CAAR Delhi Denies 5% Duty Benefit on Scrapped Lithium-Ion Cells

In re Adit Infratel Private Ltd. (CAAR Delhi)

Summary: M/s Adit Infratel Private Ltd sought an advance ruling on whether lithium-ion cells imported for manufacturing battery or battery packs of cellular mobile phones would qualify for the concessional 5% Basic Customs Duty under Sr. Nos. 319, 320 and 321 of Notification No. 45/2025-Customs dated 24.10.2025 where the cells were damaged and subsequently scrapped during the manufacturing process. The applicant submitted that the expression “for use in manufacture” covered inputs put into the manufacturing process even where some cells were lost or scrapped as an inherent consequence of manufacturing, relying upon judicial precedents concerning manufacturing loss and the meaning of “for use”.

The applicant also relied upon the earlier CAAR ruling in M/s Sunwoda Electronics India Pvt. Ltd., which had allowed the benefit for lithium-ion cells subsequently scrapped during manufacturing. The jurisdictional Commissionerate opposed the claim, emphasizing that the concessional rate was conditional upon specified end-use under the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (IGCRD Rules, 2022). The Authority noted that Notification No. 45/2025-Customs makes the concession subject to the IGCRD Rules and that Rule 3(1)(i) defines “manufacture” by reference to emergence of a new product having a distinct nature, character, use or name. The Authority held that cells damaged or rejected during assembly or testing and sold as scrap do not result in emergence of the specified battery or battery pack and therefore fall within “unutilised or defective goods” under Rule 10 of the IGCRD Rules. The Authority distinguished the judicial precedents relied upon by the applicant and expressly disagreed with the earlier Sunwoda ruling.