items are not. The ruling is limited solely to determining whether the listed items fall under these entries and does not extend to HSN classification.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
