In re Vivo Mobile India Private Limited (CAAR Delhi)
Classification of parts for manufacturing of cellular mobile phones and Printed Circuit Board Assembly (‘PCBA’)
The present matter concerns an advance ruling application filed before the Customs Authority for Advance Rulings (CAAR), New Delhi, seeking clarity on the applicability of concessional customs duty under Notification No. 57/2017-Customs for inputs and parts imported for manufacturing cellular mobile phones and Printed Circuit Board Assembly (PCBA), which subsequently become scrap during the manufacturing process.
The applicant, engaged in manufacturing mobile phones and PCBA, imports various inputs and parts and avails concessional Basic Customs Duty under the said notification, subject to compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules. During the manufacturing process, certain inputs undergo quality checks and are either used, rejected, or scrapped due to process loss, modification, or failure. The applicant currently pays duty on scrap but seeks confirmation whether concessional duty benefits extend even to inputs that ultimately do not form part of the finished goods.
The primary question raised is whether concessional duty benefits apply to inputs imported “for use” in manufacturing, even if such inputs are damaged or scrapped during the process. The applicant contends that the phrase “for use in manufacture” should be interpreted as “intended for use,” meaning that all inputs put into the manufacturing process—including those lost or scrapped—qualify for the benefit. The applicant further argues that manufacturing inherently involves process loss and that inputs consumed in such processes, even if not physically present in the final product, should be treated as used in manufacturing.
