In re AT&S India Private Limited (CAAR Mumbai)
The applicant, AT&S India Private Limited, sought an advance ruling on whether spare parts of capital goods used in the manufacture of Printed Circuit Boards (PCBs) are eligible for exemption from Basic Customs Duty under Sl. No. 39 of Notification No. 24/2005-Cus. dated 01.03.2005. The application was filed under Section 28H(1) of the Customs Act, 1962.
The applicant manufactures bare PCBs classified under Customs Tariff Item 8534 00 00 and imports capital goods under the Export Promotion Capital Goods (EPCG) Scheme. The applicant also imports more than 5,000 types of spare parts required for maintenance of these capital goods but currently pays applicable customs duties on such imports. It contended that these spare parts are imported for the manufacture of PCBs and therefore qualify for exemption under Sl. No. 39 of Notification No. 24/2005-Cus., subject to compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
The applicant relied upon the wording of Sl. No. 39, which grants exemption to “all goods” for the manufacture of goods covered under Sl. Nos. 1 to 38 of the notification. It argued that since PCBs falling under CTI 8534 00 00 are covered under Sl. No. 22, the exemption extends to spare parts of capital goods required for manufacturing PCBs. The applicant also submitted that where the Government intended to restrict exemption only to inputs, parts, raw materials, or similar goods, it had done so expressly in other customs notifications. According to the applicant, the broader expression “all goods” in Sl. No. 39 should include the imported spare parts.
The applicant relied upon several judicial precedents interpreting expressions such as “for the manufacture of goods” and “used for manufacture” to contend that goods not directly incorporated into the final product but required for the manufacturing process should also qualify for exemption.
No comments were received from the jurisdictional Commissionerate despite repeated requests, and no departmental representative appeared during the hearing. The applicant reiterated its written submissions during personal hearing.
The Authority examined the scope of Notification No. 24/2005-Cus. and observed that Sl. No. 39 exempts all goods, other than specified solar glass, imported for manufacture of goods covered under Sl. Nos. 1 to 38, subject to compliance with the prescribed procedure. The principal issue, according to the Authority, was whether the phrase “all goods for the manufacture of goods” extends to capital goods, machinery, machine tools, parts, accessories, and spare parts used in the manufacturing process.
The Authority held that the notification must be interpreted as a whole. It observed that the notification contains separate entries specifically covering machinery, machine tools, parts, and accessories. According to the Authority, interpreting Sl. No. 39 to include machinery, spare parts, and accessories would render those separate entries redundant. It therefore held that Sl. No. 39 is intended to cover goods having a direct nexus with manufacture, namely consumables, raw materials, components, and other manufacturing inputs that are consumed in or incorporated into the finished products, rather than capital goods or their spare parts.
The Authority further observed that capital goods used for manufacturing PCBs are separately eligible under the EPCG Scheme. Since Notification No. 24/2005-Cus. does not specifically exempt such capital goods under Sl. No. 39, extending the exemption to spare parts of those capital goods would, in its view, produce an anomalous result not supported by the notification. It also stated that accepting the applicant’s interpretation would expand the exemption to an extensive range of machinery, equipment, tools, accessories, utilities, and maintenance items required for operating a manufacturing facility.
The Authority distinguished the judgments relied upon by the applicant. It held that the decision in Oblum Electrical Industries Pvt. Ltd. interpreted differently worded exemption notifications containing distinct expressions relating to materials required for manufacture and replenishment of materials, whereas Notification No. 24/2005-Cus. contains no such distinction. It also distinguished the factual context by observing that the Crystar beams involved in Oblum Electrical Industries Pvt. Ltd. were indispensable to the manufacturing process, whereas the present case concerns replacement spare parts for capital goods.
The Authority also held that the decisions in Commissioner of Customs, Kolkata v. Rupa & Co. Ltd., Kudremukh Iron Ore Ltd., and Autolite India Ltd. were distinguishable because they arose under different exemption notifications or statutory schemes and did not interpret Sl. No. 39 of Notification No. 24/2005-Cus. It further referred to Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd. regarding differences in facts affecting precedential value and relied upon Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company and Tata Iron & Steel Co. Ltd. v. State of Jharkhand on strict interpretation of exemption notifications.
The Authority concluded that Sl. No. 39 of Notification No. 24/2005-Cus. applies only to goods having a direct nexus with manufacture, such as consumables, raw materials, components, and manufacturing inputs, and does not extend to spare parts of capital goods used in manufacturing PCBs. It ruled that the proposed imports of such spare parts are not eligible for duty exemption under Sl. No. 39 of Notification No. 24/2005-Cus.
Cases Discussed
- Commissioner of Central Excise, Nokia-II and Noida-I v. M/s. Elentec India Pvt. Ltd. (Vice-Versa), 2025 (2) TMI 139 – CESTAT ALLAHABAD
- Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company (Supreme Court), 2018 (361) E.L.T. 577 (S.C.)
- Tata Iron & Steel Co. Ltd. v. State of Jharkhand (Supreme Court), (2005) 4 SCC 272
- Commissioner of Customs, Kolkata v. Rupa and Co. Ltd. (Supreme Court), 2004 (6) SCC 408
- Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd. (Supreme Court), 2003(2) SCC 111
- Autolite (India) Ltd. v. Union of India (Bombay High Court), 2003 (157) ELT 13 (Bom)
- Kudremukh Iron Ore Ltd. v. Collr. Of Cus., Bangalore/Belgaum (Tribunal – LB), 2000 (121) ELT 769 (Tribunal – LB)
- Oblum Electrical Industries Pvt. Ltd. v. Collr. Of Cus., Bombay (Supreme Court), 1997 (94) ELT 449 (SC)
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
AT&S India Private Limited (having IEC No. 0796005532) and hereinafter referred to as ‘the applicant’, in short) having registered address at Plot No. 12A, 12B and 82, Nanjangud Industrial Area, Nanjangud, Karnataka, India — 571301, filed application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 02.04.2026 along with enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the issue of eligibility of the spare parts of the Capital Goods used in the manufacture of Printed Circuit Boards (PCBs) to exemption in terms of Si. No. 39 of N. No. 24/2005-Cus dated 01.03.2005.
2. The Applicant is engaged in the import and manufacture of bare Printed Circuit Boards (PCB’) classified under Customs Tariff Item (`CTI’) 8534 00 00 covering ‘Printed Circuits’. The Applicant is regularly importing the capital goods required for manufacturing of said PCBs by availing duty exemption under the Export Promotion Capital Goods (EPCG) scheme. However, the spare parts of such capital goods (`said spare parts of CGs’) for its regular maintenance are imported on payment of applicable Customs duties.
2.2 The process flow for production of PCBs in the manufacturing facility of Applicant is as follows:
– Inner Layer (IL) Photo Printing
– Inner Layer Automated Optical Inspection (IL AOI)
– Pressing
– Drilling
– Copper plating
– Outer Layer (OL) Photo Printing
– Outer Layer Automated Optical Inspection (OL AOI)
– Solder mask
– Screen printing
– Surface finish [Hot Air Solder Leveling/Electroless Nickel Immersion Gold(HASL/ENIG)]
– Routing
– Bare Board Test(BBT)/Blind hole (B hole)/ Warpage
– Surface Finish [Imm Tin/Organic Solderability Preservatives (OSP)]
– Final inspection
– Acceptable Quality Level (AQL)
– Packing
2.3 The Applicant imports over 5000 types of spare parts that are essential for regular maintenance of the capital goods which are used in the production of PCBs. Details of few spare parts of capital goods and their role in the production of PCBs are provided below as an example.
- Ionizer: It is one of the spare parts of Oxide coating machine imported for maintenance of said machine. The said machine is used for oxide coating on the PCBs.
- Gas Pressure Attenuator: It is one of the spare parts of Drilling machines and, these machines are used for performing drilling function on the PCBs.
- Suction unit 3-fold: It is one of the spare parts of Exposing machines and, the said machines are used in the photo printing process in manufacture of PCBs.
- Roller +Timing Pulley: It is one of the spare parts of Machvison Inner Layer, outer layer & Verification Machines, and these machines are used for In-Line Automated Optical Inspection of PCBs.
Further, considering the frequency of imports, value of spare parts, and pre and post import compliances under the EPCG Scheme, the Applicant is presently importing the same on payment of applicable Customs duties instead of opting to EPCG Scheme.
2.4 Concessional rate of Basic Customs Duty (BCD)
The Central Government has issued N. No. 24/2005-Cus in exercise of powers under Section 25(1) of the Customs Act, 1962 (`Customs Act’) to exempt goods enumerated therein from levy of Basic Customs Duty (`BCD’). The PCBs manufacture by the Applicant is eligible to exemption from levy of I3CD in terms of SI. No. 22 of N. No. 24/2005-Cus. all goods covered under CTI 8534 00 00 when imported into India.
2.4.1 SI. No. 39 of N. No. 24/2005-Cus., grants exemption from I3CD to all goods subject to certain exclusions falling under any chapter of Tariff Schedule except Chapter 74, imported for the manufacture of goods covered previous entries of N. No. 24/2005-Cus. The said exemption is subject to condition that the importer follows the procedures set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (`IGCR procedures’).
Applicant’s interpretation of laws/facts:
3.1 In exercise of the powers conferred under sub-section (1) of Section 25 of the Customs Act, the Central Government has exempted certain goods from the levy of BCD vide N. No. 24/2005-Cus. The relevant entries under N. No. 24/2005-Cus are given hereinbelow for ease of reference:
| Sr. No. | Heading, sub-heading or tariff item | Description |
|---|---|---|
| 22 | 8534 00 00 | All goods |
| 39 | Any Chapter except Chapter 74 | All goods except solar tempered glass or solar tempered (anti-reflective coated) glass for the manufacture of goods covered by S. Nos. 1 to 38 above, provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. |
3.2 In terms of Si. No. 22 of N. No. 24/2005-Cus., all goods covered under CTI 8534 00 00 covering ‘Printed Circuits’ including PCBs. In terms of Si. No. 39 of N. No. 24/2005-Cus., all goods (except for solar tempered (anti-reflective coated) glass) for the manufacture of goods covered by the preceding SI. Nos. subject to the imported following the IGCR procedure, including the goods covered under SI. No. 22, viz., all goods falling under CTI 8534 00 00. It follows from the above that all goods imported for the manufacture of PCBs classified under CTI 8534 00 00, subject to certain exclusions, are eligible to exemption from BCD in terms of SI. No. 39 of N. No. 24/2005-Cus.
3.3 At this stage, it is pertinent to analyse the judicial precedents on the phrase “for the manufacture” to understand the scope of exemption from BCD granted in terms of Si. No. 39 of N. No. 24/2005-Cus.
Judicial interpretation of “for the manufacture of goods”
3.3.1 The Hon’ble Supreme Court in the case of Oblum Electrical Industries Pvt. Ltd. v. Collr. Of Cus., Bombay, 1997 (94) ELT 449 (SC) analysed the eligibility of imported Cyrstar beams used as Kiln Furniture for manufacture of porcelain insulators to the exemption provided under Advance license scheme notified vide Notification No. 116/88-Cus., dated 30.03.1998. The appellant in that case was a manufacturer of ‘Lightening Arrestors’ which were supplied to the electricity boards, railways and other public sector undertakings as a deemed export. The Cyrstar beams made of Silicon Carbide were used for ‘firing’ dry and hollow Porcelain bushings in the kilns for production of porcelain insulators for the Lightning arrestors, and are fitted inside the kilns. The beams were susceptible to breakage and damage and have to be continuously replaced in the course of manufacture. Notification No. 116/88-Cus provided the Customs duty exemption to the goods imported against an Advance License “for the purpose of manufacture of products (hereinafter referred to as the resultant products) or replenishment of materials used in the manufacture of the resultant products, or both”. The Customs authorities alleged that the exemption from duty is available only in respect of the raw materials and components of the resultant product and the Cyrstar beams used as supporting structures in the production of insulating bushings were ineligible for notification benefit.
3.3.2 The Hon’ble Supreme Court in Oblum Electrical Industries Pvt. Ltd. (supra) has analysed the expressions “materials required to be imported for the purpose of manufacture of products (hereinafter referred to as the resultant products) or replenishment of materials used in the manufacture of resultant products or both.” and held that in the notification two different expressions have been used, which indicates that the two expressions have not been used in the same sense. It is also held that the expression ‘materials required to be imported for the purpose of manufacture of products’ cannot be construed as referring only to materials which are actually used in the manufacture of the resultant product but would also include materials which though not used in the manufacture of the resultant product but are required in order to manufacture the resultant product. Accordingly, the Hon’ble Supreme-Court. beheld that the Cyrstar beams which, though not used in the manufacture of H.T. Porcelain Insulators, but are required for producing the insulators in the kilns are eligible to exemption benefit.
3.3.3 The lion’ ble Supreme Court in the case of Commissioner of Customs, Kolkata v. Rupa and Co. Ltd., 2004 (6) SCC 408 has held that the expression ‘used for manufacture’ cannot be construed as referring only to materials which are used in the manufacture of that product. Such term must be given its natural meaning to also include materials which would be required in order to manufacture the resultant product. It would also include materials which are not directly used in the manufacture of resultant product but are still required for the purposes of manufacturing the resultant product. It is wide enough to include not just products which are directly involved in the process of manufacturing but also products which would be necessary for the ultimate manufacture.
3.3.4 The larger bench of the Hon’ble Tribunal in the case of Kudremukh Iron Ore Ltd. v. Collr. Of Cus., Bangalore/Belgaum reported at 2000 (121) ELT 769 (Tribunal — LB). analysed the eligibility of the spare parts imported for machinery used in mining operations to duty exemption under Notification No. 13/81-Cus., dated 09.02.1981. The spares imported by the Appellant were claimed to be spares of machinery used for the purpose of manufacture of article meant for exports out of India. The preamble to Notification No. 13/81-Cus. stated that goods specified in the Table attached to it, when imported into India for the purpose of manufacture of articles for exports out of India by hundred per cent export-oriented undertakings are exempt from duty. The Table attached to that notification contained three items only. They were capital goods, raw materials and components. The Hon’ble Tribunal analysed the scope of the preamble of Notification No. 13/81-Cus. in light of Oblum Electrical Industries Pvt. Ltd. (supra) and held that the goods imported need not necessarily be directly connected with the manufacture of the article meant for export. If the goods imported arc essentially connected to the purpose of manufacture, such goods must also fall within the ambit of the notification. The I Ion’ble Tribunal held that even though the machinery in question is not directly involved in the manufacture of the finished goods, they are machinery used in the manufacture of such goods, and therefore, spares imported for such machinery are entitled to the benefit of Notification No. 13/81-Cus.
3.3.5 The I Ion’ ble Tribunal in the case of Commissioner of Central Excise, Nokia-II and Noida-I v. M/s. Elentec India Pvt. Ltd. (Vice-Versa) reported at 2025 (2) TMI 139 — CESTAT ALLAHABAD analysed the eligibility of raw materials and inputs imported for the manufacture of battery chargers and parts of mobile phones, to the benefit provided under S. No. 431 of N. No. 12/2012-Cus. dated 17.03.2012. S. No. 431 of No. 12/2012-Cus. provided BCD exemptions inter alia to parts, components and accessories for the manufacture of mobile handsets and parts or components for the manufacture of battery chargers. The Hon’ble Tribunal held that the phrase used in the entry is ‘for the manufacture of and not ‘of’ and thus, anything which goes into the manufacture of these items would be eligible to exemption, as the phrase `for the manufacture of’ would cover all the items that are consumed directly or indirectly for the manufacture of these items.
3.3.6 The Hon’ble Bombay High Court in the case ofAutolite (India) Ltd. v. Union of India reported at 2003 (157) ELT 13 (Boni) relied on the decision in °Num Electrical Industries Pvt. Ltd. (supra) and held that die steel imported for the manufacture of moulds, which were used for the manufacture of export goods to be entitled to the benefit of Notification No. 116/88-Cus dated 30.03.1988 which provided the Customs duty exemption to the goods imported against an Advance License “for the purpose of manufacture of products (hereinafter referred to as the resultant products) or replenishment of materials used in the manufacture of the resultant products, or both” and rejected the contention that they were ineligible for benefit as the die steel was not directly used in the exported goods.
It follows from the above judgments by various Court including the I lon’ble Supreme Court that the expression `all goods required for the manufacture’ cannot be construed as referring only to materials which are actually used in the manufacture of the resultant product but would also include materials which though not used in the manufacture of the resultant product but are required in order to manufacture the resultant product.
3.4 The language of notifications is clear wherever benefits are intended to be limited in scope
The Applicant brings attention to Notification No. 11/2022-Customs dated 01.02.2022 (W. No. 11/2022-Gus’) issued by the Central Government to implement a graded BCD structure for wearable devices and its parts, sub-parts and sub-assembly. The relevant extracts of N. No. 11/2022-Cus is given below for ease of reference:
| S. No. |
Chapter or heading or sub-heading or tariff item | Description of goods | Standard rate |
Condition No. |
| 1. | 8501 | Vibrator motor for use in manufacture of wrist wearable devices (commonly known as smart watches). | 10% | I and 2 |
| 2. | Any Chapter | Inputs or parts or sub-parts for use in manufacture of items mentioned at S. No. 1. | Nil | 1 and 2 |
| 3. | 8507 60 00/ | Battery for use in manufacture of wrist | Nil | 1 and 3 |
| 8507 80 00 | wearable devices (commonly known as smart watches) | 5%
10% 15% |
1 and 4 1 and 5 1 and 6 |
|
| 4. | Any chapter | Inputs or parts or sub-parts for use in manufacture of items mentioned at S. No. 3. | Nil | 1 and 2 |
3.4.2 Notification No. 13/2022-Customs dated 01.02.2022 (W. No. 13/2022-Gus’) issued by the Central Government to implement a graded BCD structure for smart meters and its parts, sub-parts and sub-assembly. The relevant extracts of N. No. 13/2022-Cus is given below for ease of reference:
| S. No. |
Chapter or heading or sub-heading or tariff item | Description of goods | Standard rate |
Condition No. |
| 1. | 8506 50 00 | Battery for use in Smart Meters. | Nil
5% 10% 10% |
1 and 4 1 and 5 1 and 6 1 and 7 |
| 2. | Any Chapter | Inputs or parts or sub-parts for use in manufacture of items mentioned at S. No. 1. | Nil | 1 and 3 |
| 3. | 8517 69 90 | Communication module for use in manufacture of Smart Meters. | Nil
Nil 5% 10% |
1 and 3 1 and 5 1 and 6 1 and 7 |
| 4. | Any chapter | Inputs or parts or sub-parts for use in manufacture of items mentioned at S. No. 3. | Nil | 1 and 3 |
3.4.3 Notification No. 45/2025-Customs dated 24.10.2025 (‘N No. 45/2025-Cus’) issued by the Central Government prescribes the effective rates of Customs duty, IGST and compensation cess for good imported into India. The relevant extracts of N. No. 45/2025-Cus is given below for ease of reference:
TABLE I
| S. No. | Chapter or heading or sub-heading or tariff item | Description of goods | Standard rate | Integrated Goods and Services Tax | Condition No. |
|---|---|---|---|---|---|
| 228. | 84 or any other Chapter | Parts and raw materials for manufacture of goods to be supplied in connection with the purposes of off-shore oil exploration or exploitation: Provided that nothing contained in this S. No. shall have effect after the 31st March, 2028 | Nil | – | 27 |
| 273. | Any Chapter | All parts for use in the manufacture of LED lights or fixtures including LED Lamps: Provided that nothing contained in this S. No. shall have effect after the 31st March, 2028 | 10% | – | 3 |
| 274. | Any Chapter | All inputs for use in the manufacture of LED (Light Emitting Diode) driver or MCPCB (Metal Core Printed Circuit Board) for LED lights and fixtures or LED Lamps: Provided that nothing contained in this S. No. shall have effect after the 31st March, 2028. | 10% | – | 3 |
| 296. | Any Chapter | Inputs, parts or sub-parts for use in the manufacturing of Printed Circuit Board Assembly (PCBA) (falling under tariff item 85079090) of Lithium-ion battery and battery pack. Provided that nothing contained in this S. No. shall have effect after the 31st March, 2028. | 2.5% | – | 3 |
| 314. | Any Chapter | Parts, sub-parts, inputs or raw material for use in manufacture of Lithium-ion cells falling under tariff item 8507 60 00. Provided that nothing contained in this S. No. shall have effect after the 31st March, 2028. | Nil | – | 3 |
3.4.4 The relevant extracts of Notification No. 21/2005-Customs dated 01.03.2005 is given below for ease of reference:
“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts parts, components and accessories of mobile handsets including cellular phones, from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Tariff Act subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.”
3.4.5 Notification No. 21/2002-Customs dated 01.03.2002 (W. No. 21/2002-Gus’) issued by the Central Government prescribes the effective rates of Customs duty and additional duties of Customs for good imported into India. The relevant extracts of N. No. 21/2002-Cus is given below for ease of reference:
| S. No. | Chapter or Heading or sub-heading or tariff item | Description of goods | Standard rate | Additional duty rate | Condition No. |
|---|---|---|---|---|---|
| 93 | 29 or any other Chapter | Raw materials, intermediates and consumables supplied by the UNICEF for manufacture of the DTP vaccines | Nil | Nil | 10 |
| 215 | 84 or any Chapter | Parts and raw materials for manufacture of goods to be supplied in connection with the purposes of off-shore oil exploration or exploitation | Nil | Nil | 30 |
| 347C | Any Chapter | Parts (other than rubber tyres or tubes) of aircraft of heading 8802 | Nil | – | 105 |
| 356 | Any Chapter | Raw materials and parts, for use in the manufacture of goods falling under headings 89.01, 89.02, 89.04, 89.05 (except sub-heading 8905.20) or 89.06, in accordance with the provisions of section 65 of the Customs Act, 1962 (52 of 1962) | Nil | Nil | 73 |
| 357 | Any Chapter | Parts, for repair of dredgers | Nil | – | – |
The Applicant submits that it is clear from the afore-mentioned examples that wherever the benefits of exemption notifications are intended to be limited, specific limits on the scope of the said exemption is clearly defined to be limited to specific goods, viz., parts, raw-materials, inputs, etc.
By contrast, the benefit of the exemption provided under SI. No. 39 N. No, 24/2005-Cus is not limited in scope, but is rather extended to all goods (except solar tempered glass or solar tempered (anti-reflective coated) glass) for the manufacture of goods covered by the preceding S. Nos. of N. No. 24/2005-Cus, subject to the importer following IGCR procedure. In light of the aforementioned provisions and judicial decisions, the Applicant is of the view that said spare parts of capital goods imported for manufacture of PCBs specified under SI. No. 22 of N. No. 24/2005-Cus., are also covered under the SI. No. 39 of N. No. 24/2005-Cus.
Port of Import and reply from concerned jurisdictional Commissionerate
4. The applicant in their CAAR-1 indicated that they intend to import the spare parts that are essential for regular maintenance of the capital goods which are used in the production of PCBs, at the jurisdiction of Office of the Commissioner of Customs, ACC, Bengaluru. The application was forwarded to the Office of the Commissioner of Customs, ACC for their comments vide letter dated 16.04.2026, 12.05.2026 and 01.06.2026. However, no comments have been received from the jurisdictional authorities till date.
Details of Hearing
5. Authorised representatives reiterated their submission as mentioned in written reply and application. Pertinent question is about exemption applicable to spare parts of machinery used for manufacturing their main product PCB. Applicability of exemption sr. no. 39 of nod fication no. 24/2005-Customs. They provided various case laws to support their claim.
5.2 Nobody appeared on behalf of the Department for hearing.
Discussion and findings
6. I have considered all the materials placed before me in respect of the subject goods. have gone through the submissions made by the applicant during the personal hearing. I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework.
6.1 At the outset, I find that the issue raised in the question in the Form CAAR-1 is squarely covered under Section 28H(2) of the Customs Act, 1962, being a matter related to classification of goods under the provisions of this Act.
6.2 The scope of notification no. 24/2005-Cus dated 01.03.2005 and relevant entries provides that-
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the following goods, falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below, the words “following goods of the description as specified in column (3) of the Table below and falling under heading, sub-heading or tariff Litem of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table when imported into India, from the whole of the duty of customs leviable thereon under the said First Schedule, namely:-
| Sr. No. | Heading, sub- heading or tariff item |
Description |
| 22 | 8534 00 00 | All goods |
| 39 | Any Chapter except Chapter 74 |
All goods except solar tempered glass or solar tempered (anti- reflective coated) glass for the manufacture of goods covered by S. Nos. 1 to 38 above, provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. |
From the above, it is evident that goods cover under heading 85340000 are eligible for duty exemption. CTH 8534 covers “Printed Circuits”, so there is no ambiguity that PCB are eligible for benefit. Now, the question arises that whether spare parts of the capital goods used to manufacture PCB are eligible for benefit of notification no. 24/2005-Cus dated 01.03.2005.
6.3 From a plain reading of the notification, it is observed that SI. No. 39 covers all goods. other than solar tempered glass or solar tempered (anti-reflective coated) glass, when imported for the manufacture of goods specified at Si. Nos. 1 to 38 of the notification, subject to compliance with the procedure prescribed under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
The principal issue for determination is the scope of the expression “all goods for the manufacture of goods” occurring against Si. No. 39 and whether the said entry is wide enough to cover capital goods, machinery, machine tools, parts, accessories, and spares used in the manufacturing process.
In this regard, it is a settled principle that an exemption notification must he interpreted on the basis of its language read as a whole, and no entry can be construed in a manner that renders other provisions of the same notification redundant or superfluous. Therefore, the expression “goods for the manufacture of goods” occurring at SI. No. 39 cannot be read in isolation but must be interpreted in the context of the overall scheme of the notification.
On examination of the notification, it is observed that parts, accessories and machine tools have been specifically provided for under separate entries. For ease of reference, the relevant entries are reproduced below:
| Sr. No. | Heading, sub-heading or tariff item | Description |
|---|---|---|
| 4. | 8443 99 (except 84439951, 84439952, 84439953) | Parts and accessories of the following goods (except Ink cartridges, with print head assembly; Ink cartridges, without print head assembly; Ink spray nozzle) namely: (a) All goods falling under tariff items 84433100, 84433210, 84433220, 84433230, 84433240, 84433250, 84433260; (b) Electrostatic photocopying apparatus, operating by reproducing the original image directly onto the copy (direct process); and (c) Photocopying apparatus, other than electrostatic, incorporating an optical system; |
| 5 | 84569010 or 848620 | Machine tools for dry etching pattern on semiconductor material |
The existence of such distinct entries is a significant indicator of legislative intent. If SI. No. 39 were intended to encompass machinery, machine tools, parts, accessories, and spares used in the manufacturing process, the separate entries relating to such goods would become redundant. Such an interpretation would violate the settled principle of statutory construction that every word and provision in a notification must be given meaning and effect.
A harmonious reading of the notification indicates that Si. No. 39 is intended to cover goods having a direct nexus with the manufacture of the specified products, namely consumables, raw materials, components, and other inputs that are consumed in, or incorporated into, the final products covered under Si. Nos. 1 to 38. The phrase “for the manufacture of goods” cannot, in the context of the notification, be construed so broadly as to include every item that may be required for establishing, operating, maintaining, or supporting a manufacturing facility.
It is further observed that capital goods required for the manufacture of printed circuit boards (PCBs) are eligible for import under separate duty exemption schemes such as the Export Promotion Capital Goods (EPCG) Scheme, subject to the conditions prescribed therein. Significantly, Notification No. 24/2005-Cus. does not specifically provide exemption to such capital goods under Si. No. 39. In such circumstances, permitting the exemption for spare parts of capital goods under SI. No. 39, when the capital goods themselves are not covered by the said entry, would lead to an anomalous result that is not supported by the language or scheme of the notification.
Moreover, acceptance of the applicant’s interpretation would effectively extend the benefit of SI. No. 39 to more or less infinite range of machinery, equipment, tools, spare parts, accessories, utilities and other items required for setting up and operating a PCB manufacturing plant. Such an expansive interpretation would substantially enlarge the scope of the exemption beyond what appears to have been contemplated by the notification and would blur the distinction maintained therein between manufacturing inputs and capital goods.
In view of the foregoing, I am of the prima facie view that the benefit under SI. No. 39 of Notification No. 24/2005-Cus. is intended to be available only in respect of goods having a direct nexus with the manufacture of the specified products as consumables, raw materials, components, or other manufacturing inputs that are consumed in, or form part of, the final products. The said entry does not appear to extend to capital goods, machinery, machine tools, parts, accessories, or spares used in the manufacturing process, unless such goods are specifically covered under any other entry of the notification.
7. The Applicant has placed substantial reliance on the judgment of the Hon’ble Supreme Court in Oblum Electrical Industries Pvt. Ltd. v. Collector of Customs, Bombay, 1997 (94) ELT 449 (SC). However, the said decision is distinguishable both on facts and in law and does not support an unrestricted interpretation of the expression “for the manufacture of goods” occurring in SI. No. 39 of Notification No. 24/2005-Cus.
In the case of Oblum Electrical Industries Pvt. Ltd., the notification 116/88-Cus dated 30.03.1988 contains two different expressions “materials required to be imported for the purpose of manufacture of products (hereinafter referred to as the resultant products) or replenishment of materials used in the manufacture of resultant products or both.”
It is also observed that the notification 210/82-Cus dated 10.09.1982 contains the expression “raw materials and components required for the manufacture of goods” and “or for the replenishment of raw materials and components used in the manufacture of the goods”.
From the above two notification, it is observed that the said two notifications provides two different expression and it is obvious that two expressions cannot be meant for the same sense. Therefore, the Hon’ble Supreme Court held that the expression ‘materials required to be imported for the purpose of manufacture of products’ cannot be construed as referring only to materials which are actually used in the manufacture of the resultant product but would also include materials which though not used in the manufacture of the resultant product but are required in order to manufacture the resultant product.
The applicant’s reliance on the Oblum Electrical Industries Pvt. Ltd. v. Collector of Customs, Bombay, 1997 (94) ELT 449 (SC) is misplaced as the Supreme Court interpreted Notification No. 116/88-Cus., which contained the expression:
1. “materials required to be imported for the purpose of manufacture of products (hereinafter referred to as the resultant products) or
2. replenishment of materials used in the manufacture of resultant products or both.”
There are two different expressions meant for different sense. One expression is provided for the materials that are directly used in the manufacturing the resultant goods whereas the second expression has wider and broad meaning that includes materials which though not used in the manufacture of the resultant product but are required in order to manufacture the resultant product, whereas the notification 24/2005-Cus dated 01.03.2005 grants exemption to “All goods [except solar tempered glass or solar tempered (anti-reflective coated) glass] for the manufacture of goods covered by SI. Nos. 1-38″, there is no distinction made in this notification no. 24/2005-Cus, similar to the Notification 116/88. There are no such expressions were used that is meant for wider and broader meaning that has been used in the notification nos. 210/82-Cus and 116/88-Cus. Notification No. 24/2005-Cus., dated 01.03.2005, does not contain the two distinct expressions intended for different purposes, namely, “required for the purpose” and “replenishment of materials.” These expressions do not find place in the said notification. Therefore, the applicant’s reliance on the judgment in the case of °blurt? Electrical Industries Pvt. Ltd. is misplaced and inapplicable to the facts of the present case.
Thus, the ratio of Oblum is founded upon the existence of two distinct expressions within the same notification. SI. No. 39 of Notification No. 24/2005-Cus. contains no such contrast between two separate expressions. Consequently, the principal reasoning which formed the basis of the judgment in Oblum is absent in the present case.
Secondly, in the case of Oblum Electrical Industries Pvt. Ltd., the imported Crystar beams are used for firing dry and hollow H.T. porcelain bushings in the kilns and are fitted inside the kiln. The Additional Collector of Customs in the said case held that the Crystar beams are utilised as supporting structure for manufacturing of bushings and that they are capital goods not components of the resultant products. Cyrstar beams which constituted kiln furniture indispensable for the firing process through which porcelain insulators were manufactured. Without such beams, the manufacturing operation itself could not be carried out. The goods were not merely connected with the factory or its maintenance; they were functionally and technologically integral to the actual manufacturing process.
Therefore, the beams were actively participating in every manufacturing cycle and have direct nexus with the resultant product. In the present case, the goods “spare parts” are being imported as replacement of the old one. They are required for functioning of the capital goods and the imported spare is not itself an indispensable manufacturing input such as crystar beams. A distinction must be drawn between goods that are indispensable to the actual process of manufacture and goods that merely facilitate, support, maintain or improve manufacturing operations. The judgement in the case of Oblum Electrical Industries Pvt. Ltd. cannot be read as obliterating this distinction.
The exemption notifications are required to be interpreted on their own terms. The ratio of Oblum Electrical Industries Pvt. Ltd. cannot be employed to enlarge the scope of Sl. No. 39 beyond what is reasonably conveyed by its text.
8. The applicant’s reliance on the judgment of the Hon’ble Supreme Court in the case of Commissioner of Customs, Kolkata v. Rupa & Co. Ltd., 2004 (6) SCC 408, is misplaced. The said case pertained to the eligibility of textile machinery imported under the Export Promotion Capital Goods (EPCG) Scheme for the benefit of duty exemption and examined whether machines used for processing fabric/yarn, fabric inspection, knitting, dyeing and similar operations qualified as “capital goods” under the relevant notification or not.
The Hon’ble Supreme Court, in the said judgment, interpreted the definition and scope of the expression “capital goods” as used in the notification governing the EPCG Scheme. However, the present case concerns a different set of goods i.e. spare parts, operating in a distinct statutory and factual context involving different materials, products and exemption provisions.
The judgment in Rupa & Co. Ltd. neither examines nor interprets the expression “for the manufacture of goods” occurring in SI. No. 39 of Notification No. 24/2005-Cus., nor does it deal with the eligibility of spare parts or ancillary items under an exemption structured in the manner of the notification presently under consideration. Accordingly, the ratio laid down in the said judgment is not applicable to the facts of the present case and cannot be relied upon for determining the issue under consideration.
9. The applicant further relied on the judgement of the Hon’ble Tribunal in the case of Kudremukh Iron Ore Ltd. v. Collr. Of Cus., Bangalore/Belgaum reported at 2000 (121) ELT 769 (Tribunal — LB). the applicant’s reliance has no ground because the issue before the Larger Bench in Kudremukh Iron Ore Ltd. was the interpretation of Notification No. 13/81-Cus., dated 09.02.1981, which granted exemption to specified goods imported by 100% Export Oriented Units for the purpose of manufacture of articles for export. The notification was part of a special export promotion scheme intended to encourage exports the cost of production of export goods.
The object and purpose of such export promotion notifications are materially different from those underlying SI. No. 39 of Notification No. 24/2005-Cus. Consequently, the interpretation adopted in the context of an export-oriented incentive scheme cannot automatically govern the interpretation of a general exemption notification.
It is further noted that Notification No. 13/81-Cus. expressly covered capital goods imported by Export Oriented Units. The Larger Bench, while interpreting the scope of that notification, observed that since the exemption scheme contemplated the importation of capital goods used in the manufacturing process, spare parts required for such machinery could not be excluded merely because they did not directly participate in the manufacture of the final export product. Thus, the conclusion reached by the Tribunal was significantly influenced by the express inclusion of capital goods within the ambit of the notification itself.
In contrast, SI. No. 39 of Notification No. 24/2005-Cus. does not contain any reference to capital goods, machinery, spare parts, components, accessories, maintenance items or consumables used for upkeep of manufacturing facilities. The entry merely extends exemption to “all goods” for the manufacture of the goods specified at SI. Nos. 1 to 38 of the notification. Therefore, the statutory context and scheme which weighed with the Larger Bench in Kudremukh Iron Ore Co. Ltd. are conspicuously absent in the present case.
It is also pertinent to note that the preamble to Notification No. 13/81-Cus. specifically provided exemption to goods imported for the purpose of manufacture of articles for export by hundred per cent export-oriented undertakings, and the Table annexed thereto expressly covered three categories of goods, namely, capital goods, raw materials and components. The deliberate inclusion of these categories clearly manifested the legislative intent to extend the benefit beyond materials physically incorporated into the exported goods. Notification No. 24/2005-Cus., on the other hand, contains no such express inclusion. The omission of capital goods, machinery, parts, sub-parts, components or accessories from SI. No. 39 cannot be regarded as inadvertent. I lad the intention been to extend the exemption to spare parts, maintenance items or machinery components, the notification could have expressly employed words such as “inputs, capital goods, parts, components, sub-assemblies or accessories”, as has been done in several other exemption notifications.
Accordingly, the reliance placed by the Applicant on the decision in Kudremukh Iron Ore Co. Ltd. is not applicable to the facts of the present case. The said decision was rendered in the context of a distinct export promotion notification, where capital goods were expressly covered and the dispute concerned spare parts of such qualifying machinery. The ratio of that decision cannot be extended to enlarge the scope of SI. No. 39 of Notification No. 24/2005-Cus. so as to include goods used for maintenance, repair, replacement or operation of manufacturing equipment.
It is a settled principle of law that an exemption notification must be interpreted on the basis of its own language, structure and conditions, and neither words can be added to nor omitted from the notification on considerations of equity or presumed legislative intent.
Therefore, in the absence of any express provision covering spare parts, machinery components or maintenance items, such goods cannot be read into SI. No. 39 of Notification No. 24/2005-Cus. by implication.
10. The Applicant has further relied upon the judgment of the Hon’ble Bombay High Court in Autolite India Ltd. v. Union of India. However, the reliance placed on the said decision is also misplaced.
It is observed that the ratio of the decision in Autolite India Ltd. is substantially founded upon and follows the principles laid down by the Hon’ble Supreme Court in Oblum Electrical Industries Pvt. Ltd. v. Collector of Customs, Bombay, 1997 (94) E.L.T. 449 (S.C.). The applicability and scope of the judgment in Oblum Electrical Industries Pvt. Ltd. have already been examined in detail in the foregoing paragraphs and it has been found that the said decision was rendered in the context of a differently worded exemption notification and under a distinct statutory framework. Accordingly, for the reasons already recorded hereinabove, the ratio of Oblum Electrical Industries Pvt. Ltd. is not applicable to the interpretation of SI. No. 39 of Notification No. 24/2005-Cus.
Since the decision of the Hon’ble Bombay High Court in Autolite India Ltd. substantially derives support from and applies the principles enunciated in Oblum Electrical Industries Pvt. Ltd., the same cannot assist the Applicant in seeking an expanded interpretation of the expression “for the manufacture of goods” occurring in SI. No. 39 of Notification No. 24/2005-Cus.
11. Further, the appellant has relied upon various case laws which I find not applicable here in as much the facts and circumstances of these cases are different. The Hon’ble Supreme Court in the matter of Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd.-2003(2) SCC I I 1 has observed that “It is well settled that a difference in facts or additional facts may take a lot of difference in the precedential value of a decision”. However, I rely on the judgement in the case of Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company reported as 2018 (361) E.L.T. 577 (S.C.) wherein the Hon’ble Court observed that
(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.
In a prior decision in the case of Tata Iron & Steel Co. Ltd. v. State of Jharkhand reported as (2005) 4 SCC 272 the two judge bench of Hon’ble Supreme Court laid down that eligibility clause in relation to exemption notification must be given a strick meaning.
In view or the above, I find that it is a settled principle that an exemption notification must be interpreted on the basis of its language read as a whole, and no entry can be construed in a manner that renders other provisions of the same notification redundant or superfluous. A harmonious reading of the notification no. 24/2005-Cus indicates that Si. No. 39 is intended to cover goods having a direct nexus with the manufacture of the specified products, namely consumables, raw materials, components, and other inputs that are consumed in, or incorporated into, the final products covered under Si. Nos. 1 to 38.
Also, it is further noted that capital goods, spare parts of which are proposed to be imported duty free under this notification are not being imported with exemption under notification no. 24/2005-Cus rather they are being imported duty free under EPCG scheme. Therefore, it is amply clear that the capital goods are not covered under sr. no. 39 of the notification no. 24/2005-Cus and consequently, the benefit of the said entry cannot be extended to the import of spare parts intended for such capital goods. Therefore, I find that the proposed import of spare parts is not eligible for exemption under Notification No. 24/2005-Cus.
12. In view of the above facts and circumstances of the case, I reach to conclusion that
The spare parts of the capital goods used in the manufacture of Printed Circuit Boards (PCBs) are not eligible for duty exemption in terms of sl. No. 39 of the notification no. 24/2005-Cus dated 01.03.2005.
13. I rule accordingly
