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TMI Blog2024 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No. 68/2017-Cus dated 30.06.2017, as amended. 2. Department observed that the Importer has imported various goods namely Housing Plastic, USB Cables, Lithium-ion Cell etc. after availing the benefit of S. No. 512 of the Notification No. 50/2017-Cus dated 30.06.2017, as amended, during the period of the year 2017-2019. The Importer-appellant has used all the imported items as mentioned above in manufacturing of Power Bank and thus violated the terms of the exemption Notification No. 50/2017-Cus dated 30.06.2017,entry at Sr.no. 512, as amended. Department observed that as per the aforesaid Notification, the exemption benefit is available for the parts, components and accessories except 'populated printed circuit boards' for use in manufacture of lithium-ion batteries other than batteries of mobile handsets including cellular phones falling under tariff item 8507 60 00. 3. It is alleged that the Importer-appellant has manufactured Power banks, which is a portable device comprising of rechargeable cells in a special circuit to control power having USB port/s etc. As per details submitted by the importer-appellant, the amount of total duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of the concessional rate of duty under sr.no. 512 of the notification No. 50/2017-Cus dated 30.06.2017, as amended, on the goods imported by the Importer and used in manufacturing of Power Bank should be denied to them. (b) Differential Customs duty of Rs. 8,12,95,799/- (Rs. Eight Crore Twleve Lakh Ninty Five Thousand Seven Hundred Ninty Nine only) forgone on the goods imported at the concessional rate of duty by availing benefit under sr.no. 512 of the Notification No. 50/2017-Cus. Dated 30.06.2017, as amended, should be demanded/recovered from them under rule 8 of IGCR Rules, 2017 as defined under Notification No. 68/2017-Cus (N.T.) dated 30.06.2017, under Section 28(4) of the Customs Act, 1962 read with Section 143 (3) of the Customs Act, 1962 and in terms of clauses of Bond executed by them. (c) Interest as applicable, on the duty demanded above, should be charged and recovered from them under rule 8 of IGCR Rules, 2017 as defined under Notification No. 68/2017-Cus (N.T.) dated 30.06.2017, read with Section 28AA of the Customs Act, 1962, and condition of Bonds executed by them. (d) Penalty should be imposed upon them under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, being caged in the same protective casing where the Lithium Ion Battery o had already been placed. It is impressed upon that the product still is Lithium Ion Battery Pack/ power bank. Hence the allegation of department that appellants have not manufacture Lithium Ion Battery is incorrect. 10. Ld. Counsel further submitted that for availing the exemption/ benefit of concessional rate of customs duty under under Notification No. 50/2017 dated 30.06.2017, the importer- appellant has followed and complied with following: a) All requisite Provisions including the Provisions of the Customs Act, 1962 and that of CUSTOMS (IMPORT OF GOODS AT CONCESSIONAL RATE OF DUTY) RULES-2017 ( herein after referred as IGCR Rules) as required under condition no. 9 mentioned in the said notification. b) Appellants have duly reported compliances to the satisfaction of the Jurisdictional Divisional Assistant Commissioner of Central Excise, Janak Puri, Delhi and also to the satisfaction of The Assistant/Deputy Commissioner of Customs of the (Port of Import) under whose jurisdiction the parts & components/goods, in question were imported in the manner laid down therein. c) The reporting was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Recommendation from the Assistant Commissioner of Customs (Preventive) and on being satisfied about the potential use of respective Part, Components, Accessories under import in the manufacture of LITHIUM ION BATTERIES (LITHIUM ION BATTERY PACK), as required under Notification No. 50/2017 CUS dated 30.06.2017, had been ordering 'out of charge' under Section 46 of the Customs Act, 1962. The Bills of Entry filed from time to time by the appellant have regularly been assessed by the concerned officers without raising any such objection as has been raised in the impunged Show Cause Notice(SCN). 12. It is further mentioned that after receipt & utilization of the Stocks in their Factory and after observing the complete compliance on part of appellant, the Assistant Commissioner of Customs, used to cancel the Continuity Bonds filed by the appellant from time-to-time. Such Continuity Bonds were ordered to be cancelled under Section 143(2) of the Customs Act, 1962 by the jurisdictional Assistant Commissioner. Such orders can be passed only after being satisfied about the Stocks of the Parts, Components and Accessories which have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were known. 15. Finally it is submitted that the show cause notice has wrongly invoked the extended period of limitation. The department has information since the time of import, as appellant was complying IGCR Rules properly, as mentioned above. The concerned officers were supervising the procedure and were certifying the compliance of the conditions of the impunged notification by cancelling the Continuity bond, as already mentioned above. Hence suppression is wrongly alleged. SCN therefore is barred by limitation. The demand confirmed vide the impunged order is liable to be set aside on this ground as well. With these submissions the Order under challenge is prayed to be set aside and appeal is prayed to be allowed. 16. While rebutting these submissions learned Departmental Representative has submitted on behalf of the department that the demand of Rs 8.13 Cr. has been raised and affirmed along with the interest and penalty of Rs.8.13 Cr. by revoking bonds as were submitted at the time of import of the impugned goods ( parts and components) which actually are the parts and components for manufacture of power bank. The appellants has availed the benefit of concessional c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant-importer that as per TRU letter dated 26.04.2017 both the items merit classification under CTH 8507 and both are one and the same is without any application of mind. It is impressed upon that since the notification is specific about parts and components of lithium Ion Battery the TRU letter is misinterpreted by the appellant. It is mentioned that this Tribunal in the case of S B Industries (Supra) has already set aside the said clarification of TRU. The violation of terms and conditions of the bond/undertaking is submitted as the sufficient ground to hold appellant liable to pay the duty forgone as in the undertaking it has wrongly been mentioned that the imported parts and components have been used for manufacture of Lithium Ion Battery. Learned Departmental Representative has relied upon the decision of this Tribunal, Mumbai Bench, in the case of Patel Engineering Ltd vs Commissioner of Customs (Import), Mumbai reported as 2013 (295) ELT 243. With these submissions it is mentioned that the demand of duty fore gone has rightly been confirmed. Impressing upon no infirmity in the order under challenge, the appeal is prayed to be dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Customs Act, 1962 is based on post-importation conditions:- a) Use and utilization of such goods. b) There has to be 'manufacture' of specified type of Lithium Ion Battery by use of such components as specified, in accordance with IGCR Rules, 2017 issued under Section 156 of the Customs Act, 1962 read with Notification No 68/2017-CUS (NT) dated 30.06.2017 23. We observe 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. Said condition no. 9 reads as follows: "If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR Rules, 2017) These Rules specifically define term 'Manufacture' and term 'Information'. 24. The term 'Manufacture', as appearing under the referred notification, thus, has necessarily and mandatorily to be interpreted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o construction of an exemption notification, as in such case it is for the SSC to show that he comes within the purview of the exemption." This view has recently been again affirmed by the Honourable Apex Court itself in the case of L.R. Brothers Indo Flora Ltd. Vs. Commissioner of Central Excise reported as 2020 (373) ELT 721 (SC)while summarizing it is mentioned that the appellant has wrongly obtained the benefit of exemption by basic customs duty while wrongly claiming the benefit under Notification No. 50/2017. 26. Thus it stands clear that 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, as quoted above. Further we observe that the parts and components imported by the appellant, admitedly, are: (i) Lithium Ion Cells (ii) Cables (iii) Nickle/stainless steel strips (iv) Heat resistant tapes, silicone, hardware, stickers, form t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cell and battery is sufficient for us to hold that the appellant has imported cells as single units with various other components and combined the single unit cells with the help of the other imported components to be converted into a battery. The above discussion is sufficient for us to hold that the term manufacture of Rule 3(e) IGCR, 2017 gets satisfied at the time of emergence of battery as distinct from its component i.e. individual lithiumcell and others. From the case law as quoted above about interpretation of a notification, it is clear that definition of 'Manufacture' as given in IGCR Rules, 2017, the scope thereof cannot be enlarged from the stage of emergence of new product to the stage of manufacture of final product which is Power Bank in the present case. 30. Coming back to Entry No. 512, we observe that the exemption is available when the imported parts and components are used in manufacture of lithium batteries. The notification is nowhere requiring the Lithium Ion Battery to be manufactured as the final product of the importer. This observation and definition of manufacture under IGCR Rules, 2017 a joint reading, is sufficient for us &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. ii) 20. in applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose (Assistant Commissioner, Gadag Sub-Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355). Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. iii) 21. in construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as close interpretation; interpretation restrictive. vi) See strict constructionism under constructionism. Cg. Large interpretation; liberal interpretation (2). 31. As already observed above the exemption entry has simply talked about manufacture out of imported parts and components that to in compliance of IGCR Rules, 2017 which defined term manufacture also and the entry is silent for such manufacture to be of the final product of the importer of parts and components. We hold that there is no ambiguity in the notification. Department has wrongly interpreted the manufacture to mean as manufacture of end product. It is held that since the appellant has used the imported parts and components in manufacture of Lithium Ion Battery which irrespective the battery has been captively used to manufacture power bank and irrespective that power bank has a slight different connotation from Lithium Ion Battery despite having the same function as that of Lithium Ion Battery, we hold appellant entitle for the benefit of exemption of Entry No. 512 of Notification 50/2017 dated 30.06.2017. 32. Department's yet another subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be recharged which are used just like battery to store the electricity and to supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging): when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations, charging and discharging, can be repeated for the life of the accumulator. Accumulators consist essentially of a container holding the electrolyte in which are immensed two electrodes fitted with terminals for connection to an external circuit. In many cases the container may be subdivided, each subdivision (cell) being an accumulator in itself; these cells are usually connected together in series to produce a higher voltage. A number of cells so connected is called a battery. 36. The chapter note further clarifies accumulators contained one or more cells and the circuitry to interconnect the cells amongst themselves, often referred to as "battery packs". Apparently and admittedly there was nothing in HSN code nor even unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 41. The captive use of the manufactured 'Lithium Ion Battery' by the appellants to be used as 'Power Bank' by connecting said battery to a PCBA, to our opinion, is irrelevant for denying the benefit of notification 50/2017 to the appellant for the reason as below; i) The notification simply talks about the emergence of a new product having new name and different identity in the trade. It does not talk about emerged new product should be the final product manufactured ii) The emerged Lithium Ion Battery, the wire coming out from it has been connected to a PCBA and is kept in the same housing the lithium Ion Battery was first placed. iii) The appellants have paid the customs Duty while importing said PCBA. 42. It stands clear that any product called Power Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing into existence of Lithium ion Battery from Lithium ion Cells. Appellant herein also carries out the same process for manufacture of Lithium ion Battery from Lithium ion Cells (imported under Rules, 2017). Since Lithium ion Battery has been manufactured by use of imported lithium ion Cells, utilization of the same in the 'Power Bank', cannot be the basis for denying the benefit of exemption granted to the imported Parts and components so used under Notification No. 50/2017-Cus. dated 30.06.2017. 45. Though the Final Order No. 50039/2019 dated 14.01.2019 of this Hon'ble Tribunal in the case of S B Industries (supra) has been challenged by the department before the Hon'ble Supreme Court on the issue of classification of Power Bank under Chapter Heading No. 85044030 or 85.07, however no stay has been granted of the operation of the aforesaid order dated 14.01.2019. Matter is pending adjudication before the Hon'ble Apex Court. Copy of the order dated 20.09.2019 passed in the aforesaid appeal filed by the department before the Hon'ble Supreme Court being Civil Appeal Diary No. 25607 of 2019 is at page 252 of aforesaid Misc. Application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d one copy of information received from the importer to the Deputy Commissioner of Customs, or as the case may be, Assistant Commissioner of Customs at the Custom Station of Importation. (4) On receipt of the copy of the information under clause (b) of sub-rule (1), the Deputy Commissioner of Customs or, as the case may be, Assistant Commissioner of Customs at the Custom Station of importation shall allow the benefit of the exemption notification to the importer who intends to avail the benefit of exemption notification. 47. As per this Rule 5 IGCR Rules, 2017 utilization of such components through step by step process has to be under taken under the watchful Eyes of the jurisdictional Assistant Commissioner of Customs. With obvious approval by the jurisdictional Assistant Commissioner of Customs on each step/act undertaken by the importer/ manufacturer starting from providing of 'Information' under Rule 4, of said Rules and intimation about receipt in the factory of components imported at Concessional Rate of Duty. Quarterly Returns on utilization of components that such importer/ manufacture makes compliance of IGCR Rules, 2017 have also been admittedly f ..... 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