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2024 (10) TMI 297 - AT - CustomsBenefit of S. No. 512 of the N/N. 50/2017-Customs dated 30.06.2017, as amended - parts/components for the manufacture of Lithium Ion Battery - denial of exemption on the ground that the appellant has actually manufactured power bank as different from Lithium Ion Battery from the imported parts and components - extended period of limitation - HELD THAT - There is no denial about use and utilisation of all the imported parts and components by the appellant for manufacturing its product that too in compliance of the condition no. 9 of the notification, the benefit where under, appellant has claimed. The controversy is about what is being manufactured; the Lithium Ion Battery as claimed by appellants or the powerbank as alleged by the department. The benefit of exemption notification should not be extended to circumvent any good and should also not be elastically stretched to cover such goods which may not come under its periphery - the benefit of exemption to components, parts and accessories to be imported at concessional rate of duty since is based on observance and compliance of IGCR Rules, 2017, therefore the term manufacture appearing in Notification No. 50/2017 dated 30.06.2017 in its entry at S.No. 512 has to be interpreted by taking into consideration the provision of Rule 3 (e) of IGCR Rules, 2017. It is evident that w.e.f. 29.01.2019, lithium-ion cells were taken out of the scope of Serial No. 512 of Notification No. 50/2017-Cus and placed in a separate entry 17B of Notification No. 02/2019 where those were made chargeable to duty at the rate of 5%. Conversely, Lithiym-ion cells were squarely covered within the ambit of Sr. No. 512 prior to 29.01.2019 and were eligible for exemption. Hence, the amendment made vide Notification Nos. 02/2019-Cus and 03/2019Cus both dated 29.01.2019 clearly manifest that before the amendment, subject goods were exempted vide Notification No. 50/2017-Cus. Post the above amendment, the subject goods have been withdrawn from exemption notification and have been placed under the duty rate of 5%. The power bank performs the same function of storing and transfering electrical energy, it being a Lithium Ion Battery that is a combination of Lithium Ion Cells, however, connected to a printed circuit board which is meant for converting the 3.7 volt stored energy to 5 volt energy as is required by the gadget to be charged through the said power bank working on Lithium Ion Battery. It also stands established that it is only the printed circuit board(PCBA) which distinguishes a generic Lithium Ion Battery from power bank. Appellant is admittedly paying Customs Duty on the import of said PCBA - from the raw material imported by the appellant at concessional/ exempted rate of customs Duty in terms of Notification No. 50/2017 dated 30.06.2017 has been utilised by them to manufacture Lithium Ion Battery (Accumulator) which has been captively used by them to manufacture Power Bank . Hence it is held that appellants have rightly claimed the exemption. Invocation of extended period of limitation - HELD THAT - The appellant since has duly complied with the condition no. 9 of the notification, the appellant is liable for the benefit of exemption of Notification No. 50/2017 dated 30.06.2017. Though in terms of Notification No. 02/2019 dated 29.01.2019 distinguished Lithium ion Battery or Power Bank for the first time and based thereupon the demand of duty not paid by the appellant on the imported raw material/parts and components for the period January 2019 to June 2019 could have been demanded. The impugned show cause notice is held being barred by limitation. Appeal allowed.
Issues Involved:
1. Eligibility for duty exemption under Entry No. 512 of Notification No. 50/2017-Cus dated 30.06.2017. 2. Interpretation of "manufacture" under IGCR Rules, 2017. 3. Distinction between Lithium-ion Battery and Power Bank. 4. Compliance with procedural requirements under IGCR Rules, 2017. 5. Invocation of extended period of limitation and imposition of penalty. Issue-wise Detailed Analysis: 1. Eligibility for Duty Exemption: The central issue was whether the appellant was entitled to the duty exemption under Entry No. 512 of Notification No. 50/2017-Cus for importing parts used in manufacturing Lithium-ion Batteries. The exemption was claimed for parts used in manufacturing Lithium-ion batteries, excluding populated printed circuit boards. The tribunal found that the appellant manufactured Lithium-ion Batteries from imported components and subsequently used these batteries to manufacture Power Banks. The tribunal concluded that the appellant was eligible for the exemption as the notification did not require the Lithium-ion Battery to be the final product. 2. Interpretation of "Manufacture": The tribunal examined the definition of "manufacture" under the IGCR Rules, 2017, which involves processing raw materials to create a new product with a distinct name, character, and use. The tribunal determined that the appellant's process of combining Lithium-ion cells with other components to create a battery met this definition. The tribunal emphasized that the emergence of a new product (Lithium-ion Battery) satisfied the requirement of "manufacture" under the rules, regardless of the subsequent use of the battery in Power Banks. 3. Distinction between Lithium-ion Battery and Power Bank: The tribunal addressed the department's argument that Lithium-ion Batteries and Power Banks are distinct products. It noted that the distinction primarily arose from the inclusion of a printed circuit board in Power Banks, which the appellant imported and paid duty on separately. The tribunal found that during the relevant period, Power Banks were not distinctly recognized in trade or under the HSN code, and the appellant's product was sold as a Lithium-ion Battery Pack. Therefore, the tribunal held that the appellant's manufacturing process fell within the scope of the exemption. 4. Compliance with Procedural Requirements: The tribunal reviewed the appellant's compliance with the procedural requirements under the IGCR Rules, 2017. It found that the appellant had provided necessary information to the jurisdictional customs authorities, executed continuity bonds, and submitted quarterly returns. The tribunal noted that the jurisdictional Assistant Commissioner of Customs had monitored the appellant's activities and canceled the continuity bonds, indicating compliance with the rules. Thus, the tribunal concluded that the appellant adhered to the procedural requirements for availing the exemption. 5. Invocation of Extended Period of Limitation and Imposition of Penalty: The tribunal addressed the department's invocation of the extended period of limitation under Section 28(4) of the Customs Act, 1962, and the imposition of a penalty under Section 114A. It observed that the appellant had disclosed all relevant information to the customs authorities and complied with the IGCR Rules, 2017. The tribunal found no evidence of suppression or misrepresentation by the appellant. Consequently, it held that the invocation of the extended period and the imposition of a penalty were unwarranted. Conclusion: The tribunal concluded that the appellant was entitled to the duty exemption under Notification No. 50/2017-Cus for the imported parts used in manufacturing Lithium-ion Batteries. The appellant's compliance with the IGCR Rules, 2017, was affirmed, and the extended period of limitation and penalty were deemed inapplicable. The tribunal set aside the order under challenge and allowed the appeal, emphasizing the need for strict interpretation of exemption notifications and the procedural safeguards provided under the IGCR Rules.
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